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Page Industries Ltd
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Well, thank you. Good afternoon, ladies and gentlemen. This is Vedji Ticku here, I'll just give you business update about our Q3 results. Our revenues grew by 7.1% year-to-date and around 7.5% for quarter 3. Our volumes grew by around 1% for year-to-date and a dip of around 2.8% for quarter 3. Volume growth has been flatter this year, due to the sluggish demand. Our outlook for the market remains positive for future and continue to invest in our key resources, channel partners, automation and technology. Our marketing efforts continue both online, off-line media, outperforming most importantly, at the point of sale. On the capacity side, to support our future growth plans, we continue to work towards doubling our capacity from the existing [ 250 million pieces ] in next 4 to 5 years. Operations in our new plant near [ key APEC ] has commenced, and we have closed to around 150 out of the 800 machines planned operational now. We'll have all the machines operational by the end of June 2020. On the product side, we continue with our focused approach on our core business verticals of men's innerwear, women's innerwear, athleisure both for men and women, socks and towels. We have launched some innovative products, both in terms of fabric innovation and styling across all our business verticals. The kid's wear business continues to be a special focus area. It has shown an encouraging trend with good customer acceptance and feedback. We have a separate and focused sales and marketing strategy for Jockey Junior vertical. We now have a separate sales team of over 120 people across the country, headed by an independent national sales manager to have focus on this business. We also have special marketing plans to support the initiative. During this last preceding quarter, we opened 2 exclusive stores, only for Jockey Junior business. So this is from the business side. I now hand over to our CFO, Mr. Chandrasekar, who'll take you through the financial results.
Good evening, all. Welcome to the call. Our 9-month revenues for this financial year is INR 24,042 million, a growth of about 7.1%. The 9 months PAT is INR 3,122 million, that is a big growth of 2%. The PAT, P-A-T, for the 9 months is at 13% and against 14.2 year-on-year. However, the gross profit remains at 40%. It is -- it remains strong and steady at around 39% to 40%, even compared with the last year and previous quarters. A temporary deferred PAT literally is entirely due to the investments that we have made in people, in technology, in sales and marketing in the channel. And this is done solely with an eye on the future growth, which will also drive our profitable growth in the coming quarters and years to come. We have also maintained, always, that we never cut back on our investments, even when the market is sluggish. And we continue to make the relevant spends for -- to build a sound foundation for the company. The Q3 revenues are INR 7,938 million, and that is also a growth of about 7.5%. The Q3 net profit is reported at INR 870 million, that is a big growth of about 14.6%. The PAT is 11% against a comparable last year of 13.8%. So with these opening statements, I suggest we proceed to the Q&A.
[Operator Instructions] The first question is from the line of Dhaval Mehta from ASK Investment.
Sir, my question is related to incentives. So if you see in this quarter, incentives have increased by roughly around 180 bps Y-o-Y. So in absolute number, from INR 21-odd crore, it has increased to around INR 36.5 crore. So is there any change on ground in terms of competitive intensity or any change in our go-to-market strategy? Any particular reason why such a sharp increase in incentives you have seen?
No. Incentives have always been a percentage of our sales and we have always worked with a budget in mind for the incentives for the year. So while there could change from quarter to quarter, we make sure that we are well within our budgets by the time we close the year.
Okay. Because even if we see for 9 months, sir, it has improved -- it has -- as a percentage of sales, it has increased by around 130 bps. So -- which has actually impacted the gross margin of our company despite lower -- yes, on cost. So how this trend will be going forward? Should it will be around 4% to 5% of sales? Or it will be a specific number?
So it has always been between 3.5% to 4% of our sales all these years. And that's how we have maintained it. And we look forward to maintaining there even going forward.
Okay, okay. Sir, my second question is, if we see volume performance at 1%, the price growth is much higher in this quarter. It is largely because of mix or because of winter wear? Or is there any other thing to call out about?
So you're absolutely right. It is because of the mix. And of course, yes, the winter wear, this is a peak season for the winter wear and that is at a much higher price -- average price as compared to our average price for innerwear.
The next question is from the line of Avi Mehta from IIFL.
Sir, I just wanted to kind of reconfirm. You saw a 2.8% decline in volumes in this quarter. You cannot give us a sense on how it has been across the segment qualitatively?
Across the?
Men's, women's and the leisurewear, any qualitative comments, was it across the board? Or where is this decline being sharper in?
So it's -- yes, you would say -- I could say that it's sort of uniformly across the board. It's not specific to a vertical or a range.
Okay. And sir, second is that in the last quarter, you had highlighted that gross margins were under pressure. It's all decline on a Y-o-Y basis, largely because of product mix. Is that a continued reasons for the -- is that the same reason for the decline in gross margin? And with your comments on -- is the demand weakness resulting in this pressure then hence, likely to continue, any comments on that would be, at least...
The demand pressures have been there throughout the year for this entire financial year. And the gross profits, actually, if you look at the gross profits, the gross profits are sort of -- we have maintained the gross profit. It's a few of the costs, which we have taken on as we're keeping the future in mind, which is sort of adversely works on the net results. But as far as the gross margins, in terms of cost of goods, they have not changed much.
But I mean, if I look at the gross margin, I see there is an impact that I've seen in this quarter, specifically. I was just trying to kind of parse whether this was because of mix again? Or was there any promotional intensity increase?
No. It was neither of them. The main reason for the gross margin has been all the investments, what we have been making during last couple of years -- months, on the technology side. We have built on a lot of investment on the technology side, and there were a few payouts, which were done during this quarter. We also have recruited some very key positions in last -- this financial year. So the cost of people has been one major investment during this time. So it is things like those, which have impacted the gross margins.
So -- but that will impact EBITDA, right? You're talking about EBITDA. But in growth, it will just be cost of raw materials, right?
Yes. Yes, you're right, Avi. As far as the gross margins are concerned, it's 38.2% for this quarter as against 40.1% for the previous quarter. And that is largely because there was under absorption of the factory overhead and labor for this quarter alone. But on a 9-month basis, we are 39.6% and -- or at least, 39.4%. And when I say gross profit, I include all the material labor and the factory overhead. [ So that's it, ] have been around at 40% mark consistently, even going back to last year.
So the price increase that you've taken recently should help us kind of pass this on, is that a fair way to look at it because we typically take price increases at this time, right? So would that kind of help us tide over these pressures as we go over in the gross margin?
Price increases have helped. And yes, you are right. Going forward, the full impact of the price increase would improve the margins a bit.
So would you revisit your margin expectation for FY '20, like you said, 21% on an overall basis. Given that 9 month is 19%, how do you see that trending? And what would you kind of give us? That's all from me.
I think we are on 19% as far as EBITDA for financial income and finance charges. So in Q4, we do expect to improve that, but better recoveries on the overhead. But as Vedji said, it's about investing in people, investing in technology, investing in automation and in the channel. So the investment continues. The only thing is the expected volume and the revenue growth hasn't come. But if that be so, then the margins would be pretty much intact.
Okay, okay, sir. So any guidance? Or no, you would not want to kind of share for the full year?
Sorry to interrupt, Mr. Mehta.
We typically do not issue any guidance.
The next question is from the line of Akshen Thakkar from Fidelity Investments.
I just wanted to understand the way you define gross profit in the presentation that you guys have put out. Up, over and about the raw materials that you guys have disclosed, there are other cost line items sitting over there. So what are the different line items that you include over and about raw materials over there?
About raw material, you have also subcontract expenses and there are power and fuel and consumables, stores and spares, and repairs and all that. So the gross profit is after all those factory-related material labor and overhead.
Okay. Okay. And if I see your annual wage cost, last year, let's say, it was INR 450 crores -- INR 467 crores, what part of that would fit towards sort of manufacturing? I'm just trying to get a rough sense here.
If you look at YTD, labor cost would be in the region of INR 2,000 million.
Okay. INR 2,000 -- okay, INR 2,000 million. Got it. And I missed, what was the volume growth for the quarter, sir, if you could just repeat that?
The volume growth was minus 2.
Minus 2. Could you just help us understand volume growth, despite our best efforts, has been slightly muted. How much of this is generally with what's been happening in the market? Or is there like a channel-level destocking or something to that effect? If you could just give some color as to how do we read the volume performance over years.
Akshen, as you are aware that we also have close to around 700-plus owned stores now. And that's quite a good barometer for us to understand what's the general sentiment and trend in the market because these stores are across the length and depth of this country. Across the cross-section of cities, metros, Tier 1, Tier 2 cities. And we very clearly can see a trend that the -- walk-ins to these stores that have reduced considerably -- considered in the last couple of years. And so one of the biggest reasons has been that the offtake from the stores and the shelves is low. That's been the only reason for this degrowth in the volume.
[Operator Instructions] The next question is from the line of Aditya Soman from Goldman Sachs.
Two questions from mine. Firstly, was there an increase -- I mean, you mentioned channel incentives. So despite channel incentives, there was sort of a decline in volumes in the quarter. Portfolio attribute that to -- is it just the economic environment? Or do you also see other competitors just giving higher margins?
So as I just explained, Aditya, that it's the general sluggishness in the market right now and the offtake from the shelves is much lower. So that's one of the biggest reasons for this. And as far as the margins, the margins are more or less -- most of the people who are getting to the premium segment of the business, the margins have all been the same. There's hardly any difference between the margins, which have been offered by all other brands.
Yes. The reason I was asking was because you indicated that channel incentive are higher. So if not margins, then were they higher in some other format in terms of extra credit, something on that?
No. Not at all. So what I said was earlier that our incentives are actually -- are bound by the budget. So when we start the year, we have a proper plan for the amount, which can be spent towards the incentives, especially the trade incentives. And we, by and large, stay within the parameters of our budget. And so there could be quarter-to-quarter discussions between the amounts, which could vary. But by the time we end the year, we always have been within our budgets. So I don't see that as changing much. And we should be within our planned budgets by the time we close the year.
All right. Very clear. And just lastly, in terms of the sort of volume decline, was there a difference in sort of your own stores' relative, say, the MBOs?
No. It's actually, it's an interesting question. For some reason, we have been noticing this for many years now that our company's overall growth and our like-to-like store growth, our own stores, the EBOs, has always been more or less 1%, plus/minus. They've always been almost coinciding. So they're quite similar, both the MBO business and the EBO business as a percentage of sale of growth.
Understand. So some of competitors have indicated that there was sort of a wholesale disturbances because of availability of credit and stuff like that. But for you, it seems like it's more uniform across order book.
Yes, because we always have been prudent with our -- the number of days of our collecting and --
Sorry to interrupt. Excuse me, sir.
Yes?
Sir, can you speak a little louder? We're not able to hear you.
Yes. Sure. So the number of days has -- we have always been prudent with the number of days operated, given to the channel. And it's always worked for us all this while. So we do not have those issues.
The next is from the line of [ Bhargav U. ] from [ Kotak Mutual Fund ].
Sir, is it possible to know what has been the average price increase across categories on a Y-o-Y basis?
So as usual, we -- our prices are by -- within the range of 4% to 5%, and that was even, for this year, our prices have increased around 4.5% overall.
Okay. Secondly, sir, how has been the implementation on the ERS side? I mean has it been implemented across categories? And what percentage of geography would have been covered by ERS?
So as I explained in my previous call also, we do not go by the geography, but we went by the business size. So how we work was that we started with the larger distributors and kept on going down. And currently, we are close to around 30% of our business is covered through ERS, which is across the geographies. So that's how we approached it.
And would you attribute this volume sluggishness to ERS implementation?
Not exactly. To some extent, it has, for sure, because now, the stock levels at our distributor points are more in line as to what they should be. So maybe to some extent, it has definitely made an impact to that. But we think, for the future, this is the right way to do it.
The next question is from the line of Tanvi Shetty from Axis Securities.
I wanted to ask, sir, could you give me the breakup of your segment across, like in terms of revenue across men's, women's, athleisure and kids?
Sorry. Tanvi, we do not give that breakup as a policy.
Okay. Sir, could you then give me a sense or like qualitatively, how all the segments have been doing? What initiatives you've been taking, especially in women's, sir, given 20% of your -- like assuming 20% is women's?
See, like I say, in my opening statement, we have been sort of trying to work on each and every vertical of business, whether it's men's innerwear, women's innerwear, athleisure and especially, the kid's. So the Junior business, which we are taking very seriously, and we have a separate team set up for that. So coming back specifically to your question about women, there have been many new products which have been launched in the women's side of the business, both in the innerwear as well as the outerwear side. So we have seen some good progress on the outerwear business and especially, on the bra business. We have launched many new styles in the bra, which was a feedback on our product management team, and we implemented all those requests from them. And so we have launched many of them and some of them are still in the early stages. And we'll continue launching new products on the women's side. And there is some good traction in our [ initiatives ] for these new products, which we're launching.
Okay, okay. And my next question would be, sir, on the distribution front. Could you tell us that how much part of your revenue comes from wholesaler? Or is there any wholesaler in our distribution model?
No. We do not have wholesale as a model at all. We are -- we sell it to only through distribution. And besides our e-commerce business and our -- and the direct business, which we do with our key accounts, the entire business is done through our channel. So I would say that around 90% of our business is through channel, through our distributors.
Okay, sir. And what would be the number of distributors, until date, sir? And like, what rate you would be growing them, if at all...
So currently, we have around 4,300-plus distributor accounts because we have distributors for verticals now. And these are typically growing by around 4% to 5% year-on-year.
The next question is from the line of Vinod Bansal from Franklin Templeton.
Sir, Vinod here. A couple of questions. One, you mentioned the whole market condition is -- continues to drag on the performance. If you look at some of the other players in the apparel space, in the same discretionary apparel space, which may have a larger ticket size than typically innerwear. Yet, I think the commentary there is that the market seems to be doing fairly well. And the reported SSGs are very healthy, high single digits, low double digits. Where is it that innerwear is getting disconnected from that market despite both being in similar ticket size and similar discretionary space?
On the contrary, Vinod, what the reports we have is that most of the apparel brands actually in the quarter have degrown, except barring one growth. Most of the other have degrown. So you are taking in terms of just one. I'm not sure about that. But it's not [ this concern ] at all. It's -- the apparel -- the [ larger ] industry is -- we're very much part of apparel piece. And most of the apparel and the innerwear, even if you take the -- all the innerwear competitors or a dealer where all the people play in the innerwear segment, this is a general story because we have the reports from all other companies, which we looked at and the story looks to be quite similar, and even worse, at many places.
Sorry. I don't have much of a history about this business. Could you share your insights as to when we had downturns, macro slowdowns earlier, 3, 4 years back or 5, 6 years back in '12, '13 or the prior downturns. Did any of you perform as weak as you have this time around? Or this is particularly weaker this time around for the industry?
This time around, it's weaker. And see, if the other thing around also was -- that was 2008, which was almost 12 years back. And even our size were very different than will be for [ this instance ]. It is definitely a little bit more weaker this time around.
I'm sorry, I joined the call a little bit late. Could you share if you have -- again, if you have shared already the EBO SSG. For you, what would be like this quarter and for the 9 months?
Sorry. Give you what?
EBO, same-store growth, for the quarter and the 9 months.
No. I didn't share that separately. But as I said, note, I was answering the earlier question. Our growth have been pretty similar. The overall company growth and our like-for-like growth of EBO has, for some reason, for many, many years, remained always consistent. So it is more or less at the same level where the company is going.
And to repeat the question that we've asked in the earlier quarter as well. So the strategy right now would be to wait and let the macro improve and, in the meantime, do our micro initiatives like the ERS and other stuff, and grow back once the market is back in shape. Is that how you're looking at the business? Or is there's some plans as well within that?
See, while, in fact, it's definitely the plan here. At the same time, we're also taking a lot of initiatives on the product side to keep on improving our product and offering the value for money, which Page has sort of pioneered in the industry. So that effort continues from our side. And yes, we will need some tailwinds to support us. And we are doing everything possible, which is in our control to see -- so that we can proceed in the new financial year with, at least, something that we are used to. This is not what Page is used to, right? And we'll continue every effort at our end. For example, Mr. Chandrasekar can give the example of our investment in people, technology. That continues. The ERS, the digital side of the business, both in front and back end. We are working on our supply chain. We have got on to JD for our complete planning at the back end. So we are investing very heavily on this side of the business so that we are robust. And as soon as there are some strong wins, we're ready to play again.
Fair to presume that the going -- ongoing quarter, the current times are equally sluggish?
Sorry to interrupt your line, sir.
Sorry?
Just the last question I had was, is it fair to presume that the ongoing quarter, the current -- this season is equally sluggish as you've seen so far in the year?
I won't be able to reply on that because that would be too specific.
The next question is from the line of Mohit Khanna from Future Generali India Life Insurance.
I just wanted to ask regarding competition and the channel. Do you think channel -- and have you seen any sort of come back in the market starting January? Or how do you think the competition is faring? And where do you see yourself because as you rightly said, in the last answer, that we are not -- Page is not used to these kind of growth rates.
Right. So Mohit, when you ask about competition, competition is not something new what Page is seeing now. There have been players in this segment -- in the premium segment of market to way back from 2004, when Hanes arrived into India. And after that, there have been many other brands who have come. Some have shut shops, some are still there. So it's always been there, all through. So yes, the competition is always sort of -- we've always looked at all the other brands. But at the same time, we have always felt that the most credible competition is ourself, because we have to keep on handling what we have done and keep on improving on what we have done all these years. So that's not something, which is sort of a worrying factor, or we just need to keep on pushing ourself and doing things in a better way. And that's what we have done all these years.
And also, sir, in the press release, you have mentioned that lower trade products are probably selling more than the premium ones. Could you just elaborate on that?
No. We didn't say that. In all the contrary, we're seeing the other way around. We are saying that we -- one, there's a product mix. That's why there is this -- the growth rates, which you can see are higher than the volume growth. One is the core product mix. And then within each vertical, there's also -- the premium products are selling more than the less premium, I mean, pricing, not the product-wise. So it's on the contrary, what we have seen.
Okay. Okay. Sorry, that will be my mistake. So basically, if I understand this correctly, on some days, that the higher-priced products are selling more. And that is the reason that your pricing growth in this quarter looks at around 10%, even though the price increase have been somewhere around 4.5%?
Yes. And the mix also plays a big important role. As I said in my -- in the first question I answered, because of its thermal season, we also sold a lot of thermal during this quarter. So that also made an impact.
The next question is from the line of Krishnan Sambamoorthy from Motilal Oswal Securities.
Most of my questions have been answered. Just 2 questions. What is the yarn procurement cost for the third quarter? And how much -- what was it for the corresponding for the quarter last year, as well as what's the procurement cost for the quarter-to-date?
Krishnan, we do not share the costs of raw material. But I can tell you that they have been consistent for the year, and we didn't have any major spike in the cost of raw material.
Okay. And that's not happened in the current quarter -- ongoing quarter as well?
I can talk about 9 months. It's been pretty consistent for 9 months.
Okay. And my second question is regarding inventory, which had spiked up towards the end of the last financial year. How does that look like now?
Inventory has come down significantly, Krishnan.
So if you were to quantify the number of days approximately, how much would that be?
Inventory, number of days has come down to about 75 days of revenues from about -- when you look at last, I mean, quarter, it was about 85. So there has been a significant improvement in inventory days. And I also mentioned earlier on the call that we produced less, so that's the reason for the under absorption of the factory-related overhead.
The next question is from the line of Arnab Mitra from Credit Suisse.
First question was on the gross margins, again. So just Chandra, you explained how you think -- report gross margin versus how we see it, which is just COGS, cost of raw material plus purchase goods plus stock chain. So if you just look at that, there seems to be a very big dip in gross margin, but the way you see it, there's not much of a dip. Is it largely to do with outsourcing that you now have a much higher proportion of outsourcing versus last year and therefore, conversion costs are getting captured in your gross margin calculation in the RM cost itself?
So that is one reason, but that is not the only reason. So we have to take a comprehensive view of the gross margin, which includes labor also and subcontract expenses, which is the outsourcing, as also the factory overhead. So our gross margins have been pretty steady throughout last year and this year also. And there is a 200 basis point decline in the current quarter, only because of the lower production.
Okay. Got it. And my second question was on your EBITDA margins. Now if you go back into history, you normally used to operate at 21%, 22%. This year, probably you'll be more like 19%. So do you see this more as a new normal? Or as growth comes back, you will expect operating leverage to take up the margins back to that whole zone of 21%, 22%?
Yes. That is always the way we look at things. So this year, is not a normal. So there is -- I don't think we can talk of a new normal because the demand has been pretty sluggish, flattish growth. So the market will definitely come back. And yes, as you rightly say, the operating leverage will improve going forward. So we'll get back to the margins that we have always been delivering.
The next question is from the line of Susmit Patodia from Motilal Oswal Securities.
I wanted to understand one thing. You're implementing a new ERS system and, at the same time, the way -- if we go through your website, there seems to be an explosion of SKUs that must have likely happened. So how challenging does this get internally? Forget the demand part. Is there a fulfillment challenge as well that you may be seeing?
Susmit, there are 2 things to your question. One is the new products, which we have been launching. And the other is the ERS. How is the ERS managed with all these new launches? See, as you're aware, all our distributors are basically based on vertical of business. So while -- even if we launch, say, 50 products, by the time it just got into each vertical, we're talking of around 4, 5 products per vertical because we have men's innerwear. Within men's, we have 2 verticals, which is premium and modern classic. Then, the women's, then we have the athleisure men, the athleisure women. And then the juniors. So it's not very daunting when you look at it, when you break it down at the distributor level. And ERS has actually managed to -- actually put into place to manage the SKUs. The more SKUs, and if you're on ERS, your life is much easier, and easy to manage the business. That's the whole idea of ERS.
Right. No. So if you were running without ERS, you would have a little more inventory in the supply chain, right? So I'm just trying to understand if this supply chain has got leaner and that also may be showing up in the top line decline, which may not actually fully reflect the retail demand.
No. I said earlier, to some extent, of course, because those number of days have been reduced from our distributors, because the whole idea is that we want our distributors' ROI to improve. We want them -- the stock to be healthy. And hence, loss of sales is taken care of by having the right relevant stock at each distribution point and eventually, at each retail point. So yes, there has to be some pain for some gain. And this is the -- a pain part. And I'm sure, once we completely go through it, there's going to be a lot of gain out of this.
Okay. And second question was, is there -- are there more products or more categories that you're looking at? Or have your plate full already now?
A lot more categories, but product within the categories, yes.
Okay. So we will not go into -- I mean, let's say, towel or a sock or a leggings, when you -- would you call them new categories or new products?
No. Towel is a category. Socks is a category.
Leggings?
Leggings is part of the athleisure business, which is women's athleisure business.
Okay, okay. So that is not a new category. Got it.
The next question is from the line of Saumil Mehta from BNP Mutual Funds.
So my first question is, if I do an implied basis, there is a mix improvement of about 4%, 5%. I mean, is it fair to assume that the improvement mix really doesn't impact margins because margins doesn't seem to improve, even on a gross margin basis?
Yes. See, we have -- the margins are on the overall. So we are then, then we talk about a 21% -- 20% to 21% EBITDA margins, we were talking at an aggregate level. So it's -- while we take care -- I know when we price the products and we try to sort of price them very close so that we have this average EBITDA across the verticals of the business, but there could be some products, which could be slightly higher and some slightly lower. But overall, at the larger scale, it doesn't impact the margins.
Okay, okay. And to this respect to the yarn prices, you say, then they are stable? I mean, is it assumed that they remain unchanged because from companies, which we've had, it seems that for them, yarn prices seems to be on a downturn. So have we received any benefits of the same? Just wanted to confirm that.
Not more than about minus 1% or minus 2% based on the fabric and the mix that we use. So there is some improvement, but it's not like significant for us.
Okay, okay, okay. And my last question is with respect to channel checks, how is the traction in the women and the kid's wear because channel seems to suggest that there is not much of traction. I mean your colleague had comments on the same. How are we looking at that piece of the business over the next 2 to 3 years?
See, it's not any different from any other vertical business because we have supplied distributors for women's as well as the kid's business, and then they are managed in separate teams on the ground. So as far as the women's businesses, I've said this even in the previous call, it gets docked under the overall size of Page. But if you take the women's business alone and compare with all other people in the business in the category we operate, we are not -- we are like probably 4 to 5x larger than the next person in the business or the next brand in the business. So it is a very -- this is a very large business, which is managed completely by a set of people at the ground who are -- who don't do anything with the men's business. So there is a big focus in that way. And then also, I was replying a question earlier, there are many new products, which have been launched both in the inner and outerwear on the women's side, especially on the bra side. Some of them have just come to the market and a few more are on the way. So yes, that's one market, which we are going to push very hard because even our attrition levels are much lower there compared to the men's innerwear. Just an example, we talked about 19% to 20% men's -- penetration on the men's side, and it's around 5% to 6% on the women's side. So it's a huge headroom and potential there. And when it come back to the junior business or the kid's business, I explained earlier also that we have completely segregated this team from the main business. The whole idea was to create a focus because we can very clearly see that this is one market, where there's immense potential and there are no [ parity of ] brands who have this kind of distribution what Page has. You have to leverage that distribution. So we have here, in fact, that has been one of the major costs, which also has impacted us during this quarter because we have hired close to around 120 people, sorry, on the junior business side. [ And it inspired us ] to create National Sales Manager, who reports into the overall President of Sales and Marketing, so that we have a complete focus on this business. And we very clearly know that. We're going to push this business very, very strongly for next 2 to 3 years. And we've seen people will deliver almost 4 to 5x of our current turnover going forward. So the absorption of the cost will be much better going forward on the kid's side.
The next question is from the line of Ritesh Gupta from AMBIT Capital.As there's no response from the current participant, we'll move on to the next, that is from line of Bharat Shah from ASK Investment Managers.
K.C., I -- all along, we have talked about resilience of our pricing capability and maintaining margins in a certain territory. In the first 9 months, it is well below that territory. But not only that, the underlying presumption goes all along, that if the margins that we are talking about, below that margin interest and the depreciation and other numbers would also follow in a similar way. In other words, what will happen at an operating margin level? We'll fall at the pretax margins in a similar way. But this time, it has been distinctly different, not only operating margins have fallen below that minimum that we have talked about. In fact, not in that range of 20, even 22 but below 20. And items below interest, depreciation, other income, all have moved in the other direction on an adverse side. Therefore, pretax margins, which were one, always kind of completed, have fallen well beyond -- well below what one has always attributed to Page. So I'm a bit confused as to how we were looking at maintaining the pricing power and the strength of the margins, what we are talking about.
Okay. The pricing power is intact, and we don't -- as we don't increase prices beyond 3% to 5%, we have never gone beyond even 4.5% in any of the years. The margins -- the pretax margins are definitely challenged, even for 9 months. And that is mainly because the growth trajectory that we were expecting or planning for, for example, mid-teens kind of growth on revenue, would have easily absorbed all these overhead. But regardless, the management philosophy has been not to stop any investments. As with respect to people, we have brought many senior people on board in sales and marketing and even at the back end. We also continued unabated investment in technology and automation and point-of-sale distributor management system, JDA implementation for the planning SLOB process, as well as we are going to look at [ this on a -- ] to move into it. So this all reflects the confidence, which we have with respect to our future. The volume growth will sort of be able to absorb and deliver the margins that we are used to. We do not have the practice of overburdening the consumer just because we have the pricing power. That is the thinking.
No. I appreciate the 2 points. Overburdening customer is a bad idea. Is really stopping investments to create the future of the business based on the current challenges also would be a bad idea? That way we'd under-invest into business and not allow its full potential. But my point was slightly different. It is one thing that our operating margins are below the kind of range that we are accustomed to, even below the lower end of that range. But items below operating margins also seem to have gone materially adversely. Virtually, charge of depreciation has doubled, interest cost has doubled...
No, no, no. Let me clarify that. The finance charges and the depreciation are only the result of Ind-AS 116. So this is -- you will see has been pushed to below the line because the rent is now treated under Ind-AS 116. The only operating item where we have declined, below the line, is in the financial income, because last year, we had a lot of money to invest in debt mutual funds. And you know that we have given away a substantial of the 3 funds, in terms of dividend. So we don't have that much money like last year to invest. So that is where you see a decline in financial income. That is the only item below the line, which is declined for the reasons I explained.
No. K.C., exactly that was the point I was making. Presumption all along was Ind-AS would result into interest costs looking higher and depreciation looking higher, I completely understand. But presumption was when we talk about sanctity of the operating profitability, presumption goes that how it was done earlier, whereby without Ind-AS effect, what the margins would have looked like. And adjusted margins, we typically, finally, with 4 later pretax level, would be maintained in parity. Therefore, given the fact that Ind-AS impact has pushed up interest in depreciation costs materially, it is an adjustment on that. That means that in operating level, the fall is much worse than what is final, K.C. what we were seeking to kind of preserve.
There is no doubt, a decline. But if you look at Ind-AS, it is only impacted by about, YTD, 9 months, about 20 million. So it's not as significant. It's only between the lines. But yes, your point is taken. So we will have to attain those kind of volumes to be able to support the investments that we are making. But we cannot keep the investment in our veins only because of margins.
The next question is from the line of Tejash Shah from Spark Capital.
A kind of follow-up on the previous question. Now on the call, you mentioned that we'll target to go back to our usual margins [ on that 20 to ] 22%. Now again, on the call, you also mentioned that the current time side and competitive landscape has materially changed. And then you referred to 2008 as well. So let's see if there's a hypothetical trade-off between market share gain versus margins. Our business plan will be centered around margin revival or growth revival?
No. Market share is something, which is -- which will always precede any other option given to us. That doesn't mean that we'll let the margins go beyond the threshold. While we'll keep an eye on the margins, but market share is something, which will always be a priority for us.
But the earlier threshold was also keeping earlier competitive landscape and earlier growth in mind. Now at 19%, also if I add your royalty, perhaps at 24%, you're the most profitable retailer or brand around. So why -- so the question is actually, why to actually go on that part of margin guidance and not on -- or the margin rather than growth's revival.
Sorry. I'm not able to comprehend exactly what you were trying to ask.
The point is, for example, let's say, for growth revival needs, margins to be sacrificed at this level. Will we actually choose that strategy or we'll strive to revive or regain margins also?
That's something what we have done to some extent, not as a plan. But we have kept on investing for future because we know that we have a huge headroom, and there's a huge market out there. All what's happening is the moment, it could last maybe 6 months, 9 months or a year. But beyond that, we're going to go back where we were. So for that, we have to be ready, and technology is one of the biggest enablers, what we have been investing heavily this year, and followed by people. We have invested in many areas, which were nothing in the past.
As a final -- I'll squeeze in last one. Sir, the overheads and the investment that you spoke about, we did -- if I understand correctly, from Q1 itself. And all the other factors, which are gross margin drivers are actually positive, realization mix, and even cost. You said there was no divestment there also. So why this impact was felt in this quarter and not earlier quarters?
There have been specific reasons with respect to this quarter because we have further invested in the channel, and some of the costs like advertisement are more in this quarter than it was before. But on a full year basis, we restrict the budget to a certain percentage of revenues. So at a very narrow view, one quarter will not view the full picture because everything is not linear in that sense.
The next question is from the line of Suvarna Joshi from Axis Securities.
Most of my questions are answered. Just have 2 questions. One, while we've talked that we are making all the right kind of investments that are required to kind of grow our business, and we would just wait for the macroeconomic backdrop to kind of improve and support the growth. In that context, what would be the lead indicators that would kind of suggest to us that the growth is likely turning around for the industry and specifically for Page? That was my first question. And the second question, you mentioned in one of the answers to an earlier participant that the distribution has been growing at about 4% on an annual basis. So while we are largely a metro-focused kind of a distribution setup, are we also looking to expand, specifically in the women wear in the Tier 2, Tier 3 cities? Or we still have a lot of headroom to grow in the metro [ act ] itself? So these are my 2 questions.
So of course, and I'll start with your second question. I'm not sure how you got that we are a metro-centric distribution setup. We currently reach around 2,600 cities and towns through our distribution across the country. We cater to metros, Tier 1, Tier 2 and Tier 3, and we also have done some inroads on the rural side of the business for all verticals of business, which is men's innerwear, women's innerwear and athleisure business. So -- but having said that, you're asking about the scope. We have a huge headroom because our penetration levels still are very, very small. Since you asked about the women's business, our understanding is that in the target audience, which we look at around the INR 15 crore, men and women follow that. 50% is INR 7.5 crore women, we still cater to only around 5% to 6% as penetration. The number of pieces, which can be sold to these women, we're still around 5% to 6% penetration of that number. So yes, huge headroom. There's a lot of work happening on the women's side of the business. In terms of product, I explained it even earlier about how we are launching a lot of products, both in the innerwear and the athleisure side of the business on the women's business. So the answer to your question, yes, we have a huge headroom and a long way to go on the women's side of the business. And question one was the SKUs. I think the volume growth will be the right key for us to ensure that the things are back. We just, fingers crossed, hoping some ground related to change and help us to open up because currently, and what we are understanding is the [ industry ] sales are something, which are very sluggish, and the walk-ins to the stores are still wanted.
Ladies and gentlemen, that was the last question. I now hand the conference over to Mr. Chandrasekar, for his closing comments.
Thank you very much for all the interesting questions. Have a great day. Bye-bye.