Ladies and gentlemen, good day and welcome to TTK Prestige Limited Q1 FY 2027 earnings conference call hosted by 360 ONE Capital Market Private Limited. As a reminder, all participant lines will be in the listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Archit Shah from 360 ONE Capital Market Private Limited. Thank you, and over to you, sir.
Thank you, Operator. Hello everyone, and welcome to TTK Prestige Limited Q1 FY 2027 earnings call. From the management side today, we have Mr. Venkatesh Vijayaraghavan, Managing Director and CEO, Mr. K. Shankaran, Advisor to the Board, and Mr. R. Saranyan, Whole-Time Director and Chief Financial Officer. I would now like to hand over the call to the management for the opening remarks, post which we will open the floor for Q&A. Thank you, and over to you, sir.
Good evening. This is Saranyan here. Welcome you all for TTK Prestige earnings call for Q1. Before I hand over the proceedings to our Managing Director, Mr. Venkatesh, I just want to remind the participants about the safe harbor clause. The discussion and the presentations today 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 success in realizing these goals depends on various factors, both internal and external. The investors are requested to make their own independent judgments by considering all relevant factors before taking any investment decision. Thank you. Over to you, Venkatesh.
Good afternoon. This is Venkatesh here. As we get into the quarter call, let me take you through our view on general economy and then specifics of our industry and company. This quarter, again, we did face issues around the global uncertainties of Middle East political tensions and also higher energy prices as a fallout of that. Also in terms of higher commodity pricing in large number of industry segments as well. Overall, the quarter continues to be across industries seems to be a little bit of uncertainty driven by global uncertainties. Increased regional divergences that are happening, and that seems to be having a bearing as we look at some of our costs and supply chain related areas as well. Exports continues to be a little muted because of this in terms of supply chain disruptions.
I'm sure that's not specific to our industry, but that's across the country as well and in other areas as well. The Indian rupee weakening has its impact, I think that's something that needs to be watched out for. Amongst this, I think we would say, personally and also from a view of overall, I do believe that the country is certainly going through a little bit of turbulence from a global volatility, but is standing out in terms of its resilience and its ability to be able to sort of respond to some of these changes. I think that sort of augurs well for industry people. That we believe will probably continue to be a cornerstone for many industries and for us as well as we move forward. Specific to the industry, the quarter has been a good quarter for the industry.
On the follow-up of what happened in Q4, Q1 has been a very robust quarter, which has seen a significant demand generation for the industry. This has been across channels, across categories. It sort of has brought back a robust demand generation curve to the industry, and I hope this augurs well for the future as well. There have been challenges on the cost side, mounting pressures on commodity pricing and therefore input pricing, particularly in kitchenware and also across some of the commodities in appliances as well. These mounting pressures are significant and would be impacting some of the cost structures. At large, I think the industry is passing on the cost increase to the consumer. That's something that we've seen in the past, and I think that would sort of continue. The impact of that on volumes is to be seen.
The current quarter, if you were to go by, seems to be very robust on demand, partially driven by a situation where people have sort of upgraded their kitchens, gone for accelerated purchase of cookware in particular, and appliances in particular. As appliances start getting sold more, I think the smartification of the kitchens continue to be one agenda that is strongly happening, followed by premiumization as well. That's from an industry perspective. Specific to the company, I think we've had a very good quarter. We've been able to capitalize on the opportunity of demand generated, and we do believe that we've been able to do justice to fulfilling the demand.
The work that we've done over the last two years in terms of process transformations, product transformation, also in terms of increasing our internal capabilities, is holding us in good stead in meeting this demand surge very efficiently and that's probably reflecting in the numbers as we speak for the quarter. Overall, the quarter has been a very good quarter, a very balanced quarter across categories, including cookers, cookware, appliances. Some part of appliances have seen a little bit of a muted growth, that's quite natural given the way the categories are placed. At large, the growth has been significantly high. As a company, we've also seen that some of the benefits of the cost initiatives that we've driven in the last few quarters consciously are starting to yield results. We do believe the scale of which will continue to happen.
On one side, while we have pressures on the cost because of input margins, we're sort of holding them to be able to work against them by our own internal cost initiatives across functions, and also be able to meet the demand with a robust supply chain transformation, that's probably leading us to the growth as well. We do hope that this would continue, while we do believe that this is not a sustainable, consistent demand. The demand would probably settle at a slightly higher level than before, in our view, that, I think, would augur well for us and for the industry as well. With that, I'll probably open up the conversation, given that the numbers are available with everybody to read. We would probably take up the questions and answer some of the financial numbers also through the questions as well. Over to you. Thank you.
Thank you. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Parth Sodha from Trinetra Asset Managers. Please go ahead.
Am I audible? Hello.
Yeah, you are audible. Yes.
Good evening, and thank you for the opportunity. My question is. The company has over INR 870 crore of free cash, despite ongoing investment. Beyond the announced CapEx, how should investors think about capital allocation over the next two to three years?
Sir, your voice was a little muted in the last part. Can you repeat the question, please?
One second. Yes. The company has- Am I audible?
Yeah.
Yes.
Go ahead.
Please go ahead.
The company now has over INR 870 crore of free cash, despite ongoing investments. Beyond the announced CapEx, how should investors think about the capital allocation over the next two to three years?
If you remember, one year back, we announced a total investment outlay of INR 500 crore, both on soft and hard expenditure. We have spent only INR 100 crore till now. Balance INR 300 crore plus will be spent over the next two years. Of course, there's cash acquisitions also. In these times, it's better to keep some cash free with us. The allocation will be on the items already referred earlier for about INR 500 crore.
Got it. Thank you so much.
Thank you. The next question is from the line of Sameer Gupta from India Infoline. Please go ahead.
Hi, good afternoon, and congrats on a very good set of numbers, and thanks for taking my question. I'll probably ask two and maybe park the rest in follow-ups. One, there has been a steady commodity inflation across the board. One, what is the quantum of price hikes that you have taken in this quarter? How much of this 33% growth is coming from price hikes? And how much of the current inflation that you are seeing is already expensed out in the 1Q, and how much is remaining to be seen?
On the price hike, of course, we have done during this quarter. The impact is minimal during this quarter, primarily because though we did the price increase, the revised price in the market only during the fag end of this quarter. Out of this 34% what you are seeing, it's only around 3% is actually the price hike. The rest are all the volume growth. That again, across all the categories as well. Of course, that is also due to the mix change, because we are also seeing some of the value-added products getting sold better during this quarter. That is also one reason for that. Sir, what is the second question?
No, this is part of the first question only. One, then how much total price hikes have you taken? Even if it's only 3% for this quarter, overall, what is the price hike quantum, and what is the kind of raw material inflation that you are facing?
This depends on the product to product. It is anywhere between 5%-8%. It may vary, the price hikes. It depends on the category. Each category it differs.
The RM inflation, sir, your basket overall?
The RM inflation is anywhere average is around 8%.
Okay. Second question is, sir, on the growth this quarter. There has also been some specific categories which might have seen higher demand, which is very specific to this quarter, given the geopolitical issues and LPG issues. If we were to, let's say, strip out those like induction cooktops, that's the only one that comes to my mind, but there could be more. If we were to remove that, what would be the revenue growth this quarter? Or any kind of general color that you can give on this aspect?
While I don't want to be very specific on that, I think if you were to look at the numbers, unlike the last quarter where there was a disproportionate growth impact because of induction, this quarter, the growth has been significantly distributed across categories. Induction cooktops, small domestic appliances, air fryers, cookware, cookers. It's been uniformly distributed across categories.
Sir, is it a case of channel upstocking before the impending price hikes? There has been a sharp acceleration in the growth trajectory, and normally, unless exceptional circumstances like more people spending more time at home like we saw in COVID, what should be the reason of such a sharp acceleration?
Our belief is there is a minimal impact of upstocking. We're not saying that upstocking is completely ruled out. There is, but I think for the quantum of growth that we are seeing, upstocking is not the primary driver of growth. That's one thing that's very clearly coming in from the consumption pattern. Upstocking has not happened significantly high. There will be a part of this that can be attributable to that. I think what we believe is that the current scenario where consumers have walked in to buy more of induction cooktops, they've also looked at the new set of cookware, the new set of appliances. This has been a vibrant industry where, one, competitive intensity is high. Second, a lot of people have started getting new products in.
Third, Prestige, after almost a very significant gap in the last one and a half years, have introduced close to 400 to 450 SKUs. What's happening essentially is that in the walk-ins and the searches have increased, and this has led to more buying combinations of cookware and appliances to the kitchen. I would tend to believe that this is a trigger, and one of the reasons that we believe is happening is we do have partial visibility to the tertiary trends that are happening in the market through our own stores, and that's been robust enough. Our belief is that while I mentioned that it's not a sustainable growth, this is something that has been triggered off with consumer behavior. I think it's sort of a one-time effort that consumers have put in to refurbish their kitchens.
What started as just the induction cooktop is probably spread across all categories. Having said that, we've not seen in some categories which are not necessarily impulsive in nature, those categories have not necessarily seen significant growth. To that extent, I think this is something that has happened from a consumer-driven perspective rather than upstocking in our mind.
Got it, sir. I'll let others ask. I have a few more, but I will come back in the queue. Thanks a lot.
Thank you. Before we take the next question, we would like to remind participants that you may press star and one to ask questions. The next question is from the line of Praneeth from SJ Investments. Please go ahead.
Hi, sir. Thank you for the opportunity. I wanted to understand in terms of, you mentioned that there's a lot more products available, that there are a lot of sales. What the company exactly doing to get the more, get higher footfall and higher visibility? Because for them to see something, the visibility has to suddenly increase, right? What are the examples company's been putting to get that?
No, your voice is muffled. Your voice is a little muffled. We're not able to hear it properly.
Sorry.
You could be a little slow, probably.
Yes, sir. Is it better now?
Yeah, it's better.
I was asking, referring to your answer from the previous participant, that you mentioned that there's a lot more visibility of new products. The consumers are increasing the amount of wallet spend they do at Prestige. That's the reason of most of the growth. Could you explain what caused this increase in visibility or increase in footfall into our stores or something like that? Is it the higher number of stores? I wanted to understand what suddenly changed in the last quarter, over last year that the visibility increased and all of that. Because we've been introducing for the last one and a half years, right? What changed in this quarter specifically?
I think I would not see this as a one-quarter blip. I would see it as a consistent effort that's gaining visibility given the quantum of growth right now. Two things that have been very clear from a company perspective, we've strengthened our counter shares across the large outlets, where we were probably having a diluted presence in the past, either because of portfolio gaps or because of our own distribution gaps. That has got strengthened. We've increased our reach for a lot of categories. While cooker has been a well-penetrated distributed category, we've actually increased our reach of all subcategories in cookware and appliances using a cooker channel as well. I think from a company perspective, that's the second one that we're seeing. Incremental reach that is sort of getting demonstrated as we move forward.
The third, of course, like we said, is the full-fledged impact of the portfolio being made available across all these stores. Launching new products and getting them to be distributed across the length and breadth of your distribution team takes a little bit of a time. I think that's something that's now fallen into place as well. Internally, we do believe that the distribution initiatives have significantly borne fruit while we continue to be demonstrating robust growth in e-commerce and modern trade as well. I think our omni-channel focus with a very specific ramp-up across general trade has sort of helped us sustain this growth. Combine that with the demand generation that's happened, it's probably come to the benefit of the company.
Sir, for the full year, where do you think you'll end up at in terms of volume and values growth?
We don't want to give any forward guidance on that. We are confident of robust growth, I think I would leave it at that at this point of time.
Would we continue the current trend of this quarter, or would it be a little lower?
No. I think directionally I would tend to believe that for the industry and for us it would be lower. I don't want to give any specific numbers.
It should be better than last year.
Yeah, definitely better than last year.
Understood, sir. In terms of the competitive intensity in the market, what are we exactly doing? Are we focusing on price or just portfolio at this point of time in terms of competing in the market right now?
We are very clear. Our focus is very clearly on premiumizing our portfolio. We have sort of sharp-shooted on a few core categories where we are either leaders or we are potential leaders, and we tend to focus on those six to seven categories very clearly. Premiumization is the way forward that we are looking at from this perspective. Premiumization demonstrated by product portfolio, a new design-led or new feature-led premiumization laddering, and pushing Prestige, the brand power of brand Prestige in the whole game. We're not looking at pricing as a very strategic lever from either a discounting perspective or scheme involvement perspective at this point of time.
Understood, sir. A good metric to track is probably the growth. Instead of volume growth, is the value growth also because we're premiumizing over the next few years?
Yeah. Yes. We would tend to believe that directionally our value growth should be higher than our volume growth over a period of time.
Understood, sir. Would the volume growth be in line with, let's say, our inflation numbers? Or would it be more higher than that?
It would definitely be higher than inflation numbers, but I wouldn't want to give, like I said, specific guidances, but directionally it would be higher than inflation numbers.
Understood, sir. When we are premiumizing, can we expect a higher margin than in the past? Probably we peaked around 14%-15%. Is it possible in few quarters could we exceed that because we are increasing our premium portfolio?
No, I think I wouldn't want to answer that specific direction. We continue to invest in what we believe would be future accretive. Our focus currently is not so much on the profitability bands as much as on stabilizing the business, premiumizing the portfolio. Of course, the portfolio gets its due from a profitability perspective. Our overarching principle is to invest in the right direction. Like Mr. Shankaran said, we continue to invest and we have another one and a half, two years of investment that we do foresee that will happen.
Got it, sir. Last question regarding our U.K. subsidiary. What's our exact plans with that? Do we have any plans of growing or do we probably want to close down operations? Where are we at right now?
No, they are doing their best. In the current condition, what U.K. and Europe it is in, they are expanding to other markets as well. They are doing their best to do whatever the current condition. I can assure you that they are doing much better than many of their peers in U.K. At this point of time, there is no other thoughts at our end.
You'll see it based on how it goes. Right now there's no decisive decision on closing it down or growing it specifically.
No. They are doing their best. I think they are not taking away any resources from us. They are not suspending any management. They are not taking away our management time as well. This is being managed professionally, professional team there. They are doing their best what they can do, and they'll continue to do that.
With regards to our kitchen business, sir, in India, how are we planning on? Do we want to scale it substantially or we'll just let it grow at its own organic pace? Do you want to put further investment into it and grow it?
We will come back on this specifics a little later, please.
Understood, sir. Thank you. That's it from my side.
Thank you. The next question is from the line of Aniruddha Joshi from ICICI Securities. Please go ahead.
Yeah. Thanks for the opportunity. Sir, just in terms of market share, where TTK would have ended the June quarter, will it be a significant market share gain, and what will be the indicative industry growth in June quarter? Also, as far as July is concerned, whether similar trend has continued or you have seen some slowdown in the revenue growth, which was visible in, let's say, March to June kind of period. That's question number one. Secondly, now with steep increase in commodity prices, price hikes have also happened. Has that resulted in a way some impact on affordability and the continued price hike may hurt the volume, at least at the bottom end of pyramid in H2? Will that be a right assumption to make? Yeah, these are the two questions. Thanks.
Yeah. Our market shares have steadily increased. We do believe that this quarter also we would have gained market shares in specific segments. To that extent, I think it's been a robust quarter for us with gains from market share. We do believe that overall the industry has been robust. The extent of industry growth is something that I can't comment on at this point of time. It has been robust. In our view, it has been equally robust. To that extent, industry has seen a positive growth, like in quarter four, it's seen a positive growth in quarter one as well. We continue to gain market shares in very targeted segments, and we are consciously driving market share as one of the cornerstones for us to make sure that we gain a fair share of the market as well.
That's broadly what I would say from a share perspective. The segments that we operate in, from Prestige perspective, we are seeing significant market share gains as a brand, and that's quite heartening for us to say. On the cost side, there have been significant bump ups like Mr. Saranyan had indicated. There is a 5%-8% increase in the overall cost pricing that we would see, which is getting passed on to consumers in a phased manner. Some of the segments are able to absorb it. Some of the segments, based past historic trends, may not absorb it. At an overall level, we believe that the industry is absorbing this, and it might have slight impact on volume short-term, but it should even out over a period of time.
This large part of the industry growth is being driven by premiumization today and by upgradation of categories today. To that extent, I think that should not dampen the volume growth at the segments that we are operating in. Having said that, we don't operate in deep cut price points, which may be the real mass market or the rural markets in a view. Prestige as a brand does not significantly operate in those markets. We operate in those markets at a slightly higher premium. There probably some of the players might face pressure when they start passing on the benefits to consumers. Now, that's an independent segment. Our view is that segment probably would go through a little bit of volume pressure going forward. We are not playing aggressively in that segment.
Okay, sure, sir. This trend has continued even in July month also?
No forward looking from that perspective, demands have been robust. Demands have been robust than usual it has been robust.
Okay. Sure, sir. That's very helpful. Many thanks.
Thank you. The next question is from the line of Pritesh Chheda from Lucky Investments. Please go ahead.
Sir, one question on, do you see continuation of footfalls on account of purchase of induction cooktops ongoing still? Bulk of this whole demand push is also due to a fact that people were forced to go and buy induction cooktop, and in view of which they must have bought some other products. Do you see that still continuing?
I think for the category as a whole, induction cooktop has seen continued robust growth. In fact, this last four, five months have become cornerstone triggers for the category, which otherwise was actually sort of growing, but not at a rapid pace. The penetration of this induction cooktops in the country is low. Our view is that I think this has been sort of a cornerstone event that has happened. It will continue to propel the awareness of the category and therefore the adoption of the category. Induction cooktops is definitely becoming one continued reason why consumers are walking into stores, walking into our retail channel, looking at e-commerce more robustly. Combine this with a very robust cookware category premiumization that's happening. I think a combination of that is happening today.
I would say larger forces are working, the trigger being from induction cooktop, continued focus on other categories as well. That seems to be the growth trigger right now. It would continue, in our view. It may not be as robust as what this quarter is, but it will definitely continue to be pushing the walk-ins for sure. I think that's the way we look at it.
Yeah. It's actually become like a trigger point for consumers to be brought in to purchase.
Yes.
Usually one gives discount and they come in. This time it is an external event, and they've been triggered to purchase it. Sir, the other thing is this price cut after GST, and then this price rise because of the raw material costs. Now the pre-GST and the current, what will be the pricing? Is there still a lower price versus pre-GST, or we have largely recouped everything?
No, the current price increase would have taken the price a little higher than the GST rate because the commodity increase has gone up by 8%-10% average. We are more or less at the pre-GST change.
Okay. For a customer, as a price imprint, it would not be a significantly higher imprint, right? He is used to a certain price pre-GST.
That is usually the demand as of now. Yeah. This is not that much price elastic a product. If you look at it, we are operating not at the bottom of the pyramid. We are operating above the bottom of the pyramid, where these price increases are not that kind of a trigger to not to purchase.
Okay. Okay, sir. Thank you.
Thank you. The next question is from the line of Kunal from 360 ONE Capital. Please go ahead.
Yeah, hi. Thank you for the opportunity, sir. Sir, I just wanted to understand, while this quarter definitely has some updration, we've seen some consumer demand coming back, we have also introduced 400 new SKUs over the last several quarters. What is the steady state growth over the next probably year or 18 months one can look at because of all these tailwinds?
We would be happy to keep sort of encouraging and reporting some numbers like this, I think we would leave it for the future. We don't want to give any guidance. Directionally, it would be much better than in the past. That's something that I would leave to.
I think it's better than single digit.
It would be better than single digits.
Sure, sir. I appreciate, sir, you not giving any, but probably anything that we are working with in terms of we'll at least be growing at, say, 1.5 x industry growth, or we are taking it more directionally?
Our endeavor, like I said, is strongly entrenched around gaining market share. I don't want to put a number over 1.5 x or 2x or 1.1x to it. I think our direction is very clear, focused on the consumer, and therefore the consumer experience, which then is driven by clear premiumization of the portfolio, is driven by a wide range of choice available to the consumer omni-channel, is driven by more innovative products across the six, seven categories that we are bringing in. When we do this, the combination of this and a very strong, robust go-to market that ensures that our counter shares and account of presence is significantly enhanced. Moment we are able to do this, I think it will result in market shares and therefore a definitively higher growth in the market, which will reflect in the market shares as well.
We would believe that if we were to grow, we will grow faster than the market and continue to gain market share.
Sure, sir. Sir, a related question, sir. When we say the share of premium products as we define it, how much would be that share as a percentage currently?
Prestige operates largely in what we do believe is a mass premium pricing.
Okay.
What you would typically call as mass pricing, Prestige contribution would be very less. That's by design. The portfolio design and the pricing is in such a way that our presence in that is not very high. We tend to focus on the mid-belly and the top end of the mid-belly. That's something that we believe is at a premium to the market at this point of time. Even within the segments we participate, we are at a premium to some of the competition as well.
That we believe the brand has the power and the strength to sustain that. We will increasingly focus on also bringing in new product designs and new innovations that justify that premium-ness as well.
Sure, sir. Sure. Thank you so much, sir, and best of luck for the future quarter.
Thank you.
Thank you. The next question is from the line of Nikhar from Dolat Capital. Please go ahead.
Thank you for taking my question and congratulations on a good set of numbers. My question is on the CSD channel. Have we seen recovery in the CSD channel as well? What is the contribution of exclusive retail outlets to our overall sales? Also the contribution of induction cooktops to overall sales.
On CSD, we haven't seen the demand come back, but it is sort of stabilized after a bit of a drop. See, CSD as a channel is yet to sort of fully recover from the past changes that have happened, partially due to their internal restructuring in terms of supplies and other stuff. To that great extent, CSD is not yet fully come back yet as a channel. It is, however, not dropping any further. It is sort of stabilized. That's the way we would look at CSD. On induction and PXL.
Sorry, your question is on the PXL share of induction?
Induction.
On the PXL, we have around 18%-20% of our sales happens through the PXL.
Our own stores.
Our own exclusive stores. The induction, I will look at around 8%-10% of our sales comes from the induction.
Sir, what was this 8%-10% contribution, which is currently in induction? What was this earlier, like a year back?
No, it used to be 5%, it has gone to 8%-10% now.
Okay, got it. Thank you.
Thank you. Reminder for all participants, please press star and one to ask questions. Participants who wish to ask questions, please press star and one. The next follow-up question is from the line of Sameer Gupta from India Infoline. Please go ahead.
Hi, sir, and thanks for taking the follow-up. Firstly, there have been some minimum wage hikes which have been announced, and one of them are in the state of Karnataka. I believe there is a decent exposure we have in terms of manufacturing. What kind of impact are we seeing or do we foresee because of these hikes and not only reflective in staff cost, but also probably in the RM basket, given vendor cost would also go up, and how much of it is already there in the expenses for this quarter?
The minimum wages increase is not just restricted to Karnataka. This has been happening one by one in all the states. In Karnataka, we don't have any major operation either for us nor for our suppliers. There are a few states where we are present. Yes, the minimum wages have gone up. It's primarily not to the permanent workmen where we are well above the minimum wages. Even in the case of contractors, we are well above the minimum wages. Unfortunately the wages increase has been substantial this time. We have corrected those wages wherever this has been implemented.
We would tend to believe that this is something that state after state has been implemented now, and it would have an impact, but we have been sort of mitigating them through our own internal cost initiatives and efficiency drive.
Got it. Second question, sir, is this quantum of INR 12.4 crore within other expenses. There has been a steep decline here. Is there a change in our strategy or is this more of a quarterly thing to offset the overall inflationary pressures?
The other is the INR 12.4 crore, what they're referring to is strategy-related expenses. This is what you are comparing?
Yes.
Yeah. That is not any fixed amount that we will be incurring quarter after quarter. This may go up and down during the quarter, depending on what support we are taking, what exactly we are doing. This is not a number that you can stick on quarter on quarter. The next quarter it may go up or come down as well.
Got it, sir. That's all from me.
We are budgeted to spend around INR 200 crore in the three-year time. That's what is going on right now.
Very clear, sir. That's all from me. Thanks a lot and all the best.
Thank you.
Thank you. Reminder for all participants, please press star and one to ask questions. The next question is from the line of Anand Mundra from Soar Wealth. Please go ahead.
Good evening, sir. Congratulations on good results. I wanted to understand the breakdown of this INR 200 crore extra expenditure which we are incurring for three years. How much it will be routed through P&L? What is the CapEx out of this? Why it cannot be called as a regular routine expense? Why we are saying this as a one-time, sir?
Right. I think we have budgeted around INR 500 crore to spend across three years. This is primarily to strengthen the company for the future growth opportunities, which is what we had mentioned stock exchange also in January, February last year. Out of that INR 500 crore, INR 300 crore is towards CapEx, which includes improvement in the factories, automation, digitization, et cetera. The balance INR 200 crore is towards the OpEx expenditure. Taking some external support to strengthen our innovation, go to market, the cost efficiencies, et cetera. This we have planned to incur only for this. This is not a regular expenditure. This is a one-time expenditure we will be incurring over a period of three years.
That's one of the reason we are just calling it out as a note to our financials, saying that what exactly we have incurred against that INR 200 crore, what we had mentioned to the stock exchange and to the investors.
This INR 200 crore doesn't include any one-time advertisement expense or.
No. This has nothing to do with advertisement. These are all the external support experts that we will be engaging. We will be incurring some one-time expenditure to strengthen some of our processes. These expenses are towards that.
How much out of this INR 200 has already been spent, sir?
We have spent close to around INR 120, INR 130 crore in the last 18 months. The last 13, 14 months.
Balance INR 70 will be done in the next 20 months?
We will be doing that, yes. It may go up and down. We are not saying that INR 200 crore exactly we'll be spending or we'll restrict our spending to INR 200 crore. That depends on what exactly is the requirement that point of time. The indicative number is around INR 200 crore.
Sir, what we would be achieving after spending this INR 200 crore? What is the target EBITDA margins or how the company will change? What would the benefit? Anything tangible you can share, sir?
Internally, we have kept all the key KPIs to which we are working towards. We don't want to share that in the call.
The idea is to get back to margins.
EBITDA margins. What it used to be before. 13%+.
Understood, sir. Sir, another question. There's an induction cooktop sale increase which has increased from 5% to 10%, other products have also done well. One reason can be GST cut in cookers, because of which unorganized to organized movement has happened. Any other reason which you see the spending has gone up as compared to last two, three years, we have reported good growth in this quarter?
No, all categories, particularly cookware and cookers are seeing a shortened replacement cycle and a lot of cookers and cookware are now getting on to stainless steel tri-ply sort of material, which has been sort of impacting the replacement cycles, a shorter accelerated replacement cycle. That therefore is one of the triggers for the long-term growth of the category. In appliances, we are very clearly seeing there is a move to convenience, move to smartification of the kitchen, like I mentioned. We're seeing a host of new appliances or appliance category penetration going up beyond the regular traditional mixer grinders or some of the other elements of appliances. You see a combination of appliances, small domestic appliances and a few new appliance categories which help on convenience and smart cooking. We see a very clear accelerated replacement cycle of cookers and cookware.
Cookware driven by premiumization and aesthetics, cookers driven by material upgrades that are happening today. Across categories, this is something that's driving the walk-ins and the growth, which got accelerated or compounded in the last quarter.
As far as our company is concerned, well, the general industry trend is to ride on this wave. As a company, we are almost into 100 and 200 SKUs, which were not in our portfolio two years back. One of the reasons company is growing at a greater pace as compared to the industry.
We've sort of ramped up our new product launches, and that's also helping us. We do believe the challenge of making sure that these continue to scale up is there, and that's something that we will address through our go-to market initiatives.
Noted, sir. Sir, one last question on induction cooktop. How do you see the sales growth going forward as large part of the crisis is over, hopefully so?
I think it would be much better than what it was in the past. This particular four to five-month trigger has sort of opened up the category awareness, and hence also the need for induction cooktops with the household. The penetration curve of this category, in my mind, will start to accelerate, and we are leaders in this category. We do believe that we will benefit as the penetration increases. We are also equally working on making sure that we accelerate this penetration curve as well. We would continue to do this as we have done in the past. In our minds, the category should continue to grow well, not as aggressively as in the last three, four months, but definitely much better than what it was in the past.
Potentially, induction cooktops should find a place in every kitchen who has already got a cylinder or a gas stove. Basically, people now found there is utility for that. Whether the same pace will continue would not know, but over a period of time.
It'll grow over, yeah
It is one of the key product categories to watch.
Yeah. This category would have a significant penetration drive.
Okay. Thank you, sir. Thanks a lot, sir.
Thank you. Participants who wish to ask a question, please press star and one. As there are no further questions from the participants, I now hand the conference over to the management for closing comments. Thank you, and over to you.
Thank you for a very engaging conversation. We're quite happy with the sort of results that we've been able to display. Efforts that have sort of borne fruit through internal transformation, external consumer-focused initiatives, and a large amount of drive that's happened on the go-to-market side as well. It all goes well, and we do believe that it will continue to be so. Thank you and all the best.
On behalf of 360 ONE Capital Market Private Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.