Page Industries Ltd

NSE:PAGEIND

Earnings Call Transcript 2022-Q2

[Operator]

Ladies and gentlemen, good day, and welcome to the Q2 FY '22 Earnings Conference Call of Page Industries Limited. [Operator Instructions] Please note that this conference has been recorded.I now hand the conference over to Mr. V. S. Ganesh, CEO. Thank you, and over to you, sir.

[V. S. Ganesh, CEO & Executive Director]

Thank you. Thank you so much, and good evening, everyone. It's a pleasure to talk to all of you. Today, I'm joined by Mr. K. Chandrasekar, our CFO; Mr. Gagan Sehgal, our Chief Sales Officer; and Mr. Rahul Shukla, our Chief Retail Officer.And let me start the discussion by saying that the demand environment is as good as it can get. And the continued increase in demand is, in fact, leading to a situation wherein our supply is very tight. We are firing all cylinders to increase the supplies, working hard on improving our capacities. This is reflected in the Q2 numbers. With mobility and market functioning being near normal, there's an improvement in out-of-home purchasing. And this is reflected in the channels like modern trade and general trade, where we are seeing an increasing business.Our Q2 revenue grew by 116% quarter-on-quarter and 46.6% year-on-year. Volume grew by 122% quarter-on-quarter and 43.6% year-on-year. At end of September, all our channels are fully functional. We are happy to report that we have crossed 100,000 MBOs in October and 1,000-plus EBOs in September. Our manufacturing and warehousing facilities have returned to normalcy. And we are taking all necessary precautions to ensure safety of all our associates. As we speak, 98% of our associates have at least got one dose of vaccination and 75% have got both the shots.The sales has been on an increasing trend since last year. And we continue to see that in this particular quarter as well. Our branding efforts continue through multiple channels, including online, media and point of sales. E-commerce sales channel continues to be robust. As you may know, in 2019, we have set up a dedicated sales team for athleisure business. This has resulted in rapid expansion of our distribution footprint even during the pandemic. This comes not just from new apparel stores but even from our existing innerwear stores.The new retail identity in our EBOs lends itself beautifully to showcase our range of athleisure products. With the recent increase in demand for athleisure, we have managed to acquire and serve a large consumer base for Jockey athleisure. We are very confident that this increased demand, expansion of distribution, introduction of new and exciting products and styles, this category will continue to show increased growth year-on-year.Similarly, we're also seeing huge potential and growth opportunity in the women's category. In the last 4 years, we have built an extensive and strong product portfolio to specifically target women. Since 2018, we have launched subbrand, Jockey Women, with distinct identity to communicate and build awareness portfolio meant for women. Women's business is growing at a very healthy pace. And we have aggressive plans to expand this business through focused initiatives. We believe that women's innerwear will be one of the biggest pillars for Jockey in our journey of becoming $1 billion company.Our kidswear business continues to be a special focus area with very encouraging customer acceptance and feedback. We now have 51 EBOs that are exclusive for Jockey Junior. We have also appointed Jockey Junior-specific channel partners across 50 cities as Phase 1. Starting this year, we have a separate business vertical with a dedicated sales team and distributors to cater to women's innerwear and kidswear business.We continue to expand our depth within existing market geographies as well as strengthened distribution in markets, which are witnessing expansion of mature retail formats. Jockey is now present throughout India in 2,895-plus cities and towns. We see great potential in the rural, Tier 3 and 4 cities as well. And we are strengthening our distribution network in a phased manner in these markets.We will continue our focused approach on our core business verticals of men's innerwear; women's innerwear; athleisure, both men and women; socks and towels, and we are very confident of maintaining growth going forward. We continue to innovate in areas of customer acquisition, cost control, cash management and investing in the wellbeing of all our associates.I once again thank you for dialing in. And I look forward to our interaction.I will now pass on to Mr. K. Chandrasekar, our CFO, to give you the financial update. Thank you, and over to you, KC.

[K. Chandrasekar, Chief Financial Officer]

Thank you very much, Ganesh. I'm very happy to report the best quarter in the history of Page, both top line and bottom line, the previous best was last year Q3. So this is definitely a very good performance for us. The Q2 revenues are INR 10,840 million. It compares with INR 5,015 million, 5-0-1-5, of the previous quarter, which is a growth of 116%. But if you go back last year Q2, the growth is 46.6%. The revenue then was about INR 7,400 million.The EBITDA has grown at 583% over the Q1 and about 41% over the year-on-year last year Q2, INR 2,334 million as compared with INR 342 million in Q1 and the last year Q2 of INR 1,654 million. The EBITDA margins are 21.5%, which again compares favorably with 22.3% year-on-year FY '21 Q2. The gross margins are also 39%, which again is in the ballpark of 39% to 40%, which we have been achieving historically, being purely variable costs associated with revenue.The Q2 PAT is INR 1,605 million, which compares with just INR 109 million in Q1. But the last year Q2, we had INR 1,109 million, which is a 45% growth. We're also doing and maintaining all the practices which we have talked to you about on the balance sheet. The balance sheet strength of 0 debt, the cash flow management, the OpEx controls, everything continues. We have not diluted any of those practices, which have taken us here.The cash equivalent is in excess of INR 5,300 million. And that has also grown compared with last year Q2 of about INR 4,000 million. The net working capital is about INR 6,100 million. And this again compares with INR 5,100 million last year. The inventory was about INR 6,400 million. And this again compares with a similar INR 6,000 million number last year at June. And of course, this is -- in terms of number of days, it is much healthier. And because of the higher revenues, we have this kind of inventory and working capital.In terms of H1 also, you know that this year, Q1 was better than last year Q1. So H1 revenues are INR 15,855 million. This compares with INR 10,251 million for the last year H1, which is again a growth of 55%. The EBITDA margins are only 16.9% for H1 because of the Q1 impact, and which also compares with 12.7% last year H1. And the H1 this year, PAT is 10.8% and compares with 7% in the H1 of last year.So I think enough of the numbers. So I request now we go into the Q&A, please.

[Operator]

[Operator Instructions] The first question is from the line of Avi Mehta from Macquarie.

[Avi Mehta, Analyst]

I had a few questions. First, on the sales front, sir. We've definitely seen very healthy growth in 2Q. Just wanted to understand if there's any material divergence between primary and secondary growth rates, given that you've added a large number of venues?

[V. S. Ganesh, CEO & Executive Director]

Mr. Mehta, the primary -- the secondaries are in line with primaries. So the -- actually, the distributor inventory health is -- has improved with all the interventions which we have taken over the months.

[Avi Mehta, Analyst]

Okay. Okay. So despite the new additions, there is not materially difference between the primary and secondary growth rates. Got it, sir. And sir, secondly, could you give us a sense on how growth rates have trended in October? I mean, the reason was I want to just get a sense of the impact of any pent-up demand on 2Q growth or in whatever you could help us understand that, sir.

[V. S. Ganesh, CEO & Executive Director]

Well, October continues to be very robust. The demand has been very, very high for the last 2 quarters. And we can see a similar trend even now. So we expect this to continue.

[Avi Mehta, Analyst]

And sir, when you say expect to continue, do you think we're back to -- or should we start kind of looking at 20% annual growth rates on a normalized level as we go forward? Is that what you would look or 15% -- I mean, I just wanted to get some sense on the expectations as we go forward.

[V. S. Ganesh, CEO & Executive Director]

Well, Mr. Mehta, like there's so much headroom. There's so much growth possibilities, which we are seeing. Because from a penetration point of view when it comes to men's innerwear category, we are around 17% to 18%. And on all other categories, we're single digit. So there is so much which we can grow. And we have been also expanding aggressively our footprint in the marketplace. So we are looking at a very robust growth. In fact, as you know, we are chasing $1 billion dream by '26. That means the business should grow by more than 2.75x of what it was last year. So we are well poised to have that trajectory.

[Operator]

[Operator Instructions] The next question is from the line of Ravi Naredi from Naredi Investments.

[Ravi Naredi]

Sir, on occasion of 1,000 EBO in October, Mr. V. Ganesh elaborated a company expansion plan and aimed to reach USD 1 billion sales in 5 years. So how much CapEx we need? And will you expand 20% CAGR to attain $1 billion turnover in 5 years? And how you will do since last 4 years, we are growing 9% top line only?

[V. S. Ganesh, CEO & Executive Director]

Well, I will take this question in 2 parts. You were talking about how much CapEx we may need. We have been spending around INR 300 crores to INR 400 crores year-on-year on CapEx, and that will continue because as you know, we are balancing between growing capacities in-house, and we also have a strong outsourcing arm wherein we have got a very robust supply base today, wherein -- where we've extended arm of Page when it comes to process adherence, quality and service levels. So we will continue that growth trajectory. As far as expansion is concerned, the same pace as we have been doing before.As far as growth is concerned, we see the demand is so high that we have been working very hard in expanding our capacities to meet the demand. So if you see we are now showing a very robust growth. And we are seeing signs of this continuing. And if you look at how we've increased our footprint in the MBOs, we started with 77,000 MBOs in the beginning of the year, and we have crossed 100,000 now. Our EBOs have crossed 1,000. So we have been expanding. We are working very hard on the rural side of the business also.And there are emerging categories, like athleisure, the women's innerwear. These are huge traction, and the men's innerwear has also shown a very robust growth. It has been as good as all the other categories. So we don't see any issue in growing at a high speed to achieve this, and we have a very robust plan in place to achieve this target. So we -- for us, we are very, very optimistic and very sure of hitting these numbers.

[Operator]

The next question is from the line of Nihal Jham from Edelweiss.

[Nihal Mahesh Jham, Research Analyst]

Congratulations to the team. Couple of questions from my side. First, I think you had this in the statement earlier, but just to confirm that, is there any divergence [ arising ] between the growth in athleisure, menswear and womenswear for this specific quarter?

[V. S. Ganesh, CEO & Executive Director]

Nihal, I didn't get you. Can you please repeat?

[Nihal Mahesh Jham, Research Analyst]

Apologies. I was asking that is there any divergence in the growth between the menswear, womenswear and athleisure segments specifically in this quarter? Is there a significant growth in any one of these 3 categories versus the other?

[V. S. Ganesh, CEO & Executive Director]

In fact, these -- the men's innerwear or athleisure or women's innerwear, the growth has been equally robust. In fact, all of them have clocked around 40% or more than 40% growth. So it has been consistent across categories.

[Operator]

[Operator Instructions] The next question is from the line of Shalini Gupta from East India Securities.

[Shalini Gupta]

I wanted to ask you've added very significantly to your MBOs. I think it's about 17% growth over from end of financial year '21. Sir, I just wanted to ask you, where are these MBOs located? Are they in the metros, Tier 1, Tier 2 cities or where?

[V. S. Ganesh, CEO & Executive Director]

Gagan, do you want to take this question?

[Gagan Sehgal, President of Channel Sales & Distribution]

Sure. Sure, sir. So thanks for the question, Shalini. So our -- we have a very, very robust plan of expansion of our MBOs and it's not restricted to only one kind of a city tier. To give you a perspective, almost 50% of our MBO growth has come in Tier 3 and Tier 4 cities and equal number in Tier 1 and Tier 2. And our population, the Jockey target population, almost 45% plus population is in Tier 3 and Tier 4. So wherever we feel that there are gaps and there is an opportunity, be it a metro or a Tier 1 or Tier 2 going to the last mile to the Tier 4, we are expanding our footprint. And we are doing it in a very scientific manner that where there is an opportunity, where we need to penetrate, which is the town, which is uncovered, and we need to expand our footprint. So we are doing it very scientifically. And the growth is across all city tiers, if that answers your question.

[Shalini Gupta]

Yes. I mean just a follow-up question on this. I mean I appreciate that you are expanding in a big way. But I'm just wondering how your expansion help you because Jockey products are available everywhere.

[Gagan Sehgal, President of Channel Sales & Distribution]

So ma'am, the nearer you go to the customer, the more the frequency of purchase. Now if there is a Tier 4 town, where say the customer today travels to the nearest town, which is say, 20, 30 kilometers away for a shopping, and we are not present there, obviously, the frequency is going to be low. So we have to go as near to the consumer. And this is what we have done. And what we have seen is that our throughput of the outlet in the Tier 4 towns is almost at par with Tier 1 and metros. So that is why -- so there is no subsidy given. We see the opportunity of the throughput, it is self-sustaining and the cost to service absolutely in line with what it is in metros. So it is helping us by getting nearer to the customer.And at the same time, the range selling part. So if there is only men innerwear present, say, in a certain city, then our expansion of distribution footprint of the other categories to offer our entire range to the consumer. So this is how it is helping us. And hence, if you look at in the pandemic period, we have expanded our distribution footprint by 60%, from 65,000 outlets to 100,000 outlets right now. And all of them -- most of them have given us a repeat purchase order in the next 2 months itself, which shows that there is an actual healthy treasury happening in these outlets.

[Operator]

The next question is from the line of Ashit Desai from Emkay Global Financial Services.

[Ashit Desai, Research Analyst]

Two questions. Firstly, if you can highlight what is the production outsourced today? And whether any supply chain challenges that we have faced like many other retailers have announced and also what measures we are taking for that? And secondly, we've been very optimistic on women's growth. We've also done some recent campaigns on it. Besides these marketing campaigns, if you can highlight some thoughts as to what we are changing in the category and what is the kind of growth aspiration or growth targets that we are looking in this category. And one last, third question, quickly, if you can highlight the scope of expansion in MBOs, we've already reached 1 lakh, where can we expect this number to go in the next 2, 3 years?

[V. S. Ganesh, CEO & Executive Director]

So Mr. Desai, well, first answer about the outsourcing part of it and the supply chain, which you were talking about, so coming to outsourcing, we are at around 30% capacity as far as outsourcing is concerned of our total sales. So around 30% to 33% is outsourced and the balance is produced in-house. And we have been growing outsourcing side of it strictly because of the robust demand we are seeing. The fastest way we can increase capacities is through that. And we're also increasing capacities on the in-house side.Coming to the constraints part, yes, we did have few challenges because of the change in demand pattern and some of the disruptions in supply chain. This was particularly bad during the first wave, but we were armed with the learnings from wave 1. So during wave 2, I think we were able to manage it much better. And that's why we're able to see these good numbers because it's always a lead time between sourcing, supplying and reaching to the market. So we did preposition raw material. We did create those buffers, we did [indiscernible] sourcing. We improved our supply base so that there is always a contingency plan. We strengthened our planning processes. So with all that, we were able to manage it much better. And of course, when you have a long association with your supply partners with good payment record and good track record, your suppliers become your partners, and that really helps and that helped us. And having in-house manufacturing capabilities, also you see a lot of speed and flexibility. So in that sense, I can say we were better off in meeting the demand of the market.Coming to women's -- I think you were asking about the women's innerwear segment. As you know, we are a fashion basic and provide high value for money option and are growing in absolute volume and in brand presence. Our women's range is very well received by all our consumers who like the fit and the comfort. And we have been creating that awareness through all these campaigns as you rightly said. Our new products are well received with a lot of excitement in the markets. And we have created the Jockey women distinct identity, which really helps us to communicate to our consumers and bring that awareness in the portfolio and brand awareness.And we also have dedicated leadership team for the women's, and we have also rapidly expanded the distribution network there. And as you know, as I told you, we are single digits as far as market penetration is concerned on women's. And with acceptance of the products and the quality of our product, the fit and comfort, there is so much demand that we are optimistic of seeing very, very robust growth in this side of the business. And -- so much so we're also augmenting a lot of capacity for future in the back end to ensure a big supply for the women's category, both in-house and outsourcing. And we're associated with some reputed international suppliers who have great expertise in the women's lingerie, who do for the premium brands globally. So we have sourcing partnerships with them. And we also have a very strong manufacturing capability in-house to meet the growing demands.

[Operator]

The next question is from the line of Prerna Jhunjhunwala from B&K Securities.

[Prerna Jhunjhunwala, Research Analyst]

Congratulations on a strong set of numbers. Sir, just wanted some qualitative color on the sales growth. So 2-point of data. One is your volume growth on a Y-o-Y basis stood at 43.5%, if I heard correctly. And you had a similar growth on the -- you had much higher growth on your distribution network. So is it fair to assume that majority of the sales came in from the distribution expansion? And if you could give some color on the actual underlying demand against the distribution network, driven demand for you?

[V. S. Ganesh, CEO & Executive Director]

You are right. Our volume growth was 43.6%. And it is through distribution, modern trade recovered essentially because the malls opened and also our new EBOs are so exciting, people enjoy shopping there. It's more of an experience in there. So it has shown lot of robust growth and e-com has also grown substantially. In fact, e-com used to be 2% to 3% or 3% of our business before the pandemic. It's now 8% to 9% of the business. So all the channels have grown and shown good traction.

[Operator]

The next question is from the line of Gaurav Jogani from Axis Capital.

[Gaurav Jogani, Vice President of Consumer]

So I have a couple of questions. First, sir, is in terms of the CapEx in H1, it seems quite low at INR 30-odd crores vis-à-vis [ INR 700-odd ] crores that you're seeing for a year-on-year. So is it a large part of expansion is expected to come in the second half?And second question is in terms of the pricing part, sir. While we see the volume growth at around 43.6%, so this indicates that you haven't taken much pricing. So if you can tell us how -- what kind of pricing you have taken, what kind of inflation that you have seen in the RM side and what's the plan been?

[V. S. Ganesh, CEO & Executive Director]

Okay. So on the -- the first question is around CapEx -- which part of the CapEx plan is going to happen during the second half of the year because we did stop some of the expansions during the pandemic and with all these lockdowns, obviously, we couldn't have much activity on the ground. But we are -- as you know, we are actively increasing our capacity, and we need to do that to meet the growing demand. So quite a bit of the CapEx is going to happen during Q3 and Q4. And we actually are having an expansion projects and this also happening in full swing, which is a major project for us.Regarding the price increase, yes, we did increase the price during the first quarter by around 4% to 5%. And this is what we have done historically. We have always touched spikes around that range. And with a lot of other measures taken by finance and all efforts in controlling costs, having much better discipline, improving the hygiene overall, we were able to manage our EBITDAs. And we are keeping a close eye on the raw material price movements. We are -- so far, we're well under control. The raw material price increase for H1 was around 4% to 5%. This way -- in budgeted lines, this is something we factored in when we touched our MRPs. So things are well under control as of now and we're keeping a close eye.

[Operator]

The next question is from the line of Sameer Gupta from IIFL.

[Sameer Gupta, Research Analyst]

Just a follow-up on the previous participant's question. You mentioned that RM inflation of 4% to 5% in first half. But sir, other companies or in general, quarterly, prices are up more than 20%, 30% is the general feedback we are getting. So how are you able to offset this kind of unprecedented inflation via just cost productivity measures?

[V. S. Ganesh, CEO & Executive Director]

As I told you, Mr. Sameer, we have worked quite hard on budgetary controls and overheads control. We have worked quite a lot on increasing our productivity. All this is helping us to mitigate part of the problems. And secondly, we also had a good buffer. In fact, during the pandemic, it is not only because of the price increase, we knew that the market or the supply chain would be disruptive, there will be uncertainty, so we were investing on stock. That came handy. It is coming handy even now that's why we were able to more or less manage it better.Yes, you are right the price increase, which you are seeing is very, very unprecedented, which is very volatile now. We need to keep an eye on it. I'm not sure whether this increase can sustain, whether it will soften. Only time can say. It has been very turbulent. So we are keeping a very close watch on this.

[Operator]

The next question is from the line of Trilok Agarwal from Aditya Birla Sun Life Insurance.

[Trilok Agarwal, Fund Manager (Equity)]

Just 2 questions. On the MBO expansion, could you just tell us what is the total addressable market size and the number of MBOs are at 100,000, what kind of market currently is now available for you? And second, in the other expenditure part, is there -- so other expenditure has gone up sharply. Is there something that we should read into it? Or it's -- any comment on that will be helpful.

[V. S. Ganesh, CEO & Executive Director]

Thank you. So I can request Mr. Gagan to reply the first part of the question. Gagan, if you can?

[Gagan Sehgal, President of Channel Sales & Distribution]

Sure. Thanks, Mr. Agarwal. When you look at the addressable market, more or less, Jockey footprint is there in all 50,000-plus population towns, right? But there is a large part of population that is also in below 50,000 towns. And -- but at the end of the day, we are covering all the customer base. It's -- our only endeavor has been to go more nearer to the customer. As you would know that there are almost 3.5 lakh towns, which are less than 10,000 population, which don't even have a proper market. But there is a jockey customer there who comes to the main town to purchase. So from that perspective, I think the NCCS AB population is around 39 crores, which is the Jockey target audience, and we are very well placed in terms of being near to the customer.Having said that, our expansion by 60% of MBOs is to continue to go near to the customer, as I said, not only in the metros. Because even if in the metro cities, we feel the customer has to, say, travel 2 kilometers, we want to go even more closer to the customer to give him the right experience and convenience. So we are present in terms of the entire TG, but our endeavor is to go more and more closer to the customer to the last town will continue. So if we are at 100,000 MBOs right now, there was a previous question, how much can it be? I would say we should target anywhere close to -- in the next couple of years to reach 150,000 outlets and get closer to the towns which are even say, around 25,000, 30,000 population towns.

[V. S. Ganesh, CEO & Executive Director]

Sorry, I think Mr. Agarwal had a second question also which I think, KC, can clarify.

[K. Chandrasekar, Chief Financial Officer]

Thanks, Ganesh. I think it is a good question. One of the things that we have is over the last year and even before that, most of our OpEx is variable related to the volumes that we are doing. So that's how we are able to retrace and retract the OpEx when the volumes are not coming. But so this quarter, the volumes have come. So most of these expenses, of course, we had a larger outlay for advertisement in this quarter because of the growing volumes and the more positive outlook on the going forward future. There are expenditures like freight, which are volume related, e-com selling expenses. Then we have comfort specialties in the malls and LFS which are open. We also have spent more, as I told you, on advertisement, the warehousing.So most of the increase that we are seeing are volume related. And of course, we -- because of the growth, we are also recruiting people, mostly at the front end. So a little bit of increases coming in the salaries. If you look at the back end, we will be spending more on power and fuel, on employee welfare and transportation. So much of it is -- most of it is productive. I hope that answers your question, Mr. Agarwal.

[Operator]

The next question is from the line of [indiscernible] Consultancy.

[Unknown Analyst]

I just wanted to know what is the capacity you are operating at currently.

[K. Chandrasekar, Chief Financial Officer]

Yes, we are operating at 250 million pieces and 80% capacity utilization, if that helps you.

[Unknown Analyst]

And what are your targets for this in the next 3 to 4 years?

[K. Chandrasekar, Chief Financial Officer]

Mr. Ganesh?

[V. S. Ganesh, CEO & Executive Director]

So we are expanding our capacities to meet the demand. So we will keep pursuing around 400 million to 420 million in the next 3 years. And along with that is the expansion -- we'll be working on the outsourcing side of the business as well.

[Operator]

[Operator Instructions] The next question is from the line of Nihal Jham from Edelweiss.

[Nihal Mahesh Jham, Research Analyst]

I just had one question that if we look at how our sales has progressed over the last couple of years, we've obviously incrementally seen a growth of, say, around INR 250 crores to INR 300 crores in our revenue base, what we used to do a couple of years earlier. And over these last 2 years, we've taken various initiatives that is obviously being in terms of the distribution expansion, getting into intermediate categories, like kids and also there has been the e-com side of it that has taken up post COVID. So if it's possible, just to give a sense of that where is majority of this incremental growth really generated from? Is it mainly the athleisure which has taken off along with the distribution expansion and e-commerce? If you could just help give clarity on that, that will be very helpful.

[V. S. Ganesh, CEO & Executive Director]

Yes, Nihal, athleisure has shown tremendous response. The market has received it so well. Especially during the pandemic, it was so well received, and we were able to penetrate and there are repeat buys. So we have much more loyal consumers now on the athleisure side of the business. So I can say last year, yes, athleisure grew so much and really it was a growing category and it continues to be one. But this time, all our categories have shown equal resilience, they have grown equally well. Athleisure has done exceedingly well. So is the case with all other categories.So we are happy that all categories are showing the growth. And as I told you, since we are in single digits on all the other categories other than the men's innerwear, we actually have a lot of potential. But the good news is men's innerwear has also shown very, very robust growth equal to all other categories. And you know that actually rightly said with the expansion of the footprint, we are able to increase and capture the markets much better. And the other area has been e-com. It has grown close to 3x. So that has really helped, and I think that trend will continue because the purchasing habits have changed. So I think e-com will continue to grow for us.

[Operator]

[Operator Instructions] The next question is from the line of Arpit Shah from Stallion Asset.

[Arpit Shah, Co]

I wanted to understand -- hello? Hello?

[V. S. Ganesh, CEO & Executive Director]

Yes, yes, Mr. Shah.

[Arpit Shah, Co]

Yes. I just wanted to understand how ARS is helping you to drive MBO growth and probably drive volume growth. And my second question is, where do you see the men's innerwear segment revenue share moving in the next 5 years from the current levels?

[V. S. Ganesh, CEO & Executive Director]

KC, it was not clear. I think he was asking about where do we see our men's innerwear in the next 3, 4 years?

[Arpit Shah, Co]

Yes. Men's innerwear segment revenue share, how would it look like in the next 3, 4 years? And my first question was how ARS is helping you to drive MBO growth plus volume growth. So some insights on that, qualitative insights.

[V. S. Ganesh, CEO & Executive Director]

Okay. So men's innerwear has shown tremendous growth for us in the -- especially in the last quarter, it has grown very, very well, and we are seeing the continued traction for these products even now. And so men's innerwear will continue to be a major category for us. And I don't see a huge shift happening because all categories are growing equally well. So I don't know the equations will change, but there is tremendous potential on the women's innerwear category because the market size is much bigger than men's innerwear market. The products -- the price and the products have hit the sweet spot and consumers have well accepted it.So we do see that there can be accelerated growth there, right. Men's innerwear will grow well. We see much more accelerated growth happening on the women's innerwear side because of the potential it has got. Same is the case with athleisure. So we are actually focusing on all these categories with equal focus and trying to push them well, coming with very exciting products. In fact, our new products are so well received from the market that we are working hard on expanding our capacities and augmenting more supplies. So I think all categories are showing good signs.And to answer your question, yes, men's innerwear will continue to grow and ARS is definitely helping us. ARS will be going to all ranges. We started off with this and it has helped. And not only ARS, all -- closely working with our distribution, we have worked very hard in improving the inventory health of all our distributors. And we also now improved our turnaround time as well as fulfilling the distributors' concerns. The reach to the market has become faster, and we are taking more initiatives to reach them much more faster. With all that, the inventory health will improve. So that will again help us in having much better turnover.

[Gagan Sehgal, President of Channel Sales & Distribution]

Can I just add one thing, here? Your question on ARS that, yes, our secondary sales has been last year ahead of primary and they are in line with primary this year. And that has also happened because of the superior -- see all our outlets are serviced directly by the distributor system because we are into direct sales. So while we have increased the number of MBOs, with the ARS generation to fulfill the secondary, we have also increased the number of distributor salesmen, which has helped us a lot. So the distributor salesmen have gone up by double. So the number of feet on street has gone up. So the service is far better to the MBOs. The MBOs who used to give order once in 2 months or once a month are now giving us orders twice a month. So this entire direct service through increase in manpower and ARS run, which is helping us drive secondaries and MBO expansion is really helping us, to answer your question.

[Operator]

The next question is from the line of Akshen Thakkar from Fidelity Investments.

[Akshen Thakkar]

Congrats to the team on a great set of numbers. Two questions from my side. One, could you just make us understand the 4% to 5% price hike that you have taken. In your view, does that cover the kind of inflation that you've seen in yarn, cotton, et cetera? Or because you might have locked in some rates, that you might need to take some prices later in the year?Question 2 was, could you just refresh us, what's the kind of GST rate that you see on your product because [indiscernible] certain price point. I don't know if that becomes [indiscernible]. Those are 2 questions from my side.

[V. S. Ganesh, CEO & Executive Director]

Yes. So Mr. Thakkar, if you have seen our Q1, Q2 numbers, in fact, especially in Q2, our EBITDA is in line with what we always decide to be -- we always work on a 20%, 21% EBITDA. And we -- when we budgeted, we did consider this raw material price increase. And we touched our MRPs based on those assumptions. And so far, as I told you before, we are well under control. But I do agree, since it's very volatile, we need to keep a very close eye on it. And if there's further very substantial increase in raw material price, then we may have to pass on out of it to our consumers. But we are trying our best to manage it and continue to be a value for money brand for our consumers. So, so far, we are well under control, but we are keeping a close eye on this. And I think KC would be able to enlighten you further on the GST part of it.

[K. Chandrasekar, Chief Financial Officer]

Thanks, Mr. Thakkar. GST, most of our products are below INR 1,000 MRP. So we have an output tax 5%. If you look at the input taxes, for example, the manmade yarns and fabric have rates of 12%, 18%. And of course, the services have come under the ambit of GST. So therefore, in terms -- if you look at the revenue, the output taxes are 5% and the input taxes are in -- between -- somewhere between, I mean, 5.5% to 6%. So this is what is called as the inverted duty structure. It is not just for Page or apparel industry, a lot of industries and associations have represented that what happens to that extra money which keeps accumulating and is with the GST authorities, when will that be refunded.So of course, recently, some indication has come. One of the options is to increase the price of the output to whatever that is 6%, let us say. Then we have enough input to pay the output. The MRP will go up. But in terms of financial impact on us, it would be 0 because the excess GST is in the balance sheet. If the input tax GSTs are reduced, then that will also benefit us. So in terms of -- this is quite an issue in terms of revenue for the government and no notification has yet come. But if you ask vis-à-vis Page, we will not be -- the P&L will not be affected.

[Operator]

The next question is from the line of Ankit Kedia from PhillipCapital.

[Ankit Kedia, Research Analyst]

Couple of questions from my side. One is on the number of distributors, while we have increased our MBO presence by 14,000 for the quarter, the number of distributors continue to remain staying at around 4,100-odd distributors. So is the productivity of the distributor significantly increased? They're going more in the 50,000 population points so their expenses are increasing?And second question is regarding the EBO target. In one of your interviews, you have said you want to double the EBO count to 2,000 in the next 2 to 3 years. Do you sense cannibalization happening between MBO and EBOs and between EBOs as well, which could slightly impact revenues going forward?

[V. S. Ganesh, CEO & Executive Director]

Gagan, do you want to take that? And -- maybe on the EBO part. Rahul can answer on revenue.

[Gagan Sehgal, President of Channel Sales & Distribution]

Sure, sir. So thanks for the question, Ankit. In fact, I'm happy that this question came along. While we are growing at a very healthy pace, our call was that we will ensure that our distributors also grow along with us. And what is distribution? Distribution really is not just the number of distributors. It is the number of distributors, salesmen on the street, it is the number of MBOs. So one, our number of MBOs has grown by almost 60% in the pandemic period, but the number of distributor salesmen have grown by 100%.So our distributors and our secondary has consistently been equal or higher than primary, which means that distributors' ROI is healthier than ever before. And the same set of distributors with the same set of fixed expenses today are getting a higher revenue. So I would say that all the distributors are in a happy space as of today because the distribution expansion has happened. All they had to do is invest in the manpower. And that manpower has more than doubled paid them back with the kind of growth that we have had.So we are very happy when we look at the distributors' ROI till the last mile, from a Cat A distributor, Cat B, Cat C. And our call is very clear. If Page Industries is growing, we are having a healthy growth that our distributors grow with us. Just because we are growing, we will not increase the number of distributors unless it is really required. But we will definitely increase the number of salesmen, distributor salesmen, which has happened. And I'm sure this will be the feedback from the distributors that their ROIs are better than ever before, and I think they are in a very happy space. And yes, we extend all support to them to make sure that our distributors' ROIs are healthy. If that answers the first part of the question, I will hand it over to Rahul, for the EBO part.

[Rahul Shukla, Sr. Vice President & Head of Modern Retail]

Thanks, Gagan. Yes, Mr. Ankit, if you would have observed in the last couple of years, our rate of expansion of EBO has been in the zone of around 150 to 200 stores every year despite the constraints of pandemic. There is no reason why this space cannot be continued. In fact, it would be accelerated. Our intention is to accelerate the space. Despite all the expansion that we have done, the 1,000-plus stores, our retail presence is still in only 350 cities. So there is an enormous opportunity for us to expand and increase the region penetration. And we certainly look at doubling up our EBO base over the next 4, 5 years.With regards to your second question on cannibalization as we expand, the consumers -- there are all kinds of consumers who are shopping from different places. There are consumers who are shopping from e-commerce, people are shopping from MBOs. They're also shopping from EBOs. And we believe these are all synergetic. Our intention and our strategy is to reach out to every channel, every place where the consumers are shopping and give them a wow experience and take up leadership positions in those channels. All these channels, particularly MBOs, EBOs, they're synergetic in nature. So EBO access is more of advertisement for the branch. So that the consumers go to MBO, they end up buying Jockey over there.And there is a lot of recruitment of new consumers from competition from elsewhere that happens in the EBO space. This then over a period of time become loyal consumers and then start helping the EBO sales. So both of them actually work very well in tandem and in [ its strategy ]. And considering the fact that we have no discount policy, the products are sold exactly in the same price everywhere. So there is no cannibalization. A little bit of cannibalization might happen when the stores open near to each other. But nothing that affects the viability or profitability. Does that answer your question?

[Operator]

The next question is from the line of Varun Singh from IDBI Capital.

[Varun Singh, Research Analyst]

My question is, how do you think about the emerging competition from all -- so many new companies? So lot of MNCs coming to India and -- hello?

[Operator]

Yes, you're audible, sir. Please go ahead.

[Varun Singh, Research Analyst]

Yes. Yes, sure. Yes, so sir, how do you think -- I mean, how are you thinking about these emerging competition from so many new players? So given now Amazon delivers to kind of more than 99% PIN codes of India and so on e-commerce platform, you have got so many new companies coming and competing and trying to disrupt categories. So not just e-commerce, even a lot of MNC companies, they have come out with their private label. And so many -- I mean, customers are saddled with so much of options to buy from. And quality and price has always been not a great tool to compete.So in a category like innerwear, in both men's and women's category, how are you thinking about this emerging competition, sir? Your view will be very, very useful in terms of how should we understand the -- especially this gaining market share and growing the market. And if you can name one company which you believe is a respectable competition to you. Yes, that's it from my side.

[V. S. Ganesh, CEO & Executive Director]

Thank you. Thank you so much for asking that. And as the product quality is unmatched with an equally strong distribution network, we are actually in a very good position to track big potential opportunities in India as the total market is expanding at a very rapid pace. The middle-income group -- if you see the growth, we need to -- there is room for competition and for us to grow. There is space for more than one there to start with. And so we always see competition is good. It keeps us nimble. We make ourselves very competitive.And the growth in the market is so rapid that we are looking at it inward, and we are seeing the opportunities to grow, and we are working very hard on that. We have also been expanding into the rural, Tier 2, Tier 3 cities as well. Hence, we are very confident of maintaining growth going forward. And we don't feel that competition is going to kind of affect our growth because if we are very, very passionate about our products, if we give the right quality and the right value proposition to our consumers. And if we can keep offering them exciting products and if we can reach them much better, there will be -- as we are seeing now, our products there's a huge demand and it will continue to be well received.Along with that, it's the new categories which are going to be growth engines for us. For us, the athleisure is -- we are -- it has taken off, we have a long way to go there. Even though it is well received, even though we are leading in this category, if we look at it inwards, we are just in the starting point. We have to do much more there. So is the case with the women's innerwear as I told you. We have just embarked on the juniors. So there is so much which we need to do, and there is so much market out there. We are looking at it very positively and looking at how we can grow with those opportunities, which are presenting. And that's why we also been expanding our footprint very aggressively.Now when you talk about credible competition and rather than naming the product, how I can say how we look at it. We look at it in 2 ways. We are -- we have competition from each category. We may have one brand just is -- or few brands which are competing with us in the women's innerwear segment. And it can be a different set of brands when it comes to men's innerwear and so is the case with athleisure. And bras, again, it's a category for us. It's a category by itself, where it can be another set of people or brands which may be competing. But we're always focused on how we can dominate the market, be much ahead of the competition so that we can see that -- finally, the competition is ourselves today and how fast we can grow because the market is there and how can we compete with our mindset and grow much faster is what we are looking at. I hope that answers your question.And when it comes to what you said about Amazon, yes, but they also -- we are there in Amazon. I know there are less entry barriers for other brands to come in. How -- we keep looking at it very closely because who would have imagined Paytm or GooglePay would be a competition for one of our banks. Today, they compete with our banks. If you ask this question some time back, the bankers would have talked about some other bank. Today, that is how the market is. It's very volatile. It's very agile, and we need to keep an eye on it. So we are continuously at it. We are very passionately working on having the right product at the right price and place it rightly and service our partners right. And as long as we do that right, the potential is tremendous for us to grow.

[Operator]

The next question is from the line of Ashish Kanodia from AMBIT Capital.

[Ashish Kanodia, Research Analyst]

Going back on the distribution expenses. So I think during the call, there were 2, 3 points which were highlighted that, first, Jockey is already present across all the target consumers. So whenever we are expanding the MBOs, it's basically we are going closer to the consumer, which also means that there is some cannibalization in sales from the existing MBOs. And I think when I look at the volumes for retail outlets, so I looked at between FY '15 to '20, the volume per retail outlet or per touch point has actually declined by almost 25%, 30%. So when we talk about ROI for distribution as well as for the MBOs, can you please help me understand if there is no cannibalization, then why is the volume for outlets declining? And how do you think about the ROI or what is the feedback you are getting from the MBOs?

[V. S. Ganesh, CEO & Executive Director]

Gagan, do you want to take that?

[Gagan Sehgal, President of Channel Sales & Distribution]

Yes, sure. Thanks, Ashish. I'm not very sure about the throughput per outlet. Yes, after pandemic, what has happened is that some key outlets, which were in the high street, which were high contributors have definitely gone down because the consumer behavior has changed. But having said that, there are some smaller set of outlets which have grown phenomenally well. So all these outlets, which have degrown, some key outlets will eventually come back on track as and when there is reverse migration and again, consumers come back to the key cities. That is why we have seen majority of the growth in Tier 3 and Tier 4 cities as well at this point of time.But when we look at the throughput per outlet, it is very healthy. And what helps when we do the MBO expansion is we are able to offer a higher range. Now if we depend, say, on a particular MBO or we do not have competition within, that MBO would only keep a certain range, but we have so much more to offer. Some MBO might just keep men range, but not the women and not juniors, for example. So our distribution expansion is then keeping in mind that we do not just open an MBO in an orbit manner adjacent to the existing MBO, but by getting closer to the consumer where the consumer finds it difficult and he has to travel.So as I said, we have geo-tagged all our outlets on the map. We know exactly in which town, in which village and which place our existing outlets are, where the consumers -- where there is a decent population and they need to really cover some distance to come there. And hence, to offer convenience to the consumer, we are managing our distribution expansion in the scientific manner. We have not really seen degrown in the MBOs where we open a new outlet, to be very honest. I will have to again relook at the data. But to answer your question, definitely, it has happened because of some key outlets not firing because consumers are not going to highly densely populated markets right now. It is just a matter of time. But through distribution expansion, we have not seen any dip in terms of any MBOs. We have only seen all of them are thriving and the throughput is healthy everywhere with that. That is our observation, to be honest.

[Operator]

Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to Mr. Chandrasekar, CFO, for closing comments. Thank you, and over to you, sir.

[K. Chandrasekar, Chief Financial Officer]

Thank you very much. As always, this earnings call is something we look forward to from Page, and we learn a lot equally. Thank you for your support and faith in Page management. I hope all of you had a good festival and hope to see you soon. Thank you very much.

[Operator]

Thank you. Ladies and gentlemen, on behalf of Page Industries Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.