Q4 20/21

May 24, 2021

Ladies and gentlemen, good day. Welcome to the Relaxo Footwears Q4 FY21 earnings conference call hosted by Axis Capital Limited. As a reminder, all participant lines will be in the listen-only mode. There will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal the operator by pressing star then zero on your touch tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Gaurav Jogani from Axis Capital. Thank you, and over to you, sir. Good afternoon, everyone. On behalf of Axis Capital, I would like to welcome you all to Relaxo Footwears Q4 FY21 earnings conference call. From the management we have with us today, Mr. Ramesh Kumar Dua, Managing Director. Mr. Ritesh Dua, Executive Vice President, Finance. Mr. Gaurav Dua, Executive Vice President, Marketing. Mr. Sushil Batra, CFO. Mr. Vikas Tak, Company Secretary. We'll begin with a brief discussion from the management side, and then we can open up the floor for the Q&A. Over to you, sir. Thank you. Good afternoon to everyone. Ladies and gentlemen, thank you very much for attending our earnings call for the financial year 2020-21. We have already shared our earnings press release and result presentation. Hope you got an opportunity to go through that. I will start with Q4 FY21 financial performance, followed by full year FY21 financial performance. In Q4 FY21, Relaxo booked operating revenue of INR 738 crore, which is a growth of 38% year-on-year. The strong revenue growth was partially due to low base of Q4 FY20. As we know, sales was impacted in Q4 of last year due to lockdown in the month of March last year. EBITDA during the quarter was INR 163 crore, which was a strong growth of 69% compared the corresponding period of previous year. Our EBITDA margin for the quarter was 21.8%, vis-à-vis EBITDA margin of 17.8% in Q4 FY20. Our profit after tax was INR 102 crore for the quarter, up by 97% year-on-year, with a PAT margin of 13.7%. For FY 2021, our revenue declined marginally by 2% to INR 2,359 crore, with EBITDA margin of 21%. Our PAT of INR 292 crore in FY 2021, with a margin of 12.4%, grew by 29% year-on-year, mainly due to product mix and saving in selling and administrative expenses. During FY 2021, we generated a cash of INR 513 crore from operations and spent INR 142 crore in CapEx and repayment of current and non-current borrowings. At the end of March 2021, we have 398 exclusive brand outlets which contribute around 7% of total revenue. Export is holding its ground and contributing around 4% of revenue. During the ongoing crisis, we are undertaking all necessary measures to ensure safety and well-being of our employees and partners. We continue to support and provide assistance to our distributors and customers. Due to lockdown in various parts of India, overall demand for footwear is subdued right now. However, we believe that demand for footwear should bounce back whenever the restrictions are lifted. The second wave of COVID-19 in India is more severe and continues to impact lives and livelihoods. We stand with all those affected and are dedicated toward protecting and supporting our employees, partners, and communities in the face of this unfolding crisis. Relaxo remains committed toward its stakeholders by creating a sustainable, profitable, and growing business. The company enjoys comfortable liquidity position with zero net debt and continuing to provide assistance to its distributors and vendors. Despite the uncertainty related to the extent and length of the fresh wave, we believe that company is well-placed to emerge stronger in the post-COVID-19 world. We remain committed to give the best experience and value for money to our customers and creating long-term value for our shareholders. We can now open the floor for questions. Thank you very much. Thank you. Ladies and gentlemen, we will now begin with the question and answer session. The first question is on the line of Nikhil Jain from Edelweiss. Please go ahead. Yes. Thank you so much, and good evening to the entire management. A couple of questions from my side, and I'm taking from our last interaction. At that point in time, obviously, you mentioned that given the trend of raw material prices, you expect that longer-term margins would sustain at around 18%, but we've obviously ended the year at a much higher number. First, if you could comment, what is it that you expect going forward then? After which I can come to my next question. Mr. Batra? Yes. Anisha? No. No, I can take it. This year, that is 2021, the margin have been more because we have been saving on account of sales and promotion expenses, travel expenses, and some professional expenses. That has been the one. The raw material price also have been behind. Some efficiency we worked at backend also in our plants. That was the main reason for more than expected EBITDA level of achievement. Captain, you can. Sir, is it that in the coming year, we expect most of these expenses would normalize, especially on the advertising part? We have to see it from time to time how the things are. Presently, the second wave has come up. Traveling will remain restricted. Brand building is something you can't avoid. That we have to go on. This year, our strategy is that we have to build our brand in the long-term interest. This year, compared to last year, our expenditure on brand building will be more. This is what I want to say. Sorry to interrupt, sir. We're not able to hear you clearly. I'm telling the expenditure on brand building this year will be more than it was last year. For longer periods, we cannot keep on saving on brand expenditure like advertisement and all that. This year, as a strategy, we'll be spending more money on brand building. That is what I wanted to tell you. That's very clear, sir. Thank you so much, sir. One more question from my side. I just wanted to understand on the industry scenario at present. Wouldn't it be fair to say that given the disruption that has happened because of COVID, especially in a lot of our MBO channels, there has been disruption of other brands which has helped us increase market share. Would that be a right sense of what is happening on ground at this point in time? The way things are, this total very chaotic, unpredictable environment that we are prevailing in. Nobody expected the COVID-19 wave two will be like that, and we are now in the lockdown. When only the lockdown will start opening up, then only things will start working. Presently, three out of our eight plants are only operating, and maybe only 10%-15% of markets are open. Business is largely affected. The way things open up, then only we'll be able to really know how the things take shape. As far as organized is concerned, definitely we are in a better situation than unorganized players. That advantage we might have than others. As far as our retail outlets are concerned, there our business is hardly 7%-8%. Last year also we suffered, a lot of retail outlets were closed. Because we are selling to a lot of multi-brand outlets, which are through wholesalers and distributors, around 50,000 we are attending. That is our saving grace that we are able to have in our business. That is the way the things are. That advantage we'll have this year also. Sure. Just a last question. What will be the share of e-commerce for the entire year, sir? E-commerce, including modern trade and all, this is hardly 10%, so I would say 8% rather. Our stakes are very low. We are selling, after all, not very high-value items. Last year, the e-commerce was closed for a lot of time. Shoes and all these things, sale was less. Ultimately, because of all these things, our business was little bit affected, e-commerce. It is not a very big stake for us in e-commerce. Our articles sell more on multi-brand outlets. No, absolutely. I was just trying to understand that this year, given the disruption, if there is a sizable increase in our share compared to last year, especially on the e-commerce side. No, no. You will not accept because ultimately our articles are mostly priced around INR 150 to INR 125 or INR 200. These articles are not viable to be sold online. Okay. We generally sell to multi-brand outlets only. Absolutely. In the second quarter when the disruption was there, we had reached a 10% share. I just wanted to check maybe there is a continuation of that once the open up happened after, say, September, October. Online, when things open up, then it is there. We have seen our whole year how the things have panned out. This year also we are sitting in lockdown. Yes. Ultimately this year or last year, if the market are chaotic, what we find is that when the markets are like that, when the people are indoors, more of the slippers have sold last year. This whole year also you have seen the remain like this, when people are indoors. This closed footwear will remain affected, and the sale on online will also remain affected. Understood, sir. That's very helpful. I'll come back. If you have a few more questions, I'll come back with you and take them. Thank you so much. Thank you. The next question is on the line from Amnish Aggarwal from Prabhudas Lilladher. Please go ahead. Yeah, I have a couple of questions. My first question is on the raw material front. If you look at our gross margins, both on a YOY as well as even on a QOQ basis, our gross margins are actually down. In this quarter they are 56.8%, in the previous quarter they were 58.9%. How much is inflation in raw material currently? I understand that most of your petrochemical-based imports, they have moved up even in the month of March as well in May. Secondly, how much price increase you have undertaken, and will we be able to sustain our gross margins at the current levels? That is my question number one, first part of the margin. The second bit on the margin side is that if you look last year, we have actually cut down on our overhead significantly. If I look at the full year, we are down by nearly 400 basis, and you are yourself indicating that ad spend is poor. Looking at this scenario that this year ad spend will come back, raw materials are high. What sort of outlook on margin would you like to give from here on? This is my first question on margins. The way things are, raw material prices definitely they have gone up and I mean, volatile. This scenario we have faced in our life number of times. Many times rubber was INR 100, then it went INR 250. These things do happen in any business cycle. We have gone through it. What is our strategy? Every quarter, whatever prices are, accordingly, we then take our decision, keeping in view market condition, price revision. Whatever is required, whatever is possible, then we pass it on to our customer. This is what we have been doing. Raw materials, naturally, they will always vary. Accordingly, we also-- But at the same time, we have to be also watchful that what is the competitive intensity in the market. Then you can't just immediately do kind of immediate reaction prices and then after three months you say, "Okay, now prices have gone down, so we reduce it." There has to be a kind of stability from our best judgment we pass on to prices with the competitive industry, and accordingly take the decision and that's what again we review the things. This is what we have been doing since ages, I will call it, and this is what we intend to do future also. Keep on raw prices, keep on quarterly reviewing the market condition, accordingly passing on. Margin is concerned that you told, naturally, this year things are different. We have to watch the margin condition and take a decision. The way things are, gross margin may get impacted. On the overall year basis, we have to wait and see. We can't say now. Accordingly, management also do a course correction in between also. Many actions that we've already taken. That's the call we have taken. We keep on reviewing all these things. Margin is very chaotic, very volatile. Raw material-wise, otherwise, this lockdown exercises, nobody can say with guarantee how long lockdown will continue, how long COVID-19 wave will continue. Now there's a fear of COVID-19 third wave also. The way things are, nothing can be said with certainty. We have to see, keep on reviewing every quarter and take corrective action. That's it. How much price increase you would have undertaken in the past few months? Around 7%-8% we have taken. Again, this price rise is depending upon article to article in the same category also. Some article we have taken more than 10%, 15% also. Again, we have to see which article can take how much price increase. Some articles, because we are in a kind of a fashionable market, don't perform well, some articles perform too much. Then we have to see what is the competition rate of similar articles. Accordingly, article by article we have to review. We can't generally say, okay, 7% all around. We have to be very watchful on all that. Article to article we have to decide. Okay. Sir, my second question is on the demand scenario. Relaxo caters more to the value for money segment in footwear. Last year, rural India, small town, that was not impacted much by the first wave of COVID, but this time around the scenario seems to be different. What sort of an on-the-ground situation you are currently witnessing, and in your view, will it take longer for the demand to come back this time around, more so in the small towns and rural India? Well, again, the things are, I'll call it, difficult to predict. As the thing is, the way things are, I mean, now COVID-19 wave 2 is now going down, things are improving. We think in a couple of months things will then start improving and maybe back to normal. Many times, there's a pent-up demand kind of a thing. Similarly, things start improving. I think June, July things will start. July will be the very good month to improve. In June also, different states are taking different decision. If the lockdown prevails, then things will remain the way they are. It is a very difficult thing to predict. We have to wait and see only. Nobody can say with certainty what is going to happen. Everybody is confused to whomsoever we ask the question, how long things will happen, the way things are, nobody can predict. We have to wait and see. Okay. Thanks a lot, sir. Just one thing, how much CapEx are you planning for the current year? Mr. Agarwal, may we request that you return to the question queue? Absolutely. There are colleagues waiting for their turn. Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants in this conference, we request you to limit your questions to two per participant only. The next question is from the line of Akhil Parekh from Elara Capital. Please go ahead. Hi. Thanks for the opportunity. My first question is on the demand for closed footwear. First few quarters of the year, the demand was driven by open footwear. The expectations were, as we move closer to the festive season and winter season, the demand will pick up. How has that been the case? How is the demand in closed footwear for third quarter as well as fourth quarter? Well, you are right, demand of closed footwear did improve during festive season, the quarter three and quarter four both. Before that, demand of closed footwear was really not because it was all under a fear of lockdown and lot of monthly loss. People were also cautious in moving in the market. People were more indoor. Shoe business was affected. After this, what you call it, festival season, third quarter and fourth quarter have been quite satisfactory as far as closed footwear is concerned. Okay. Would it be fair to say the demand is now back to pre-COVID level for almost all the categories? You know this quarter four, yes, it was rather better. Now again, this first quarter of this year, we are sitting in lockdown. What can be said about this time? Sure. Just last question on the price hike, you mentioned that on an average 7%-8% price hike. Have you passed on the entire inflation in the raw material say in PU, EVA, and PVC? Because the prices of raw material have risen far more than 7%-8% in last two quarters. Should we expect more price hikes to happen during first two quarters of the year? We have to again review quarter by quarter. This is what we decided for this quarter, keeping in view the market conditions also. We have to see how much raw material, sometimes we have in stock also some materials which we have. At the same time again, we have to look outward also and backward also. What is the supply chain and outward, what is the market emerging competition scenario? Keeping that thing in view, we review the things and then accordingly revise our prices, whatever, whenever, quarter by quarter. Sure, sir. Thanks a lot and best wishes for the coming quarters. Thank you. The next question is from the line of Tejas Shah from Spark Capital. Please go ahead. Hi, sir. Hi, team. Thanks for the opportunity. Hope all of you are keeping well. Sir, sorry to stretch this point more, but the first question pertains to our margin philosophy, and I'll just give you some data before you answer the question. In last three years, we have added roughly INR 400 crore of turnover, and we have added INR 200 crore of EBITDA there, INR 193 crore to be precise, which roughly means that incremental turnover is actually coming at way higher EBITDA margin. Obviously this year is abnormal, and you said that some of the costs were not there. In normal scenario, where would you like this business to operate at least for the near term? Will it be 17% range or that is not a part of the calculation at all and it is an outcome based on the economic environment? To tell you, sir, it is very difficult to tell you what EBITDA margin will be because things are totally unpredictable. The way we are sitting in a lockdown, under these things it is difficult. Raw materials are expensive. Overhead will just mount the way things are. We are trying to control the things. Let the thing settle down, then only quarter by quarter things will improve. Sure. Things are very unpredictable at the moment. Volatile, totally. Nobody can predict at this moment what the year is going to end. We only hope that these waves settle down, things start opening up, then accordingly we will take our decisions accordingly, depending upon whether a price revision is required, what expense is to be saved for this year. We have to then take all these precautions. Definitely, this is the thing. Revenue is under pressure, the margin will be under pressure only. Sure. Sir, let me rephrase the question. Let's assume hypothetically, we all hope so for that situation normalizes very fast. As a business, are we comfortable operating at 20%+ margin without compromising on our competitive moat or our competitive power in the very competitive landscape that in any case we are operating in? We have to always watch competition also accordingly. When the competition intensity is there, we have to keep, be very reasonable with our pricing also, so that at least we don't want to lose market share also. You understand? We have to spend money on brand building also. All these things keeping it together, sustaining 20% this year is going to be a real challenge. It is not possible the way things are now. We have to wait quarter by quarter and see how the things open up. Fair answer. This answers the question. The second question, you mentioned, and last time also you had mentioned export presence in international market. Any more formal details on that, and will it be part of any way PLI scheme that government has proposed? Ritesh, you can take it. Yeah. Just repeat the second question, second part of the question. will it be any ways connected to PLI scheme that government is proposing on footwear as well? Let me answer the first part first. Actually, we are right now at 4% of our revenue. 4% of the company revenue is doing export sales. We have been able to sustain this sales in last year also. Even because due to COVID, all these Gulf countries and African countries have been affected a lot. We have been able to maintain and we are able to achieve around 98% of the previous year. Seeing the government incentive, we have been already in touch with the government authorities. Whatever incentive we have been able to avail, we are availing. Surely this impact of COVID is happening in this quarter as well. Because many countries have partial lockdowns or night curfew or complete lockdown. We are just having a wait and watch saying all the things improve. The good part is we have been exporting in our own brand with our standard of quality, which is really bringing confidence in the mind of consumer there. We are very confident we will come back soon, revive the business soon once the things settle down in COVID front. The person you are speaking with has put your call on- Hello. Yes, sir. Please go ahead. Hello. No, that's all from my side, sir. Thanks and all. Thank you. We'll move on to the next question. That is on the line of Nikhil Chaudhary from Kotak Portfolio. Please go ahead. Yeah. Hi, sir. Thank you for the opportunity. Sir, I have just two questions. Sir, can you share the mix of closed footwear when we started the year and probably versus now when we end the year? Can you repeat it, please? Hello, am I audible? Can you repeat the question? Am I audible? Yeah. Yeah. I'll repeat. Sir, can you share the mix of closed footwear in the total portfolio when we started the year and versus now when we end the year? We can average out for the year. Our closed footwear share is around 15%. 85% is open footwear. Okay. It is same like when we started the year and when we are ending the year, correct? In the start of the year, we were in lockdown. There were no share at all. April, we lost. May also some part we lost. What was the share? Share was definitely first quarter, second quarter share was low. It's only after festival, third and fourth, when things started opening up and people started moving around, then only the closed footwear started improving. Sir, actually I'm coming from. Yeah. Sure. Go ahead. Third and fourth quarter, share of closed footwear was better. It improved. It came to maybe better than even the last year. First two quarters, it was affected. Okay. Sir, when we started the year, as in, what I meant is, when we started before the lockdown, what is the usual share like? Where I'm coming from is, Campus is also coming up with lot of closed varieties or SKUs in the closed footwear. What our checks suggest is Campus has become aggressive. Just wanted a sense on how the competitive intensity is from Campus and how we are able to tackle it. Sir, that competition is a very good thing for the company. The company always remains more active, and it is always good to have good competition. As a result, the whole industry grows. As per your question earlier than last year, what was our share? It was 20%. First quarter and second quarter the previous year were much better than what it was last year. This year, because sale of slipper was much higher and growth was much more, so the ratio of open footwear went up. Closed footwear, because today also, throughout the year, schools were closed, so school shoe sale was not there. People were moving less outdoor, sales was affected. Other articles also, like canvas shoe, that is again closed footwear. Schools were closed, so there were no sales. That has been one of the reasons. Even outdoor movement is less, sale of closed footwear goes down. Got it. Sir, all in all, we have not lost any market share, right? No, there's no loss of shares. It is cyclical because of the market condition that things are happening like that. Got it. Sir, last thing, I just wanted to understand our strategy wherein the competitor is having nine distributors for a set of area, and we are just having one or two distributors, because won't it strain the balance sheet of one or two distributors in keeping all the SKUs, categories? Just wanted a perspective, because I understand probably the one or two distributors are not able to keep all the categories, SKUs, and supply to our MBOs. You know, again, it's a matter of strategy. When you have too many distributors, they fight among themselves, and then they say they don't get margin. Okay. That competition will be intense, it will be too much among the distributors, then also they start losing interest in the brand. Okay. When you give an allocated area to a distributor, then only he becomes more motivated to do that. We have to protect that area so that today, suppose you are my customer, I give you certain area, you do with your all hard work develop that area, and tomorrow suppose I put another distributor. How you will feel like? After all, you have nurtured and developed the area. It is your territory, your responsibility also. Today, my sales people go in the market and take orders. Whom they give orders to out of the nine? If it is one, I will give to that person only. The person who is responsible for that territory. Agree. That is the way we want to operate as we are doing. Yeah. Allocation of area. Fair from the point of view of distributor, but just wanted a sense on how retailers are perceiving us. What happens is probably, say, I understand, I'm completely agreeing with you that the distributor will definitely want to preserve his own interest as to he should not have the competition. Retailers will have lesser choices, and then probably from the point of view of retailer, then it becomes little hard in keeping our SKUs in all categories. Just getting a perspective. I understand distributor may benefit. That I understand. When I find some distributors cannot handle all the range, then we may say, "Okay, you take these two brands, rest we give to another." Still, he will have some kind of a control or responsibility of that category. From retailer point of view, you're right. If he has more choices, then he also plays between two distributors. Too much cutting of discount. He expects too much of credit also from each other. That also a very unhealthy position. As a company, we go to the retailer, we find what difficulty he's facing, then we sort out the way the things are. We don't want a distributor should overcharge. At the same time, we don't want the retailer should force him to cut too much discount and then both bleed later on. The retailers also many times pass too much discount to the consumer. That also we want to see. When the retailer doesn't earn, he looks back at the distributor looks at the company. There has to be some responsibility of the distributor. Give him the area, let him develop it. Whatever difficulty the retailer face, then we are there to take care of it. This is the way we do things. Got it, sir. Very clear. Thank you, and wish you all the luck. That's it from my side. Thank you. Thank you. Next question is from the line of Dhaval Mehta from ASK Investment Managers. Please go ahead. Good evening, sir. Thank you for the opportunity. My first question is, let's say, in FY 2021, what would have been the industry decline of the footwear category and how the competitive landscape has changed, let's say, in last one year? Yeah. I would like to combine it with Gaurav. If you have noticed that during last year, the formal segment, outdoor segment has declined, and the casual segment and work from home segment has increased. The open footwear. Party wear, fancy wear have declined. In leather shoes, outdoor shoes. The casual footwear, open footwear has increased. Correct. Even, let's say, pre-pandemic, open footwear used to be around 15%-20% of the overall industry size, right? If a large part of the industry has declined, the overall industry would have declined sharply. Is my adjustment correct? The major decline has come in leather shoes and outdoor shoes. That has declined tremendously, and the gains are in open footwear. Okay. Yeah. In terms of competitive landscape made from unorganized players or organized players, how it has changed in last one year? It's a similar thing. The ASP has gone down. If you see as an industry, the ASP has gone down because, again, the closed footwear being expensive has come down in share, and the open footwear, which are quite cheaper, has gone up. Yeah. Similar thing with the unorganized also, as well. Okay. Let's say, whatever the share of unorganized was pre-pandemic, is the share similar now or their overall share has come down of the overall pie? It's very difficult to measure. We don't have a credible agency who can back the data that this is the % drop or this is the % increase. Our guesstimate, we can say, slight decrease we have seen. Okay. My second question is, any call-out, let's say, in terms of which brand of ours has done exceedingly well, be it Flite, Sparx or Relaxo? In terms of geographies, which geography has seen healthy growth? If you see, in India, Maharashtra and Kerala had maximum lockdowns. These two states, west and south, were impacted more, but north India and east India were doing pretty well. This is last year's scenario. Currently it's all lockdown, so difficult to say. Is the profitability same across all the geographies, sir? Yes, more or less it is same. It's only the freight which will be very less. Okay. As most of our factories is in North. If North does well, then I believe the freight cost will be lower. That helps the margins. Correct. Okay. Noted, sir. Thank you, and all the very best, sir. Thank you. The next question is from the line of Bhargav Buddhadev from Kotak Mutual Fund. Please go ahead. Yeah. Good afternoon, ma'am. Congrats for a very strong performance. Sir, my first question is that you mentioned that the closed footwear demand had been impacted in FY21, but as we sort of enter second half of this fiscal, it seems likely that post-vaccination things could slowly start coming back. In your experience, is it possible to broadly quantify what could be the extent of pent-up demand? And when I say quantify, I mean could it be 1.5x of normal demand, 2x of normal demand in your opinion, broadly at the sector level? Sir, it is very difficult to quantify the things. We have to wait and see. We don't know even to what extent our lockdown will reduce today. Sure. Things are so unpredictable. We have to just move the way things are, accordingly. Sure. You think that there will be an element of pent-up demand for sure, right? Because this particular demand cannot get lost, the closed footwear demand. No, pent-up demand will be there. There's a lot of fear in the minds of the people. Even when the lockdown is lifted, I don't think people will immediately start moving very freely. Okay. It will take some time. Sure. Slowly things will improve. This is what we think. Sure. Secondly, sir, how are we prepared in the event there is a strong pent-up demand? Are we carrying enough inventory to sort of meet that demand, or can we sort of push our factories to sort of meet that demand? How are we prepared on that front? We have inventories also. At the same time, we have production capacity also. We always have a cushion in our production capacity, generally utilize the 70%. We have cushion right now. Inventory also, it doesn't mean we can have unlimited inventory. That also we have to take care. The way things will pan out, accordingly we will take decisions and actions. Okay. Lastly, sir, at the company level, is it fair to say that the volume decline for the full year would be in the range of 8%-9%? Across open wear and closed wear, in open wear you would have grown, but in the closed footwear you would have seen a significant volume decline. Is that a fair assessment? No. Last year, actually, our volume grew. Grew by around 7% because slipper sale was much more than the closed footwear. That is low-value segment. Because demand was much more of slippers. Okay. Our sale is only 2% less. Okay. We could only make up because our slipper sale was more. Actually, volume has grown by around 7%. Got you. Okay, this realized increase of 7% was for the quarter and not for the full year? Full year. We're talking about full year, this volume. Okay. For the full year, you are saying volume growth was 7%, and average realization would have been down because of increase in open wear. Correct. Okay, sir. Understood. Thank you very much for the clarity. Thank you. The next question is from the line of Girish Pai from Nirmal Bang. Please go ahead. Yeah, thank you for the opportunity, sir. Sir, I just want to understand, has there been an overconsumption situation in FY 2021 for open footwear, which could potentially mean softer demand in FY 2022? No. It doesn't mean that today you require a slipper always. After all, there's a limited life of a product. Anybody requires at least two slippers in a year. That demand is going to remain. Once the things start opening up, consumption will begin. Consumption is still today also, even if you are indoor still, at least you require slipper. You're not barefooted. Consumption is still there. Last year consumption cannot affect this year consumption. This is what I want to say. Okay, sir. Sir, had the second wave not happened, say you were sitting in the month of February and looking out into FY 2022, what is the growth you would have probably looked at? What kind of numbers were you people looking at internally? Assuming that second wave is not going to happen. Sir, yes, it would have been much better, because after all, whole month we have lost. This May. In April also, things were affected. There's no point in just dreaming of those things what could have happened. Now let us face what the reality is. The reality is, COVID-19 wave is there and things are affected. We have to see now how our June pan out and how our second quarter pan out. That is we have to see. That's important. Okay. Lastly, sir, at some point in time, I think three, four years back, you had started this distribution restructuring where you focus more on exclusive distributors. Now, has the journey come to an end or are we still on this journey? Sir, we are on the journey. Always you keep on improving the things, the way of working. Putting DMS system on those people, encouraging more and more people to become exclusively our distributors, selling our products. Looking at their area, territories, how we can make them more responsible, how we can make them more efficient, how we can add retailers to them, more kind of a universe being created. It is ever-ending exercise. There is nothing like. Even the best things can be made better. We are always on it. Today also, I will say that this is an ongoing exercise. Sir, 650 to 700 distributors that you have, how many of them would be exclusive to you, sir? Around 125. We are trying to encourage them more and more to convert our exclusive. That journey will continue. Okay, sir. Thank you very much. Thank you. The next question is from the line of Ankit Kedia from PhillipCapital. Please go ahead. Sir, just wanted to understand the premiumization trend. How much was the premium product sold in the year? Given that open footwear in the first half, we saw a lot of premium Flite and others being sold, while closed footwear was more MRP level products. By the end of the year, how did that change happen and, from FY20 to FY21, has the premiumization overall increased significantly for us? Which could have also aided some gross margins. No, sir. Last year was a tough year. Rather, we have to introduce lot of value for money articles. As a result, our receipt per pair average price was lower. More slippers sold, although in the slipper segment, we did add premium segments also. Ultimately, because shoe segment was not selling, and there also in shoe segment, we had to introduce value for money shoes also. Overall, last year, our average selling price came down, although volumes went up. Sure. Sir, my second question is regarding the school category. How big is the school category for us, and how much is the inventory in the system for the schools? Last year schools didn't start, and this year, with the uncertainty in the schools, there could be a lot of pent-up demand from the school side. If you could just share, how does the school footwear industry work for us? Sir, it is a very small share in our scheme of things. Hardly nothing. Just around 1% is our in share in our scheme of things. Shoe business, 1.5% or so, that's all. Otherwise, these days schools are not open, still closed, so there's no shoe consumption at all. Right. Sir, my last question is regarding the new BIS certification guidelines for footwear manufacturers which is compulsory from 1st of July. How will that change the unorganized sector? It will be very tough for them to get the certification. Do you see post this in the second half a good market share gain for organized footwear compared to unorganized footwear coming? First of all, this guideline already, our association is in regular talks with BIS and the government, and they're likely to be postponed, the implementation of this thing. Sure. This will take time because it is very confusing. Even they are not clear. The way notification is, even it is not clear. I just give you one example. They say, rubber Hawaii chappal will attract this thing, but nobody makes rubber Hawaii chappal, then what is the meaning of it? Even they are not clear. When we ask them, "What is the matter with white chappal?" They are not able to explain, because they see change. These things that we have picked up, they have picked up from maybe 20 years back what was happening. They are now in talk with us. Our research industry is talking to them, and they have understood the things, and accordingly, there is a likelihood that these things will be postponed for quite some time, implementation of these guidelines. Sure. Sir, just one last thing. What was the absolute A&P spend last year? If you could just share the absolute amount we are looking to spend in FY 2022, that would be very helpful, sir. Gaurav can answer this question around approximate idea. See, approximately, last year at start it was 8%-10%, it has come down to 5%-7%. That's why in FY 2022, what are we looking at? We are thinking to 8%-9%. Increase by 1%-2%. Okay. Yeah. Sure, sir. Thank you so much, sir. Thank you. Ladies and gentlemen, we'll be taking the last question. That is on the line of Mr. Gaurav Jogani from Axis Capital. Please go ahead. Thank you for the opportunity, sir. Sir, first question is with regards to how much of the cost that we are able to save in FY 2021, how much of that can we sustain going ahead, I mean, in FY 2022? I said 3%-4% was the saving. Of the overall saving package? That expenditure we are going to do this year. Okay. Basically, whatever we have been able to save last year, approximately 3%-4% of it we can save this year. Is that understanding correct? No. We have to again watch the market scenario and take decisions accordingly. We may plan something, but ultimately, we have to see the market scenario and decide whether it is pricing, whether it is brand building, whether it is sales and promotion expenses. Everything we have to see. It's a very dynamic environment in which we are operating. You can't just say it is writing on the wall, you do like this. If the market dynamics change, we have to change our things also. That is the way things move. Not that once we plan, then we have to see the environment. Environment is dynamic, and we have to be flexible accordingly. That is what we will be acting on. Sure. Sir, my next question is with regards to the replacement cycle in the footwear industry. Have you seen any changes over the past five to 10 years? Earlier, people used to replace it every one year, two year. Has that replacement cycle gone down overall basis? Have you seen any trends as such? No. We can only say earlier our footwear assumption was per capita consumption guesstimate 1.5 pair. Now, this guesstimate is two pairs per capita consumption. That is what reflects consumption has gone up only because of this. Maybe people are keeping more pairs than what they were keeping earlier. As far as the poor man is concerned, those who wear slippers, their consumption any time too, because one slipper lasts hardly around six months. He has to buy two pairs. Overall consumption of footwear has gone up because there is a variety, there's a fashion. Because of fashion itself, people buy 10-12 pairs in one year. That is the way consumption has increased. Sure. Sir, last question from my end is, what is your CapEx guidance for the year FY 2022, this coming year? CapEx? Yes. Around INR 140 crores, INR 145 crores was we have planned. Okay, sure. That's all from me, sir. Thank you. Thank you. Ladies and gentlemen, that was the last question. I now hand the conference over to the management for their closing comments. Thank you all for joining the call. This is all from our side. Looking forward to join you again. Thank you very much. Okay. Thank you all. Thank you. Thank you. Ladies and gentlemen, on behalf of Axis Capital Limited, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines. Thank you. Thank you.