TTK Prestige Ltd

NSE:TTKPRESTIG

Earnings Call Transcript 2025-Q2

[Operator]

Ladies and gentlemen, good day, and welcome to TTK Prestige Limited Q2 FY '24-'25 Earnings Conference Call hosted by AMBIT Capital. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. Yash Jain from Ambit Capital. Thank you, and over to you, sir.

[Yash Jain, analyst]

Thank you. Hello, everyone. Welcome to TTK Prestige 2Q FY '25 Earnings Call. From the management side today, we have Mr. Venkatesh Vijayaraghavan, Managing Director and CEO; Mr. Shankaran, Advisor to the Board; and Mr. Saranyan, Whole Time Director and CFO. Thank you, and over to you, sir, for your opening remarks.

[R. Saranyan, executive]

Good evening. This is Saranyan here. Welcome you all for the Q2 earnings call of TTK Prestige. Before I hand over the proceedings to Mr. -- our Managing Director, Mr. Venkatesh. I just want to remind the participants that today's discussion may contain certain statements which are futuristic in nature. Such statements represent the intentions of the management and the efforts being put in by them to realize certain goals. The factors in realizing these goals depends on various factors, both internal and external. Therefore, the investors are requested to make their own independent judgments by considering all relevant factors before taking any investment decision.

Thank you. I hand over the proceedings to Mr. Venkatesh for his opening remarks.

[Venkatesh Vijayaraghavan, executive]

Good evening, and welcome to this call. So while we look at the performance of the company and the industry, I think our view of the economy is quite robust, and we see a lot of positive offshoots coming in from an Indian economy perspective. Despite issues around the global turbulence and other geopolitical tensions around, we do believe that the economy is on a robust platform, and that is sort of also reflecting in some of the numbers at a macro level.

From our business perspective, if you had to look at some of the global tensions is sort of reflecting in our business impact in terms of container availability and in terms of some of the freight rates related which had some varying on our export business, which we would talk about as we move.

Overall, the economy seems to be robust, and we do believe that, that's a good positive sign for us as we move in the direction of growth for the industry as well. [ Closer ] home from an industry perspective, we believe we -- after a long period of time, the industry is starting to bounce back again. Our categories and our core categories have started to see good growth coming in, particularly on the retail environment.

And this sort of gives us the confidence that the overall direction with the categories are moving in the right direction. Our trade channels have done very well in the last 2 quarters and we see -- and this is complemented by our growth coming in from e-commerce and modern format stores.

We do have specific issues around the rural channel, which in this category is sort of finding a little bit of struggle given some of the model changes that's happening and some of the economy related issues on the rural demand as well. On the commodity side, like I mentioned, there is a surge that you've seen in terms of our prices. While it's being managed from the quarter perspective, we do believe that this probably would have an impact as we move forward.

This level of increased commodity pricing is expected to be there across the year, and that's something that we would factor in as we move forward. Our export orders are robust. There's been delay in shipment because of freight related challenges given the global tension. But our belief is that as we move forward, we would look at a robust export growth and some of our shipments have got deferred to the second half of the year, and we believe that, that will also get sort of -- that demand will get addressed as we move forward.

Overall, our outlook from the channel's perspective is quite good. We do believe that we're moving into a phase of good growth. And as we move forward, this would sort of help us drive the growth much more faster and ahead as we move forward.

That would be my sort of remarks, and I think we're quite confident as we move forward that we would continue to keep the part of growth. We've also sort of looked at some of our investments to be made in a few areas of improvement, and that is work in progress as we move forward. Some of them would reflect as we move in the quarters coming by. So overall, a confident position, and we do believe that we are in the right place and position, and we will take this forward as we move.

[R. Saranyan, executive]

We are open to questions and answers. Yash, we can proceed with the questions and answers.

[Operator]

[Operator Instructions] The first question is from the line of Resha Mehta from GreenEdge Wealth.

[Resha Mehta, analyst]

Diwali wishes to the entire team. So the first question is on the consultants. So we are engaged a consultant. So if it would be possible to elaborate on what were the observations, the corrective measures, gaps, et cetera, that have been recommended and what we have chopped out as a plan. And also a related question that, what would be the recurring cost for the consultants each quarter going forward? And until what time would you know we incur such a cost? That's the first question.

[Venkatesh Vijayaraghavan, executive]

So while we've come back on the specifics at this point of time, what we have done is to take an asset stock of where we stand and some of the opportunities and efficiencies that we would be able to unlock as we move forward. The consultant has actually done the first phase of the work and they've come back with their recommendations to us. That is getting internally evaluated. And as we move forward, we will take appropriate steps in that direction, including sort of looking at the boundaries of operations with the consultant and the related costs as well.

But at this point of time, I think the first part of the exercise has given us quite a visible set of opportunities that we would like to work around our core and therefore, be able to bring in efficiencies as we move both in terms of top line growth and in terms of some of the related efficiencies that we can bring in.

Specifics to the costing, I probably -- we would not, at this point of time, be able to talk about it. And over a period of time, as relevant, we will then -- we will sort of talk about it later.

[Resha Mehta, analyst]

Any specific findings or anything that you can elaborate from the consultant recommendations?

[Venkatesh Vijayaraghavan, executive]

So we'll come back on that and maybe at an appropriate time, we will come back on that.

[Resha Mehta, analyst]

All right. The second question is basically on the channels. So you've called out that the institutional channel is seeing some headwind for -- has been seeing some headwinds for quite some time. So what exactly is the issue there? And also on the Prestige exclusive stores, if I see the closing as on this current September quarter is similar to what was there as on March quarter. So there is like a reduction of almost 40 stores. So are we seeing any kind of mass closures here or any kind of stress on the Prestige exclusive store format. So that's the second one.

[R. Saranyan, executive]

Yes. I will -- Saranyan here, I will answer the second question first which is on the exclusive stores. Yes, there were -- see, what we have done is we have rationalized the stores to ensure that I think the partners that they are not doing well. I think we have closed down in those markets.

We have filtered up that gap with the other distribution process. So that's why you see a reduction. But going forward, I think we keep adding as we move forward, depending on which market is required and where exactly those stores are required we'll keep adding it up. Over to you, Venka, on the other...

[Venkatesh Vijayaraghavan, executive]

So some of these do not have a visible bearing on the top line, but it is more about rationalization that has been required at this point of time and that's been done in the Prestige exclusive chain as we look at.

From a channel perspective, like we said, one of the very positive signs that we see is that the overall traditional channel, which includes general trade, exclusive stores, e-commerce and modern trade are doing well, while we see a little bit of pressure on the general trade channel because of the e-commerce scale up and modern trade scale up that's happening.

As a combined bucket, we do see that there's a significant growth that has happened and that would probably continue as we move forward. Our unique to the current situation has been the rural channel and institutional channel. These have been some structural related challenges at the market level, not from Prestige perspective or not specific to TTK Prestige, but at a market level.

And TTK Prestige being a very dominant player in this segment, we've sort of seen this impact our top line. These are some structural changes that have happened combined with weak demand from these markets. So to that extent, I think this is something that would be a transitory in nature, but we would have to address it as we go.

[Resha Mehta, analyst]

So just a follow-up here, if I may. So when you say institutional channel, you are meaning the CSD channel or the corporate sales channel. And also in the Prestige exclusive store. So broadly, the major part of store rationalization exercise has been done or is it still underway?

[Venkatesh Vijayaraghavan, executive]

It's done. It is more or less done. This was a work in progress that got finally sort of consolidated right now. It's largely done. And you would therefore see that as we move forward, the expansion plans would be visible. We are rapidly expanding new stores in specific targeted geographies, and that will reflect as we move forward.

And as I said, the bearing of this at this point of time is very little from a top line perspective, but it will -- the expansion will continuously keep adding to these. On the channel, yes, that includes the CSD channel as well.

[Resha Mehta, analyst]

And even the corporate sales channel?

[Venkatesh Vijayaraghavan, executive]

Corporate sales channel, we're not seeing too much of a problem. It is more of the CSD channel and the rural channel that we have seen with sort of a challenge that's happening right now.

[Operator]

[Operator Instructions] The next question is from the line of Hitesh from Kosha Capital.

[Hitesh Kumar, analyst]

Sir, could you share how have been the demand trends in this festive season? And also, if you can dissect this demand between, say, the mass premium segment and the premium segment. When I say premium, I mean products priced at a higher price point, how the demand has been in both these segments, if you can elaborate there?

And also, how much of festive season sales are already reflected in Q2 numbers? Or is it in Q3 that we'll get to see the festive sales numbers?

[Venkatesh Vijayaraghavan, executive]

Some part of the season sales will be felt in this season as well in Q3, partially, but a major portion has already been reflected in the quarter 2 as we speak. So to the question of where is the growth happening, we are seeing the growth happen at mass end which is reflected in terms of the insights coming in from e-com channels as well as the other where we're seeing growth coming in from Tier 2, Tier 3 expansion that is happening.

We're also seeing growth coming in from the premium end. We are not exposed directly to the super premium end, but our belief is that the super premium end is offering us a growth opportunity as we move forward. From TTK Prestige perspective, across the 3 segments of premium, mass premium and mass, we believe there is enough growth opportunities that are there and are getting addressed as we speak.

Rural, there has been a weak demand, and that is sort of reflecting in the rural channel that we've seen. But otherwise, from a mass market perspective, the mass premium stroke premium perspective, the growth rate in our view, is robust. Like I said, after a long period of time, they're coming back -- the categories are coming back to a growth phase right now.

[Hitesh Kumar, analyst]

Sure. And sir, how has been the implementation of BIS in the appliances side because growth that we see is quite subdued and -- is there any -- I mean, how is the industry gearing up for this whole transition to this BIS?

[Venkatesh Vijayaraghavan, executive]

Yes. So BIS implementation would largely impact the flexibility of having new products coming from exports perspective, which is from other countries that they get imported. There is a progress in implementation of this across multiple categories, and that I think is a short-term challenge.

But from our perspective, we would say that over the last few years, we've been consistently working on that with our vendor partners. We are better positioned to handle this challenge as we move forward. The subdued performance that you see is also partially due to the reflection of the rural channel.

Appliances overall is growing well in the trade channels, as we mentioned. So going forward, I think we do see that happen. BIS and the implementation of BIS long-term in our view is good. It ensures that there are certain quality parameters that come into the industry. From our perspective, we are better equipped to handle it given that we have our vendor partners also doing this product for the last 3, 4 years now.

[Hitesh Kumar, analyst]

And sir, just the last thing because as you mentioned that the general -- the traditional channel continues to do well, we had a 12% kind of growth. But if you look at the overall number, it's still lower than the FY '22 number that we had, at least on the domestic side.

Now if we do a like-to-like basis for the same traditional channel, how has it been vis-a-vis FY '22? Is there a growth? Or is there a negative growth there, too?

[Venkatesh Vijayaraghavan, executive]

That is a growth.

[Operator]

[Operator Instructions] The next question is from the line of Sameer Gupta from India Infoline.

[Sameer Gupta, analyst]

Given there is an early festive this year, we had a base of minus 15%. How do you look at this 2Q performance? Optically, it should have been a good growth because it's an early festive and the base is also favorable. Secondly, the industry is bouncing back. So what kind of growth are you targeting in second half of FY '25?

[Venkatesh Vijayaraghavan, executive]

Yes, I wouldn't be able to give you a direct number on that. But like I said, I think our outlook is quite positive given the way we've been sort of looking at some of the channel performances in others, right?

The overhang of rural continue and that would be a challenge as we move forward. But we would definitely look at a good growth as we move. Specific, I wouldn't be able to [ sort of work out ] right.

[R. Saranyan, executive]

And the festive thing if you look at Diwali from the last week of October, the festive demand -- the festive filling of the stores has happened in the second of September and the whole of October. So October, it looks very robust.

[Operator]

[Operator Instructions] The next question is from the line of Sameer Gupta from India Infoline.

[Sameer Gupta, analyst]

Just a follow-up. Sir, you have mentioned that rural is facing an issue, but most of the companies still this quarter has specifically mentioned as to the problem being urban India and rural is actually coming back very strongly.

So just wanted to understand, is it a specific geography issue in rural that you are facing or a little bit more color here would be helpful.

[Venkatesh Vijayaraghavan, executive]

So I think it's backed by 2 parts. There is a demand challenge in rural in our view. And also, there is a channel-related structural issue that is being sort of addressed at this point of time. So a combination of channel and a combination of weak demand in rural is, in our view, creating this issue as we speak or the challenge as we speak. We are not too sure that there is a robust rural demand, which we are not witnessing at this point of time.

[Sameer Gupta, analyst]

The structural challenge is basically the MFI channel you're saying?

[Venkatesh Vijayaraghavan, executive]

Yes, yes, yes. Both CSD and MFI have got some structural challenges, which is internal to them. and that is sort of reflecting in our performance, right?

[Sameer Gupta, analyst]

Got it. And it's not very geography specific as to it's only a south related problem. It is across the board in rural that you are facing an issue.

[Venkatesh Vijayaraghavan, executive]

This is across. The channel is more dominant in non-South, but that is across.

[Operator]

[Operator Instructions] The next question is from the line of Resha Mehta from GreenEdge Wealth.

[Resha Mehta, analyst]

Just on this BIS bit, if you could elaborate on how well the overall industry is prepared to handle this transition and do you see that as a distinct advantage for players like us? And are we prepared for this transition. So if you could just share some granular details on this would be very helpful.

[Venkatesh Vijayaraghavan, executive]

We are not dependent on the imports so much. So we have built an [ entity ] structure, and we're able to meet the BIS standards for all the appliances, which we sell in India.

[Resha Mehta, analyst]

Okay. And how about the industry at large, the unorganized players or the very small regional brands?

[Unknown Executive]

[indiscernible] I cannot answer other companies.

[Venkatesh Vijayaraghavan, executive]

Directionally that would be a challenge given the dependency that some of the competitive -- other companies would sort of depend upon. I think over the last 3, 4 years, we've invested steadily in our domestic capabilities, particularly the appliance side, that we hope will help us in good stead as we move forward.

In the short term, there will be transitionary pressures on new product development and new product launches. But I think as we move forward, that's a good sign, and we are better poised to take advantage of this.

[Resha Mehta, analyst]

Right. And on the China bit, right? So of course, I recall post-COVID, we had greatly reduced the dependency on China. But overall, at an input level, would it be possible to quantify that what is the China sourcing? Maybe we don't do it directly, but via our vendors. Possible to give some color here, if not an exact quantification.

[Venkatesh Vijayaraghavan, executive]

See, there are some -- the reality is that there are some core parts that still get imported from China. The domestic capability to do them is not there in appliances. That part of it, including the challenge of BIS is getting addressed. So I think as we move forward, that is something that we get addressed. But from some of the vendors are importing some critical parts that is still work in progress as we speak.

But that's an area of focus that we have taken upon us to ensure that, that does not sort of derail us as we move forward.

[Resha Mehta, analyst]

Can you just elaborate on which are these small kitchen appliances, what parts exactly motors, et cetera, something, some color here would help.

[Venkatesh Vijayaraghavan, executive]

Not in this call.

[Operator]

Since there are no more questions from the participants, I now hand the conference over to the management for closing comments.

[Venkatesh Vijayaraghavan, executive]

So first of all, our wishes festive -- for the festive season and happy Diwali to all of us. I think thank you for having taken the time to be on this call. And as I -- as we said, I think -- we do look at positive offshoots coming in, in terms of category, some of our performances as well. And we are quite confident as we move forward, we would continue to do well as we've done in the past.

And once again, Diwali wishes from our side. Thank you.

[Operator]

On behalf of AMBIT Capital, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.