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Rupa & Company Ltd
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Ladies and gentlemen, good day, and welcome to the Q4 and FY '24 Earnings Conference Call of Rupa & Company Limited, hosted by Orient Capital. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict.
[Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Sumeet Khaitan from Orient Capital. Thank you, and over to you, Mr. Sumeet.
Good evening, everyone. Thank you for joining us on the call today. We are joined by the management of Rupa & Company Limited, represented by Mr. Vikash Agarwal, Wholetime Director; and Mr. Sumit Khowala, CFO. They will take you through the results and the business performance, post which we will open the forum for Q&A session.
With this, now I hand over the call to the management for their opening remarks. Over to you, sir.
Thank you, Sumeet, and good evening, ladies and gentlemen. On behalf of Rupa & Company Limited, I would like to extend a very warm welcome to all of you who have joined us for this results con call. We appreciate your time and interest in our company's performance. I hope that everybody had an opportunity to go through the financial results and investor presentation, which have been uploaded on Stock Exchange.
We are pleased to present an [ impactful ] overview of our company's performance during financial year 2024. At outset, we acknowledge that our performance would not meet expectations set at the beginning of the year. This was largely due to challenges in maintaining prices within the business landscape. Notably, we achieved a healthy 17% annual growth in volume, driven by a 16% growth in economy segment, 17% in mid-premium segment and 25% growth in premium segment.
However, in value terms, our revenue grew by approximately 6.4% year-over-year. The premium segment showed superior value growth of 20%, while economy and mid-premium segments each grew by 7%. Despite our efforts, initiatives to boost revenue from export, thermal wear and women segment did not materialize this year. But looking ahead, we are optimistic about refining our business strategies to achieve a rebound. Modern Trade continues to perform well, contributing 4% to our overall revenue in financial year 2024.
Our proactive marketing efforts, including collaborations with the known celebrities has efficiently enhanced our brand visibility. This is reflected in the increased sales volumes across our segments in financial year '24. We invested approximately INR 66 crores in the branding and advertising, which constitutes about 5% of our revenues in financial year '24. We also launched a new pilot projects for our retailers under the [ Pragati ] scheme, a loyalty program with stand out features like lifetime validity of reward points, which will help us to match and [ be better ] better as well.
Currently implemented in 2 states, we will monitor its progress before expanding to more states. In a recent development, we launched a new range in the premium segment. The signature collection, in collaboration with renowned fashion designer, Rohit Bal, under Macroman M Series. We also expanded the portfolio for the Colors brand, which has gained significant market traction since its launch. Further launches are anticipated in the near future. Additionally, the management has decided to discontinue the licensed brands of [indiscernible], which did not deliver the desired results post-COVID disruption.
So we note that in financial year '24, we did not meet the expectations set, but your confidence in us and conducive market opportunities would continue to boost and inspire us to do better and enhance shareholder value. In fact, we take that as one of our prime responsibility. We anticipate our revenue growth to be in the range of 13% to 15% in financial year '25, primarily driven by volume with an EBITDA margin in the range of 10% to 11%. For quarter one, financial year '25, we expect our revenue to grow in the range of 18% to 20% year-on-year.
I'm also happy to share that Rupa brand has been recognized as a well-known trademark brand by Trademark [indiscernible]. This only shows how strong the brand is and how it is well recognized by the consumers. And I'm sure it will help us to reap more and more benefits in the coming future.
With this, I will now conclude my speech and would like to hand over the floor to our CFO, Mr. Sumit Khowala, to brief you our account financial performance. Over to you, Sumit.
Thank you, sir. Hello, everyone, and thank you for joining us for our quarter 4 and FY '24 earnings call. I will provide a brief overview of our financial performance for the quarter 4 and FY '24. On quarterly performance, revenue from operations for quarter 4 FY '24 is INR 400 crores. We grew by 1.6% year-on-year. The EBITDA for the quarter stood at INR 40 crores as compared to INR 27 crores same period last year, registering a growth of 48% year-on-year. EBITDA margin for the quarter stood at 10.1%, up by 340 basis points year-on-year. The net profit for the quarter stood at INR 24 crores against INR 19 crores in quarter 4 FY '23, which grew by 29% year-on-year.
[ Tax ] margins for the quarter stood at 6.1%, up by 150 basis points year-on-year. On yearly performance. Our revenue from operations for FY '24 stood at INR 1,217 crores against INR 1,143 crores in FY '23, up by 6.4% year-on-year. EBITDA stood at INR 117 crores, grew by 32% year-on-year. And EBITDA margin for FY '24 stood at 9.6%, up by 180 basis points year-on-year. Profit after tax stood at INR 70 crores as against INR 54 crores same period last year, registering a growth of 30% year-on-year. [ PAT ] margins stood at 5.7%, up by 100 basis points year-on-year.
Cash generated from the operations stands at INR 156 crores positive, which is mainly utilized in reducing our net debt. Our net debt has reduced significantly as of March 24 and stands at INR 6 crores versus INR 134 crores last year. There is an exceptional item in the profit and loss account for INR 3.82 crores, which is a write-off for unamortized balance of business rights for our license brand, FCUK, which we are not going to continue in near future.
With this, I conclude my submission and open the floor for question-and-answer session. Thank you, everybody.
[Operator Instructions] The first question is from the line of [ Sahil Bora from M&S Association ].
Yes. So I wanted to know how the progress on opening new stores in places like airports and train stations, and how do we think they will help our sales?
Opening stores in airport and railway is a great idea. In fact, we are trying that airport but rentals are quite high. But we are talking to railways to [indiscernible] stay there. At the same time, we are having 29 deals now, and we are planning to open another 20 new this year. But that's a great idea, and we make a note of it. We are trying and railway is definitely on that focus area.
My next question was, can you give us an idea of how many new stores we plan to open in malls like our own outlet, warehouses for next year?
Around 20 [indiscernible], which is the mix of high street and malls.
Okay. Okay. largely, our working capital has increased from last quarter. Like as of December, it was around INR 736 crores, and now it is substantially higher at INR 762 crores, can you specify some of the reasons for this substantial increase?
If you see working capital in terms of raise, it's almost same. The working capital increase is in proportion and in line with the turnover increase.
The next question is from the line of Mamta Agarwal from Singhania Association.
Congratulations for a good set of results. Sir, my first question is, how are our subsidiaries companies like [indiscernible] this quarter?
Your voice is not audible.
Hello? Am I audible now? My question is, how are our subsidiary companies like Rupa Bangladesh and Rupa Fashion performing this quarter?
For both these subsidiaries, operations has not yet started. And means the performance is basically, we have very negligible negative EBITDA for these 2 subsidiaries.
Okay. Okay. So my second question is can you provide us with the revenue contribution across segments for the quarter as well as for FY '24?
Okay. The revenue contribution from economic segment for quarter 4 FY '24 for economy segment is around 45% and mid-premium is around 50% and premium for 5%. And for FY '24, economy segment is 47%, mid-premium is 50% and premium is 3%.
The next question is from the line of [ Sohail Joshi ] an individual investor. Please go ahead.
Congratulations on the results, sir. Can you help us understand the current status and impact of the big stores and exclusive brand outlets that we have opened?
We are still not very high on deals in terms of number [indiscernible]. So once we reach a landmark of the 50, 60 [indiscernible]. There will be a good set of numbers to actually make a difference to our numbers and all. We are still in the process of lending in open [indiscernible] making it a viable bundle here.
Okay. And what was our total CapEx in FY '24 and our CapEx plan for FY '25?
The total CapEx for FY '24 is around INR 7 crores to INR 8 crores. And we don't have any capacity expansion plan for FY '25. So there will be a routine CapEx of INR 12 crores to INR 15 crores.
The next question is from the line of Resha Mehta from GreenEdge Wealth.
This is Resha. Sir, the first question is, can you talk about what is the channel inventory in the system like, now how many days hasn't gone back to the old days of 30 days or below? Or is it still in that range of 10 to 15 days?
Our understanding is the inventory level is still low with the dealers and all. It's not still very high.
Okay. So how far away will it be from the old inventory levels in the system?
I think once the yarn prices are still -- it's not falling any more still but once the yarn prices are firm, and I think dealers will start building more inventory in coming time. But that is only depends upon on the raw material prices. Once it's strong, then we will be a little more confident of building the stock.
So you are attributing the low channel inventory purely to the raw material or even the subdued demand scenario that we are witnessing?
Subdued demand still that whatever demand is [indiscernible] inventory level of that is a [indiscernible] strong inventory, but it is more due to subdued raw material prices.
Okay. Okay. And in the last financial year, FY '24, we've grown at 6% versus one of our peer dollar. They have grown at almost double the rate around 11%, 12%. So clearly, we think to be using some market share here. So what steps have you taken to kind of revise this growth? And yes, if you could just elaborate on what strategic steps are [indiscernible].
[indiscernible] negative also on annual basis. So we won't be able to -- when committed what competition has done. But initially, I commented, we are not happy, not satisfied with our performance. We feel we could have done better. But we have seen lot of initiatives the last year. I am sure that did worked well last year. But in coming quarters, we should be able to do better.
Yes. So my question is, what are those steps and what are your results are we expecting from those steps?
As I told you, we expect around 15% growth for the coming financial year with a 10% to 11% EBITDA margin. And coming quarters, first quarter, we are looking for a growth of 18% to 20%. And in terms of steps, we are like a number of steps in terms of building the team, in terms of [indiscernible] celebrity for our economy range, in terms of launching a new brand [indiscernible] signature collection with first time in India into with Rohit Bal, which is a very popular designer. So innumerable, we are building a very strong IT team. We have, in fact, hired a new [indiscernible] manager in process of hiring the new senior export manager to focus on the export area. So a lot of initiatives. It is a continuous process.
Sir, do you yourself ask for your internal assessment seeing that you're losing market share?
Yes. Last year, you can say it. We have probably lost a bit of market share. But we are talking about [indiscernible] competition, which we made. There are other competition as well. But I think one of the competition has grown to a certain percentage overall on a year-to-year basis. So just a year [indiscernible], but I think coming year, it will be more clearer.
And in terms of some strategic initiatives, the presentation mentions rapid expansion in high potential areas and one more being reorganizing the distribution channel. So can you like really elaborate on these 2 strategic initiatives?
Ma'am, the expected areas have performed well with good volume numbers. We have built up a strong team there, and there is a continuous focus there to gain the market share. And regarding the reorganization of distribution channel. We have launched a Pragati scheme for our retailers and which would provide us a better distribution management system, which will distribute the reward point to our retailers, and this is redeemable in time. And that reward point is valid for a lifetime. Basically, it was to match the secondary sales better, which is majorly primary now. So it will help us to do a secondary mapping also, which will help us in longer.
Ms. Resha, I request you to rejoin the queue for your follow-up questions.
[Operator Instructions]
The next question is from the line of [ Darshil Jhaveri ] from Crown Capital.
So sir, just wanted to get an idea of how do you see the demand scenario in the industry-wide being right now. Are we at now the new upfront of a new cycle? Or what do you see the demand scenario as currently, sir?
Demand scenario, seeing India's population and the opportunity we see a huge opportunity there. But at the same time, industry is getting competitive. But there are various avenues in terms of exports, in terms of volume trade, in terms of women's wear, in terms of thermal wear. So definitely, opportunities are also there. So identifying the right opportunity and to work [indiscernible] what you're doing.
Fair enough, sir. Also, sir, just wanted to ask any kind of chance of a price hike in this year? Do we see it as it's possible? Or how is that, do we have? Or is there pressure. sir?
That's on our wish list, we will be trying to do around 3% to 5% of price hike, but it will all depend upon the raw material prices to a great extent.
Okay. Okay. Sir. And sir, just wanted to know, sir, we are guiding for the 15% growth, but is there like some risk that this cannot be achieved or because -- or what is it dependent upon our growth if we can put that away, like, which sector has to fire so that we'll be able to achieve this growth, sir?
Well, a lot of factors like in terms of export users, which is not very big for us, women's wear, which is not again, very big for us. [indiscernible] last 2 years has not done well, so that are 2 segments. Winter wear still numbers are very less compared to what we did a couple of years back. So winter has done well. Winter, they should do well.
In the economy segment, we have invested heavily in last 1 year with endorsement with Ranbir Kapoor and all that should do well. Modern trade should do is, in fact, with signature collection with Rohit Bal what we've introduced that should help us. So there are various things, what we are doing, opportunity are everywhere. We are working on all -- actually, on all of them, building with a very strong team. And we are hopeful, we should be able to do better this year. And the launch of new retail scheme, loyalty scheme that will likely help us to map better secondary retailers also where we are primary, but where secondary is happening, that means that mapping will also be done. So that's another initiative what we have started. So [indiscernible] depend on.
And sir, just my last question. When can we get back to the trajectory of 14% to 15% EBITDA this year? You are guiding around 10%, 11%. So when can we like -- what pathway do we see that we can return to our maybe historical margins?
I think right now, the challenge once we do a [indiscernible] top line of around 15%, 15% and above this year in coming year to two, once you have [indiscernible] top line, those numbers are quite achievable per year.
Okay. Okay. Fair enough, sir. That's it from my side.
Also, the loss will depend on raw material prices. The last few years, raw material prices have been taken a huge hit. So that was the main reason, which is very unique and which is our [indiscernible] business to any business standard procedures. So that we are getting out of it. So probably this is the last year of the pain period, and I think coming year should that we should do better.
The next question is from the line of Rehan from Equitree Capital.
My question is on the gross margin. We've been raw material price be fairly stable over last year, but your gross margins haven't supposedly improved drastically in terms of the overall market kind of situation. So can you throw some light on why are we still struggling on that?
The ASP has not been increased. So the net realizable is less, so we have maintained the gross margin that we have maintained in the last quarter. For the December quarter and the gross margin for the fourth quarter remains same. Going forward, if there is a price hike, we'll definitely improve our gross margin.
Is the product mix changing? That's mainly my question because we're not -- the contribution seems to be same versus Y-o-Y. Are we selling more on the economy segment? Or I mean I'm just trying to understand that because the gross margin is purely flattish versus industry trend.
Yes. As of now, the product mix haven't changed, but we have taken a lot of initiatives to launch the premium segment and like Colors is a mid-premium segment. And once the [indiscernible] women's wear, ladies wear and thermal wear picks up, those numbers will change. The gross margin will definitely change.
Okay. So basically, is the company focusing more on premium or mass market? I mean where are you trying to find your strength and capitalize on that?
It's everywhere, we find a lot opportunity in all the segments, and our focus is everywhere. We have a core focus on economy, [indiscernible] we focus on premium also. And other segments that are not very huge big for us, but the opportunity is great, like, as I mentioned again, like women's wear, ladies wear and thermal wear, those are high gross margin businesses, where, of course, the focus is also there as well, include exports.
In your segmental volume growth, could you repeat the volume growth for year-on-year segment like economy, mid-premium and premium for year-end quarter?
Yes. The volume growth for economy segment for FY '24 is 7.7%. And for mid premium, it's 8.6%. And for premium segment is around 25%.
This is volume, right?
Just a second, economy segment there is 16%, mid-premium 17%, and premium is 25%.
But these are all volume numbers, correct?
Yes, volume numbers.
And your for the quarter is 27% and 7%, is that correct?
Yes.
Okay. And lastly, what kind of contribution are we seeing from the women's wear, this segment, let's say, this quarter?
Contribution from women segment for FY '24 is around 10%.
And can you tell, what would the ASPs like for the year, for the entire year?
What were the ASPs like for FY '24?
It is between INR 70 crores to INR 75 crores.
The next question is from the line of Aniket Kulkarni from BMSPL Capital.
So I just wanted to understand what basically drives the demand in this industry? So as you said, the raw material prices are at multi-year lows. So the product prices too should be at lower prices, right? So if that is the case, then -- why is the demand side not yet picking up? Or I mean I just wanted to understand what are the factors, which drive demand? Is it better consumption? Better economic performance on the rural side? Or I mean, what exactly drives demand here? Because if the prices are low, then demand shouldn't be a problem, right?
It's not about the price. As we have said, we have grown 17% in terms of volume. But as demand definitely -- it depends a lot upon the prices also. But rural demand is soft for us. So if we see rural demand is very large quarters where it is soft, in coming quarters should be well, which will definitely help us in better numbers as well. But our understanding was we grew demand in the last few quarters. Inflation probably [indiscernible] understanding, we assume it is largely because of inflation.
[Operator Instructions] The next question is from the line of Junaid from Counter Cyclical PMS.
You have been mentioning about the Pragati scheme. So can you just throw some more light on what that actually is? And how will it impact the company going forward.
So it's basically a retail loyalty scheme. So long historically, we are doing more of primary selling to our distributors and wholesalers. Now this is further mapping and once we do primary and the dealers will [indiscernible] that is secondary what we call. So that is actually a secondary mapping what we are doing. And anybody who is willing to [indiscernible] through the system, will get the reward points. So those reward points are for lifelong retailers. It's basically a loyalty program for retailers. More rebuy, more incentives he gets. And more wider range he buys, more incentive he gets. It's basically to incentivize retailers who are associated with us.
All right. So this is just improved the stickiness of the retailer with us [indiscernible].
[indiscernible] and to do a regular business.
When was this launched and have you seen any impact of this?
[indiscernible] stations we have launched, those stations with [indiscernible]. So now we are increasing to 2 states. We have started the process. It takes a little time to stabilize or city or a state. So it's a little lengthy process, but we are hopeful in a quarter or two, it should -- we'll be able to get a better traction from them.
All right, sir, got it. Sir, can you also share the price trend of raw materials for FY '24? And how are they faring right now?
Like it's stable now and coming quarters, we see is it should stay stable until the less export demand is not very huge, which we don't export demand is better from previously. But coming quarters, it should not be [indiscernible] formed.
Sir, can you quantify the number?
In terms of yarn prices?
The raw material price, yes. Yarn prices.
Primarily, say yarn prices is around 285 to 290 for a [ certain ] count. So that should stay around these levels in our assumption.
All right, sir. And how about these in Q4 FY '23?
'23, it was 350.
The next question is from the line of Anushka Chitnis from Arihant Capital.
I just wanted to ask if the management has any capital allocation policy for the years to come. If there is any major CapEx plan. If you can just talk about that a little.
There is no expansion plan for FY '25. So there will be a routine CapEx of INR 12 crores to INR 15 crores. We are operating at around 70% to 75% of our [indiscernible] capacity. So whenever we would require increase in capacity, we can invest. We have cash in our books, and we can [indiscernible].
And at the same time, we are looking for some inorganic opportunities or [indiscernible].
The next question is from the line of Manish Shah, an Individual Investor.
So in this quarter, our margins have gone up. What is the primary reason for that, sir?
The gross margin compared to last year quarter 4 has been increased. And reason for the same is basically the change in mix as well as calibration of prices.
So sir, is this thing sustainable in the foreseen quarters also?
Yes. Going forward, if the price remains same, we will maintain the same level of gross margin. If the price, yes, raw material price get rises, if market supports, we will take a price hike and improve our gross margin.
Sir, in this quarter, our high-margin products have given good sales. So is this our focus products for the foreseen quarter also?
Absolutely, yes.
And sir, who are our major, 2, 3 major competitors?
Major competitors is all the listed. You are aware of that there is, of course, Jockey is there, the other brands are there. All the listed brands are there.
Sir, but yes, in the listed, I think there are 2, 3 people only, Dollar, Lux and other people. But what about this other Dixcy Scott and Macho Sporto Amul and all these people?
Of course, all these are competition. Whoever is in the market is all competition, somewhere or in some region.
But these are smaller than us, these people?
These are unlisted brands, so we are unable to -- we are not able to give [indiscernible].
But our major competitors are the listed one only. I think these are bigger people like Dollar and Lux.
Those number [indiscernible].
So we don't know about these other people who are not listed.
I'm not sure about their numbers and all.
The next question is from the line of Yash Sonthaliya from Buoyant Capital.
So few questions on our Pragati scheme. So are we doing this scheme only in the new states and regions or also applying to the older regions or the existing regions?
No. We have applied to older region and to new region, both just to experiment how it goes.
So currently, the 2 states, what we are mentioning, both are new or the older states?
One is new, one is old.
Sorry?
One is new, one is old.
Okay. And second question, like a follow-up on this. In the older states, how we are dealing with our distributors because if I'm not wrong, directly connecting or giving incentive to retailers can hamper the connection with distributors, right?
[indiscernible] distributors only. The program is through distributors only, it's not a grade program. So distributor is a channel partner through him we are doing. It's not a [indiscernible] to retailers. In fact, it will help distributors also to have a better payment rotation from retailers because that relationship is going continue to with retailers. It's not onetime. So the idea is to have a continued relationship between dealer and retailers.
Understood. And one more follow-up. Like going ahead, if we are able to reorganize more of our distribution channel, how would it impact or apply to our inventories and margins?
That would definitely help us and Pragati program is [indiscernible] that line only. So that will help us to organize our distribution structure also.
Is there any ballpark quantifiable numbers on inventory and margins from this specific program?
Not as of now. But definitely, it will do better. But in the immediate term, it will be difficult to comment on anything specific.
Understood. And one last question. Like we are expecting 15% revenue growth next year. So how much it is from the existing states and increasing volumes? And how much it is from new penetration? Any ballpark number if we have.
[indiscernible] number. But of course, we state the percentage will be high. And the existing state, the percentage will be low, but the mix of 15% is what we are targeting here.
[Operator Instructions] The next question is from the line of [ Resha Mehta from GreenEdge Wealth ].
Thank you for the follow-up. Just on a related note from the working capital side, what the previous participant mentioned. So effectively, what would be the reduction in working capital that we see because of this program? And also, overall from the other efforts on the inventory and new reduction of better base side? So currently, we are at almost 63% of net sales, that's our working capital requirements. So what is our aspiration number here? And FY '25, where do we see this 63% number settling?
Going forward, we are taking necessary efforts to reduce this working capital to around 170, 180 days for this year. We have taken a target to reduce it to total working capital to 180 days. And we are taking necessary steps. We are providing channel financing scheme to our dealers. Already, 65 dealers have been enrolled in this program. And we are also preparing inventory. We have implemented as for [ HANA ] system, where we can have a real-time inventory check, what to produce and have a business forecast for them.
All right. So got it. And also the resolution mentioned at the given distribution channel that we have. If you do for the premium and [indiscernible] premium product categories. So is the economy range out of the direct distribution channel?
So initially, we are targeting premium and the super premium distribution. But the program, once you start [indiscernible] distribution model.
And what would be the revenue contribution of premium and super premium categories to FY '24 revenue?
Premium segment contributes around 7%. Super premium is basically half, 0.5% to 1%.
The next question is from the line of Ketan Athavale from Robo Capital.
I wanted to know your growth outlook for the next 2 to 3 years.
So I think 15% year-on-year is what we target.
Okay. So we maintain that for -- even after [indiscernible]. Okay. And then you said if we continue to achieve that, then we can get up to 14% to 15% of our historical margins, right?
Absolutely.
Okay. Got it. And can you just name -- I mean, top 2 drivers? I understand the Pragati scheme. But besides this, if you can name our top 2 drivers of our growth.
Top 2 drivers of our growth, definitely athleisure and women's wear is one. So athleisure and women's wear both are a big segment where we can have a huge growth. And where our size is not big, so opportunity is quite big there.
Thank you. That was the last question for the day. I would now like to hand the conference over to Mr. Sumeet Khaitan for closing remarks. Over to you, sir.
Yes. Thank you, everyone, for joining the call. I hope management was able to answer all the queries today. And we are Orient Capital Investor Relations Advisors to Rupa & Company Limited. For any queries, please feel free to reach out to us. Thank you, everyone, and have a nice day.
Thank you, Sumeet.
Thank you. On behalf of Rupa & Company Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.