Monte Carlo Fashions Ltd
NSE:MONTECARLO
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
585.25
870.55
|
| Price Target |
|
We'll email you a reminder when the closing price reaches INR.
Choose the stock you wish to monitor with a price alert.
This alert will be permanently deleted.
Monte Carlo Fashions Ltd
You don't have any saved screeners yet
Ladies and gentlemen, welcome to the Q2 FY '23 Results Conference Call of Monte Carlo Fashions Limited, hosted by Emkay Global Financial Services. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Jigisha Kapoor from Emkay Global Financial Services. Thank you, and over to you.
Thank you. Good morning, everyone. On behalf of Emkay Global, I would like to welcome you all to Q2 and H1 FY '23 Post Results Conference Call of Monte Carlo Fashions Limited. From the company, we have with us the senior management including Mr. Dinesh Gogna, Director; Mr. Sandeep Jain, Executive Director; Mr. Rishabh Oswal, Executive Director; and Mr. R.K. Sharma, CFO of the company.
I would now like to hand over the call to Mr. Sandeep Jain for initial comments. Thank you, and over to you, sir.
A very good evening, everyone, and thank you for joining us for this earnings call of Monte Carlo Fashions to discuss the financial and operating performance for half yearly and quarterly performance of financial '23.
I would like to highlight that certain statements made or discussed over the conference call today will be forward-looking statements. A disclaimer to this effect has been included in the results presentation shared with you earlier. Result documents are also available on the company's website and also have been updated on the stock exchanges. A transcript of this call would also be made available on the Investors section of the company's website.
Now let me share the financial and the operational highlights of H1 and Q2 of financial '23. The company reported revenues of INR 248 crores during quarter 2 financial '23 as against INR 238 crores, thus registering a growth of 4.3% year-on-year. Revenue from online channel sale is INR 8.2 crores for this quarter. Operating EBITDA for this quarter was INR 50 crore against INR 52.7 crores in Q2 financial '22. The PAT stood at INR 30.3 crores as compared to INR 33.9 crores in Q2 financial '22. Revenue from operations H1 financial '23 stood at INR 361 crore as against INR 280 crores in H1 financial '22, thus growing by 29% year-on-year.
Online sales for the first half stood at INR 12.2 crores. Operating EBITDA was INR 55.2 crores in H1 financial '23 as against INR 44 crores in H1 financial '22. Thus, it is growing 25% year-on-year. PAT stood at INR 26.4 crores as a case, INR 23.7 crores in H1 financial '22, growing by 11% year-on-year.
Our balance sheet remains robust, and we continue to enjoy a net debt-free status. We have a cash balance of INR 277 crores, which comprises cash and debt balances along with the current and noncurrent investments. Long-term borrowing is INR 6.7 crores as of September '22 (sic) [ '23 ] compared to INR 8.3 crores as of September '22, which shows our efficiency in serving the [ debt ].
Monte Carlo continues with its endeavor to build our leading branded apparel company with a well-diversified product portfolio, such as cotton, woolen, kids and home furnishing. Apart from the cotton segment, we also produce different other garments. We also produced cotton and cotton branded T-shirts in the economy category under the brand Cloak & Decker. The ability to tap various market segments provides the company the tremendous opportunities for growth in the coming years. The key strength is a wide and growing distribution network with a diversified presence across India.
The company's focus is to reach the end user through different distribution channels. The company currently has 2,252 MBOs plus [ SAS ] and 336 EBOs, 687 national chain stores. Concerning online sales, we are looking to focus more on selling through our own portal. However, our clothes are also available on various e-commerce websites such as AJIO, Amazon, Flipkart, Myntra, FirstCry, Jabong and Kapsons. The company has opened 14 new stores in different regions and at the same time, closed a few nonperformance stores also. In the half year itself, the company achieved more than 50% of the target of the opening 30 [ new stores ] in the financial year. Most of our net revenue is from franchise, EBOs and MBOs where [ we're primarily alone ] preorder or outright basis.
Under this business model, there is no significant inventory risk, and we remain insulated from the average [ hazard ] sales in branded apparel business. I would like to highlight that to date, we have experienced almost 0 bad debts in our business, which stands as a testimony to our robust business model based on 0 credit risk quality for the company.
At Monte Carlo, we try to provide our customers with finance floating through product innovation, high quality and the launch of new collections from time to time. Moreover, we continuously work towards changing the look and the feel of our stores to give our customers a best-in-class experience. We are optimistic about future growth and earnings potential. We believe that have a strong foundation for the future, which we can provide us with sustainable and profitable growth for the longer term. But our focus will be to maximize revenue growth going forward. Our considerable interest is to build profitability by maintaining cost control measures.
Now we can open the floor for the question-and-answer session. If you have any of your queries post this earnings call, you may also write us at investor@montecarlocorporate.com or contact us through [ Dickerson World ], our investor relation advisers. Thank you very much.
[Operator Instructions] We have the first question from the line of [ Rahul Shah ], an individual investor.
Sir, I would like to know how your brand Rock It performed in this quarter?
Okay. I'll ask Rishabh to comment on this.
So the brand Rock It is currently only available online. Coming forward in this summer, we will be available in offline. And in this financial year, we'll be clocking around INR 10 crores to INR 15 crores of turnover from the plan, which was INR 5 crores last year.
Okay. Okay. And so my next question is, what is the current status of the new Jammu and Kashmir project?
See, the current status is that I think we'll be hopefully able to register the land in this November itself as most of the documents have been processed and change of land use -- change of land use documents has been processed by the government. So most probably, the land will be registered in our name in the number itself. And we have already hired a consultant for architect and the PMC consultants. And we also add a few people. So hopefully, we'll be able to start the process by next month.
So you are telling that the land will be in your point, in your land you'll be acquired by next 1 or 2 months?
No, land will be acquired in this month of [Foreign Language].
Okay. And when can we expect the operations?
It takes almost 9 months to 12 months to have the production on the floor. So we can expect this to have a production in third quarter of next financial year.
Okay. Okay. So probably around Diwali?
Around that time, positively.
We have the next question from the line of Viraj Parekh from Carnelian.
A couple of questions from my side. We have doubled our online sales close to INR 19 crores from INR 8.2 crore year-on-year. And even the H1 figures have almost doubled. So you're saying that the Rock It is sold online, solely online. So I just wanted to understand whether these sales are coming from our online partners from our own website, like we haven't been able to achieve double the number of online sales. And the second question is that we have like opened -- will you open more than 30 new stores this FY net of closing? Or do we stick to our annual guidance of opening 30 stores this financial year?
So I would come to the second question first. We have given a guidance of 30 stores in the beginning of this year for this financial year. So the net store addition now we are revising that guidance. I'm happy to announce that we'll be opening around 40 to 45 stores in this financial year. And the net store addition should be between 40% to 45% in this financial year as compared to last year. And again, I'll ask Mr. Rishabh to comment on the online sales and the Rock It sales for this financial year.
So for the first question, if I heard it right, our contribution of our own website, Monte Carlo [ Corporate ] is around 15% to 20% of the total online sales. The other 80% happens through different porters under different models. And Rock It right now is selling online, but it is not a major contributor to the sales online. It is -- going forward when I give the guidance on -- so when I give the guidance of INR 10 crores to INR 15 crores, majority of it will come through off-line distribution channels going forward in the upcoming summer season. So the contribution of Rock It and online sale is not that much. Majority of it is through Monte Carlo plan.
See, we took a decision to change the strategy in favor of off-line channel as we -- and we have discussed with the market people and the distributors. So it made sense for us to launch Rock It in the distribution channel to have the most growth in this brand.
Okay. Just a follow-up, just one question. I mean, for instance, [ online sales contributed ] 15% to 20%. So are we seeing more revenue, more demand from the other e-commerce partners we have in online sales? And the second question follow-up is that, sir, you're revising the guidance of 40, 45 stores. So we would be opening net 40, 45, right, after closing?
Yes. Yes, net 40 to 45 stores in this financial year as compared to our guidance of 30.
And can I answer the first question?
Your voice is not audible. Can you please repeat the first question again?
Sure. Sure. Is it audible now?
Yes.
Yes. So what I'm asking is that since our own website is contributing close to 15% to 20% of online sales. So are we seeing more traction in terms of demand from the e-commerce partners we have in terms of online sales?
Yes, there is higher demand from our e-commerce partners. And also, we are now focusing more on outright sales to these partners. So like Amazon and Flipkart, they've started buying outright products from us where there is no discount sharing, no return on the company side. So we are pressing more of that method since that is more profitable and profitable for us.
All right. Great. Can I just squeeze in the last question. Is there time?
Yes, yes. Sure.
Yes. So I've seen that we doubled our ad expenses from close to 2% of revenue in H1 FY '22 to close to 5% of revenue in FY '23. And in your presentation, you highlighted from where we are spending in which media and through which channels we are doing advertisement. So what is the strategy in terms of advertising? Are we targeting more digital? Are we targeting more media? Can you help me and in which region is the advertising being done? Is this done in the northern region, Eastern region where we have substantial good presence? Or is it being done in West, South or Central region where the presence is a little bit less [ compact ] to not?
See, the first question you asked about the -- how it doubled in this quarter as compared to last financial year. See, on the year basis, I think we'll stick to our guidance of 2% to 3% of budget with the revenues as far as advertising spend is concerned. And it is separate across all the geographies. It's not limited to Northern, Eastern or Central region. It is separate to Southern and Western also because we took the cinemas all across India. And the digital is actually -- digital is already supplied through various websites and various channels all across India. So I'll ask Rishabh also to contribute in this particular segment.
Yes. So as far as our strategy is concerned towards advertisement as Sandeep said, we have spread across geographies. More focus is on online. We've reduced our spend to almost negligible when it comes to TV advertisement. But we've tied up with Air Asia. We have 10 aircraft on board with Monte Carlo advertisement in [ high gear ]. We've also taken up spots in Hotstar during the current work that is happening. And so yes, we've increased our -- but we are trying to be more effective with the spend that we are doing. And we are ditching off-line and TV advertisements in favor of advertisements like in theater, in aircraft, online OTT, so things like this. But the overall spend will stick to the guidance.
Of 2% to 3%?
Yes, 2% to 3%, yes.
Okay. That's really helpful. Just last question. If you could help me with the volume numbers of FY '22 and H1 FY '23 segment-wise, of how we've been able to grow? That would be helpful.
I can give you a broad figure of woolen division, cotton division and textiles. So in woolen division, the volume for this financial first half was 416,000 and which was still at 83,000 in last financial year in last H1. And then in cotton segment, the volume grew to 26.65 lakh pieces as compared to 22.67 lakh pieces last financial year. In textile, it is 582,000 pieces as compared to 513,000 pieces in last financial year. So overall, the growth is approximately if we see in quantities, it is 4 lakh -- [ 44 lakh 4,000 ] as compared to 42 lakh pieces.
We have the next question from the line of Nikhil Jain from Galaxy International.
I just wanted to actually check, see, in this quarter, we had only a 5% sales growth. And on top of that, the margins have also declined. And this is in spite of the fact that we have passed on all the price hikes as communicated in earlier calls. So I just wanted to know like what is actually happening? And we thought that the -- and if you look at the borrow of other companies in the discretionary space, I think they have shown better growth. So I just wanted to have your thoughts on this.
Basically, when we give our guidance, we always give our annual guidance. We never give our quarterly guidance. Quarterly guidance, there are variations season to season. Sometimes there are weddings, which are late, sometimes dispatches are happening as far as seasonality is concerned. So there are variations in quarter-to-quarter. But overall, we remain committed to the guidance which we have given. And the margin decline, the main reason was advertising cost has come into this quarter, but the overall guidance will remain the same. So it will get compensated in the next 2 quarters.
As far as if you see clearly there's a INR 10 crore jump in advertising cost in this quarter as compared to last quarter. But that will again [ rectify ] in the coming quarters. So the overall spend will remain at 2% to 3%. And there is a drop in other income also on the extent of INR 4 crores. So we'll have some benefit also as now that the bond yield has increased. So we'll get that benefit in the coming 2 quarters. So overall, I don't see any issues anywhere as far as margins are concerned. But yes, there are variations from 1 quarter to another quarter. But overall, for the year, we remain optimistic and positive.
Okay. Just one more additional question. So earlier before we have informed that, let's say, for the next winter season, so which is now actually started. So we have passed on all the price hikes and we have seen robust growth, right? So that, hopefully, in the next 2 quarters, we will make up for the sales growth and the margins, right?
See, we are finding very difficult to understand your question. Please speak slowly and clearly, again, I think there are -- the voice is not clear. Can you please repeat it?
Yes, I'm sorry. I just wanted to get your perspective on the next 2 quarters, given that earlier, we have said that we have passed on all the price rise in the commodities. And also, we had a robust season coming in. So we will make up for our guidance in the next 2 quarters, both on sales as well as on margins?
Surely, we stand committed on our guidance, which we gave earlier. And when we give annual guidance, we take into account all the price hikes and also the discounts which we give in the seasons. So I think we remain committed to the guidance which we have given earlier. And as far as [ run through ] price increase is concerned, that is already being passed on to the customer. But whatever raw material prices have come down now in these last 2 months. So that benefit will come in the next financial year.
We have the next question from the line of [ Zaki Nasir ], an individual investor.
Is it audible now?
Yes.
Sir, a commendable performance for the quarter of [ 2Q ] Monte Carlo. [indiscernible] the thing is that in retail apparel, if you see the 10 for other companies also, there has been a slight shift between Q3 and Q2 this year in terms of the season going up. So what is your opinion will happen to Monte Carlo because our bad season is Q3. So would it remain the same? That is my question number one. My question number 2 is you have made for it into South. How is your feel on that market, sir?
The first question is quarter 3, you were asking over quarter 2. Am I right?
Yes. Yes, there is a bit a bit of overlap between the 2 seasons this year. So your opinion on that, sir?
See, what happens is that in a company like us because when there is a change in the wedding season, change in the festivals. So there are some supplies happening in September, some supplies are happening in October. So there are quarter-to-quarter variations. But we are not worried about that as the guidance which we gave is basically a full year basis. So the sales which has not happened in September quarter will happen in October quarter. So that is one area. And what was the second question?
Sir, your feel on the southern markets you've [ referred in your comments ]?
In Southern market, I think as we committed earlier also that we'll be growing around 35% to 40% as compared to last financial reason. We are well on track because we have opened around 4 outlets also. 2 in Hyderabad, 1 in Chennai and 1 in Bangalore, and that is giving us even the response is excellent, and we have a plan to open another 3 outlets in South and also 2 outlets in West also. So overall, we'll be opening around 20% of the total outlets that we opened in pan-India in South and West. That gives us the confidence there going forward. The guidance which we gave is 35 to 45 will be achievable.
We have the next question from the line of Danesh Mistry from First Advisors.
Congratulations. I had a couple of questions. The first 1 was that you've increased your guidance on the stores from 30 to 45. That's quite a large jump. So, a, do you have visibility of opening of the stores in terms of locking in the leases and all? And second, what has driven your sudden positivity around the store openings, sir? That's question number one.
Okay. See, the reason for going to 45 stores from current 30 store is depending upon the market conditions, we find that the market is actually giving us -- there is a demand of opening EBOs in some of the markets where we were not present. So that gives us the confidence that definitely the number can be increased to 45 compared to 30 as compared to last year. And we were a bit conservative also in our guidance in the beginning of the year because we just -- the COVID was ended. So the guidance was very conservative. But I think now it has given us the confidence that we can increase the guidance of 45 stores.
Got it. Got it. And these are again where, in the north or in the South or is it equally spread?
Yes, as I said earlier, that we'll be opening 20% of the stores, new stores in Southern and Western market and [ in best view ] will be open in the rest [ throughout ] India.
Got it. Got it. Okay. I had just another question. See if I compare your inventory position as of September '21, versus September '22. Of course, I know that quarter 3 is a strong -- is generally the strong quarter for us, so we have to stock up on inventory. But our inventory has grown about 30-odd percent Y-o-Y on a balance sheet basis. So is it safe to assume that we can see that kind of throughput in sales in quarter 3? Is it an indicator...
Definitely. When the company is giving [ a titer ] of 20% to 25%, definitely, there would be more inventory in the system as. So this is how this inventory has built up.
Got it. Got it. And lastly, if I remember correctly, last year, quarter 3, we had a corporate -- the CSR expenses. Do we have it this time as well?
No, we book it every quarter. The rules have changed so -- but this quarter we have already booked it.
Got it. And is that why your other expenses are up?
Yes, that is why other expenses are up because of CSR addition of 1 CR in this ...
Understood. So is it safe to assume 1 CR every quarter of CSR, is that a current assumption?
No, no. It is first half. The first half is 1 CR and 1CR again will come into second half.
[Operator Instructions] We have the next question from the line of Sonal Minhas from Prescient Investment Management.
Am I an audible?
Yes. Yes, you are audible.
I wanted to understand like the effort the company has made in terms of reducing their debtor days and inventory by and large. If you could basically just share what has happened in terms of digitization of inventory in terms of tagging the inventory, even writing down the, let's say, 1-year or 2-year old inventory because that's something which significantly affects the gross margins of the business. And you've seen that vary quite a lot quarter-on-quarter. So just want to understand how you first value your inventory, which is current, which is 1-year old, 2-year old? And how has the inventory benchmarking practices improved over the course of the last 3 [ quarters ].
See, inventory is valued at the cost. So whenever it comes back, we value it on the cost. And when it gets sold, so we realize the profit or if it's sold at lesser price. And normally, that inventory is very, very less, approximately 9% of inventory of total company, which comes back, which is getting sold at our own factory outlet. Out of that, it's only 1% or 2% of the inventory, which goes into bulk lots. So that, I think, incurs some loss. But otherwise, all the inventories sold above the cost.
So every inventory is valued at cost and whether it's 1-year old, 2-year old, 3-year old? It basically [indiscernible] ?
No. We don't keep 3-year-old inventory in our system. It's mostly 1- and 2-year old. So we try to get rid of -- the 2 season last year in inventory as early as possible.
And that is done through factory outlet, that is done through e-commerce? How is that done actually?
Some of them is done through factory outlets and some of them is done through selling of bulk lots.
And bulk lots is in B2B?
Bulk load is basically B2B.
Okay. And if I were to just quantify what percentage of inventory would be held and sold in bulk lots, just a ballpark?
I think hardly 1% of the total inventory. I can give you a total actual figure also of last financial year, about [indiscernible] ....
Just want to understand [indiscernible] ...
[indiscernible] approximately 1% of the total inventory. It's not that much because most of the inventory is getting sold at our own factory outlets. So it is just a balance some of the items, like you asked about 2 years or 3 years back, we need to sell it through bulk lots as it was not getting sold at our factory outlets.
Got it. And you said roughly 8% to 9% of the inventory comes back from third parties ...
Approximately in full -- in whole company.
Okay. And sir, on debtors, I just want to understand, I see a downward trend from March '18 until now, debtors going down. But what is our -- on the ground tangible sense the company is doing to actually improve its working capital? I wanted to understand that if you could explain that here.
We are making every conscious effort to bring the debtors down, and we are having a tight control on our even agents, distributors also and our EBOs also. So that is helping us, and that is helping us to bring in debtors out.
Okay. Any near-term target, sir, like, for example, 1 year out, 2 year out? What this company aspiring to achieve in terms of cash conversion or debtors basically, if there is any there?
We would like to bring our debtors down every year the number of days or the debt reparations. But it cannot be come down at a certain 120 level because we sell it around 90 days in most of the goods. And also, there is some sales which is end sales basis, which also takes time. So that would be the prudent level of, I think, 120 days, you can consider at the debtors level.
Okay. And sir, compared to, let's say, your competitors, what would be our better base factors are our channel practice basically, if I were to just compare you to your peers in the market? Are we leaving more [ cred ] on the table? Are we leaving? Is it comparable to your competitors? Just trying to understand that.
It is comparable to all the brands which are surviving in the market because when we are selling to retailers, so they have the credit period from all the companies. So mostly all of the companies who are operating the same business area normally have more or less same credits.
In our case, as you know that our sales is basically happening in the third quarter. So at that time, we have to supply our books a little earlier before the starting of the season. So that makes some number of days more than the other companies as some sale is happening in discounts also in Jan and Feb. Because in sales period, they give us the payments once the goods are sold. So that makes some of the days increased in that case. And not all companies have the third quarter revenue, which is more than other quarters. So basically, we are in a segment where the third quarter contributes almost 50% of the sales of the company.
Sure. So there is a reason for even holding onto inventory and debtors, basically.
Yes. That's the reason that we hold an excess inventory in September quarter because we have to disperse those goods in September and October, and some portion goes until 15th of November. So that is the reason we have to hold high inventory in our system to fulfill the winter sales.
Got it. And sir, if I may just ask, like, to understand how much, let's say, the MRP of product is INR 100. How much roughly do we leave in the channel and realize across sale?
I don't know if any of these are available with us, but I can ask my account department to check it, and I'll let you know after this call is finished.
We have the next question from the line of [ Gaurakh Suchdeva ], an investor.
Sir, you have given an estimate of around 20% growth this year. If may I ask what is your vision for the next few years, maybe 3 to 5 years, will we really be able to grow at the same pace?
See, we intend to grow at the same pace. But again, it depends on the economy. It depends on the macro conditions globally also. So -- but if everything goes well and the economy is growing at 6% to 7% per annum in India as we have been growing in this financial year, I don't think this target is difficult for us to achieve.
We have the next question from the line of Abhishek Maheshwari from SkyRidge Wealth.
A couple of questions. So sir, this quarter, Q2, your advertising and business promotion expenses were very high. And you have said that you will be able to -- you'll be maintaining the levels at 3%, right? 2% to 3%, and -- so like going forward and coming years, should we expect that every Q2, the -- this particular line item will be higher than for the other quarters? Or will it spread evenly across all 4 quarters in coming years?
We cut down advertisement expense heavily in [ the last 2 years ] and over the next year. And now there is a need to increase our advertising cost because we need to promote in various geographies and various channels also. So that is why the guidance which was 1% to 2% last 2 years has gone up to 2% to 3%. But we'll stick to our guidance. And there can be variations in quarter-to-quarter. In some quarters, it may appear more and in some quarters, it may appears less. But the overall guidance will remain at 2% to 3% of the revenues.
Okay. So I should not assume that Q2 will be the highest or Q...
No, you should not assume that. The overall percentage will remain the same, but spread depending upon the season, depending upon the supplies, depending upon the requirement of the market, it can change from quarter-to-quarter.
Okay. Good to know, sir. The second question regarding your sales growth. Sir, in H1, you have already crossed -- 29% sales growth. Sir, Q3 being the best quarter and now that you are opening much -- a lot many stores, do you think you'll be able to cross 30% sales for the full year FY '23?
It's a good guess. So H1 already, I think we have achieved on the line of what this company has given the guidance. And we again reiterate the earlier statement that the 20% to 25% growth is very much achievable, and we are on the track of that. And there might be some surprises if the season goes very well.
Very good, sir. Sir, the third question, J&K facilities will only be producing blankets, right? Or will we have a machinery to accommodate some other products also?
So can you please repeat it?
Sir, J&K facility, it will only be producing blankets or we will have the equipment and machinery to be able to produce some other products too?
No. This facility is built for blankets and quilt. So we'll be making quilts also. We will be making blankets also. And then we have future plans to put up another line, which is a flannel blanket and flannel fabrics. So that is in the second phase of this project. But the first phase of this period will be having a blanket line and also the quilting line. And there's also a plan of doubling this capacity up to 1 year.
Okay. Sir. And sir, Phase 1 compares is a CapEx of INR 80 crores, spread over the next 1 year?
Yes, yes.
Okay. Sir, and my last question, any CapEx are you planning for backward integration also? Or you're focusing more on brand development and the garment manufacturing?
There is a requirement of some warehousing for the company as the business is growing and it's growing at -- last year, we grew at 45%. This year will be growing around 20% to 25%. So we need more space for our products to be dispatched from central warehouse. So we are putting up 2 warehouses in Ludhiana. One warehouse is already completed, which is 82,000 square feet. And one way of is under construction, which is approximately 2 lakh square feet. So this will be having a cost of around 26 to 27 [ seya ] in the CapEx. And no backward integration. No, but no backward integration. It is just the requirement for the future business and supplies for the warehouse in [indiscernible].
We have the next question from the line Dhiral Shah from Phillip Capital.
So what is our capacity utilization?
Right now, we are going 100% capacity utilization in both the plants.
Okay. So do we have...
Dhiral Shah, this is the operator. I would request to turn off the speaker phone, there's a lot of background disturbance that is coming from your line.
Yes. So sir, I just wanted to know, as we are guiding for almost 20%, 25% growth. So do we have incremental capacity to achieve our growth guidance?
See, incremental capacity is not the issue. Basically, we are -- more of 70% of the products are outsourced. So for cotton segment and wouldn't we have a set plus capacity available with us. So there is no constraint as far as increasing capacity or increase in outsourcing is concerned.
Okay. And sir, any reason why our online sales have been halved if I compare with H1 to H1?
See, we already told that there are variations from quarter-to-quarter. Some supplies are happening in October, so that will get compensated when the next quarter comes.
[Operator Instructions] We have the next question from the line of [ Sagar Shah ], an individual investor.
Sir, I just want to know like what top line or revenue growth can we expect for next 2, 3 years? Can you give some guidance on that?
I think, again, we already stated this earlier also that this year, we intend to grow 20% to 25%. And we hope to grow at the same range. Again, it depends on the macro conditions of the country and also if the countries keep on growing at this kind of pace, which we have been growing in this financial year. So we don't see any difficulty to manage the growth rate, whatever we achieve in this financial year also.
We have the next question from the line of [indiscernible] from Ministry of Finance of Onam.
Yes. Am I audible?
You are audible.
Yes. See, I just wanted to have some clarity. In respect of this transfer pricing mechanism between Monte Carlo as a company and all this [ Nahar ] group of the companies. Now I can see from your annual report as well, a lot of purchase and sales transactions are happening between these 2 group companies, a purchase side and as [ real estate ] side. Can you just give a clarity that how you decide this transfer pricing mechanism? And what exactly the partition sales going on with these good companies?
See, this happens at a bland prices. So whatever price they sell to the market they sell to Monte Carlo also. And there are some niche products, which are available with our group companies. We buy from them. Like if you talk about the woolen yarn. So they are 1 of the few suppliers in India who supplies quality woolen yarn and it comes to us at [ market ] prices. And again, it's already to buy our [indiscernible] also.
And then approved by Audit Committee.
Yes. I do understand that part because the volume transactions are buying and selling considering your total yearly purchase and the yearly sales is quite substantial [ money ]. Don't you have the other supplier other than your group company?
No, no, it's not substantial at all. If you see it's, I think, around 10% of the total purchases we do in a year.
It's less than 10% of total purchase we do in a year.
And what do you sell to them?
If we don't sell anything to them. If there are some requirements from their side, like sometimes they ask for some sweaters and some jackets or some products which are available with us, we sell them at the market price. So basically, these transactions already are recorded on [indiscernible].
Second thing, now if I read into your quarter-by-quarter, all your quarters presentation, it seems that the focus of management is going too much towards the cotton side. And it is being highlighted every time that every quarter why cotton sales, cotton-related sales are increasing compared to them. Why is this company's expertise is on the woolen brand. And virtually, there is no competition in terms of your brand capability on the woolen side. So I'm trying to understand why you were going so much towards this cotton side, which is hundreds of other companies are there in the competition compared to woolen, though I know woolen is more of a seasonal product, which -- where you have very huge competitive advantage and brand name and others, which is well established. And even now your competitors cannot come close to it in terms of your brand capability. Why you are going so low there and higher to the side? I understand the seasonality factor, you wanted to mitigate and everything. But is it not going too much on the one side, coming out of your expertise area?
See, I'll answer in 2 steps. See, being a tropical country, where we have 9 months of almost summers and 3 months of winter, it gives less scope for vendor products to grow exponentially at a higher growth rate. And secondly, if you see the geographically, it's only the Northern and Eastern region, we have winters. But if you want to compete in South and West, you need to have a very strong cotton here also. So thirdly, we don't want to restrict ourselves only to 1 category and then to limit ourselves at the mercy of the weather. Also if sometimes the weather is not that severe and the weather is mild, it may affect us also. So considering all these facts, the company has taken a thought of going aggressively into cotton wear segment to stay competitive in all the geographies. And also, that helps company to have dependence on 1 category, but other categories should support the growth.
Cotton includes winter also.
Okay. So third, probably the little clarification with respect to see, in terms of your brand and the quality of the product, which especially in the last 2 years has improved a lot. But most of our sales are going towards the B2B side, and we don't directly go to the customers. And that's why your working capital in terms of receivables and others is just increased. So what's the company's plan to attract and go directly to the consumers where your working capital things will be reduced as well as your pricing power, and the brand power can be more visible rather than going through a lot of middle men here and there and selling through B2B, not really on a B2C matter?
This is contrary to what we are doing. We have around 336 EBOs, which are in great contact with the customers. We have more than 2,000 retailers who are indeed in contact with the customer, wonders are going directly from factory to those places. So there is pain to know that -- you are saying that we are doing only B2B...
Are you selling directly to customer or through your retailers?
We're selling direct to the customers. We are selling directly to the retail partners who sell to the customers. So it's not that -- I can't -- I just can't go and get to the customer and sell my goods. So we have to sell through outlets. We have to sell through retail shops. We have to sell through websites. So they are -- and this is what every brand does in India.
That is what defined is [indiscernible] ...
Let me rephrase the question, sorry, maybe I did not be able to put the questions properly. Let me rephrase this. See the question is, that sales in other brands, for example, [indiscernible] fashions or other brands, they directly sell to the customer through different outlets and they collected the cash almost immediately. So if you see the receivable part is really lower. I mean sometimes they are negative working capital, if I take out the inventory part out. Then in our case, is going to retailers or MBO channels and others, where we're keeping our receivables stuck, and we're getting it at 120 days, compared to if I sell to direct customer where the realization is immediate. I'm just trying to understand that part.
We need to correct you in that. All the brands in India follow the same model. They sell through their own outlets, the sell-through multibrand outlets. They sell through national format stores, they sell through their websites. And just all the companies in India are operating in the same way in which we also operate. But the receivables in our case is, I have already told that. See, in winter season the inventory becomes very high. And also, there is a long winter season sale period also. That is why the receivable days have increased. Otherwise, the model is quite the same as other brands as in India.
Okay. And what is the cotton price impact now [Foreign Language] now the cotton price...
[indiscernible] to come back in the queue for follow-up questions.
We have the next question from the line of Riya Mehta from Equita Investment. [Operator Instructions]
Yes, am I audible?
Yes, you are audible.
So my first question pertains to on the macro front, what is the strategy of the company. Going forward, are we going to increase our potential or we will be increasing both in cotton as well as woolen, so the share remaining constant. This is the first question. Second would be in terms of geographical presence, where are we looking to form them more? And third would be in terms of margin profile since cotton as a percentage is increasing, do we see this trend to continue going forward? And what kind of outlook would you want to give for that?
Consciously, we are increasing our cotton presence year-by-year because we know that, as I answered earlier, also that being a tropical country, where we have 9 months of summer and also geographies where the summers are almost 11 months. So consciously, we are moving into more of increasing cotton sales as there are limitations for selling the woolen items in those areas. And secondly, what was the second question...
On geography.
Geography was already [indiscernible].
Geography and margins. Company margins going forward.
See, margins, I think we'll be able to sustain our margins going forward in this financial year also because all of the increase in cotton prices have been passed on to the consumers.
And what kind of winter order book are we looking for?
What kind of winter order book?
So we order book has been quite strong, as we said earlier also in our business update, which we've given in last quarter. So the order booking was more than 15% overall as far as volumes are concerned. So that is giving us the confidence to reiterate that we will be growing [ 20, 25% ] for this financial.
We have the next question from the line of Sonal Minhas from Prescient Investment Management.
I have 2 questions. First of all, wanted to...
Mr. Sonal, your voice is slightly breaking up. If you will come on the handset mode once.
I'm on the handset. I don't know if I'm in a bad network. Am I orderable, am I better now?
Yes.
Okay, sure. Sorry for the mid. I had 2 questions. The first one was around induction of professional management in the top ranks of the company. I wanted to understand, let's say, what is the plan of the company in the next 3, 4 years or in the last 2 years? What have you done to actually professionalize the management over and beyond the promoter, the group? And secondly, I think I just wanted to understand the related party transactions. I think as an investor or I think as just the analyst community, I think, what we'd love to understand a little bit more the disclosures around the rated party transactions. Because if I see FY '22, FY '21 annual reports as well, give us a fair bit of [indiscernible] numbers. So if this -- is this a business call, can this be done from other entities? Just want to understand the commercials of this in greater bit. And if this can be tapered over the course of the next 2, 3 years, just want to understand that.
So come to the first part of your question, where you're asking about the professional, who have been inducted. See, our company is basically a professional driven company. Definitely, there are owners involved, but they're involving only in the major decisions. All the decisions literally have been taken by the professional depending upon the markets and depending upon everything. And as far as related-party transactions are concerned, it's an arm's length process. I answered earlier also that it's all audited by the auditors also. And this old related party transactions are even less than 10% of our total overall purchase. So I don't think so -- I don't think that there is anything which suggests that we purchase more from our group companies and less from others. It is just less than 10% of the total purchase which has happened in the company.
Sorry, you're saying something? Or should I -- I have a follow on question.
Our audit firm is the best in the country. The Deloitte is auditing us, and they are also auditing the rated party transactions.
We've been given this requirement [indiscernible].
Understand that. And is there a business commercial reason to buy from these groups because they're group entities? I just want to understand, is there like the sole vendor for that? Or is there something which they solely produce?
See, in case of woolen, yes, Oswal is the only one which produce woolen yarn. And they supply to other [indiscernible] also, even they supply to [indiscernible], they supply to U.S., they try to Bennington. So they supply to us also and it's all arm's length practice.
We have the next question from the line of Danesh Mistry from First Advisors.
I had a question on the stores. You said that opened 30 to 45. So these are EBOs. So that would mean that we'd be paying more lease for these stores? And how does that work out for us?
No, mostly, they are franchise outlets. So 90% of the -- 85% to 90% of the outlet we open are a franchise. More, we are a franchise versus rental. And there are some locations which are high rental locations, which we [ can't enter ]. So those are taken by the company and managed by the company. So that is how we proceed every year.
Okay. But do you see any major incremental increase in our rentals because of that? Let's say in the major locations we take a...
We don't see a major CapEx going into this fund.
And the rent, the rent part of is on a major increase, right?
Rent part is borne by the franchisee normally. But wherever we take the -- so on rent, we bear the rent, and then we pay commission to the franchise.
Correct. So -- but we don't see a big increase in that rental cost for us on a company...
We don't see a big increase in rental cost for the company.
We have the last question on the line of Nikhil Jain from Galaxy International.
Just wanted to know -- I just have 2 questions. One, in the cotton segment and in the woolen segment, so what would be the kind of margin difference between these 2? And do we anticipate that margins of the cotton segment will kind of catch up with the woolen segment as we move along over the next 2 to 3 years? So that is question number one. And second is on the store front. Just wanted to get some idea on the economics of a store. So let's say, when do the franchisees generally are able to break even on the stores that they open? So if you have any view on that.
See, if I come to the first question where you are asking about your margins in the cotton and woolen segment. I'm happy to share that the cotton segment is actually more margins activity level as compared to woolen segment. So that, I think, answers your question. And secondly, we expect the franchisee to break in 3 years as and when you open the franchise. Breakeven in 3 years.
And the past performance of the EBO stores is in line with this expectation, right?
Yes, yes. That is why we have been able to increase in most of our existing franchisees to open the more showrooms and more EBOs for us. So that shows us that whatever we have planned, actually, it is as per that expectations only.
I would now like to hand it over to the management for closing comments.
Thank you very much for participating in our conference call. Still, if you have any questions which are not answered or any queries which have not been replied, you can please ask always for our -- Mr. R.K. Sharma, our CFO at investor@montecarlocorporate.com, and also, you can ask our Investor Agency, [ Dickerson World ] for any queries. Thank you very much.
Thank you. On behalf of Emkay Global Financial Services, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.