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Page Industries Ltd
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Ladies and gentlemen, good day and welcome to the Q3 FY '22 Earnings Conference Call of Page Industries Limited. [Operator Instructions] Please note that this conference is being recorded.I now hand the conference over to Mr. V.S. Ganesh, CEO, Page Industries. Thank you and over to you, sir.
Thank you so much. Good evening all and greetings from Page Industries. It is a pleasure to talk to you all today evening. I look forward to our interaction and I'm very happy to answer all the questions that you may have. I'm happy to report that we had an excellent quarter last quarter. With the market opening, with less restrictions and being almost near normal, there is a good improvement in out-of-home purchasing and the challenge by modern trade and general trade are seeing increasing businesses. I'm also very happy to report to you that we have been able to expand capacities in line with the increasing demand which we are seeing and we have taken lot of measures to increase capacity, both in-house and with our chosen outsourced vendor partners. The supplies have been improving month-on-month and the robust performance in the marketplace and the performance of the supply chain team in delivering more goods is reflected in the Q3 numbers.Our Q3 revenues grew by 9.8% quarter-on-quarter and 28.3% year-on-year. Volume grew by 5.3% quarter-on-quarter and showed a 24.6% growth year-on-year. As of end of December, all our channels are fully functional. We are happy to report that we have presently more than 105,000 MBOs and 1,030 EBOs. So for us, it was a historic moment when we crossed the 1,000 EBO mark and now you will be happy to note that we are 1,030 plus EBOs. The operating environment overall has seen good improvement and is having less disruptions. We have introduced shift operations in most of our manufacturing facilities to ensure safety by way of maintaining social distancing amongst associates and to augment more capacities and we also increased outsourcing capacities. Our compliance teams are closely working with the outsource vendor partners to make sure that all health and safety protocols and standards are followed.The sales has been on an increasing trend since last year and we continue to see that in this quarter as well. Our branding effort continues through multiple channels, including online, media and point of sale. If I were to talk about our athleisure business, the investment we made in 2019 to set up a dedicated sales team for the athleisure business is yielding good results. The strengthening of the team and having a focused leadership for this vertical has resulted in rapid expansion of our distribution footprint even during pandemic times. This comes not just from new apparel stores, but even from existing innerwear stores. The new retail identity in our EBOs lends itself beautifully to showcase our range of athleisure products. The athleisure products are so well received that the demand for this category has been moving upward each quarter and we also have been working at the back end to augment those capacities.This gives us tremendous confidence that with this increased demand, expansion of distribution, introduction of new products and styles; athleisure will continue to show increasing growth year-on-year and this is going to be one of our key focus areas. When it comes to women's business, the story is similar. Women's continues to be a high growth opportunity category for us. In the last 4 years, we have built an extensive and strong product portfolio to specifically target women. The amount of jockey women distinct identity in 2018 has helped us to communicate and build awareness in the women's category. The campaign, which we did last year or during the second quarter of this year, has also helped us to create more awareness. This is complemented by the addition of some very exciting products in this category. Women's business is growing at a very healthy pace and we have aggressive plans to expand the business through focused initiatives.We believe that women's innerwear will be one of the biggest pillars for Jockey in our journey of becoming a $1 billion company. Our kidswear business has also shown very encouraging results and it continues to be a special focus area. We have had a very encouraging customer acceptance and feedback in this category and we are now going all out and creating more capacities and supplies in this category in line with the demand. We now have around 53 EBOs that are exclusive for Jockey juniors and we have also appointed Jockey Junior specific channel partners across 50 cities as [ phase 1 ]. And the journey continues and we continue to expand in this area. Considering the immense potential that we are seeing in the women's and junior categories, starting this year we have a separate business vertical with a dedicated sales team and distribution to cater to the women's innerwear and kidswear business.We continue to expand our depth within existing market geographies as well as strengthen distribution in markets, which are witnessing expansion of mature retail formats. Jockey is now present throughout India in 2,850 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'll continue our focused approach on our core business verticals that is men's innerwear, women's innerwear, athleisure men and women, socks and towels and we are confident of maintaining growth going forward. We continue to innovate in areas of customer acquisition, cost control, cash management and investing in the well-being of our people and in our sustainability initiatives. While we delivered strong year-to-date performance, I think it is right for me to thank our teams in having continued focus on excellence and driving the brand with purpose. With their support, we are recording continued progress and good financial performance.For today's call, I have the pleasure of having Mr. Gagan Sehgal, our Chief Sales Officer; and Mr. Rahul Shukla, our Chief Retail Officer; of course along with Mr. K. Chandrasekar, our CFO. So they will be more than happy to answer any of your queries which you may have in their domains.And I now call upon Mr. Chandrasekar to give you the financial update. Over to you, KC.
Thank you, Mr. Ganesh. Welcome to the call once again. I'm extremely happy to report the best-ever quarter in the history of Page Industries, which is Q3. INR 11,898 million with a 28% growth and PAT of INR 1,745 million, which is a 13% growth year-on-year. And also in this year, Q2 was the best ever until it was surpassed by Q3. As you know, we reported INR 10,840 million as top line and this has surpassed the last year Q3, which was INR 9,270 million top line and Q4 was INR 8,807 million. So in the past 5 quarters, we have delivered the best 4 quarters in the history of Page barring Q1, which was partially under lockdown due to pandemic. And in terms of EBITDA margins, we have delivered 21.1% EBITDA, which also compares favorably with 21.5% of the previous quarter. But the last year year-on-year Q3 was 24.4% and we had significant raw material price increases since then.We have also increased our ASP, but we had -- I mean typically we deliver around 21% margin and we are around that range in Q3 as well. The gross margins are around 40%, which is more or less in line with history in terms of range between 39% and 40%. The Q3 PAT has been good and, as I said, a growth of about 14%. We're also doing extremely well on the conservation of cash and being able to support the vendors. The cash and cash equivalent is about INR 5,560 million, which again is better than Q2 which was about INR 5,300 million. The net working capital is about INR 5,935 million, which was -- at September it was about INR 6,100 million. Inventory has increased to about INR 6,950 million when compared with about INR 6,400 million.So we're building up inventories and ensuring that we are able to match the supply to the demand because the demand is ahead of the supplies even now. And so we are increasing our inventories and the good quality inventories as such. For the 9 months, the revenues are INR 27,750 million and compared with INR 19,522 million year-on-year, it is a growth of 42%. The EBITDA margins because of Q1 for the 9 months ended 31st December, '21 is 18.7% and compares favorably with 18.3% of the previous year. The profit after tax 12.5% as compared with 11.5% which is also favorable.So I suggest we move on to the Q&A session now.
[Operator Instructions] We take the first question from the line of Avi Mehta from Macquarie.
Sir, first was on the price increase. In the second quarter, you had indicated that you've taken about a 5% price hike. Have we taken any further price hike to pass on the input cost inflation?
Mr. Mehta, we increased the price by around 8% during December, January. This was mainly because of the input cost increase. Of course we were planning to do it in 2 phases because we were also expecting the GST rollout. So we didn't do the second phase because the GST rollout didn't happen so we did the price increase to meet the increasing raw material prices.
To follow-up with this. From the EBITDA margin point of view, should we now aim for 22% as we go forward or if you could kind of help us? What range are we looking at as we go forward after this price increase given the input cost inflation?
Mr. Mehta, we always curate the prices in such a way that we are in the 20%, 21% space so that we can continue to be a value for money brand for consumers. So we always are conscious of that and we are comfortable at a 20%, 21% level. So we touch the prices in such a way, we are in that zone.
Sir, my second question was on the gross margin calculation that you've shared in the presentation. This time you've excluded sale of raw material to vendors and sale of non-inventory by doing the math. Could you explain the nature of the sales and whether the increase that you have seen in that component, the excluded component in this year, is that one-off or is that a new run rate that we should assume going forward? If you could help understand that.
Good question, Avi Mehta. Increasingly we are dispatching -- we have opened up outsourcing in Bangladesh also and we also worked very hard on disposing the slow and longer inventory. So we also have opened factory outlets, which was not there in the past. So these are not necessarily related to the FG sale. So in order for apple-to-apple and since we sell inventory to our outsourced vendors at cost, that does not contain a margin. So in order to remove that distortion, from this quarter we've started reporting on apple-to-apple the finished goods that we are selling.
Sorry. Sir, may I request you please. We have the next question is from the line of Tejash Shah from Spark Capital.
Congrats on a good set of numbers. Sir, my question pertains to EBO expansions. We have actually achieved a very good milestone of 1,000 plus stores. So in terms of EBO network, we are actually next to -- I can take [indiscernible] Lifestyle space. So first of all, how much more runway you see in terms of expansion, let's say, in next 2 years on EBO network? And if you can give us some more color on what is the nature of expansion that we have done in the recent past? Are we getting to Tier 2, Tier 3 cities or it is largely penetration in areas where we were already present and we're going deep in existing markets?
I think Mr. Rahul will be the right person to answer this. Rahul, do you want to take this?
Yes. Thank you for the question, Mr. Tejash. Am I audible?
Yes.
Yes. So on the first question, we have seen -- if you see over the last 2 years, we've been opening practically one store every few days in the year. So we've opened up around 160 to 180 stores is what we've opening. And we'll continue to drive the pace of expansion as we move forward. In fact this year probably we'll exceed that target as well. And as far as the second question that you have in terms of the opportunities for growth in the Tier 1 and Tier 2 towns. So if you look at the number of cities that we are present in with EBOs, there's hardly 360 cities that we are present in out of the more than 2,800 cities that Jockey is currently getting retailed. So you can well imagine the kind of opportunities that exist for expansion for Jockey retail. Of course every market will have its own time when they will be prepared to take an EBO because our vision is to have [indiscernible] viable and sustainable cash flow in the country. Our expansion is happening uniformly across all Tier 2 cities. We're expanding in metros, in Tier 1 and Tier 2 as well as in Tier 3 and Tier 4. Roughly 1/3 of the distribution presence is in all these 3 buckets.
And then what is the least population city or town we would have gone to so far till now?
Specifically, we define the Tier 4 cities as the ones which have a population of 50,000 plus. So we are targeting those markets. And there's enormous number of markets where we can actually open retails.
Sure. And just last one on associated question. So usually this kind of expansion also needs associated back-end investment in supply chain, warehouse facilities and all. So any color on that? How are we ramping up on the back end?
So we had a 5-year plan in place and we review it every year. So we have a budget for next year. So the entire operating plan, including warehousing, is done proactively to be in tune with the increasing demand and sales. So we are well prepared on that trend not only on the warehousing side of it but also on the manufacturing side. And we also have done enough groundwork through supply chain partners on the RM side of it. And similarly, we have worked very closely -- our IT team works very closely with the business to ensure that the IT infrastructure, including to serve the e-com business, is well fueled for the projected business growth. So we are well prepared as far as those expansions are concerned.
[Operator Instructions] We have the next question from the line of Ankit Kedia from PhillipCapital.
Sir, my first question is on the MBO channel expansion. Could you give some color of this 1 lakh MBO outlets? How many would be between men, women and kids? While I understand there could be some overlap between them, but individually if you can tell us, we will know the opportunity size of more expansion which could come in individually between the 3 men, women, kids and athleisure also if you can help us get the opportunity size.
Gagan, do you want to take it?
Thanks for your question, Ankit. So yes, this 100,000 MBOs that we have right now is the total base and our focus is that wherever there is an opportunity, we try to do range selling. We just don't go ahead with one category. If we see multiple categories, all the teams get activated and wherever there is a potential, we try to be present there in that particular category. I would say the percentage is pretty, pretty healthy. Out of our total men innerwear base that we have, when it comes to women and athleisure, there's almost 60% to 70% of that where women and athleisure is present. And we are still counting. As I said, it depends on the total base itself. Wherever we see an opportunity, we try to go with all categories. After one, everybody else follows. So it's pretty healthy in terms of our presence across all categories.
And just a follow-up on that. Last quarter you highlighted that 1 lakh was the target which you achieved. So going forward from here, do you see a pause in the expansion of MBO and it will be more of increasing repeat purchases in these outlets or we'll continue the expansion strategy and the repeat purchases and others will follow simultaneously?
So Ankit, it will not be either/or. I think it has to go hand-in-hand. Like during the pandemic period itself, we have expanded our MBO base by 61%. Exit FY '20 we were at 65,000 outlets Today, we are at 1,05,000 outlets. We see there is a lot more opportunity because almost 50% of these outlets we are opening in Tier 3 and Tier 4 towns and we still see more and more opportunity there. At the same time, we will continue to do range selling and category upselling in the existing outlets. So both will continue at the same time.
My second question is regarding omnichannels. Most of the other retailers are today shipping their online consumer buying from their retail outlets. So given that our retail outlets are franchisee owned, do we have the ability or the technology to actually ship from the retail stores or we will continue to ship from our warehouses and that's where some of the inventory could actually be blocked for us and that's why we are facing some supply chain issues given that 8% to 10% of our orders today are coming from online?
Well, if you see the numbers, we have clocked very good growth. So the issue as we regards supply chain was a good problem because the demand was much higher than what the supply could do be in the beginning of the year and then they started catching up and I should compliment the teams for ramping up capacity very fast and to catch up with the demand. So we are in a much healthier situation as far as the supply chain issue is concerned. And coming back to the online business, we have our own e-com warehouse through which we cater to the requirements of online businesses. So it is not happening regionally or through the distributors, it is from a central warehouse. But again we have robust marketing plans where we keep enough inventory to meet the demand and we have everything close by. All our warehouses are close by so we ensure that there is no sales loss. If there is an upside in some other channel, we ensure that we cater to it.
The next question is from the line of Sanjaya Satapathy from Ampersand.
So my question is that quite a few consumer discretionary companies reported fairly weak revenue and volume performance in this quarter 3 and they cited a variety of reasons like delayed monsoon and the disruptions as well as impact of excessive inflation on affordability. So whereas your top line growth has been okay, fairly strong in fact. So what really is the reason that -- are you seeing some kind of a change in consumption pattern or that the penetration potential in your case is far higher?
Well, Mr. Sanjay, how I see it is I think it's the power of the brand, the product which we offer, the acceptance of the product offering which we have for our consumers. We have come out with very exciting products, which is well received in the market. And the other most important 2 things, which I can say is one is the value for money proposition. So if you see how we have touched the prices, we have been trying to hold on to the maximum and we have only touched barest minimum so that we continue to be a value for money brand for consumers. And second is the team's passion for excellence in whatever they do, which make sure that we give superior products of the highest quality to our consumers. I think it's the right products, retail expansion where we have made sure that we are present in wherever we need to be and we did invest even during the pandemic, we didn't shy away from investing and increasing our retail footprint. The value for money and the quality of our products and the range of our products. I think these factors have really helped us and that's what we could hear from the consumers when I see the demand.
Understood. Sir, if I can just ask there so are you saying that you could not have done better compared to what you have achieved even though this late surge of Omicron wave and monsoon. So what I'm trying to say is that your performance was fairly what you wanted irrespective of the disturbances or you would have done better?
Actually, Sanjay, we could have done more, but there is so much we can with supply chain. So we did -- to be honest, I think there were some opportunities lost because the demand was much higher than what we could supply initially. But as far as last quarter is concerned, yes, we did catch up quite a bit. But if I see year-to-date, we could have done much better. As you know, we lost 48 days in Q1 and we lost the operating capacity also during those times so we had to do quite a lot of catch-up. The demand was much higher than supply in those periods. So things are looking very bullish for us even going forward looking at the acceptance of our products.
Understood. And sir, which means that you will be able to sustain this within kind of Top 10 growth in the coming period. Apart from that, one comment that you made about your proposed price hikes in 2 phases and then phase 2 did not happen. I could not really understand that part.
Okay. Sanjay, what I meant was -- there was a question did the increase of price? Yes, we did increase and we did increase the price in anticipation of the GST and we wanted to revisit it for the raw material sometime in January or early February, but we didn't do that since the GST was not rolled out. The recent increase in prices, which we made helped us to meet the increasing raw material price. So we thought of doing it in 2 phases, but we didn't go ahead with the second phase because the GST increase was not rolled out.
And then about your top line outlook because you have given out some kind of a guide that you'll be touching some billion-dollar sales by fiscal '24 or something like that. So you are well on your way to do that. I just wanted to get a feel of that.
Yes, we are very much in the trajectory. In fact, the quarter-on-quarter performances are in line with our long-term business plan to achieve the target. So we are very much at it and we are clocking very nicely to hit those targets and I think we'll hit it faster than what we thought.
The next question is from the line of Gaurav Jogani from Axis Capital.
Congratulations on a strong set of numbers. Sir, my question is with regards to the EBO outlets. Now you have 1,000-plus EBO outlets. Would you like to share what would be the percentage contribution to the overall sales from the EBO?
Rahul, do you want to...?
Sorry, your question is about EBOs as the overall company's contribution?
Yes, sales contribution.
So all I will say is that it's now quite a substantial contribution, probably 1/3 of what the company does and it's been growing rapidly over the last couple of years as the press release is based around expansion and the same-store productivity.
Sir, the next question is with regards to the strong 24% top line -- the volume growth that we saw and even on a 2-year CAGR basis if we see, it's 22% growth that we have seen. So how much, sir, would you allude this to the pent-up demand that because of the strong demand of the earlier quarters that we're not able to maintain and some of it got bunched up during this quarter. So how much of this would you allude to that?
I personally feel this is real demand rather than a pent-up demand because I do understand when we had wave 1 and wave 2 when the markets were closed and hardly any shopping was possible except for online. Yes, when the market reopened, there would have been pent-up demand. But if we see the last 6 months, the markets have been operating near normal and our demand continues to be as high as before. So it's -- what we can read from the market is that these are real demand, it's not a pent-up demand, and we are preparing ourselves for the same.
Sir, just one last clarification from my end. So the $1 billion target that you have set for yourself, that is for FY '24 or for FY '25?
We are looking at '25-'26. We shall try our best to achieve it faster than that, but the target is '25-'26.
The next question is from the line of Chirag Lodaya from Valuequest.
Sir, my question was on volume growth. So if I just heard it correctly, you had 24% volume growth during the quarter and top line growth was around 27%, 28%. So the pricing element was just 3% to 4% Y-o-Y. Is that understanding correct?
KC?
Yes. In terms -- there is a lot of mix element in terms of channel and product category in that. We increased prices by close to 5% in Q1. So there is always an impact of cannibalization and mix in that.
Okay. So 5% price increase in Q1 and recently you took 8% price increase. So now it is in all 13% over last 9 months. Is that understanding correct?
This increase will take effect only from Q4 because this happened towards the end of Q3. It is yet to be accepted in the numbers.
All right. And you could also touch upon this Bangladesh, what exactly we are trying to do, which kind of products and what is the plan? How big can be Bangladesh for us in terms of sourcing?
On Bangladesh, we have been working with couple of vendor partners for quite some time now and we have added one more vendor partner. So we have been very choosy about the selection of vendor partners. We have been looking at -- as we have told in the previous calls, we don't outsource a product, we outsource the execution piece of it and they should be an extended arm of Page. They should be a mirror of our in-house facilities. The same way we operate, in-house, the outsourcing vendor partners operate. So we were lucky enough to identify few vendor partners who had the same wavelength and could work with us as a strategic alliance. So our volume growth from Bangladesh will predominantly be determined by the alignment of the vendor partners to the Page way of working.So otherwise, we will be looking at expansions wherever possible, it's not particular to Bangladesh. So we have not gone to Bangladesh for price benefit. It is in fact the cost of goods purchases from Bangladesh and domestic continues to be almost same. It is to make sure we get the volumes and we get the quality and standards which we are expecting. And there are some very big factories in Bangladesh that's for the best brands globally and they have the best management talent available. So we pick and choose such vendor partners who can associate with us and in that sense, it has worked very well so far. So the growth will be based on how they can grow along with us and how fast we can find like-minded partners there.
Right. Just last bookkeeping question. What is the A&P spend for the quarter and first 9 months?
Sorry, couldn't...
Advertisement spend for the quarter and 9 months?
KC, I was not able to hear the question.
Yes, he's asking the advertisement, right? Advertisement, we spent about INR 160 million -- I mean sorry, INR 294 million in Q3 and the 9 months spend would be around INR 715 million.
The next question is from the line of Bharat Shah from ASK Investment Managers.
Delighted to see the kind of robustness of the business performance. One question. We have embarked on the technology transformational project for a length of time. So just wanted to understand where are we in that journey. Technology at one point of time probably was for hygiene and for informational value and it has become an enabler and now probably it has become the key component of the business to improve the character of the business. So where are we on that journey and how extensively we are adopting that to improve the character and resilience in the strength of the business? Related to that, a smaller subquestion is what is our overall logistics cost both in terms of sourcing as well as distribution? And given our manufacturing proliferation and improvement in usage of technology, can we expect to see improvement cost in percentage terms in the logistics cost over the period of time?
Thank you, Mr. Shah, for asking those questions. Actually to answer your first question on the technology side of it. As you rightly said, this is a continuous journey so I think year-on-year we need to upgrade ourselves to bring agility to the business, bring smartness to the business and to bring safety and security to the business when it comes to data protection and other things. So we have been working on those fronts. And just to update you, we have now fully migrated to Blue Yonder for the planning side of it. This is the latest development, which we have on the technology side, which is going to give us lot of edge as far as supply chain planning is concerned right from demand sensing, demand planning to operations planning. So that's something which has happened. Some of our units -- especially on the women's verticals, most of the units have now smart technology wherein we get real-time information to improve productivity.So every machine is attached with -- and every bundle has the high button so that everything is logged in and logged out and we get real-time information. Any downtime is known real time. And this data also is helping us to bring in lot of efficiencies. Similarly, we have made lot of investments on the HR side when it comes to HR, IMS and that continues to be a continuous investment being made. We always were very, very strong on the front end as far as the sales force automation and other activities are concerned wherein we are able to get lot of information today. Our sales team in the farm can see how much stock is lying with the distributor, what has been the purchasing pattern of the retailer and therefore, which products needs to be pushed and what is his target, where is he against that as far as targets are concerned. Everything is real time. So we do have that.We have a very strong management dashboard with real-time others so that we get early warnings if something is not right. And I think KC can elaborate further on a lot of initiatives, which we have taken on data protection and data security is concerned. So we have been working on that and we have continued to be investing on these trends and these investments will continue and that has brought in -- it has been a great enabler for us to have this accelerated growth because as you know, what took us here will not take it there and unless we embrace technology and support, we cannot scale at that speed. And therefore, we have been blessed with an amazing team which was able to spot the right requirements and implement them on time. As far as logistics cost optimization is concerned, it is well within our control, within our budget and it's well managed.But we are still looking at warehouse expansion wherein we can have a better reach to the market with an [indiscernible] and also improvement to logistics cost. So that is something we are working on. But our main focus area is to reach the market faster because the cost is well under control. So there may be a little bit of weakness as far as cost benefits are concerned when we work on the new warehouse systems, but it will be mainly to improve the stock health of the distributor because if we can reach inventory to the distributor faster, he can work with lesser inventory and proceed better and have much better health as far as inventory is concerned.
And my second question, for a length of time we have been working on improving and transforming the innards of the firm. But in between market situation was less favorable and therefore, we were in a kind of a state of bubble for a length of time where effects were more in purpose, but outcomes were somewhat stingy and hard to come by. Do you think finally we are at a stage where the Page going ahead will look more and more of the kind that we have seen in last some time rather than that phase of a bubble that we kind of got stuck, we were in that kind of a situation. So have you kind of decisively broken out of that and where we can look at the target of $1 billion and all that is fine. But internally given everything that we had, the product portfolio, the brand and the distribution and the value proposition, we are at a stage where Page for future will look more and more of the kind that we have seen of late.
Absolutely Mr. Shah, you can count on us. We are tracking well on those fronts to achieve that $1 billion target and it can be achieved only if we can achieve those numbers which we used to achieve in the past. So you can see in the last few quarters that is what we have done. And we are pretty focused, we are blessed with a great management team who are well aligned to the business and there are strong shoulders on which we are standing and driving the business. So we are blessed with an amazing team and our product development team is coming with some exciting amazing products. The operations team has been working so much on excellence that we can continue to be cost competitive. In fact, we were awarded the manufacturing excellence award very recently when it comes to excellence. So we are fully geared up in that sense and you can see that. You've already seen it in the last few quarters and I'm sure you'll continue to see good results.
Sure. And just last question, which I had asked earlier, but wanted to check on that. What kind of logistics cost as a percentage of our revenue so far that we seeing and do we think we'll be able to see measurable drop in the percentage of that over a period of time?
Mr. Shah, thanks for that question. If you look at our logistics spending down as well as the entire warehouse and managing the warehouse. As you know, a large part of the business today are outsourced to DHL and we are increasingly doing so. So the total cost arising is somewhere around 2% and it remains so. It is slowly coming down, but maybe in maybe 2.4 to 2.2 kind of percent thing. So while it is not significant, but it can make or break the supplies. So we're focusing on mix and with all the B2C and new channel partners coming in. The comfort in warehousing is what we are focusing on and also investing in systems. We recently switched over [indiscernible] billing for e-commerce. So a lot of these automation initiatives will help us to match the supply to the demand through the warehousing.
Best wishes to the entire Page team. And delighted to see the kind of a change which has been unfolding.
The next question is from the line of Swagato Ghosh from Franklin Templeton.
I wanted to understand how are we thinking about inorganic growth opportunities. We have raised some cash which we can deploy. So how are you thinking about that growth?
Mr. Ghosh, if you can repeat the question. The line was not clear.
Okay. I want to understand how are you thinking about growth opportunities. We have raised some liquidity at our disposal. So how are we thinking about that growth?
Mr. Ghosh, since it was not clear, I'm repeating the question. Were you asking since we have cash and how we are going to use it for growth, am I right?
Yes. Inorganic opportunities specifically.
No. At the moment, yes, let me specifically speak about this. We are not looking at any acquisition if you are asking about that because we have a lot of work on our hands in the organic growth itself. As you know, we are growing rapidly and we need to expand capacities and the future of the brand in India. It is so huge that we have to specialize and focus and improve the operating efficiency. So in the same category, obviously we cannot introduce a competing product based on our agreement with Jockey. I hope that answered your question.
Yes, that does. So you are saying that the cash we have, that would all be used up in, say, expanding capacity and investing in, say, marketing et cetera, for newer categories, et cetera organically?
Organically. We already have all the categories that we want to do. So we will be investing in capacity expansion, in digital transformation, in all other aspects where the business can become faster and more efficient. Sorry, VSG was not able to hear you so I took that.
So Mr. Ghosh, just as Mr. KC said, we are looking at organic growth and there is so much to grow, we don't want to get distracted unless there is something very, very exciting. But nothing of that sort has come to our radar. And as you can see, we have been growing our ranges as you might have seen when it comes to juniors, now the way our accessories is performing, which are in line with brand Jockey. So there is a lot of work to do in that front and there are a lot of opportunities and we would rather try and focus and leverage on our strength.
Understood. That is very clear. And sir, second question is when we talk about expanding MBO numbers, can you give me an idea about for the incremental MBOs, how much percentage shelf space we get for say a new MBO that we are entering? Say, in the first year, 2 years, what is the percentage shelf space allocated to our brand?
Well, it depends actually. There are some MBOs, which will be having appetite to accept most of our ranges and so they may want to keep the juniors, the women's innerwear, men's innerwear. But there are some MBOs which are just selling kidswear so they may only accept the kidswear product. So it depends on the MBO. And there are also some cases where they start up small and then they keep expanding as they get comfort. So it's very difficult to put a hard number there by way of the percentage. Gagan, you want to add some more light to it.
No, I would completely agree with what you said, VSG. Shelf space can only be -- with the majority of the outlets in any case looking at our distribution footprint, we are present in most of the outlets which sell premium apparel. So we are there. So when we go to a new outlet, it can be maybe a non-conventional outlet for example. In a non-conventional outlet in the similar category, we can get 100% sales spread because there is nothing else present except Jockey. While there can be some other outlets where, as VSG rightly said, it's only a kids outlet and we want to make a foray into that, they do not sell our brand all. So there we can place our products. So it depends. Maybe there is an outlet which is a footwear outlet where we place our socks. It's very difficult to talk exactly. But yes, we do strive towards getting the rightful market share what we deserve at the last outlet level. That's all I can say.
The next question is from the line of Trilok from ABSLI.
Congratulations on a very strong quarter. I just have 2 questions. One is in the initial remarks that you mentioned, the demand is firm across the categories. So is it -- could you give some sense now from particularly with respect to men's innerwear and womenswear and also athleisure. Are these the demand quite stable across categories or is there any one category which is driving the growth? And point 2, if you could also share basis are you seeing any differentiation in growth between urban and rural markets?
Sir, as far as growth across categories are concerned, all categories have done well and every category has shown robust growth. So that is one encouraging and good news which we have. The men's innerwear, athleisure, women's innerwear, the bras; it has all shown good growth. And we are seeing since our market penetration has been low as far as bras, women's innerwear and athleisure is concerned; we will be seeing accelerated growth there because there is much more headroom on those brands. Because as for penetration on the men's innerwear, we are at around 17% to 18%. And when it comes to other categories, we are in single digits. So obviously you will see much more accelerated growth there. But even men's innerwear has grown tremendously well. So all categories have recorded robust growth.
Okay. And in one of the interviews you have highlighted about non-innerwear category almost 1/3 of the contribution to sales. Has that kind of inched up further or is there any range that you guys are keeping in mind going ahead? And also if you could just address the question on rural versus urban.
It is more of the same because the men's -- even though the athleisure side of the business has grown, the bras have grown, men's innerwear has also shown similar growth. So overall as you could see the numbers, these are exciting numbers we have, but the percentage has not shifted because we are very happy that all categories have shown similar growth.
Sure. And difference between urban and rural, if you can just qualitatively speak about it.
Well, rural, there has been -- when it comes to retail footprint expansion, I can say around 45% of the expansion has been on the Tier 3, 4 cities and therefore, the corresponding sales is being booked there. Gagan do you have specific split on rural top line and...
So we have had -- in terms of percentage growth, I think it's -- we have grown in all city tiers. There's not too much to say where we have grown. But when it comes to our expansion, our endeavor is to reach the last town for the ease of the customer to come and purchase and explore our products. But overall rural, we are pretty excited because we have also seen that the new MBOs that we opened in the Tier 3, Tier 4 towns show us a very healthy throughput from the first month itself, which shows that there is an appetite for the consumer immediately to come and shop there because the density of the outlets is also pretty low when it comes to rural. But when it comes to growth, I think we are seeing almost a similar growth in all city tiers.
The next question is from the line of Sameer Gupta from IIFL.
Congrats on a good set of numbers. Sir, since FY '20 our MBO footprint has grown from 66,000 odd to now more than 1 lakh odd. But if I look at the 9-month FY '22 sales CAGR on a 2-year basis, growth is at around 7%. And also I noticed that the city footprint has been kind of stable in the -- from FY '20 to '22. So what exactly is happening here? Are we targeting smaller stores within existing cities and hence any of the business metrics is quite stable when it comes to margins and working capital. What exactly are we doing different now to get this kind of an expansion in our MBOs?
Our expansion has been driven with opportunity. Wherever we see an opportunity, we are expanding. So we have been very mindful on that and there is tremendous scope there. And there is also room for expansion as the product gets more and more stronger and when there are more and more offerings, it also enables us to expand faster. And of course going forward, we will also be focusing while we are expanding. We will also be looking at productivity side of it and the cost to serve. So that is definitely one area of focus for us.
Could there also be an element of competition being disrupted during this time and that is an opportunity that we have seized?
I feel this is a true demand because the supply chain disruptions, they're more or less common for everybody. But there might have been a big shift from the unorganized sector to the consumer shifting to the organized sector to the brands. So that definitely has happened and you can see it across the brands, including our competition. Everybody has done that because there is definitely a movement from the unorganized sector to the organized sector. But for us, we have been able to do comparatively better because of the power of our product and the acceptance of our product in the marketplace. So we will continue to focus on our product and the price.
Hello, there's something wrong.
Yes, sir.
Yes. No, sorry. I heard something else. Please go ahead, sir.
Okay. I was just telling you that for us, we did comparatively better because of the strength of our product and the value for money, which we always offer to consumers. So we'll continue to focus on the very foundation on which we have built the brand. And Gagan and Rahul are working hard on improving the reach and that is also very important so that our presence is felt by our consumers. So better reach, much better product range and value for money. These things will definitely help us.
Ladies and gentlemen, due to time constraint, we'll be taking the last question from the line of Arpit Shah from Stallion Asset.
Congratulation on good set of numbers. I just wanted to understand what is our market route to expand so many MBOs. Your volumes have gone from 73,000 MB0s to 1,05,000 MBOs. So have we gone direct to the retailers or are enticing distributor to go to MBOs? If you see most of the FMCG companies in the rural areas or in smaller towns have gone direct. So they're not -- some distributors are trying to go direct. And also qualitatively, what is our view on having so many distributors in urban areas where you can actually save on channel margin specifically and a lot of secondary data?
Gagan, do you want to take it?
Yes. So your question is what is the strategy for the expansion of these outlets and whether we are doing direct service. So there was a question on technology as well earlier. So we have mapped the potential and the opportunity areas and we are expanding our MBOs completely basis that. We have geotagged all our MBOs so we know exactly where we need to be present in order to be closer to the customer. So that is a strategy that we are taking in expansion of MBOs rather than just growing rampantly where there's already an MBO and we open another MBO next to it. So it's very strategic to get closer to the customer. That's one. We have the approach, which has been successful for us so far which is through a distributor. So all the MBOs are serviced through the distributor. But the good thing is that wherever we are opening new MBOs, as I said, the throughput is very healthy from day 1 and we have not had to subsidize any place so far. So wherever we are strategically opening outlets, they are being serviced by the distributor without giving any subsidy and it's working very well for us. So which gives us lot of confidence that the closer we continue to go to the customer, it will be very good for us as well as the customer.
Got it. And just one more question. If I just see one of your smaller players, almost half of your size, has actually undertaken 22% price increase in the premium segment and broadly the volume growth is 0 for that. And for your company, the price increase was around 16% for that company and so hard core volume growth has been 24% and the price increase has been 3%. The revenue growth is broadly the same for the second company and our company. I'm not able to understand difference why the other peers have to take a lot higher price hikes and while we have taken lower price hikes and still we have been able to maintain the margin.
Well, we have taken lot of initiatives to control expenses. I should thank KC and his team for having a lot of budgetary controls in place and we have worked with utmost discipline during these difficult times. We also made some strategic moves. We built strategic raw material inventory. So to some extent, we were able to insulate ourselves from the raw material price pressures because we could see it coming. And since we had money in our hand, we could better utilize it by investing on stock which came very handy. And our operations team has also worked pretty aggressively on improving productivity and controlling cost. So all this has helped us to ensure that we touch the price to the minimum extent and continue to be competitive despite all the price pressures we had on the RM trend and deliver better volumes.
So do we have a different way of calculating volume growth like what is the volume growth depending on? So the volume growth has super healthy at 24% and this kind of volume growth has not been seen in any other consumer discretionary or consumer staples network in India. So how are we calculating the volume growth?
We are looking at same quarter last year the volume and the volume for this year and calculating the growth. So this is -- what you are seeing is a true growth and there is no change in the way we calculate. We are reporting the way we had done all these years.
Thank you. Ladies and gentlemen, that was the last question. I would now like to hand the conference over to Mr. Chandrasekar, CFO of Page Industries, for his closing comments.
Thank you so much. It was such a pleasure and such knowledgeable participants and enjoyed answering all the questions. Thank you very much for participating in the Page Industries Q3 earnings call. Have a good day. Bye-bye.
Thank you very much, members of the management. Ladies and gentlemen, on behalf of Page Industries Limited, that concludes this conference call. Thank you for joining us and you may now disconnect your lines.