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Page Industries Ltd
Earnings Call Analysis
Q1-2025 Analysis
Page Industries Ltd
Page Industries delivered stable financial results in Q1 FY 2025 despite a challenging operating environment. The company saw a modest revenue growth of 3.9%, reaching INR 12,775 million, while PAT increased by 4.3% to INR 1,652 million .
The company continues to invest in digital transformation, consumer engagement, and expanding its distribution network, which now includes over 104,696 MBOs, 1,395 exclusive brand stores, and 1,137 LFS outlets. Notably, e-commerce channels experienced significant growth of 32% in Q1, reflecting evolving consumer purchasing preferences .
Despite the marketing spend for the cricketing season impacting the EBITDA, which grew by 2% to INR 2,433 million, Page Industries maintained a healthy EBITDA margin of 19%. Efforts to enhance inventory health have resulted in a reduction of inventory days from 93 to 72 .
Early signs of demand revival, particularly in rural areas, provide optimism for sustained growth. The company's efforts in improving inventory health, product launches, and stringent supply chain management are expected to further bolster this positive trend .
Despite the optimistic outlook, the company remains cautious due to past volatility and expects to see better performances in the latter half of the year. The focus on operational excellence and leveraging technology continues to be a priority to navigate these uncertainties .
With stable input costs, especially in fabric and yarn, Page Industries does not foresee the need for price increases in the current financial year. This stability in costs, coupled with strategic marketing efforts, is expected to sustain their competitive edge .
The company's strategic withdrawal from certain large format stores in favor of strengthening brand presence elsewhere reflects a focused approach to market penetration. This consolidation aligns with their long-term strategy to build a robust and sustainable brand presence .
Recognizing the vast potential in the women’s innerwear market, Page Industries has dedicated teams and marketing strategies to tap into this segment. Additionally, the accessories portfolio is set to contribute significantly, driven by an independent sales vertical focused solely on this category .
The company’s prudent financial management ensures it remains debt-free and well-positioned to reward shareholders, as evidenced by a dividend payout policy aiming to distribute 50% of PAT. This conservative yet flexible approach reflects their commitment to delivering value to stakeholders .
Page Industries is well-poised to capitalize on market opportunities through its robust distribution network, technological advancements, and strategic investments. The ongoing efforts to enhance operational parameters and maintain healthy margins provide a solid foundation for sustained future growth .
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Ladies and gentlemen, good day, and welcome to the Q1 FY '25 Earnings Conference Call of Page Industries Limited by Valerom Advisors. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Anuj Sonpal from Valorem Advisors. Thank you, and over to you, Mr. Sonpal.
Thank you. Good afternoon, everyone, and a very warm welcome to you all. My name is Anuj Sonpal from the Investor Relations team. On behalf of the company, I would like to thank you all for participating in the company's earnings conference call for the first quarter of financial year 2025.
Before we begin, let me mention a short cautionary statement. Some of the statements made in today's earnings call may be forward-looking in nature. Such forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ from those anticipated.
Such statements are based on management's beliefs as well as assumptions made by and information currently available to management. Audiences are cautioned not to place any undue reliance on these forward-looking statements in making any investment decisions.
The purpose of today's earnings call is purely to educate and bring awareness about the company's fundamental business and financial quarter under review.
Now let me introduce you to the management participating with us in today's earnings call and hand it over to them for opening remarks. We firstly have with us Mr. V.S. Ganesh, Managing Director; Mr. Deepanjan, Chief Financial Officer; and Mr. Karthik Yathindra, Senior Vice President and Chief Marketing Officer.
Without any further delay, I request Mr. V.S. Ganesh to start with his opening remarks. Thank you, and over to you, sir.
Thank you, Anuj, and good afternoon, ladies and gentlemen. Welcome to the earnings call for the first quarter of FY '25. As Anuj updated to you today, I'm joined by Mr. Deepanjan, our Chief Financial Officer, and Mr. Karthik, our President and Chief of Sales and Marketing.
Before we discuss the specific numbers, let me briefly touch upon the performance in Q1. The operating environment in Q1 remained stable and largely consistent with the preceding quarters. We are yet to witness significant improvement in consumption, though there are early signs of positive indicators.
Uptick in rural consumption is encouraging and is expected to provide an impetus to overall consumption in coming quarters. Our unwavering focus on sustainable sales practices and enhancing inventory health has contributed to revenue growth and maintaining operating margins.
We continue to invest in digital transformation, consumer engagement through marketing initiatives and in leveraging technology. These focus pursues resulted in a PAT growth of 4.3%, while revenue growth was 3.9% in Q1.
In line with our objectives, we also continued to invest in enhancing consumer reach and experience, also in diversifying and enriching our product offerings, focused on operational excellence and in digital transformation. The good control over expenses has ensured strong operating margins without touching product prices.
Additionally, we expanded our distribution network in line with our long-term objectives. As of the end of June, we have a network of over 104,696 MBOs, 1,395 exclusive brand stores and 1,137 LFS outlets. We are strategically directing our attention towards metros and Tire 2 and 3 cities.
The e-commerce channel had a growth of 32% in Q1, reflecting evolving consumer purchasing preferences and the commitment to fostering our online presence.
Our strategic focus encompasses multiple trends, and this includes intensifying general trade distribution, expanding large format stores and exclusive brand stores, growing the D2C business, improving the customer experience, strengthening the product portfolio, strong partner and consumer engagement and brand building measures to ensure -- brand building measures to ensure good brand recall and ensuring a robust supply chain.
Your unwavering support and trust in Page Industries is very encouraging, and we eagerly anticipate the opportunity to address any questions you may have and provide further insights into our performance during this call.
So Deepanjan will now take you through the specifics of the quarter, followed by addressing any queries that you may have. Thank you so much, and thanks once again for joining the call today.
Thank you, V.S.G. Good afternoon, everyone, and welcome again to today's earnings call. I hope you're all keeping well, and I'm pleased to share the results of Q1 of FY '25.
So to take you through the highlights of key financial highlights in Q1, we recorded sales volumes of 57.4 million pieces, a growth of 2.6% year-on-year. Revenue in quarter 1 was INR 12,775 million, which was a growth of 3.9% year-on-year.
EBITDA for the period was INR 2,433 million, which was a growth of 2% over the last quarter. EBITDA margin was 19%, with stable raw material costs, margins have remained healthy. Though there was marketing spends for the cricketing season in Q1.
PAT in Q1 was INR 1,652 million, which was a growth of 4.3% Y-o-Y. Inventory days was 72 as against 93 days in the end of FY '24. Focus on healthier inventory in the distribution network has resulted in maintaining optimum inventory levels. Working capital days was 73 days, and it was in line with that in the end of FY '24. We continue to remain debt free.
To summarize our financial performance with robust operational parameters, we are well positioned to benefit from resumption of demand. We remain focused on expansion in multiple channels, digitization and leveraging technology to deliver value to all our stakeholders.
We can now discuss any queries that you may have.
[Operator Instructions] The first question is from the line of Avi Mehta from Macquarie.
So it is heartening to see your comment on early signs of demand revival. Wanted to just check, are you more optimistic on calling a recovery now versus what we -- where we were in the end of the fourth quarter?
Yes, more optimistic because of 2 things. One is we are seeing better footfalls and the revival in demand and all the hard work we did in the last 1 year, I'm sure it will pay dividends as we move forward. The actions we took to improve the inventory health at distribution making sure the launch of a new product are seeing the light of the day, bringing in more hygiene and discipline across the value chain, the marketing efforts we have taken, all this is definitely going to help us. So that gives us a lot of courage and confidence.
So you expect -- how do you expect the year to pan out, again, second half, mid-teens? Or how do you see that would be useful to understand that changes?
Early days, Avi, because of whatever we are seeing is something we had to see how long it will last because it has been pretty volatile in the past. So it is definitely a wait and watch for us. And I hope with the festive season coming up, it should be buoyant. And we hope to see a good second half of the year, that is the hope which we have.
Got it, sir. So just on the second bit was on the -- just understanding the industry dynamics. One, how is the dealer inventory in the athleisure space now? Where does it stand versus normalized levels? And also if you could update us on the discounting pressures, how do they -- how are there in the industry?
Avi, I feel Karthik will be able to throw more light on that. Karthik, if you want to take that?
Yes, please. Avi, thanks for the question. From the time we've started order replenishment as a process for primary selling to our distributors. Our inventory levels have now come down by about a little over 6 days at an overall level. Of course, there's a lot more pronounced for the athleisure, more than 10 days of inventory has been reduced at the distributor level.
And as far as discounting is concerned, I think it's a lot more under control as an industry right now, because I would imagine that players who do indulge in discounting have actually not seen much of a throughput during those periods of discounting.
In the early times of last year, the first 2 quarters, there were ramp in discounting in the. However, that has come down substantially in the second half of last year. We've not seen major discounting from players in quarter 1 neither.
Perfect. Sorry, just a clarification, you said more than 10 days reduction in athleisure, is it now lower than normalized levels? I didn't kind of understand that point, sorry.
No. What I mentioned, Mr. Mehta was that from the time we started out of replenishment system to where we are today. We have more than 10 days of inventory that has come down at the distributor point. I see a couple of quarters more before we can be at an optimum level where secondaries and primaries would be at tandem.
Got it. Got it. I just have one question, if I may. Just on how is the input cost environment and whether there is any need for price hikes? That's all from my side.
So the input cost has been largely stable. In fact, cotton prices are quite stable on -- and it is on the lower side. So we don't see any input costs, especially in the fabric and yarn creating a pressure that can lead us to any price increase. So current financial year, as of now, there is every reason to believe that there will be no price increase in the current financial year.
[Operator Instructions] The next question is from the line of Amar Kalkundrikar from Nippon India Mutual Fund.
Can you speak a little bit about secondary demand trends? That's one. And number two, did I hear Karthik right that it will take a couple of quarters for secondary and primary sales trends to sort of come in tandem?
Amar, thanks for the question. In quarter 1, we've seen secondary and tertiary numbers to be ahead of primary. That's a reflection of the inventory holding in the value chain. So we've seen better secondaries and primaries when compared to what we reported as primary. And yes, I'll repeat myself, I think if the demand continues the way it is, if quarter 1 is any reflection of what we can expect in the future, then it would take us another couple of quarters before secondary and primary.
The next question is from the line of Devanshu Bansal from Emkay Global.
Sir, I want to better understand your comment around green shoots in demand. So typically, Q2 and Q3, volumes have historically remained in line with what we have delivered in Q1. Is it that this time around, we may see some growth in the coming quarters versus Q1? Is this a right reading of your comment?
Mr. Bansal, it's early days, but we are optimistic. And as we move forward, things should look better. So that we are all gearing up towards that.
Got it. Mr. Ganesh. Just a small follow-up here. So as the current demand environment is there, so would -- in that light, would that be a fair assumption? Obviously, we don't know how coming months will behave. But based on whatever we have been through this quarter so far, based on that, will that be a right assumption?
You are right.
Got it, sir. Karthik, last time around, you mentioned that channel inventory was closer to 20 million pieces. Just if you could sort of suggest the number at Q1 end, how is that as of now?
There's not been much of a decrease from an absolute point of view. However, Q1 typically is a high contributing quarter for us. From that standpoint, the number of days of inventory has come down, whereas the absolute inventory holding will remain more or less similar to what I had mentioned earlier, Mr. Bansal.
Got it. Last question from my end. Realization has improved 1% almost in this quarter, and this is despite we not taking any sort of price hikes. Is this due to a better revenue mix with athleisure women growing faster than men? Is this a right assumption?
We've seen both. It is a function of category mix and also within categories, we've seen the premium ranges perform better than the premium mix.
The next question is from the line of Kirti G. Dalvi from Enam AMC.
Just a couple of questions. Coming back on the same secondary or tertiary demand. If you want to hazard a guess against a 3% growth in our sales number volume-wise, how much would be the growth you see in secondary or tertiary demand?
Kirti, without mentioning the absolute numbers, let me just mention that secondary and tertiary demand has been ahead of primary. So we've seen better numbers at point of sale when compared to what we've realized in primary purely because of the inventory holding that we have in our channel.
Okay. Second question, pertaining to margins front as our gross margins have improved on a Y-o-Y basis, and OPMs got impacted because as we mentioned, we spent on the marketing and other stuff. Do we see the spend continuing, especially on the promotion and the marketing side?
So typically, on the marketing side, we spend around 4% to 5% of our net revenue, and that's what will continue. So that's on an annual basis. In a quarterly level, there can be some variations. But overall, for the year, it will be at 4% to 5% levels. And the overall operating margin at EBITDA level, I think we have done around 19% current quarter, which would be largely there within the 18% to 21% even at the annual level.
Okay. And sir, on capacity utilization and the expansion part, if you could throw some light. That would be my last question.
So currently, our capacity -- planned capacity is around 200 million pieces. And our current expansion plan with the increase in efficiency, we do not have immediate plans of any additional manufacturing facility, while the Odisha plant is nearing completion, and I think we should be getting into initial production days in the last quarter of this year.
Okay. So plan -- I mean in terms of the absolute value wise there won't be any backward integration-related CapEx plan?
Not this year.
The next question is from the line of Sameer Gupta from India Infoline.
Firstly, some bookkeeping questions. Growth in the EBO channel this quarter, is it materially higher than the reported number? And just to add to that regarding the channel, and the LFS channel, if I look at, there has been a sharp reduction over the quarters in the past few quarters in terms of our REITs used to be around 3,000 stores and today, it's around INR 1,300 or something -- 1,100 or something. So just wanted to understand this aspect in a little more detail as to what is going on in this channel.
Thank you, Sameer, for the question. To address your first question, yes, we've seen -- when compared to the average e-commerce has performed much higher, followed by the exclusive branch or given the expansion drive that we have in that particular channel, then followed by general trade.
Coming to your second question. On the large format store, we've taken strategic calls in terms of consolidating our presence in this particular channel and have had to exit a few key accounts where we've been present in the past. This is in line with our long-term plans of building the brand in this channel.
And has that been a material contributor in the kind of growth or the kind of sales performance that you have reported in the last few quarters?
Not necessarily. Large format store as a channel is a small contribution to our overall business. The loss in sales that has been experienced because of the consolidation has not affected the overall numbers that have been reported.
Great, sir. Secondly, sir, the -- I mean, it's been like 6, 7 quarters now, and we are still contingent on overall consumption coming back. There was a lack of discipline in terms of other players. But what I also noticed or there's a feeling that there has been a pricing gap between Jockey and smaller brands, which has kind of widened in the last few -- recent years or so.
And incomes have not really kept pace with this kind of pricing and the natural upgrading, which used to happen from smaller brands to Jockey, that has kind of been paused. So -- like, is there a plan to launch a flanker brand at a lower price at some point if this kind of performance continues? Or is that not possible? Some thoughts on that?
So a couple of things. Firstly, in the last couple of years, if at all, from what the study of competition and who we consider our target audience, the available brands and Jockey, the gap is only reduced because Jockey has stuck to its prices for the last 24 months now. The last price increase that was initiated by the brand was back in July '22, and there -- exactly about 2 years since we touched our prices. And the way we mapped it against players who address the same target audience, the gap has, in fact, come down.
As far as the second question is concerned, there is no plan for the launch of a sub-brand at least. But of course, if there is an opportunity for us to hit value price points, with our products without compromising on quality or consumer experience, that is something we strive to do.
With some level of input cost reduction that has been favorable to the brand, there have been a few products strategically launched over the last 4 to 5 months, especially in the athleisure category, which are at very tight price points, addressing the value-seeking consumer.
And this would be under Jockey brand only?
That's correct. It is under Jockey.
Is there a restriction on launching any other brand apart from Jockey? I mean just trying to understand that part also.
I mean, strategically, we don't see a need for us to launch a sub-brand within Jockey. And again, we would not be entering a brand that directly competes with Jockey either, even if it is a separate brand.
The next question is from the line of Sheela Rathi from Morgan Stanley.
So thank you for bringing this idea that there are green shoots emerging, secondary and tertiary doing better than primary premium doing better. So just wanted to understand, if there are any specific markets where we are seeing these green shoots emerging. Is it the metro cities or the smaller towns? If you could give more details around that, that will be very helpful.
Thank you, Sheela, for the question. We are definitely seeing better growth rates in a smaller town when compared to metros and this is in fact, inversely proportional to the size of the town, right? So Tier 3 and Tier 4 towns are seeing better growth rates when compared to metros, Tier 1s and Tier 2s. That's what we witnessed in quarter 1.
But otherwise, in terms of geography, we don't see a big difference between how the different geographies are performing between north, south, east and west.
Understood. So Karthik, just a follow-up here. Is this a change versus what we have been observing for the last 4 to 6 quarters?
Yes, it has been consistent in the sense, not significantly higher, but definitely higher than metros and Tier 1s and Tier 2s. Tier 3s and Tier 4s have been consistently doing better over the last 2 to 3 quarters at least.
Okay. So that has -- so it's a trend which is continuing from a Tier 2, Tier 3 market where they are doing better and the metro cities are relatively doing weaker versus the past. Is that a fair assessment?
No, I'm not saying they're doing weaker when compared to the past. I'm saying in relation to Tier 3 and Tier 4, the growth rates are lower in metros. The base of the business is still much higher in metros and Tier 1s, as you would imagine. But the growth rate because these markets are nascent, are much higher in Tier 3 and Tier 4.
Okay. The second question because e-commerce channel is doing well for us. Just wanted to understand, is there any margin gap, which we observed here versus the off-line channel? I mean, are the margins comparable or there is some -- are the margins slightly low on the lower hand?
E-commerce, as a whole, I mean, we have got 3 verticals in e-commerce, B2B as well as D2C, so there are 3 verticals. So e-commerce as a whole, the margins are more or less comparable with the offline business. Whereas within the e-commerce, D2C has got slightly lesser margins because the spends in marketing even the delivery costs are slightly higher, but largely, they are comparable.
Okay. So B2C will be lower than the B2B. Is that right?
Yes. Yes.
Okay. One final question. In terms of international opportunities, are we seeing any -- I mean, are there any thoughts around increasing our exports in the coming years? And what are the early thoughts?
We are looking to consolidate our international presence. There are a few markets which lend itself to the products that we make here from India and become a natural extension in terms of placing us there. There is specific focus towards those geographies. I believe in the coming years, we should see some level of focused approach towards our international business.
So most of the plants will be more from a medium-term perspective. Is that fair? Or we could see this in the coming quarters or something?
It will be from a medium term because entry into any market and to have a meaningful presence and do business there takes time. We are looking to make sure there is sufficient market and consumer understanding before we go and have a meaningful play there.
The next question is from the line of Shirish Pardeshi from Centrum Broking.
A couple of questions. Starting with -- on Slide 4, you mentioned the green shoot. So let me harp a little better to understand. And just relating to what Karthik just mentioned that Tier 2 -- Tier 3, Tier 4 markets are doing better. So if you can help me to understand what are the top 20 markets contribution? And I would assume that, that will contain the metros. And then equally, what is the Tier 3, Tier 4 contribution or how it has moved over 1 year?
Karthik, do you have the data for that?
Yes. Just give me a moment. Yes. So metros and Tier 1s, the way we classify it contribute to a little over 50% of our business, and Tier 2 downwards in the late 40s in terms of contribution.
And the balance is Tier 3, Tier 4, what you're saying?
That's correct.
So why I was more interested today, if you can give me some regional variation. Because what I understand and our market visits says that there is not that big problem in South, but it's more on the northern side. So is that observation is correct or maybe if you can help us what is actually happening on ground?
No, Shirish, we don't see a differential performance from a growth rate point of view across -- that's what I clarified earlier, across the region between North, South and East, West. Contributions vary. That's a function of our presence. But in terms of growth performance, we don't see a that difference in how one region is performing compared to the rest.
No, this is common in relation to your Tier 2, Tier 3 commentary -- Tier 3, Tier 4.
No. Tier 2, 3, 4 across the country, like I mentioned, is growing better than metros and Tier 1. But if I had to split it geographically between North, South, East and West, our performance has been consistent, more or less.
Okay. My second question is that recently, the FMCG trend, which is looking at the rural is growing much faster, while there will be some issues in the urban regarding the income generation activities, which are a little lower. So do you anticipate this kind of issues will come up in future and then we'll be forced to drop the prices further? Or it's too early to take a call at this time?
We don't anticipate such adverse reactions to the product at the current pricing, at least in the foreseeable future, we don't see a need for us to drop the price.
Okay. My last question on -- our revenue growth was about 3.9%, while our other expenses have grown much higher and sharper. So if you can tell me if there is one-off. I mean, you did explain there is an ad spend, which is the thing, but is there any material change, which you can see?
No, not exactly. So when we say other expenses, it does include marketing. It also includes IT expenses. So marketing is what we have seen a bit of a higher spends in the current quarter. Though we remain within that 4% to 5% annually. And in IT expenses, we have gone into major digital transformation initiatives.
So we do see a slightly higher digital spends towards IT in this quarter as well as it will escalate a bit more in the coming quarters. But yes, factoring all those things as still our margins -- operating margins, we are quite confident that it should be maintained within the 18% to 21%.
The next question is from the line of Gaurav Jogani from Axis Capital.
Sir, my first question is with regards to a comment on the annual -- in the annual report. You have mentioned that you target to be a USD 1 billion revenue company by FY '26. Now going by the current trends, do you still feel that target is achievable? Or there is some postponement to that particular target?
Gaurav, you are right, it may be tough to achieve the target at that speed because this was -- we projected this number way back, then we had the volatility during the pandemic and then we had last year, a challenging year for retail across the brands. So we have to consider all this, and then we need to recast the numbers and look at a more realistic trajectory for us. And we are actually working on that. So we are revisiting a 3-year and 5-year plan.
Sir, any sense that you can give a well -- as per your internal target, when you think you can achieve this mark or at least the best possibility by which this mark can be achieved?
We -- it's still work in progress for us. We are revisiting the pay book for the 3-year and 5-year. So maybe we'll be able to give more clarity in the next meeting, when we meet up next time, because it's still work in progress.
Sure. Sir, my next question is with regards to the Bangladesh disruption. I remember earlier, there was some supply chain or some sourcing that you used to do from Bangladesh. So sir, any impact on your sourcing because of this near-term disruption that you see there?
No, because we import very small quantity, few thousand pieces a month from Bangladesh. And those SKUs are actually having very healthy inventory in our warehouses. And today, I got an update those -- that factory, which is actually supplying for us is back in operation. So we don't foresee any risk at all.
And secondly, when it comes to supply chain, we have made sure no category or no product, critical product is with one vendor. It is always having multiple vendor source, both geographically also. So we always have the risk mitigation plan. And for major size, we also share the production between in-house and outsourcing so that we can manage all these volatilities.
Sir, my last question is with regards to, again, the industry inventory that you could see earlier that used to be quite high. Now given the fact that the discounting has come down meaningfully in the last 6 months and even in this quarter, do you think the channel inventory overall for the industry is at a healthy level, which eventually could help you to grow during the second half without any increasing competitive activities?
Yes, as Karthik updated sometime back, the -- should be -- the inventory levels have become more and more healthy over time with the discipline with which we have driven the ARS. And of course, the number varies category to category, it is in the teens as far as inventory days reduction are concerned for the athleisure products.
And some of the other categories, we embarked on this journey later. For example, the last category we touched upon on ARS, which is still work in progress with Juniors, which is comparatively lesser inventory day reduction. So as the inventory health improves, it will definitely help our numbers. And as Karthik said, while it will show good health improvement and therefore, good sales in the coming days, the primaries will be in line with secondaries once we give a quarter or 2 more of the inventory to come to optimal levels.
The next question is from the line of Nihal Mahesh Jham from AMBIT.
Sir, one clarification [Technical Difficulty].
Mr. Jham, you're not audible. Mr. Jham?
Am I audible?
Yes, Nihal, we can hear you now.
Sorry. Sir, I was just clarifying on the manufacturing capacity. Historically, I think [Technical Difficulty].
Nihal, your line seems to be very choppy. We are not able to hear you now.
The next question is from the line of Ankit Kedia from PhillipCapital.
Sir, my first question is regarding the consumer movement from economy to your products previously the Lux or Dollar consumers used to migrate to Jockey, at least Modern Classic.
Do you think now with Zudio coming in and having a good inventory of men's and women's wear our customers have got more choice now and instead of moving towards Jockey or Modern Classic of Jockey at least the young audience is first trying Zudio and then seeing the move in there, because they also have now 550, 600 stores today.
Yes. So if you look at it at innerwear as a category that's more relevant when you take that company and compare ours. I don't see when you talked about Zudio and other companies because for them, they have multiple products, they are not an innerwear brand per se. And if you look at the market share and the penetration, which we at 17%, 18% and dominating the market, you can understand how fragmented it is and there is enough headroom for all of us to grow, and we have tremendous opportunity.
Sure. Sir, my second question is regarding the accessories portfolio. Our check suggest that you have really invested a lot of the sales force in the accessories part of the business. Can you just throw -- help us understand over the next 2 years, which all category extensions are you doing in accessories? And what could be the revenue contribution coming in from the accessories portfolio now?
Karthik, you want to take it?
Yes, yes. Thank you, Ankit. Even the current portfolio of accessories that we hold is quite substantial and hence, we moved to have an independent sales vertical addressing only this vertical. Within accessories today, we include our categories like socks, towels, caps, hand kerchiefs, and face masks, which has little relevance today, but it forms the part of our portfolio. So we have a good enough width in terms of set of products to put out in the market.
I think we have a lot to achieve within what we have as a product portfolio from a revenue standpoint. Obviously, we will still be in the lookout for relevant categories from a product development point of view where we see an opportunity for the brand to associate itself and capitalize on market opportunity.
But for now, at least this financial year, the move to have an independent sales team is to essentially address the portfolio that's already in hand.
Is it fair that the number would be high single-digit contribution for this vertical?
Yes, it is thereabouts.
And my last question is on the EBOs, store opening...
Sorry to interrupt sir. May we request that you return to the question queue for follow-up questions as there are several participants waiting. The next question is from the line of Tejash Shah from Avendus Spark, Institutional Equities.
Sir, my first question pertains to distribution. I believe in your opening remarks or somewhere answering the question, you said that we have consolidated our presence in modern trade. So could you share the insights behind this decision? And additionally, how should we think about distribution expansion at consolidated basis for this fiscal and the next?
So I think expansion is something that we are committed to, but meaningful expansions where we believe the brand would be placed and done justice to with all the brand principles and business principles with which we've grown the brand thus far. So as long as these are in place, and we believe the channel provides an opportunity for us to grow, expansion will be the way forward.
We have, however, like I said, taken calls on specific accounts where we believe it's not favorable for the brand to be present in the way we want to be present from a strategic standpoint, which is where we have consolidated. But otherwise, across modern retail as well as general trade, we would be looking at expansion in a meaningful manner.
Sure. Any number you can actually give to this meaningful number?
Number for? Tejash?
As in the sense ballpark, how much you target usually expansion, distribution expansion, looking at demand scenario and our own challenges on inventory today?
So especially in modern retail expansion is not under our control. It's got to do with how the accounts that are there and what expansion plans they have. As far as a brand that operates in that channel, we just want to pick and choose who we want to work with and make ourselves available there. We have no influence on driving expansion as far as seeing modern retail challenges -- channel is concerned, the large format store.
We also categorize our exclusive brand stores under modern retail. There, it's a stated strategy that we look to expand anywhere between 150 to 180 stores every year. That's the plan we have for this year as well.
Got it. And last one for last almost 2 years in some way or another we are trying to figure out if our value proposition to customers has changed after COVID, and we seem to be very confident that it has not. So what tools or benchmark that we use to measure our product's competitiveness or value proposition compared to our previous products?
We do a like-to-like comparison of the product and the price point over a period of time. So we have a clearly defined target audience. We have a clearly defined set of competitors who we believe address the same target audience. We benchmark ourselves against these competitors in terms of their product offering and price points. That's the confidence we have, having done this consistently.
And it's not a new exercise or activity we're doing. This we've been doing since a very, very long time in terms of ensuring that we are relevant in the market, both in terms of product offering as well as price points.
And have we added Zudio, or Decathlon products in this peer set in the last 2, 3 years for comparison?
Not for Innerwear as a category, but in relevant areas in athleisure, they do feature.
The next question is from the line of Garima Mishra from Kotak.
My question was more on the various categories you have and the green shoots and demands that you mentioned, should we construe that you're seeing very similar trends across the 3 categories, men's innerwear, women's innerwear and athleisure?
Thank you Garima. From a secondary and tertiary point of view, yes, we are seeing a similar uptick across the categories we are present in. However, how it translates into primary, like I mentioned earlier, is a function of the inventory that we are holding. That's why we are seeing the difference. Our inventory holding at the channel level today higher for outerwear when compared to innerwear and hence, that effect on our primary reported numbers.
Got it. But what you're trying to say here is that at least the -- if we exclude this inventory bid, you are seeing very similar demand trends across the 3 categories, right?
That's correct. At a tertiary and secondary level, it's consistent.
Got it. Understood. Second question is, see, women's wear you've highlighted is a very large underpenetrated category largely informal today. Are there any steps you are taking in terms of your loan capabilities, design, distribution, et cetera, to better tap into this category?
Yes, definitely. Women's innerwear is one market, which is obviously much larger than the men's innerwear market. It is also a market that is -- in relation to men's, the level of organization of the market is much lower, it's largely unorganized.
And even within the organized sector, within branded play, the number of credible players are much higher in the women's innerwear space when compared to men's innerwear. And hence, makes that market that much more competitive.
in order to address that opportunity, it's only recently that we've had in the last 3 years now have dedicated sales vertical addressing this category separately. Even the way we approach this business internally in terms of our structure is there is an independent team right from product design, marketing, product management as well as sales addressing only the women's innerwear market.
So this is to ensure that we give it the requisite focus so that we can capitalize on the market. Even from a marketing standpoint, our investments are skewed disproportionately towards the woman consumer to make sure we are able to build that -- connect with that consumer at an emotional level.
So these are some of the steps we've taken as an organization and we are in a way committed to these steps to continue persisting in trying to gain share from the existing organized market and also grow the entire pie of organized by converting consumers from the unorganized market towards the organized market [indiscernible].
The next question is from the line of Sabyasachi Mukerji from Bajaj Finserv Asset Management Company.
Just trying to understand your comment on secondary and tertiary sales growth being better than primary growth of 2.6% volume growth for this quarter. Then, I mean, how does it -- the inventory channel -- inventory is kind of stagnant at 20 million pieces, which was there in last quarter as well. Is it because of the different basis that we are talking about here?
It's also because the way we -- in terms of number of days, the difference we look at is mainly because of -- see in quarter 1, we tend to fill in a lot more inventory than the rest of the quarters because historically, it's been a large quarter for us, quarter 1 as well as quarter 3.
So there is some level of input that goes in as far as quarter 1 is concerned in primary. That is the reason you see that the overall base inventory remaining more or less the same. There is a reduction, not enough to speak about.
Okay. Okay. So basically, it means that while the percentage growth might be higher in secondary and tertiary, but because the base was lower in terms of absolute pieces, that's why we are seeing -- not seeing a meaningful reduction in the absolute inventory. That's the correct understanding?
That's correct. On the -- in the primary front, yes.
Got it. And you mentioned that probably this will take another couple of quarters unless we see a good uptick in the demand environment.
It just goes either way. It depends on how the secondary and tertiary demand continues. If you see a good uptick, this could be sooner as well, yes.
Got it. On the e-com channel, I believe it is about 7%, 8% of our total sales, how much would be quick commerce out of it?
Quick commerce is a new venture for us. We've been operating with one of the players for about a year now, but majority of the -- and today, we operate with about 4 players and soon to start with 2 more. But majority of this initiation has happened in the last 2 to 3 months. So at this point in time, quick commerce contribution is low, but I'm sure by the end of this year, it should be decent.
And when we mentioned that there are 3 verticals when it comes to e-commerce, so B2B, B2C -- so B2B, again, would be some of these aggregators platforms, online platforms, and there will be quick commerce as well.
No, not exactly. Go ahead.
We bought -- what Deepanjan meant was we have a B2B where we do an outright business with some of the large players. And then we have Page Industries listed as a seller in these marketplaces. That is the second route. And third route is Jockey.in, the brand monobrand website.
Okay. Okay. And quick commerce would be that outright -- under the outright sale category?
So it varies, Sabya. It depends on the mode. In majority players, we operate as a seller on the marketplace as well as do an outright. Quick commerce also it's not one formula for all the players. It depends on the agreement that we entered into with individual players. It could be outright. It could also be via marketplace.
And margins and working capital for all these 3 mode of operations in e-com would be similar or any difference over there?
I think we did answer that. So there will be slight differences between B2B versus the B2C verticals. So e-commerce B2B's margins are very much similar to our offline businesses. But as the B2C segment of it, B2C verticals are slightly lower because it does require heavy advertisements or marketing investments in terms of customer acquisitions, also the delivery costs tend to be a slightly higher in case of marketplace and Jockey.in. So that's why the margins in these 2 B2C segments tend to be slightly lower than the B2B segment.
The next question is from the line of Ravi Naredi from Naredi Investments.
Yes, sir. V. Ganesh MD sir, you are managing company well and you declared INR 300 interim dividend, which is fabulous one. It shows how our stocks and debtors are under control. Sir, you had given a target to reach USD 1 billion by 2026 in your annual report. So what preparation in our mind and have you sufficient capacity to achieve this. So how you grow 35% CAGR in the next 2 years. This is my question.
Thank you. As we updated previously, that may be a tough ask. This was a guidance or a target we set for ourselves few years back, and now we need to recast the numbers and be more realistic about it because we had a lot of turbulence in the business in the recent past, and we also had a very challenging last year.
And we need to appreciate all those and relook at our strategies and plan for the future. So we are in the process of recasting the 3-year and 5-year plan. And then we'll be able to kind of understand how quickly we can reach the INR 1,000 crore mark.
Okay. So now by 2026, we still have a plan to reach USD 1 billion target?
No, that's what I said. That may be tough to grow at that rate, and that's where we need to be realistic. There are 2 reasons. One is it is tough, and second is we need to make sure whatever growth we achieve is hygienic and sustainable. We should not be looking at short-term trends, we should be prepared to run the marathon. So that has been our philosophy, which has helped the brand over time, and we would be navigating through that strategy and for which we are now recasting a 3-year and 5-year plan.
Well, we have sufficient capacity or we go without capacity. We...
You mean manufacturing capacity?
Yes, yes, yes.
Manufacturing capacity, we currently have a capacity for around 200 million pieces. And with outsourcing, we can move -- go up to 260 million. And we are continuously working on expansion. So as part of our annual plan and the 3-year and 5-year plan, we keep looking at -- and we keep calibrating the expansion of the back end with new units.
So we are now having Odisha unit. And we are also having 1 more unit in the outskirts of Mysore. These 2 are coming up. And we will be constantly looking and planning our expansions according to the market demand.
Right. So 200 million our production, 260 million outside production?
No, no, 200 million our production and 60 million outsourced production so giving a total capacity of 260 million.
The next question is from the line of Onkar Ghugardare from Shree Investments.
Am I audible, sir?
Yes. Yes, please.
Yes. My question was, since you have declared INR 300 dividend. So have you changed any dividend policy or like, what is the reason of this dividend because last year...
Well, our cash balance looks very healthy, and we are considered the investment requirements for the future with a very conservative plan. So we always also look at the worst-case scenario, the likely and the best-case scenario and prepare ourselves accordingly.
And with a very, very conservative plan, we look at the projection. We also consider the CapEx requirements, the expansion plans and the cash reserve we have since we have a pretty good reserve -- healthy reserve, we thought it is better, we have a better dividend payout and give the money to our stakeholders or shareholders rather than holding it for and on behalf of them.
No. Actually, what I meant was this is a one-off or like this is how it is going to be in the future.
That depends on the top line every quarter, so we need to wait and watch.
So as MD explained, we do assess the annual requirements and even the future requirements. And based on that, is the cash balance supports it, we will give -- we can give higher dividends. But yes, every time before we declare dividends, we assess what is the future requirement.
Okay. Because last year's full dividend was around this much. So that's why this question arises.
Yes. Business situations are different. So we are in a better position now, and as MD explained, we have assessed our future requirements or CapEx requirements. So currently, yes, we are in a position to give a higher dividend in this quarter.
But have you changed your capital allocation policy or dividend distribution policy. Just wanted to know that.
No, dividend distribution policy remains the same. So we plan to pay 50% of our PAT as a policy.
Okay. So depending on the situation, you will be looking how much to pay every quarter?
That's right.
The next question is from the line of Lakshminarayanan K G from Tunga Investments.
Sir, if I just look at your employee count, which you gave in your one of the pages, it has actually materially come down by almost 16% when I compared to Q1 of last year. And is this a conscious decision to bring down the workforce? Because your employee cost has been remaining the same. That is my first question.
And also, when you look at your subcontractor cost, it is actually half in FY '24 when compared to FY '23. So if I just put together, are we trying to be more productive? Or is it -- it's always a flexible workforce?
We are trying -- so it's a combination. You are right, we are more productive. Our productivity has improved by more than 12%, 13%, that means the outputs have increased. We have not reduced manpower, we are now normal attrition.
No from 21,000 -- sorry, it was around 21,000 something in August end, I mean, sorry, last year around the same Q1 and it is progressively coming down. Now it's around 17,000 plus.
So that's why I'm saying, there are monthly attritions, which we have not replaced, and that's why the numbers have come down. But if you see output, it has remained the same because corresponding increase in productivity has been witnessed with all the initiatives, the back end has taken.
And we also had a healthy inventory, which meant that we temporarily tuned down our outsourcing capacities because we had good inventory -- number of days inventory and we wanted to bring it to an optimal level.
So that's one -- what is the subcontractor cost? Because last full year, it is -- it halved, so what is that for this quarter?
Deepanjan, you cost of purchased goods.
No, the subcontracted cost is what is captured as part of our other expenses, so...
Yes. Can you just give a number and how it is compared to last year same quarter?
So compared to last year, it should be half of it since the volume has been halved.
Got it. Sir, what is around? I mean any number you want to keep the subcontractor cost as part of the other expenses?
No, how we actually look at it as when we buy from subcontractors, also, we should one we outsource the process, so we want to make sure we get the right quality. So there is no difference in the product or quality. It should be an extension of Page.
And we also pay the contractor or subcontractor well so that they can actually make meaningful profits and make sense at the business proposition like how we work with our channel partners, same way.
And we also, therefore, see whether we can have the same EBITDAs as we get from in-house manufacturing. So that has been a strategy. So they are virtually like our own factory outside, and we make sure that the EBITDAs are similar.
Thank you very much. Ladies and gentlemen, due to lack of time, that was the last question for today's call. I now hand the conference over to the management for closing comments.
So thank you again for participating in this earnings call. It was really a very interesting discussion, and thanks for your keenness in the results of Page Industries. We will look forward again to such earnings call in future. Thank you again.
On behalf of Page Industries Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.