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Relaxo Footwears Ltd
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Ladies and gentlemen, good day, and welcome to the Q4 FY '22 Relaxo Footwears Limited Earnings Conference Call hosted by Centrum Broking Limited. [Operator Instructions].
I now hand the conference over to Mr. Akhil Parekh from Centrum Broking Limited. Thank you, and over to you, sir.
Thank you, Ryan. Good afternoon, everyone. On behalf of Centrum Broking Limited, I would like to welcome you all to the Relaxo Footwears Quarter 4 FY '22 Earnings Conference Call. From the management, we have with us today, Mr. Ramesh Dua, Managing Director; Mr. Ritesh Dua, Executive Vice President, Finance; Mr. Gaurav Dua, Executive Vice President, Marketing; Mr. Sushil Batra, CFO; and Mr. Vikas Tak, Company Secretary.
We'll begin the call with a brief discussion from the management, and then we can open the floor for Q&A session. Over to you, sir. Thank you.
Thank you, Akhil. Good afternoon to everyone. Ladies and gentlemen, thank you very much for attending our earnings call for the financial year 2021, '22. We have already shared our earnings press release and results presentation. Hope you got an opportunity to go through that. I will start with Q4 FY '22 financial performance followed by full year FY '22 financial proposal.
In Q4 FY '22 Relaxo booked operating revenue of INR 690 crores as compared to INR 748 crores in the corresponding period of previous year. Revenue during the quarter was affected due to disruption caused by omicron variant of COVID. GST rate high from 5% to 12% with effective from January '22 on all footwear priced below INR 1,000 and subdued demand due to high inflation.
EBITDA during the quarter is at INR 111 crores as compared to INR 163 crore in the corresponding period of the previous year. Our EBITDA margin for the quarter is 15.9%. EBITDA margin decreased mainly due to steep increase in raw material prices and extra [indiscernible] trade towards GST rate difference here in own inventory.
Our profit after tax is INR 63 crores for the quarter as compared to INR 102 crores in the corresponding period of previous year. For FY 2022, our revenue stood at INR 2,653 crores as compared to INR 2,359 crores, which is a growth of 12% year-on-year. The growth in revenue is achieved mainly due to calibrated price hikes taken during the year to mitigate impact of high raw material prices.
EBITDA is at INR 416 crores as compared to INR 495 crores in the previous year. Our EBITDA margin totaled 15.7%. The decline in EBITDA margin is mainly on account of increase in raw material prices and normalization of selling, marketing and administrative expenses in FY '22 as compared to FY '21. Our profit after tax is INR 233 crores as compared to INR 292 crores during the previous year.
Moving to FY 2022, we generated a cash of INR 140 crores from operation [indiscernible] INR 140 crores in CapEx. At the end of March 31, 2022, we have 390 exclusive brand outlets, which contributed around 7% of our FY '22 revenue. Exports [indiscernible] INR 100 crore mark and is picking up with opening of market and its contribution is more than 4% of revenue of FY 2022.
Going forward, we are conscious about the continual extra inflation and remain cautiously optimistic on the basis of strong recovery across category, especially in the high-value closer category after opening up of offices prudentially. We believe that we are well positioned in the footwear marketplace by providing the right price value equation to our customers, while making sure our products remain affordable and [indiscernible]. We remain committed to all our stakeholders by creating a strong foundation for the future, which can provide a sustainable and profitable growth for the long term.
Thank you. We can open now the floor for questions. Thank you very much.
[Operator Instructions] Our first question comes from the line of Tejash Shah with Spark Capital.
Just I will start with a couple of basic questions. If you can help us to understand the split between -- the realization split increase which has happened between price increase and premiumization, if any, happened during the year and during the quarter.
Price increase, this year was a lot of inflation. Raw material prices went up. So price increase was in the range of 25% across all the categories, in few category more and few category less, so this is majorly due to the price increase. And so that mix, we could close footwear was sold much more as compared to FY '21. So that mix also happened in this year. So overall increase majorly is due to price increase.
So sir, this 25% price increase would be at customer level because of GST increase as well. But that would not have totally reflected in our numbers, right?
No, it's a mix of raw material and GST. GST came only in January '22. That was the last increase which we took. But overall, from start of the year from May onwards, raw material prices were going up so we took price [indiscernible] price increase in full year.
Okay. Sir, second, how -- though initial period yet, but almost 4, 5 months have passed by after GST increase have happened has happened. So what is the initial feedback in terms of customer and both channel whether they have absorbed this price hike easily? Or will take some more time for demand and channels to settle down on this?
This is Gaurav. So it's been 4 months, you are right. And what we are seeing is in first 2, 3 months, there was a pressure because it was new for the trade. There was a lot of resistance. People were talking about taking price back from 12 to 5, they were giving a lot of representation to the government. But now it is settled. The rates have been settled. Post that, but there is definitely pressure because of inflation. Consumer sentiments are still not so great, and whatever the pass-on of prices what we have done or the industry has done, it's taking time for the consumer as well as for the trade to take it.
Okay. And sir, last one, we have -- based on the recent channel checks, which has been done on the vector, it does seem that there's a huge traction in online channel for closed footwear especially the sports footwear or athleisure footwear. So have we seen any such traction in our number? And what was our exposure to online tunnel for the full year as a company and also within the Sparx brand in particular?
So Yes, Sparx brand has done very well in the e-commerce platform. And we can see the growth rate was more than 40% in e-commerce platform. So there is a traction of sports shoe selling more on e-comm.
Okay. And sir, what will be the total exposure of online as a channel for us?
We We were last year around 10%. Now it is 11.55. So it's going to go more than that.
Our next question comes from the line of Gaurav Jogani with Axis Capital.
First question is with regards to the RM inflation as you have highlighted. So is the bulk of the RM inflation now done? Or do we need to take further price increases to mitigate this RM inflation that we're seeing?
The Raw material situation continues to remain unpredictable. You cannot say [indiscernible] everything the sector all were that in news, different times, sometimes taking material, chemicals, polymers. So things are [indiscernible] we can't say confident industrialized as further raw material situation is concerned. But we have to be watchful of it. And accordingly, we have to see market dynamics also and [indiscernible] taking apple reductions.
Sir, to put the other way around, is assuming whatever the RM prices are today, so does it cover the -- I mean, whatever price increases we have taken, as on today, RM price we cover it? Or do we need to still take further some pricing actions to cover the impact? Because the impact on margin is huge as can be seen from the results. So still do we need to take more price increases to even cover today's RM inflation?
No, we have to wait and see all these things. Our goal at the government is to focus on our market share in the market. [indiscernible] that we are in, which are meant for March's lower rent of society. So that's very important. I will be keeping strict with the government. And accordingly, get appliable reductions [indiscernible].
Okay. And sir, the next question is with regards to your volume, if you see this particular year. So the volume in this particular year has even seen a decline if we compare versus FY '20. While I do agree that there was some impact during the first quarter of Omicron quarter was impacted. But how do you see the volume trajectory going ahead in the light of the sharp inflation that we are seeing, given our the target consumer is very price sensitive?
So last year, if you remember, in May, we had this corona wave where everything was shut down. And followed by January also, we had a small Omicron variant coming in. So definitely, there has been pressure on volume in terms -- because last to last year, the open footwear was selling a lot because people were at home. And the shift -- there was extraordinary sales happening on last to last year. So to sustain that was a challenge.
And going forward, the consumer sentiments are still not so buoyant. So we see, I think, after maybe quarter 1, the things will come back. But very difficult to say right now because of unpredict supply chain, things are not settled, raw material prices are not settled. But we are hoping that quarter 2 onwards, we can see some recovery.
Sure, sir. And sir, one last question from my end is regarding sportswear segment. I mean, sir, these ports are also to say the casual further segment has been seeing very good traction as such. And in this, like we have seen [indiscernible] one of our listed competitors getting -- sorry, one of your competitors getting listed on the exchange. And they have been showing smart growth in Q4 as well. So in that extent, sir, in that light, if you see what is our action towards the sportswear segment, what are we doing to address that?
So we have 3 brands. They are basically -- for them, it is athleisure brand, what we hear. So that is 1/3 of our business. So we are also seeing a good growth rate in athleisure and sports category. So we are going in line with the industry.
Sure. So any -- because anything we're going because a general market check suggests that they are higher on the market share percentage-wise, given that we are very dominant in that segment. So anything that we are doing in terms of product launches or expanding our reach on the online or anything else that so that you can highlight that we are increasing our presence there?
Definitely, it's -- we are taking some steps. And I think this is -- like, for example, we are increasing some [indiscernible] spends on e-comm. And having new tie-ups with like different channels also, so it's a continuous process.
Our next question comes from the line of Bharat Chhoda with ICICI Securities.
Generally, when we see Relaxo has a good working capital cycle of around 50 days. But this time, it appears to be on the higher side of it closer to 90 days. So what is the reason for the same, sir? Is it more of RMB raw material being accumulated or is it the finished goods? Can you just provide a brief view on that?
This year being because there was a pressure on the [indiscernible]. So our inventory has increased normally more than expected. And there are 2 reasons for inventory increase. One is the [indiscernible] on sale and then the prices also because your cost of [indiscernible] everything has increased, so it is also given a multiplying effect about the inventory. That is one reason.
Your voice is not clear. Could you please repeat, sir? I was not able to get it.
Just repeating. So inventory is the major reason for working capital distributors in this year. And there are two reasons. One, the pressure bond are sale. And second, because the cost of goods has also increased even raw material also, we were carrying a little more inventory just to be more cautious about the future price increase. So inventory has increased in the balance sheet, that is visible also. And second, I think some debtors also little bit -- not much, but a little bit, there is an increase. These are the two reasons vertical capital [indiscernible].
Okay. And sir, we have seen this -- the realization significantly higher at debt level. Do you see -- we would see an impact on the volumes going ahead and probably also what is the margin we should work with? Like is it a 17%, 18% kind of a margin that is possible for us to maintain with the current level of this?
Yes, margin definitely because this year has been a little tough year competitively. And FY '21 are the best years [indiscernible], but FY '20, compare with that, that margins are definitely achievable, and we intend to, and we are hopeful that will be achieved FY '20 base, if you see.
The FY '20 basis what we should work with for FY '22?
Yes, we can say. [indiscernible] and this year, we achieved lower than that would definitely we intend and it's possible also.
At this level, do you see the consumer actually -- like the volumes, are they being impacted? Or how is it? Because that -- could you please provide a view on that. How the consumer is reacting, the volumes have been down or how it is at this price level? I think initially, there has been a comment from your side probably. But post that stabilization, is that volume again picking up?
So as you -- you are well aware that because of inflation, the purchasing power of the lower end of the pyramid, the mass market, they are feeling the pinch of inflation. So they are looking -- some of them are looking for cheaper alternatives. You can understand they are -- because they have no money in their pocket, so they've been for cheaper alternatives. So there is a volume pressure, no doubt about it. But I think from quarter 2 onwards, this thing will be much better.
Our next question comes from the line of Mythili Balakrishnan with Alchemy Capital.
I just wanted to get a couple of data points for you. I wanted to understand the mix between the different brands, Sparx, Bahamas, Flite and the normal hawai.
So we are doing like hawai and Bahamas come under hawai division. So that is around 25%, and Flite is 37.5%, and similarly is Sparx, 37.5%.
Got it. And within Sparx part, right, 50% was [indiscernible] and the rest 40% was the [indiscernible]. Has that portfolio sort of changed in terms of the mix?
Yes, it has changed. Now it is 60% shoes and 40% sandals as [indiscernible] growing tremendously.
And are the sandals are a part of the business under pressure or both of them are being?
Both are doing well. The only thing is there is a good demand in athleisure and sportswear that e-commerce is growing much faster because of India becoming more fit and demand of these products are going high.
Got it. Could you also help me understand the distributor and channel mix for us currently? I mean, how much EBO online and wholesalers?
So we have around 680 distributors, 650 to 680 distributors. And online contributes around 11.5 percentage of our sales, 7% is contributed by retail and 4% by exports.
Got it. And the last question was as on CapEx. We have spent like around INR 140 crores this year. Just wanted to get a sense of is that like some larger CapEx in the footing given our venture into the South, et cetera?
No, we don't have any intent to the spending in South, but definitely, we are expanding our capacity in North. We have our own setup. So we are integrating our back-end operation and for that we are working. So this year also, we have intent to spend around INR 100 crores. So it will add to the back-end operations, mainly.
Our next question comes from the line of [indiscernible].
Just two questions. First is if you can come this extra trade sport which is given to the channel, how much of the content for that?
Extra trade sport we gave in Q3 because we were having inventory in December and GST was effective from January. So in that quarter, we gave around INR 15 crores to INR 18 crores and some -- because we were carrying some inventory at our end also, we gave the sport in this quarter. So that is around INR 8 crores to INR 10 crores in this quarter also.
Okay. And you said the pricing will be travel now or inventory in the channel is liquidity or has not been pricing? Is that a fair understanding?
Yes, now new progressing material has come in the market. So that old inventory is almost clear. So now everything is through in the system.
Okay. Just 2 more later ones, if you can. You said now 650 of distributors are there, how many distributors have you added in the full year?
So that is roughly around 10%, what we have added.
Okay. And just in terms of SKUs, would be the table how many articles do we have? And let's say, what is the addition on a Y-o-Y basis?
So 400 articles we have right now. And if you talk about [indiscernible] 12,257 [indiscernible] we have.
And what is the change? Is it the reduction in that because math reduction, I just want to understand what is [indiscernible] FY '21?
No, there's two in SKUs. Yes, it's around 10,000 to 12,000 generally [indiscernible] some practical there are plus and some minus. [indiscernible], but it ranges around 10,000 to 12,000.
Our next question comes from the line of Ashish Kanodia with Ambit Capital.
The first question is in terms of capacity additions. So in terms of volumes, what is the capacity addition plan for the next 2 years? And across which brands or categories will we be expanding those?
Already, we have reached the capacity of 10 lakh payers per day. And utilization is around 65%. And within this category, we are focusing to see some capacity of whatever is required [indiscernible].
Okay, sir. Got it. Second thing, in terms of price hike, I think price hike was 25%. But in terms of the prices taken in 4Q apart from the 7% which you might have taken because of GST. Was there any other pipelines as well?
The last price hike we took in December, but that was inclusive of GSP as well as material impact also. So that was the last one.
Okay. Okay. Very helpful. And last question in terms of there is an interest in RM prices, but is there any disruption in the supply of RM as well or at least on the supply side, that's not a challenge?
No, we are getting supply, but we have -- what we are doing is we are maintaining inventory of the materials because this uncertainty is there. It is always there. So we have to be -- keep some material -- raw material inventory for possible any disruptive there.
Sure, sir. That's helpful. Just on the inventory side, is it possible to share out of the total inventory which you are carrying at the year-end, what percentage would be pertaining to finished growth and what percentage would be of raw material?
So overall, mature inventory is [indiscernible] because most of the materials, we keep around 50 to 60 days inventory in the system, but this time were a little higher. So evenly, we keep around 40 days, but this time it is higher. So percentage terms, you could say around 1/3 will be around -- around 30% will be [indiscernible].
Our next question comes from the line of Nikunj Gala with Sundaram AMC.
Sir, just want to understand on the pricing trend. You mentioned 25% increase which you have taken. So this is this increase is at a consumer level or if I look at your realization increase on a Y-o-Y base for FY '22, it is also here 22.7%. So a kind of use is also at the consumer level?
On MRP, you can say, consumer level, yes.
So even At the MRP, it's a 25% increase on a Y-o-Y basis? And this includes the GST increase also from 5% to 12%, right?
Yes, yes, yes. But it depends upon category to category also. 75% across all categories, in some categories, more on category life. So it depends upon the raw material.
Okay. Got it, sir. And if I look at this price increase on a 3-year base, like our realization on a 3-year basis, it would be 7%. So I just wanted to understand the 7% kind of increase on a 3-year basis, how this much have impacted the consumer from the volume perspective because our volumes are down 2% on a 3-year basis. So is that a very meaningful impact as you are looking at the external environment that the demand has been impacted so much on an account of this kind of a price increase?
Ramesh, the price increase has happened more in hawai slippers, Bahamas and Flite. Because they are having content of polymer, which become very expensive. So there 5 [indiscernible] has been extraordinary high, and that affected the volume and of the articles. So the 25%, what you're talking that average across all categories.
I understand. Sorry to dwell more on this. Can you just help us with the -- let's take an example of average, the large part of your chunk of your product would be selling at approximately INR 250, INR 300 article at the consumer level. And on that, you have taken, say, 20%, 25% increase, so that INR 250 to INR 300, like INR 50 per pair would have such a deep impact on the volume, I just want to understand that.
Yes, yes, you are right. In some categories, we can feel the heat that using INR 50 increase is there. So it has definitely affected some volume. But going forward, this thing will improve because other people are also increasing the prices. So if you take consumer some time to really adjust to the new prices.
Sure. And just last 1 question. So on a very sustainable basis, what kind of working capital you think would be available in the medium term? I understand this year, it would be high on account of high RM, but what is the target pressure level you work with?
Threshold through which, long term or?
On a Very sustainable working capital deals.
If it's a 3-month pricing [indiscernible] 3, 3.5 months maximum.
So this is different from the last -- if you look at 7, 8 years where it was 2 months. Now we have shifted to 3 months kind of working capital?
Because now the sole category is growing much faster. It's a high-value item. So it's lead time is much lower, and we have to give a little more credit to the trade also because it's high value item. So that's why it's increasing. And moreover the ramp deal prices or price has also gone up like anything. So overall value term it is definitely putting presenters.
Our next question comes from the line of with Akhil Parekh with Centrum Broking Limited.
Sir, my first question is on the price side. What is the price differential now between relaxes footwear and say, unbranded and some of our peers like the sale [indiscernible]?
Can you repeat the question? Your voice we can't hear.
Sorry, I repeat the question. How is the price differential between Relaxo versus our peers and versus the unbranded?
See, what it was last year, we have maintained the same gap. It is not that there is a huge gap in terms of like what it was 1 year back. So I can just say that we are always expensive and unorganized. You cannot compare brand with unorganized it's very difficult because they do pricing on a daily basis. So we do not do. So it's very difficult to compare with the unbranded. But if you talk about other brands, whatever difference was there before it is same.
And how much that would be roughly?
It depends upon brand to brand. There are so many other brands also. If you're talking about [indiscernible] so 5% to 10% difference is always there.
Got it. But does that lead to a down trading? For example, given that one brand is cheaper and they can sacrifice on quality. Have we seen a trend where consumers have shifted from a branded?
Some parts of India or you can say, bottom of pyramid, where people are feeling the heat of inflation a lot. So they are doing it because, again, money in the pocket, whatever money they have and it's getting depreciated. So they are going towards the unorganized. But that is a short-term phenomenon because the quality is not that good. So it will come back to the brand.
Okay. Okay. And my second and last question is, in terms of the retail touch points, right, if I look at fourth quarter '21 presentation, we said we had 50,000 customers and now we have 60,000 customers. So any specific geographies where we have added 10,000 outlets in last 1 year?
So it is across actually, but major invest in South.
Our next question comes from the line of [indiscernible] an Investor.
My first question is regarding how your customers are reacting to the significant price increase? And would you be willing to reduce the prices if the raw material pressure soften, which is something if I recall correctly, you have never done in the past?
We have always remains relevant to the market conditions and also the keep our pricing competitive. Taking a view of our input costs are at the cardigan that will keep on [indiscernible].
Okay. And just one more question, if I may. Do you see an increase in contribution from e-commerce like to as high as 15% to even 20% from 11.5% this year in less than medium term? And if you can outline what is your growth strategy for incremental share in e-com?
So as everybody knows that digital is growing and e-commerce is the fastest-growing category in footwear, so 11 to 15 in 1 year will be difficult, but we are definitely having a high aspiration, and we will grow to a good number. This is difficult to say right now, it will become 11 and 15 in just 1 year.
So sir, I was just looking to know more about the strategy that you are deploying to increase your many revenue shares from the e-commerce channel.
Strategy, if you ask like we are going to increase the spend on the different channels, be it e-com. And so that is one -- and we are going for SMUs or whatever product specific, whatever cost we have to take, we are doing that. And we are adding more channels in that.
Our next question comes from the line of [indiscernible] with Investment.
Two quick questions from my end. First, you highlighted a sales mix as 25% in hawai and Bahamas and 35% in Sparx. So was that volume get you were referring to? Or was that a value break?
It's a value break.
Okay. And how would the volumes be then? If you could share that, please?
Volume generally, we do here. But overall, next year, yes, contribution come from hawai, including Bahamas. Second is Flite, [indiscernible] last one. So this is the breakup.
Okay. Sir, secondly, on a price increase, you highlighted that a large price was [indiscernible] right now, we're already [indiscernible] I assume that raw material pricing would have further increase from December up to now. So are we contemplating any further price increase in the near term or the increase taken in December was sufficient for us to maintain a margin at the desired level?
I'd like to continue with what is been already there. And that things stabilize. Every now and then change in pricing destabilizes the market and creates lot of uncertainty.
Fair Fair enough. But can we see some pressure on margins then in quarter 1, quarter 2 because there will be a lag in price increases?
That will be there. After all, things that are in the system, new things are getting adjusted. So -- but it will improve in the next quarter, maybe somewhat other quarter also.
Okay. You highlighted our online share is 11.5% on the overall volumes. But if I take closed footwear category as a whole, what will be your online share there? I was just trying to understand, are we in on with competition or ahead of them?
Can you repeat your question?
Sir, Our overall share in online is 11.5%, as you highlighted. I just wanted to understand what would be the share in closed footwear category, sports and [indiscernible] primarily?
So if you talk about online, so in Sparx, we have 60% we have been shoes and 40% is sandals, even in online. So majority of sales are coming more than 500 MRT in online.
Okay. Sir, let me put another way. Out of that, in our Sparx brand, what would be the online contribution?
It's more than 25%.
Our next question comes from the line of [indiscernible] Securities.
I just had one question. In the online channel, at the EBITDA level, so considering the delivery and all those expenses as well, would it be profit-making for the company?
We try to keep same margins, what we have online, offline and retail. So we last time also discussed that we do not want that goods to go from one channel to another because of prices. So we keep it same.
Same margin, you mean the gross margin, right? But considering the expenses of fulfillment of those orders would you still be making sale level of margin EBITDA level?
Yes, it's the same.
Understood. And just 1 quick question on the geographic breakout. Would it be possible to share some broad numbers on region-wide sales?
So our major sales come from North India, that is around 50%, and then 18% come from East, same west 18% and around 13% from South.
Our next question comes from the line of [indiscernible].
Yes. Sir, so around 2 years ago, distributor count was around 800, and today, it has come down to around 650. So why has the distributor count reduced over the last few years?
So we have the -- see, we have -- we want quality distributors. So less than 10 lakh sales per month. So there were many numbers. So we have cut down the tail. So we are focusing on the cost of reaching them was also not -- it was not viable. So we are focusing on good number of distributor holding more than 10 lakhs per month. So that is how we decide -- we do the deal. You have to cut the tail.
And is it [indiscernible]?
Sorry, can you repeat?
Sorry, to advertise of setting the distributors over or it is still working in process?
No it is a continuous process. It is a continuous process. We add 50 or we removed 25 who are not performing. So it's a continuous process.
Sir, and secondly, your presentation says that you have added around 10,000 retail touch points over the last 1 year. And despite that, we have seen a volume decline. Now given that this is a [indiscernible] category and replacement cycle of how I would be 2x a year roughly. So what explains the volume decline?
The volume decline is mainly due to price region and GST impact, and these are the regions now. So we are definitely new to find. But ultimately, there is a overall pressure on the demand for volume decrease.
Right. Sir, is there any salary destocking because of the price hike?
What is the chance destocking?
Yes. I mean the reduction of inventory in the channel because the prices have gone up by 20%, 30%?
Distributors and retailers are very cautious because of so many changes on MRPs. So they're keeping less stock.
Okay. Sir, will it be possible to quantify what will be the reduction in rate in the channel in volume terms?
Sorry, we don't have it. Distributor inventory and in the system at the retail level, we don't have.
Our next question comes from the line of [indiscernible].
You had an 8% decline in volume in FY '22 versus FY '21. Did the market also decline at the same rate? And if not, who gained the market share?
Overall category of hawai and [indiscernible], it has actually goes down because this year, the margin is opened up and outdoor it started me on the market. So close for has dated and this what to cater couples and these things have gone down. And at the same time, we cover high inflation. Mindpower, of these marches has gone down. So they are trying to hold on to their old shipper also and so during the purchase.
No, I was trying to understand whether we launched market share to any competitor unlisted competitor, maybe something has come from the south, for instance.
No, no, no. That's not there. you see last year because it was a normal exceptional year. open footwear sales was much, much higher than the normal -- so that's why you are seeing there is a big growth in the number -- that is the only reason because last year, we saw more of a year, which is demand on less competitively and close put pick up in this year. So we don't see there is, I think, some sticking of market share from there. if your overall number has come down to close -- if you go to an AC also or this segment.
And what was the mix of open to close footwear in FY '21 compared to FY '21?
This year, it is around 2018 INR 2 crores to 80% open which when last time it was Okay.
And did you see any difference between urban versus rural demand?
Yes, yes, yes. rural, we are feeling more pain. There's more pressure in the rural side of India. Urban still, there is a movement. But in rural India, they are not able to absorb the inflation or price hike.
Okay. And lastly, there was a mention that you will start kind of doing better starting from the 2. What exactly do you mean by that?
So as we have increased prices in December and still there are 3 to 4 MRPs lined with the retailers. -- and they are liquidating that. So we are hopeful that the whatever prices we have taken, that will be absorbed, and all the old inventory will be out of the system. So there's a lot of confusion with retailers, having multiple MRP with him. So we are thinking that once the liquidity it off and the new rates will be adjusted.
Okay. And my last question is on ad spend. What was that a specific sales in FY '22 versus FY '21?
So FY '21 being a tough year, we spent on less intensely it was less. But definitely, this year, we spent as we have been doing -- so this is -- we are between 21 and 22. 22 was a normal year, 21, a little different.
Our next question comes from the line of Ankit Kedia with PhillipCapital.
Sir, couple of questions from my side. Do we sell to B2B players like Fran and go business? And what would be our contribution from them?
We started with Uran and Agio, but our contribution is quite less. It is less than 1% also, you can say that. So it's a new channel for us. And the problem with them is they are paying a discounting game, which we do not want to disrupt the market. So we are cautiously watching them. And then going forward, then we'll see how we have to do business.
Sir, because 1 of your competitors booked double-digit revenues through these channels in the sports category. So do we sell directly to them or to a distributor channel will sell then?
Through our distributor Okay.
And sir, my second question was, while you did say South is only 13% and we added more MBOs to lessen South. Could you share that the maximum volume decline would have come more in the north market or it was even the spread now Southeast West?
No, it was more in north and east part of India. Western South did well. Reason being 1 more reason being the best in South was affected more because of COVID lockdown, which they bounced back very well last year.
Sir, in these 2 geographies, not 2 years down the line, do you think both the geographies together can contribute around 40%, 45% of our revenues in 2 years' time, they will still remain in that of ballpark.
It's very difficult to say right now how they will grow exactly to 45 or remain at 30%, 35%. So -- but definitely, they have more.
Our next question comes from the line of [indiscernible].
My first question on the raw material side. Can you quantify what has been the jump in the raw material prices for the proper versus 3Q and our plant last year. Any number to attach to it.
Different materials are different we can tell you at an average, average of different kinds of materials inflation. -- you want to know specific.
[indiscernible] the major part of raw materials, the number probably on average.
You want Q4 versus Q4 or full year versus full year?
Q4 versus Q3 and Q4 versus 4Q of last year.
Q4 [indiscernible] there is a huge deficit last year, very good year from round price of you. You can see in some materials, it was around 80% also, which is also a major contributor in the material side. So Q4 versus Q4 overall it is huge, you can say around 50%, 60%. But Q3 versustain Q4 because already material has paid out, so that is competitively much lower, maybe around 20%, Q3 versus Q4 overall.
Okay. And sir, one another question. So we do it that, so there are 2 parts. First, the GST higher Panasonic and then is that we -- so can we say that the GST part on is almost done and it is almost only the raw material price hike that has to be taken or even the GST part has also led in the 2 way reflective in the price that we [indiscernible]?
I think GST has been done now [indiscernible] by now it has settled in the market really taking time, but yes, it has been settled now. [indiscernible] is only leftover item and overall inflation in the system, overall inflation, on all brands, it is also there in the everywhere is there. There are 2 things. One thing is cost of input has gone up because of the normative itself and GST also. On the other hand, the buying power of the consumer has gone down. So both in the affected actually.
Just your view as to how the market or probably our competition are strategizing with respect to the taking the price hike more of taking a price as we are cutting back on business just to ensure that the demand [indiscernible].
So raw material is quite common for all of them. So they have also taken price hike. And all of them are also feeling the heat. There's a limit to pass on the price to the end consumer. So now for now, it is wait and watch. Let us see how prices go in next quarter.
Our next question comes from the line of Tejash Shah with Spark Capital.
Sir, a couple of follow-ups. So in most category are competing with unorganized and across categories in our channels are picking up that wherever unorganized was depending on -- dependent on Chinese imports, we have been struggling both on inflation and also availability count because the supply chain has been disrupted badly. So are we seeing any benefit of that in our favor because our supply chain will be relatively much more robust than unorganized competition in the 3 segments that we operate in?
No, the material that we're using in our quite easy. We are always keeping good event in that system. So there is no question of disruption in our manufacturing or thing have been cautioned and we have to be cautious on that.
Yes, precisely that is the point. So definitely, we are actually better off than some of the unorganized players. So are we seeing that natural gain happening in market share because unorganized is not as competitive, I'd say, compared to, let's say, debt 2 years back or a year back?
The material like polymers, PVC and a natural rubber. We are available in domestic also. So that's not an issue for material when you not is the question of pricing. A year where the prices were very high in local markets because -- but now there's comparable pricing is there. So [indiscernible] for these categories.
Fair. Got it, sir. Sir, second and last question. If I see our volume, we are actually lower than FY '20 volume, so understandably, our capacity utilization will be lower than what we had in FY '20 because we had CapEx also in the last 2 years. So again, we have guided for INR 100 crores of CapEx this year. This looks a bit higher on maintenance CapEx side. So just wanted to understand what is this outlay for?
Because every year, we should say very fast-moving article and we have to create new designs of money goes in a more side also, around INR 25 crores, INR 30 crores every year, it's recurring CapEx every year we have [indiscernible]. And then we are setting up some back-end operation that is almost in the final stage. So 2 expenses definitely will go there. So these are the 2 major and other routine expenditure around [indiscernible].
Our next question comes from the line of [indiscernible] Capital.
My question is to you, it seems we are in a rather difficult situation there. As you mentioned, the in some ways, the volume or -- the top line is not in our hands because the consumer is stressed because of inflation. And the margin is also not in our hands because the raw material has a lot of pricing concerns. Under these kind of scenarios, how do you manage the business? How -- what do you -- what are the numbers and metrics that you focus on these days?
So we are going to increase our A&SP spend, plus we are going to have a competitive range introduced soon so that we are able to get the top line fixed first. So that is the priority number one. And there will be some measures in appointment of new distributor adding more outlets. So definitely, I think we will be coming back with the numbers.
Okay. And I mean, as the situation is unfolding, I mean, there are so many different scenarios that are possible. And this is the scenario that you would be most worried about? And I'm thinking, for example, if there is protracted inflation increase for the next, let's say, 18 months, 24 months then I would imagine that there will be a lot of pain in the system. But I'm curious to hear from your experience, what is it that you worry about the most in terms of future expectations?
Sometimes we have to first protect our market share and top line. And we have to keep our pricing very competitive so that we are there. Once the things settle down, then you can always have the better pricing and margins also.
Can I ask a follow-up on this? I mean I think at least a couple of times during the call, you have emphasized on market share. Why do you care so much about market share? And why do you think if you have market share and pricing and margin and everything else followed? But I'm just -- I think it's very interesting in your key focus on market share.
It's very important we have. We cannot lose the shelf space. We have to be there in the market the consumer always that is a prime important once we are always there and everything else will follow out of plan only. If we lose the market share, then what we're left with.
Got it. And in your experience, and I'm thinking, let's say, in early 2010 when the inflation was 10% or 12%, how was -- I mean, if you compare that period to now, I mean any learnings and lessons that you can apply from those times to today?
No, this time, inflation has been very severe. For example, the EV material, which was at INR 120 costing 1.5 years back, if that becomes INR 300, it is very severe, it never happened. So at that time, inflation was there, but it was gradual and gradual price hikes were taken and things settles like that. This year, it has been very fast so far as we have to take 4 prices increasing in the last 1 year, it will never happen. And still today also uncertainty continues. That's it.
Got you. But in these times, while it is bad for the economy and unfortunate for the consumer. But in some ways, is this not a good time for Relaxo to really feel and take market share from unorganized players for whom the pain will be much more?
No, no [indiscernible] for all. But they have in the system, they always avail the system. And we are all generally or this share then go down there and there. So it doesn't mean somebody will be wiped out in the system.
And you've seen more competition from unorganized players, given your price points or from all of these organized players, particularly the ones who are now going public as well and face pressure from their investors to show good results?
Competition is -- from unorganized also and organized also, but we have to always remain competitive on all fronts. We can't just root down upon anybody likely.
They were selling before, now also so listing and nonlisting does not [indiscernible].
They were all within the system. They will remain always in the system.
Yes, sure. Got it. Got it. And 1 final question, if I might. Ramesh, my biggest concern is succession plan for [indiscernible] Is this something that is actively discussed in the company? Or is this something that the Board is discussing? What are your personal thoughts on that?
So that's [indiscernible] process. We are serious on it, but we can't [indiscernible] beyond anything now.
Ladies and gentlemen, due to time constraint, that was the last question for today. I now hand the conference over to Mr. Akhil Parekh for closing comments.
Thanks, Ryan. On behalf of Centrum Broking, I would like to thank the entire management team of Relaxo for answering all the questions very patiently and in detail. I'll hand over the call to the management team for any closing remarks. Thank you.
Thank you all for joining the call. This is all from our side. Looking forward to join you again. Thank you very much. Thank you from Relaxo side. Thank you.
Thank you. On behalf of Centrum Broking Limited, that concludes the conference call. Thank you for joining us, and you may now disconnect your lines.