Mirza International Ltd

NSE:MIRZAINT

Your conference is being recorded. Good day, ladies and gentlemen. I'm Pavitra, moderator for the conference call. Welcome to the Mirza International Q3 FY 2020 Earnings Conference call, hosted by SBICAP Securities Ltd. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Prashant Tiwari from SBICAP Securities Ltd. Thank you, and over to you, sir.

Thank you, Pavitra. Good afternoon, ladies and gentlemen. I'm responsible for the mid-cap coverage at SBICAP Securities. We are pleased to host this call and thank the management for this opportunity. We have with us today the senior leadership of Mirza International. Unfortunately, Mr. Shuja could not join us because he is unwell. So Mr. Shyam Awasthi, who is VP Finance, will start with his opening remarks and take Q&A session after that. Over to you, Mr. Shyam.

Thank you, Mr. Prashant. Good afternoon, everyone, and thank you for joining our call today to discuss the Mirza International Limited quarter 3 FY '20 results. So the total revenue of the company has grown by 29% to INR 398.02 crores as against INR 307.38 crores. There is a growth of 29.49% in this quarter. The net profit after tax for quarter 3 FY '20 is INR 21.53 crores as against INR 7.46 crores in the previous year same quarter. The EBITDA for the quarter 3 is INR 50.27 crore as compared to INR 29.88 crore in the same quarter last year. I'm giving this EBITDA without taking the effect of the AS 116. The EBITDA margin for the quarter is 12.63%. The effect of the AS 116 is INR 1.83 crores, by which the profit is reduced because of the effect. Okay? Now the export performance during the quarter 3 FY '20. The export sale of footwear for quarter 3 FY '20 is INR 123 crores as against INR 101 crore in the same quarter last year. There is an increase of 23% on Y-o-Y basis. The country-wise result is, the U.K. market has increased by 35%. It has clocked a turnover of INR 100 crore versus INR 74 crores in the same quarter last year. The U.S. market has also increased by 10%. It has clocked a turnover of INR 11 crore versus INR 10 crore in the last year. The rest of the world market has decreased by marginally INR 2 crores. The Indian-branded sale of the Red Tape and Bond Street for quarter 3 is INR 253 crores as against INR 187 crore in the corresponding period last year, the growth of 35%. This was the highest turnover in any quarter for our brand. There is a growth of 35% on a Y-o-Y basis. The export performance for 9 months. The export sale of footwear for 9 months FY '20 is INR 415 crores as against INR 368 crore in the same period last year. There is an increase of 13% on Y-o-Y basis. The U.K. market is increased by 22%. The U.S. is increased by 7%, and rest of world is decreased by marginally INR 10 crore by 17%. The 9-month Indian-branded sale of the Red Tape and Bond Street is INR 525 crores as against INR 428 crore in the corresponding period last year. So there is a growth of 23% in Indian-branded business in last 9 month. The advertisement expenditure for quarter 3 FY '20 was INR 7 crores. This is around 1.75% of the Indian-branded sales. The net financing cost in Q3 FY '20 is INR 8.78 crore, without taking the effect of AS 116 as against INR 8.77 crores in the same quarter last year. The net borrowings has been decreased to INR 275 crore, the lowest level in last 2, 3 years, with a debt equity of 0.44.The net worth of the company has increased by -- increased to INR 629 crores. The gross margin for quarter 3 is 43% as compared to 40% in the same quarter last year.We have opened 13 Red Tape exclusive outlet during the quarter. The total count of the Red Tape outlet has reached to 227. Out of this, 56 are the large format online stores. And 164 plus -- 164 are the offline stores, 7 are small factory shops. The inventory levels has gone down. As on 31st December 2019, the inventory -- the total inventory of the company is INR 389 crores as against INR 430 crore in 31st March 2019. So it has gone down by INR 41 crores in last 9 months. From April '19 to December '19, the inventory has gone down by INR 41 crores. And the debt, the debt in the same period was -- as on 31st March 2019, it was INR 350 crores. It has come down to INR 275 crore as on 31st December 2019. It is reduced by INR 75 crores in last 9 month. So there is a good working capital cycle. And the growth in the segment side, like in the domestic side, if I am telling you the channel-wise growth. The -- in the 9 -- in this quarter, the wholesale business is grown by 8%, the online business is grown by 18%. The retail business is grown by 66%, then overall growth was 35%. In the last 9 month, the wholesale business was at par, maybe some loss of 1% or 2%. The online business was grown by 5%, the retail business was grown by 53%. Out of this growth of 53% in the retail side, the organic growth is 33% in the same-store growth, part of the stores in this, like -- in this year 9 month and a number of the stores in the last year 9 months. So with this, I request to please start the question-and-answer session.

[Operator Instructions] We have first question from Siddharth Oberoi from Prudent Equity.

So the tax is at 31%, so when will you come in that bracket of 25%?

So the reason for this taxation is, we have to take the effect of the depreciation at the income tax rate that the companies attract, that is one point. And there is effect of this AS 116 because of that the tax is growing. But on an actual -- on an overall basis, if you see the tax rate of the 9 month, it is somewhere around 26%.

Okay. And I missed the point where you said the new outlets. How many new outlets has come up in the last quarter?

Yes. In this quarter, we have opened 18 outlets, but we have also closed 5 outlets. So net outlet was 13 which were opened.

All right. So these are online or...

Online and offline both, mix.

All right. And -- so what is this growth been due to mainly, the one that you've reported in this quarter?

Yes. The growth -- the main reason I have given you the numbers. The -- there is a growth in the retail segment, the highest growth. And this is mainly the organic growth. In the same-stores, we have achieved 33% growth in the last 9 months in this financial year and in the last financial year. So the main reason in this quarter was due to the winter. In the winter, the garment growth is excellent. You see in this quarter, the garment growth is 65%. So because of the product, we have improved our product range. The jackets are there, the sweaters -- our products have been highly acceptable, good quality product. So the repeat customer came. And the -- and moreover, if you see last 2, 3 quarters, in last, 3, 2 quarters, the market sentiment was very down. All the retail, there was no footfall in the retail segment. In that case, we also have to offer some extra discount. In this quarter, the market was good, the footfall was good, and the product was good. That's why this has resulted in better sales.

And how is the market in Jan and Feb for the last quarter?

The Jan looks good. The Jan looks good. It's quite -- export is also good, and the domestic footfall is okay. So -- but after that, we just can hope. I think the quarter should also be good.

Okay. Do you have any numbers for same-store growth?

Yes. I've given you. There is a -- we have achieved 33% same-store growth, the organic growth.

All right. Also, due to this -- the Brexit is already done, do you expect any traction in the U.K. market?

So as of now, the U.K. market has not given much traction. But actually, our business is not a fixed kind of business. We work on the -- we are in the fashion business. So we count order-on-order basis. We'll see, say, 50,000 base order. And after that, completion of the orders that are already finished. So it's order -- make-to-order segment. So it means after 2 to 3 months, we can -- we have just -- we can foresee the demand of 2, 3 months. After that, it means we can't predict how the market is going to be.

[Operator Instructions] We have next question from Abhishek Joshi from CGS-CIMB.

Sir , just wanted to know what is the size of Indian formal footwear industry in India? And what could be our rough market share and the share of between organized and unorganized players in this?

So actually, none of the company, none of the business, none of the magazine can give you the correct number. Because the Indian market is very unpredictable. In India, if you talk about the rural market, most of the rural market is without -- means they are selling without [Foreign Language] and everything. So means, you can't actually predict the size of the market. What one thing is sure. That is the -- if you see the trend of last 3, 4 years, the Tier 2 and 3 cities are growing very fast. The young generation is getting the taste of the branded footwear. They are more conscious to the brand, we have to wear the brand. And that's why the branded market has grown very fast in the last 2, 3 years, and it has a lot of potential in future to grow in such a pace.

Sir, what was the reason for expansion of our gross profit margin this year? Was it due to better product mix? Or because of a reduction in raw material costs?

No. So, actually, the gross margin has reduced because of the product mix and the product -- and this is one of the factors. Second factor is that our raw material prices has not been increased. We -- like recently, the government has introduced the duty on the footwear. But fortunately, we had planned our production in such a way, our -- we are procuring from the Philippines, Vietnam, China, where we are paying -- we are importing under Asian tier. So we have to pay just 5% duty. So we -- our sourcing in such a way, we are sourcing our garments in -- from Bangladesh, where there is no duty. So our product mix is very good, and we are also saving on the purchasing also. We have set up a -- our own company in the Bangladesh. We have set up our own quality team there. They sits -- there -- around the clock, around the year, they sits there. They go to the customer and who buys there. We have got our own in-house studio. So everything we are trying to do in-house. That ultimately saves the cost.

Sir, last -- my last question -- are we still continuing our strategy of capturing the market share by selling our products at reasonable prices as much as we in the Red Tape product in India? In other [ region ], what's the sale in U.K.?

See, there is a complete product change from what we are selling. We are selling Red Tape in the India. But the Red Tape portion what we are selling in the U.K. is very thin. In the last year, we have clocked the turnover -- in this 9 month, we have clocked turnover of somewhere around INR 20 crores in the Red Tape side in the U.K. U.K. main business is make-to-order. That is white label goods. So that is not comparable from India. So that pricing is different. That is on cost flows method. Whatever product you want, we just calculate the price and give it to you. So that mix is totally different from Indian business. India, we are doing everything under the Red Tape and Bond Street brand. So it sourcing its product range is completely different from the U.K.

Sir, but are we more focused in capturing market share in India or maintaining our margins?

Sure. That's why -- you see our growth journey. Last year, we have grown by in the domestic side 50 -- around 50% in the domestic side. We have clocked a turnover of around INR 588 crores. This year, in 9 months, we have clocked around INR 525 crore. Our target is to achieve INR 700 crores. So to see our growth rates, and that is the -- for us to gain the market share.

Yes. Okay. And any rough estimate what can be our market share right now in formal?

That is very -- that is a very tough question. There is no clear cut study. And right now, what is the total market is? What the market size is. That is the thing. The India market is such -- I mean such a way that nobody can predict what is the actual market size.

[Operator Instructions] We have next question from Zakir Abbas Nasir from [ Nasir ] Investments.

Yes. Zaki, Z-A-K-I, it is. Congratulations on a great set of numbers, I would say. And it has been, I think, after 4 or 5 quarters that the numbers look very, very healthy. Would you say that the -- our business has gone through the tough cycle and the future will be bright? And this kind of numbers will be maintained in terms of the health of the number, sir?

The last 2 quarters were very bad from the retail point of view. There was no footfall. But fortunately, this quarter has improved. The product was good, the product activity was good. We get repeat customer, means, we have got the organic growth. That is the sign, means -- and the January is also good. So we can predict the next quarter should also be good. And for exports, we don't have any prediction out of 2, 3 months because we have got the orders of just 2, 3 months only. Beyond that, we can't predict. So this is the thing.

But the feel of the business, how do you feel...

The feel is good. January is looking good. January's numbers are good. So means, we can't predict internally, we are just predicting that the quarter should also be good.

And sir, the import duty on shoe parts has been increased from 10% to 20% in the budget. Would that have an impact on your margins, sir? Or you would be passing it on to the customer?

No, sir, no, sir. Fortunately, what happened, if I'm just giving you the structure of how we are importing the things. So we are importing mainly from the countries like Vietnam, Indonesia, Philippines and Thailand, the footwear, in which the duty has increased. And in these imports, we are just paying 5.5% duty because of the Asian countries. So the duty is increased from the China. So this, we are not affected at all. Our duty is not increased. So it will not have any impact on us.

Okay. And how does the Indian -- sir, see, you would be having a large number of stores, like 200 and odd. Do you see a softening in the rents of these stores, sir? Or it's still on the trend?

Your question is quite correct. We are actually seeing the softening of the rent. We are negotiating the rent in many cases, see, if the shop is at the prime market and getting good business. We are not just -- means, the landlord is not negotiating it. But if there is some big point, we are negotiating. And in many cases, we have just -- we are just trying to reduce. In many cases, the rent is actually reduced. And I think most of the retailers are doing this. Because the retail segment, the last 2 quarters was too bad...

Yes. Rentals have slightly softened I think, so at the commercial space.

Yes. That's correct. Yes.

[Operator Instructions] We have next question from Vipul Shah from RW Equity.

How does the working capital look like? I remember in the earlier calls, we were saddled with huge inventory, where the -- where Mr. Mirza had earlier indicated that June and September, there was a conscious decision to sort of wind down the inventory, which is where the results for those quarters also was impacted.

Correct.

So how are we looking at the inventory position now?

Sir, there are 2 points. Currently, the inventory level is gone down to such a level, our total inventory is INR 389 crores, which is the lowest in last 2 years, number one. And most of the -- these nonmoving and nonselling inventory has gone. We have just sold in the last quarters only. In the current period, it will be, but it will be in a normal ratio, first thing. Second, working capital cycle has increased, that's why we have paid INR 75 crores of the loan. And the inventory is also reduced. So that means now that things are in good shape. The -- our logistics have been improved. A lot of things, the product has improved. And a lot of internal changes has been done. So going forward, I think you will see more improvements in the working capital cycle.

Secondly, sir, earlier on the calls, we used to indicate that a lot of our buying used to come from China. Now I've -- we've been hearing that we've sort of replace China with Asian countries. Is that correct?

Correct. Absolutely correct. Fortunately, within last 1.5 months, we have shifted all our China imports from China to Vietnam and all those country. So that has benefited to us.

So what it means is this latest medical emergency from China, that also doesn't have any impact on our sourcing?

No, no. It is not affecting, not affecting.

We have next question from [ Ayush Mittal ] from [ NAPL Value Investing Fund ].

Sir, I have couple of questions. One, like you mentioned that because of the winter also, we might have had a very good quarter. Is that right? And what kind of run rate do you think we can do going forward?

Sir, winter is one of the reason. But you see, in the last winter, we have also clocked a turnover of INR 187 crores. And this is also the winter. This year, we have increased -- our turnover is increased by 35% So winter is one of the factor. But in the same winter, we have grown by this much amount. So this is because of the product mix we have introduced. See, our jackets, they were out of stock. It was such a huge success, it was out of stock, and the other products are also equally good. So the product is also one of the things. We have improved the quality. We have introduced new designs, new things and new designs. I mean, we've hired a couple of new designers. That's a lot of things we have done. So going forward, I think the same numbers will not be during the next quarter because the winter has exceptionally good numbers. But the -- means, we can see the traction in the January number. So I think the overall number should also be good in this quarter.

And because this time in North India, it was a really cold winter and suddenly, there was a big demand. So...

That's correct. That has helped our numbers a lot.

And sir, when I look at your numbers, on the quarter-on-quarter basis, depreciation has gone down by almost INR 5-odd crores. What could be...

No, sir, actually, I'm just -- I have mentioned in the call, the depreciation has not gone down. Actually, if you see the depreciation is increased because of this AS 116 effect. Actually, the depreciation in this quarter is INR 9.94 crores. But because of this effect, we have to show it at INR 16 crores. We have to...

No, what I mean is, this rent part has gone down then. Because if you just see the September quarter, it was INR 20.76 crores.

The rent part -- no, no, sir, I'm just giving you the number. If you take out the effect of 116 this year, the depreciation in the last quarter was INR 9.22 crores in the same quarter last year. In this -- INR 9.22 crores, was as of 31st December 2018, same quarter last year. In this quarter, it's INR 9.94 crores. So there is increase of INR 70 lakhs.

And sir, what I'm trying to understand this versus September, preceding quarter, just quarter-on-quarter?

Sir, September was INR 20 crore, but this AS --, if you remove the AS 116 effect, the September actual depreciation was INR 9.20 crores.

Yes. So I'm trying to understand this rent part. Has the rent cost reduced for us? Or is it some temporary thing?

Sir, rent cost, what is the rent -- rent was around INR 7 crores only in the quarter. So the rent cost has increased marginally because of the increase in the outlets. But after that, there is no -- the rent cost was INR 7.29 crores only. It is decreased from the other expenses.

What I'm trying to also understand is, if you look at operating margin, they have gone -- they have increased because the rent portion has been removed which is now being challenged finance and depreciation cost. So if we are to do the comparison from earlier times, the margins are still very low at maybe 10%, 12%.

No, sir. If you take out the 116 effect, the EBITDA is 12.63%. And the margin...

Yes, 12%. So that's what I'm trying to understand that earlier we used to do 18% kind of EBITDA.

Yes, that's the -- sir, that was the story of the old times. But that was -- in that time, our retail business, the domestic business was not so big. In last year, you -- if you are aware that we have grown in this space last year, we have grown by 50% and this year, a growth of 23%. So because that EBITDA cannot be maintained in such a growth phase, we have to clean up the inventories, and we have done a lot of mistakes that we had corrected. But going forward, after 1 year or 2, like this EBITDA will improve. Like going forward, this -- you will see the improvement. But not to the 18% level.

[Operator Instructions]We have next question from Gaurav Lohiya from Bowhead.

I think what is not clear from the [ Ayush's ] question was that why this Q-on-Q depreciation, which was INR 20 crores in last quarter has suddenly become INR 16 crores. So what I understand from my -- based on my understanding is that we had taken the cumulative impact probably in Q2 but it was not there in Q1...

In Q2, the impact was 6 month...

Maybe you can explain it in a better way...

That's why I told that, the actual depreciation in the Q2 was INR 9.20 crores. And from INR 9.20 crore, in this quarter, it is INR 9.94 crores. This is the main...

Can you please repeat the numbers, please?

Yes. In the last quarter, the actual depreciation shown is INR 20.76 crore. Out of this, the effect is INR 11.56 crore. The AS 16 effect is INR 11.56 crore. Base effect was...

And that is to be spread over 2 quarters, right?

Two quarters, that's correct.

Yes. Okay.

So actual depreciation was INR 9.2 crores. And in this quarter, it is INR 9.94 crores.

Okay. And second, sir, can you throw some light on the tannery business as to how to look at this business? And the losses have increased over there in the tannery side. So...

Yes. The -- actually, the tannery in this quarter, this was the really bad quarter for the tannery because of the 2 effects. The ROIC prices have gone down, means, it -- drastically, the stock which we are having -- which we had purchased has, means, come to the level due to almost at 50% level. So that is the loss we had to incur at the tannery. And going forward, I think now the stocks are at the bank price at the current rate price. So going forward, the -- I think the January looks good, the orders is also good. The capital utilization also good. So I think the branded losses are over now. We are predicting this, means, the figures are showing in this way. So I think it should not be in the coming quarters.

So can we expect overall margins to move up because if the tannery losses are not there, then your margin should actually inch up if your profit...

Yes sure. If tannery will not give any profitability at the breakeven, so our tannery -- our -- the overall company profits will increase. The EBITDA will also increase.

Versus last quarter and versus Q3?

Last quarter, yes.

[Operator Instructions] Next, we have a follow-up question from [ Ayush Mittal ] from [ NAPL Value Investing Fund ].

Sir, in the retails segment result, after the profit for the period line item, there's another line item of loss of INR 5.5 crore, which has not been classified to P&L. What is this item?

Actually, this is the notional loss or the ForEx loss on the forward contract. The forward contract for export, which we're having, we have to revalue that at the 31st December prices. So this is notional, it doesn't have any effect on the APS. But this is the notional loss, this is not the actual loss. Because we are taking the forward contract and negotiating our sales from that forward contract. But as where the company is turned, we have to show it. This is the notional loss.

And -- so we take a simple -- we do simple hedging by way of forwards about the imports that we do?

We take the simple hedging -- no, no. We take simple hedging on the way of -- by way of the forward. Whenever we receive the export order, on that day we take the forward contract on that rate -- on that change of rate.

And on imports also, are we hedging?

Yes. We have also started hedging the import. Not 100%, a few percent is also getting started.

Okay. And sir, any risk on a sourcing thing? Because slowly government is very clear that they want to encourage made in -- make in India, while we are importing huge amount of quantities of our apparels, sport shoes and all those things.

Sir, as of now, we are not seeing any threat because our import is diversified. Like footwear, we are importing from Vietnam, Indonesia, Philippines, Thailand, 4 countries. So that is very much diversified. The sports goods, we are just importing and the leather is only in-house. The government, we are importing from the Bangladesh. We are also sourcing -- we have started sourcing the government in India also, that is also start supplying us. So we are just trying to take care of this -- all this -- that should not -- the supply should not be from only one source. So we are just -- a lot of efforts are being done just to diversify our supply,

Sure. And sir, what about the advertising initiatives or the spends that we are doing? I think there has been a sharp reduction on this front?

Sir, the advertisement, last quarter, we have expensed around INR 7 crores in the advertisement. And after this year...

In which quarter?

In this quarter, in Q3, we have expensed INR 7 crores in advertisement. But as the turnover is increased, the percentage has gone down to 1.75%. But in the value terms, we have incurred a -- the higher amount.

Okay. And yes. But any -- like even now is the digital and print advertisement that we're doing, we are not trying to hire any ambassador or do some TV commercial or something?

Sir, we are not going for TV. Because -- means, once our -- the brand has reaches to INR 1,000 crores, then we will start doing all these things. So like digital marketing, we are very much on the digital marketing. We are spending a lot of money in the paper media advertisement. The Times of India, we have booked for the whole year. And the digital campaign, Facebook or Twitter, we are doing. So the digital media, we are capturing the -- means, we are very selective on this. The digital media, the paper media and a lot of social networking sites we are doing.

We have next question from [ Ranil Matthew ], an Individual Investor.

Yes. It's nice to see a good quarter after quite a while. Just few questions. The last conference call, it was said that the company is moving more towards franchisee model, in terms of the offline stores. Now any update on that? Because the last time I got a feeling that more and more opportunities are coming in that way, and therefore, the working capital would be better on in having new showrooms.

That's correct, sir. In this quarter, we have done so. We have opened around 5 -- 6 or 7 outlets are the franchisee outlets. So it's a mix of the franchisee outlets, the area where we are getting the franchisee, we are giving them. But where we're not able to find the franchisee, we are doing all in-house, means, we have to be present there either by franchisee or by our own stores. So we are working on both the models and opening the stores in both the models.

But in terms of demand, how do you see from investors in terms of franchisee models for the brand?

Sir, now we are getting the demands for our online outlet, which is very capital incentive outlet, but we have received a lot of interest from the franchisee. And till now, we have opened around 4 to 5 outlets in the franchisee, the big outlets where the investment is high. So the person -- means the public is accepting this -- that model, they're investing in this way.

Yes. The other question, just a quick one is, do you see the EBITDA going back to 18% at some point? Or is it a target? Or you would say that the best would be about 15%, 16%, even as a target going forward?

Sir, truly speaking, what -- in the retail segment, what we have been achieving, means, I think, the good -- but -- what our target is to reach at the level of 14% to 15% in next 1 or 2 years. So, 18%, I don't think it will be possible. If we increase, if we go in such a pace in such a growth rate, so that will not be possible, I think. And then maybe after 2, 3 years, that can be possible.

Okay, fair enough. And sir, last one. See, we also see multiple products coming under the brands, and there are also new brands, which is there on Amazon if I'm not mistaken, Ozark. I know are you -- are these brands specific to online model? Or these are available as also outside? I mean, what I'm trying to say is, you have a deal with, let's say, Amazon, where you are promoting a certain brand only specific to that marketplace?

Sir, we have -- our major brand is Red Tape and Bond Street. But we have got a little -- very smaller brands, in which we don't want to invest big long-term time right now, that -- like ladies brand, called MODE. It is also available...

MODE, MODE, yes.

MODE, M-O-D-E. It is ladies brand. It is also available in our online outlets and marketplace, like Ozark. Ozark is the brand, which are we -- we are only doing in the online space. We could -- if you put this brand investor, you have to invest in the marketing and although, that will not be fair. I think Red Tape has got a lot of potential in which we can achieve a lot. So these are the small brands, and these are -- is going -- available only on online and maybe to some of the retailers only maybe have tie-up with this. So these are the number of brands, but the focus is on the main Red Tape and Bond Street.

We have next question from [ P. Yogesh ], an Individual Investor.

What is our total input cost as a percentage of -- sorry, as a percentage of total cost?.

See, actually, we have got a different segment, like we have got tannery, we have got the retail business. We have got the manufacturing. So it depends on business to business. Like, in the export business, the input cost is not very high. But in the retail, in which our -- the garment is imported, footwear is the -- exports shoes, totally 100% imported. So it is -- the ratio of the import is higher. So means, it's very difficult to just give an overall view because we have got different verticals.

Sir, ex-garment and ex-leather shoes, then what is the -- except leather...

Like in the -- for the export, we have got -- the export turnover is somewhere around INR 500-odd crores in the last year, in which the input cost is somewhere around 20%, 25%.

Okay, Okay. And sir, what is happening in China, do you see -- because China is also the largest exporter of leather footwear. So do we see any opportunity there from this side from U.S. or maybe U.K.?

Sir, till now, we are -- means, we have not we got any significant order in which we can say, we have got such a big order. Because India has always been the big exporter and the #1 in the leather footwear. And China is #1 in the sports footwear, in which -- means, none of the Indian companies is to that level. But as far as leather is concerned, the India's has also been the [ fair ground of standards are ] there. There are a lot of good quality of leather is there. So means, there will be a traction. I think we are hoping, maybe -- means, getting the good orders. But currently, we don't have any such queries that we have got any such big order or something.

And sir, about the EBITDA margins, what is the -- domestic -- what is the class of domestic market? Basically, if you see in the retail, discounted price of average pair of shoes is -- almost at same level of last year and last -- last 2 year. So do we see the -- there is a reduction in the discount or maybe somewhere we get operating leverage? Like, how do you see -- how the margins can move up from here, by increasing pricing, operating leverage or reduction in certain losses or optimizing certain losses or increased productivity?

Sir, there are a couple of factors. Like, last 2, 3 quarters, we have incurred a lot of losses. We have cleared a lot of inventories. So the beta margin has been the lower -- to the lowest level than ever. So going forward, our target is to just reduce the cost that we're doing it. The results are before you. And means, the pricing -- if you talk about the selling price, we are not able to sell -- increase the price because we are in the competition market, [ fastest ] -- there are a lot of competitor there. If we increase the price, the customer will go to that shop. So that is the benchmark for us, we cannot increase the price. But we have to play on our working capital cycle, on our cost to inventory maintaining, means the logistics, so that -- for that, we are doing a lot of work. So this will improve our EBITDA in the time to come.

Okay. And last question on my side. What could be the inventory level current and versus last year?

So the inventory as on 31st December is INR 389 crores. And as on 31st March, it was INR 430 crores.

No, no, sorry, inventory in the market, means -- inventory in the market basically...

Inventory in market?

Domestic market, sir?

Inventory in domestic market? So domestic inventory you are talking about?

Yes, yes. Yes.

Domestic inventory is also reduced because of this -- all this cleaning up old inventory and all that. So the domestic inventory is also getting reduced.

We have next question from [ Vivek Ram Krishna ], an Individual Investor.

Can you hear me?

Yes, yes, Mr. Vivek, please.

I just wanted to ask with the problems that China is going through, I'm sure a lot of companies in India also import from there to sell in the India market. Are you expecting any uptick in orders because we are fairly insulated? Do you think we can fill that vacuum?

See, fortunately, in the last 1.5 months, we had shifted due to some reason over the import of the finished goods, like the footwear, basically, from China to this Vietnam, Indonesia, Philippines. So this is not going to affect us at all in the current period because we had already shifted all these over sourcing from China, too. But as far as our export is concerned, in which we are just importing a few things from China, like lining or something. For that, we are just -- just finding out the vendors in India. So that will not be -- the percentage is not too big, so it will not be challenging, I think.

No. I'm saying more of the upside. So for example, if Bata is importing from China and selling those shoes in India, that supply chain is affected. Now that's a gap for that we can take and say, they are not able to supply. But we can because we are procuring from Indonesia, Vietnam. So do you see that as an opportunity?

Sir, that is an opportunity, I think. But the actual, what numbers can we mature, means, to what customer? There's actually a local customer. Every customer has a taste. If someone is wearing the shoes of Bata, he will go to the Bata. If he will not find that shoe that he will look for some option. So in that case, maybe he can come to our shops and find. So I think this quarter will just give an indication if we get some traction out of this.

[Operator Instructions] Next, we have a follow-up question from Vipul Shah from RW Equity.

Sir, couple of further follow-ups. Any further updates on the commission to payable to directors? We had one earlier reduction in one director relinquishing voluntarily. But is there any update on that, sir?

Sir, there's no further update. The commission is around INR 6 crores for 4 persons. It is still there, it has not increased. So it is at the same level. If any news will be there, we have also, means, put up the observations of the investor to our management. And maybe some later date, he can decide something.

Okay. And the other thing is sir, do you think we will have to pay a import -- further in our imports from the Asian countries? Because even these countries will realize that since China supply chain is short, there is an opportunity for them. So from these [Audio Gap]

recently, we have imported the canvas plant, so that we can produce in our Unnao factory. We have got a land of 70 acres. So we are doing, means, started doing things in-house. We have imported the canvas plant. Big plant and sourced Chinese people, called them to just to set up the plant. So this -- I think this -- if this is success, then we can shift somehow gradually as the size in getting increased, our -- the market share of this product is getting increased. Currently, this [Audio Gap] for the rest of our production. So I will update you how the things goes.

And is it now -- is it fair and safe to say that the kind of aggressive inventory buildup, which we have seen in the earlier quarters, is now behind us? And there are learnings from those episodes, which will help us now in not sort of going down that route again.

Sir, actually, I think in the last to last conference, Mr. Shuja has also admitted that we have grown so what that we had done a lot of mistakes. And the person learns from the mistakes. We have learned a lot. We have taken a lot of hit also. Now we have improved our supply chain, we have improved our warehousing, reporting and all this. So that we can -- this should not happen in the future. So we'll -- the target is to just keep all these things that way just to improve the working capital and improve the inventory. So that is our target, and you will see the improvement in the time to come.

It would have been actually great if Mr. Mirza was on call today. But...

Actually, he was scheduled to be there. But today morning, he could not come because of the fever and the cold.

Oh, okay.

That was -- he was -- that's why I had announced. But sorry for that.

We have next question from Yogansh Jeswani from Mittal Analytics.

Firstly, congratulations Shyam, sir for a good set of numbers.

Thank you, Yogansh.

Just wanted to understand more on the same-store sales growth that you're mentioning, you said 33% right?

It is 33% in the 9 month. In this 9 month and the same quarter last year 9 month, the same-store growth is 33%.

Right. So sir, but if I look at overall numbers, the turnover growth hasn't been in that line. Because if we are growing what like same-store growth is at 33%[Audio Gap]

The 9 month, I had given the number. In the 9 month, the domestic overall sale is grown by 23% only. But the retail sales is grown by 53%. Out of this, the organic was 30%, but the retail segment is grown by 53%. And the online was -- grown by 5%. The wholesale was at a loss of 1%. So the -- out of the 53% growth in 9 months in the retail segment, the organic was 33%.

Okay. So if I have to break it down a bit more. So earlier, we used to say that the absolute sale on a monthly basis for an online store was INR 25 lakh, if I'm not wrong.

INR 25 lakh to INR 30 lakh on average, you can say, on average.

INR 25 lakh to INR 30 lakh. So has this average moved up substantially? And if yes, what is that number, sir? Are we at INR 35 lakh-plus?

So this -- actually, there are number of stores, around 56 online stores, but some store is going INR 40 lakh. Like Ambala store, that is doing INR 50 lakhs per month. And some stores are doing INR 25 lakh. So means, it is improved, means, now it is -- means, you can say the INR 28 lakh to INR 30 lakh is the ballpark for a store.

Average?

Correct.

Okay. INR 28 lakh to INR 30 lakhs, right. And sir, secondly, we had launched the women line and a few other products. So what is the traction like on those? Are we seeing any good numbers from them?

Yes. Actually, if you talk about the MODE, the MODE segment -- MODE is the brand in the ladies side in which we have got the sport shoes, the MODE garment. And the share of the MODE, means, the footwear share is somewhere around 5% in the footwear side. So this brand is also getting -- taking some traction, there is also getting better.

So do we plan to add in more divisions? Or do we plan to just go or like maybe down to subtract...

We are not trying to add more divisions. We are focusing on these brands to expand. These brands have also a lot of potential to grow. So we are more towards the...

No, sir, I'm saying, are we trying to add ladies garment as well?

Yes, ladies garment. We have started ladies garment also. Ladies garment is also, means, like, we have introduced the ladies jeans, ladies T-shirt. It's not a big segment, but we had started. If you go over our online outlet, you will find the ladies garment, ladies jeans, ladies leggings. You can find ladies sandals is there. So a lot of ladies segment we have introduced. Because ladies have got a lot of greater buyings over than men. So that segment is also very good.

Next we have a follow-up question from Siddharth Oberoi from Prudent Equity.

In the September quarter, that balance sheet that you have come out, there is some other noncurrent liabilities, which is INR 162 crores compared to INR 10 crores for last year. So what is that due to?

This is sir, this is 116. This is accounting AS 116, in which we have to take on records the future rents. Save our future rent for all the outlets for next 10 or 11 years in which we have got the rent agreement. So this is the value of the liability which we have to incur in next 10 or 12 years for the retail outlet. So this is -- you will see the noncurrent liabilities, and you will also find the same figure in the figurehead schedule. The figurehead also increased by INR 150 crores rupees. So this is the contra entry.

Okay. So it is actually INR 162 crores mentioned there. So...

Yes. That's why everybody is asking this question. You will also find the INR 157 crores, something in the figurehead schedule. The figurehead is also increased by that much of amount. So it's a -- that's a contra entry because of the AS 116.

So where is that contra entry? What is the other point you said? Where is it...

In the figure sets, in the figure sets.

Oh, okay. Okay, okay. Got that. Also, this leather business did a loss of INR 7.8 crores this quarter and 9 months, INR 13 crores. Sir, what is the future of this?

Sir, future, means, all -- what -- means we are predicting in this January month, is also good, the old inventories. Actually, the things what happened in the leather, the ROIC prices has gone down drastically to the half. And the inventory, which we had bought at the higher price, that also, means, we have sold inventories so that was the reason of the loss. Now the inventory is at the current prices. So -- and the order book is also the -- capital utilization in this quarter, it also looks good. So in this quarter, there will not be a profit, I think, but it should be breakeven in this quarter. So that will add a lot of value to the overall results.

We have a follow-up question from [ Ranil Matthew ], an Individual Investor.

Just 2 quick questions, sir. Last -- one of the con calls, it was also suggested by some of the participants that we should have an investor presentation along with the results that you declare.

Sir, next time you will -- yes, Mr. [ Ranil ] that was - that should be -- I mean I was supposed to send this but it couldn't be. But next time, you will get the presentation.

Yes. Is it possible for this quarter also, maybe in 1 or 2 days, you are able to do this? Because it also will help...

So I think -- sir, I have given all the numbers, whatever detail should be in the presentation.

No possibly it helps...

What we can do, we can send you this transcript, so you can find the detailed numbers what we have given in the call.

Yes. So what it does is it also helps people who have not participated. So it becomes a documentation from the company itself. And like, it actually builds your -- see, what I'm trying to understand is -- I mean, say is, it builds the credibility in the system.

Sure, sure, sure. Mr.[ Ranil ], noted your point. We will do that.

Yes. Sir, the second one, also as a connection to this is, see, companies like ours in terms of its brand promise is very high. And therefore, also in the market from a branding perspective, is it possible that for you to kind of forecast and envisage how this company would be 3 years from today, 4 years from today? And then what the brand sizes would be? So that people get a feeling in terms of where -- what is the direction. I mean, today, when we talked in the investor conference, it's more from a selling, a trading point of view as how many -- how much is this sold this quarter, how much will be sold next quarter. But I think -- I don't think Mr. Shuja Mirza is -- had that. I think he's more of a brand guy in terms of how he wants to.Because I still remember, one of the conference calls, he was asked where does he see this company in next 10 years or whatever it is? I mean, he said, I want this brand to be fighting with the best in the world. Now the point is, can we have small steps in terms of how do you see in -- from a larger perspective because now we are talking more from a very, very, very short term, which is not a brand perspective, per se. Yes?

Right. So what -- means, your point is totally valid. I will put up this point with the management. And means, we can see how we can address this issue, and we will do something for this.

Yes. So because -- don't get me wrong, but even from your valuation point of view, while somebody else is more highly valued...

No, no. You're correct. Sir, your point is absolutely valid.

Yes. Because there is a brand priority.

That's correct, that's correct. And we will do that. We will just take care of this.

Last question for today comes from Vipul Shah from RW Equity.

Sir, what is the gross debt levels and the net debt levels at the end of this quarter, sir?

Sir, the total debt level is, INR 275 crore is the debt and the bill discounting limit is INR 110 crore. So the - that is -- this is the net debt, INR 275 crore is the debt and INR 110 crore is the bill discounting limit.

And sir, what is the volume growth we have seen this December over previous year, sir?

Sir, as far as the volume are concerned, I can give you the volume of the export. But in the domestic market, the variety of the product is such, means, the -- some of those, like we are selling sandals. Sandal is -- it's selling price is around INR 400, INR 500. So that quantity will not matter. I think that will not have any significance.But in the export side, I'm giving you, we are -- we have increased, means, we have seen the volume growth of -- it is around 26%.

Okay. Because the domestic is substantial -- yes, footwear only I'm asking. Domestic is a substantial part of your business today.

Yes, yes, footwear only -- Sir, domestic means, the numbers will not be of any relevance because the sports shoes has selling price of around INR 1,700 to INR 1,800. Like the Bond Street, we are selling at the price of INR 900 or something. So means, the number of payers will not match, if -- in one of the quarter, the Bond Street is sold lower but these -- but sport is sold higher number. The mix will be changed. So that's why we stopped giving this volume growth in the domestic side.

There are no further questions. Now I hand over the floor to Mr. Shyam Awasthi for closing comments. Over to you, sir.

Thank you very much, all the participant. And I have noted down all your valuable suggestion and -- means, again, thank you for joining our call. Thanks a lot. Bye.

Thank you, sir. Ladies and gentlemen, this concludes your conference for today. Thank you for your participation and for using Door Sabha's conference call service. You may disconnect your lines now. Thank you, and have a pleasant evening.