Ladies and gentlemen, good day, and welcome to DOMS Industries Q1 FY25 conference call, hosted by ICICI Securities. 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 the 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. Nilesh Patil from ICICI Securities. Thank you, and over to you, sir.
Thanks, Sumit. On behalf of ICICI Securities, we welcome you all to Q1 FY25 results conference call of DOMS Industries Limited. We have with us Mr. Santosh Rasiklal Raveshia, Managing Director, and Mr. Rahul Shah, Chief Financial Officer. Now, I hand over the call to the management team for their initial comments on quarterly performance, and then we will open the floor for question and answer session. Thanks, and over to you, sir.
Thank you, team. Good afternoon, everyone. It is our pleasure to welcome all the participants to the earnings conference call for the first quarter, ending June 30, 2024. Joining me on this call is Rahul Shah, our CFO, and the team from Orient Capital , our investor relations advisor. I invite the opportunity to go through the investor presentation and the results release that we have uploaded on the exchanges on our company's, and our company website. The start to the financial year 2025 has been positive. Despite the challenges caused due to extreme weather conditions during the first quarter, DOMS has sustained its growth trajectories with continuous momentum in sales and an improvement in margin profile. Our continued focus on innovation, unique product design, coupled with our inherent manufacturing focus, supported by a well-entrenched distribution network, working seamlessly in tandem, are the key contributors for this performance.
The encouraging market acceptance of our recently introduced writing instrument range of our product is a testimony to a steady and focused approach to product development. We continue to further deepen and widen our portfolio in this category, and the newly commercialized manufacturing setup of additional 1 million pens per day would further boost our capabilities. Encouraging results like this reinforces our commitment towards continuous product development, keeping consumer needs and preferences top in the mind. Supporting our growth agenda is our efforts to further expand our manufacturing capacities with multiple ongoing projects, including the construction at adjoining 44-acre land parcel, which commenced in Q1 2024. These initiatives are in line with our endeavor to capitalize on the growth opportunity as well as to reaffirm in the Indian, and improve our market share in Indian stationery and art material market.
Further, capitalizing our brand value, manufacturing expertise, and distribution network, it is our continuous efforts to not only work towards enhancing our market share, but also to increase the targetable addressable market to continue on the growth momentum. Our recent initiatives are aligned towards the same. Be it foraying into the toy segment with our investment in ClapJoy or our entry into BTS segment with the acquisition of 51% in Skido, or the recent announcement for the proposed majority buyout in a baby diaper company, Uniclan. We believe this opportunity to aid the accelerating growth of DOMS with the able support and effort of experienced and trusted entrepreneurs.
With optimism about our growth prospect and confidence about our strategic initiative in terms of product capacity expansion, we at DOMS continue to dedicatedly work to deliver excellence and aim at delivering the best for our esteemed consumers, shareholders, and all our stakeholders. With this, I would like to hand over the call to our Chief Financial Officer, Mr. Rahul Shah, for the update on Q1 FY25 financial overview. Thank you very much.
Thank you, Santoshbhai. Good afternoon, everyone. Coming to the details of our financial performance highlights for the quarter ended June 30, 2024, our revenue from operations for Q1 FY2025 grew by 17.3% to INR 445 crore, as compared to INR 379 crore in the corresponding quarter last year. Sequentially, quarter on quarter two, we have been able to achieve a double-digit growth of 10.2%. This increase in sales was predominantly on account of change in product mix, increase in volume, supported by our expanded capacities in the writing instrument segment and scholastic art segment, coupled with marginal increment in our ASP.
The EBITDA for Q1 FY 2025 grew by 38.9% to INR 86.4 crore, as compared to INR 62.2 crore in Q1 FY 2024, with a margin expansion of over 300 basis points. Further, on PAT front, too, we saw further elevation in our margins from 9.6% in Q1 FY 2024 to 12.2% in Q1 FY 2025. PAT for Q1 stood at INR 54.3 crore, growing sequentially by 15.7%.
...The increase in cost price of certain key materials like polymers and waxes resulted in consumption margins increasing by 0.9% sequentially, on a consolidated basis, sequentially compared to Q4 2024. However, the increase in consumption was offset by reduction in our other direct manufacturing costs and savings due to efficiency playing out on account of scale and size of operations. On the operational front, we continue to focus on expanding our manufacturing capabilities to capitalize on the growth potential. Cash outflow towards capital assets, including civil works for Q1 FY 2025, was around INR 35 crore, which was primarily spent towards construction activities, plant machinery and equipment. In terms of construction, it was primarily towards capacity addition for our paint division, as well as ongoing CapEx, CapEx at our 44 acres land parcel.
On the working capital front, we have seen a slight decrease in our working capital cycle to around 41 days from 47 days in FY 2024, primarily on account of decrease in inventory days. We believe in spite of growing operations, we will be able to maintain our working capital cycle to around 40 to 50 days. With this, I would request to open the floor for question and answers. Thank you very much.
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 Percy from IIFL Securities. Please go ahead.
Hi, sir. Just wanted to understand the thought process behind this acquisition of diapers. So, this is very unrelated to our current sort of business and type of products that we are in. Earlier, we had some plans to go into school bags, lunch boxes, water bottles, et cetera. So we have done something about school bags, water bottles, lunch boxes is still pending, so I thought you would be thinking on those lines, but just diaper is something very unrelated, so can you explain the thought process behind the same?
Hello, Percy. Hope you're fine?
Yes. Thank you, sir. Sir, you are not audible.
Yeah. So acquisition is in line with our objective to increase the breadth of our product offering to further diversify revenue stream. By entering categories that are associated with growing years of kids, children and young adults, that helps to expand our targetable market size, is always our aspiration. So, and DOMS as a company, has always looked at partnering with enthusiastic partners, some with manufacturing expertise, product understanding, and are looking for growth. We feel that, like, you know, the people of Uniclan fit our criteria, and also our target consumer, our distribution channel as well, the primary distribution channel of distribution partners. I'm sure this helps the company to further expand its offering and targetable addressable market.
And, I think this could be another interesting thing for the company to explore and build up a very different organization.
Sir, what is the brand name of this company? Is it just a contract manufacturer or does it have its own brand which it sells directly to consumers?
Yes, I will like, you know, I'll, like, you know, I'll take you a little about the company. So Uniclan Healthcare is a publicly listed private limited company, promoted by Mr. Vatsal Desai and, Jaipur based Mehta Group, Dileep Group and Jain Group. This company is engaged in manufacturing of baby diapers and baby wipes. The manufacturing location is Jaipur, Rajasthan, where they have installed capacity of around 400 million pieces of diapers annually. So the infrastructure are spread across 6,500 square meters of land area, and, construction of around 4,500 square meters. Company currently has two diaper lines, and third one in, like, you know, in process, and the brand is Wowper.
Okay. 100% of the sale is B2C or is there any B2B also here?
Yeah. So 48% of the company are generated through their domestic network. Like, you know, they are present in 12 states right now. Thirty-four percent of the company deals with state and e-commerce platform. Like, you know, they have a strong presence in Amazon and that and as well, and close to thirteen percent of the company is coming from OEM as well.
...Understood, understood. And lastly, on this topic, can you tell us what you would be bringing to the table, and also, just wanted to understand if the retail outlet is the same. My understanding was that stationery shops do not generally store these products in any material measure. So if the distribution is different, the manufacturing is different, the brand is different, what is it that we are really bringing to the table in the partnership?
Yeah. So as, like, you know, as, as discussed, like, you know, yes, you know, DOMS would want to be known as a company, you know, associated with kids that are growing, years and age. We would not want to, you know, limit our scope, stationery and art or office supplies, but we present across, you know, multiple products associated with kids and their growing years. We believe we can leverage our understanding of our consumers, their presence, their preferences, liking, along with our growing brand and distribution network. So one of the prominent, most loved, you know, globally.
This exhibition is very much in line with our objective to be associated and register a strong brand recall by being associated with the growing years of kids, children and young adults, and expand our addressable market size.
Got it, sir. Got it. My last question is on margins. This quarter, we have done an all-time high margin of close to 19.5%. First of all, what is the reason for the margin expansion? And secondly, how do you think we should think about margins going into the next 2-4 quarters?
Hi, Percy, Rahul here. So during the quarter, Percy, consumption, if you see, would have increased by approximately 1%. This was primarily due to increase in cost of raw materials, especially polymers, waxes, and even paper. However, this increase in consumption was offset by a reduction in direct expenses on account of being in direct paper, power and other manufacturing expenses. This was approximately 0.8%. And, you know, due to the, it's also benefited because of the rationalization and better absorption of certain indirect expenses, like selling and distribution, logistics, et cetera, which decreased by 0.7%, resulting in the overall EBITDA margin improving from 18.8% to 19.4%.
Going forward, our margins would be in the range of about 17%, considering that, you know, this acquisition of Uniclan. Uniclan posted revenues of about INR 140 in FY 2024. The EBITDA margin right now, considering it's a growing company, 5%. So, you know, when it will get consolidated, which have impact on our margins, the company has recently got the full shareholders and is in the process of giving out ESOP, the accounting will have a little bit of impact. And we believe the margins are close to 17% sort of mark, accounting for also the raw material prices trend next year.
Okay. So 17%, including the new company you have acquired? Hello?
Yes, yes, yes, including.
Okay, okay. That's all from me. Thanks, and all the best.
Thank you. The next question is from the line of Sneha from Nuvama Wealth . Please go ahead.
Hi, sir. Good afternoon, and congratulations on a strong set of numbers. Just drilling down to your previous question, you know, you have entered into diaper business, you know, and also your MOA suggesting, you know, you can actually cater to many more categories. And, you know, categories mentioned that, you know, even garments and also what's the strategy and where do we actually see ourselves in the next five years? Probably, you know, some vision there. Like you mentioned, you don't only want to stick around to the stationery and arts space. How are we seeing, you know, ourselves standing out? And, with the new facility that you're coming up with, you know, will it see any of these products, or will it be only part of stationery some sense there would be?
Neha, sorry, I honestly was not able to get the question very clearly and the point of the question. Repeat the question.
Sure. It was more related to the alteration that you have made in the MOA, which is suggesting that you're, you know, planning to enter other categories like garments, you know, of course, cushions and bottles was something that we have discussed, but there are a lot of other categories that you recently entered the diaper. Could you help us understand the vision of the company, that in the next five years, where do we see ourselves? What could be the major revenue drivers for us? And also regarding a new facility, is the new facility going to take up any of the product, or is it going to be purely, you know, art and stationery company from the capacity perspective?
Yeah. Basically, the current capacity expansion that we are doing in the stationery segment—that is basically for the stationery business, for the current business that we are in, where we are planning to increase capacities across our core products. The alteration that we have proposed in our memorandum is, you know, just to encompass, you know, just to have that flexibility of, you know, adding new lines of business in future. Like we said, like Santosh mentioned earlier, you know, we want to now be a more kids company rather than being referred to as a stationery and art material. And therefore, we've incorporated these changes in our memorandum. As of now, you know, there are no other plans for other segments.
It's just to allow flexibility for the future.
But, in these new categories, are we thinking of putting up our own, you know, manufacturing units, greenfield plants, or are we looking at similar sort of acquisitions like we have done for the toy business, like we have done with Skido and now the diaper range?
For certain unrelated or new products, these are inorganic route. You know, we continue to evaluate every opportunity from multiple perspectives before finalizing upon something. You know, we go through a detailed thought process, understand some shifts in our strategy or no. But then there are certain segments where, for example, you know, where one of the clauses in the memorandum where we added is cosmetic pencils , you know. That's a product which is very similar in terms of manufacturing capabilities to how we manufacture our wooden pencils. So though not something planned right now, but in future to allow us that flexibility where we can, you know, use the same expertise, we've added that.
And see, at DOMS, we've always believed in partnerships and, you know, love working with the experienced entrepreneurs in different segments. So it will be more of inorganic for categories which are outside of stationery and art material, or where we do not have our experts.
I'm sorry, Rahul, but we are facing a little challenge in terms of hearing you.
Yes, sir.
Sorry , couldn't hear you.
Sorry to interrupt, Mrs. Sneha. Can you please use handset as your voice is not audible and clear?
Sure. Am I audible now?
Yes, please go ahead.
So basically, just to, you know, extend my question, Rahul, here you said inorganic expansion, but what about the distribution channel? The current distribution channel will not be able to take care of any of these products. What's the plan here? Because a lot of these new products will actually demand a complete new distribution channel, complete new sales personnel. How are you, you know, planning to go about this?
So, Sneha, there are like, you know, in our industry, there are like, you know, two type of, like, networks. So one is, like, you know, the consumer-facing, which, for our current, products are our stationery and, retail partners, suppliers of super stocks and distributors. As the customer, it can cover most of the product aspect. Our super stocks and distributor networks can be leveraged along with the Uniclan current capacity and geographical reach. So this is the overall picture.
Understood. I think I'm unable to hear you properly. I'll just take this offline.
Yeah, no problem. We can have a call.
Yeah, sure, Neha. We can connect anytime.
Sure. Thanks. Thanks, and all the best to you.
Thank you. The next question is from the line of Kunal Vora from BNP Paribas. Please go ahead.
Yeah, thanks for the opportunity. First one is on the Uniclan acquisition. Looks like, the gross margins are at 27%-28%, which is low for a FMCG kind of a business, and they just about broke even in FY 2023. Can you talk about how the numbers were for FY 2024? You mentioned the EBITDA margin was about 5%. So what kind of EBITDA margin you made, and also your expectations for FY 2025 for Uniclan, both in terms of growth as well as profitability?
So, in, Kunal, in FY 2024 also the, you know, margin profile was similar. The company sales was around INR 144+ crore. Out of this, about 81%, plus sales came from their own brand, while about 13% was from OEM business. EBITDA, margin is, close to 5.1%. So, the gross margins are similar as per the last level, last year's level. In terms of, you know, sales guidance, it is too early for us to comment, because, you know, we are still in the process of closing this transaction.
While the diligence and activities have been completed, we are in the process of finalizing the agreements, the execution, and the closing is expected by, you know, either this month end or latest by the end of the coming month. Once the closing is done, then I think we would be in a better position to guide on the numbers from this business that we can look at for current year and the coming years as well.
Okay. And would you look to raise stake in this business, or you'll be comfortable holding the 51%-52% you are currently acquiring? And does the business need growth capital, or what kind of CapEx intensity do you expect there?
So, Kunal, just to answer your second question first. The current acquisition that we are doing is structured by, through a primary infusion in the company, where the company would issue us fresh shares as well as purchase of some shares from the existing shareholders of the company. So with the primary round happening, we think their capital requirements for the midterm would be sorted. Then, depending upon how the growth and the business plans out, we will be in a better position to understand future requirements. You know, in terms of raising stake, well, if you see historically, you know, we've betted on partnerships. We want these partners to continue running the business.
We believe they are the best, drivers to drive these companies going forward, and hence, you know, we would want to continue being a majority shareholder at about 51-52% sort of a percentage. The rest of the promoters, being in the company with, 48-49% sort of a percentage and driving the business.
Okay. Post your capital infusion, what will be the debt level which this business will have?
So, current debt level is about INR 38 odd crores plus the, you know, this is the net financial position of the company. But like I said, the capital that we will be infusing would be used for some amount of capital expenses, where the company is looking at expanding its manufacturing capacity for diapers and starting the wet wipes, also a segment. So some amount would go to CapEx, and rest would be towards working capital requirements. Because then we would think about, you know, in the longer term, how do we reduce debt or do we actually need to look at with that?
Understood. I had a couple of questions on individual category segment. scholastic stationery seems to have grown in single digits. How do you see it for the full year, and what's happening there?
So, see, scholastic stationery , if you compare, you know, from Q1 FY 2024 to Q1 FY 2025, within scholastic stationery , I would say, the increase in capacities has come predominantly from mathematical instrument boxes , where we've increased our capacities, which has helped us in increasing the sales from this segment. No material capacity addition has happened in pencil during this said period. Like we'd informed earlier, pencil capacity expansion is something which is in the plans right now. We expect this capacity addition to be available by end of this financial year to early next year, and that is where we will see growth coming in from scholastic stationery as a segment.
Understood. Okay. And, office supplies, on the other hand, seems to have doubled, so I think it should be because of the pens, capacity, which is coming. So how are you looking at, this, segment for the full year?
So this segment, like I said, you know, we just commercialized our, you know, third unit for writing pens, so, which has a capacity of additional 1 million pens a day. This got commercialized towards the end of June. So going, forward, very soon, our capacities for writing pens would increase to about 3 million pens a day, and, hence we believe this segment to continue to grow for us, at least in the next coming, couple of quarters.
Okay. Okay, okay. But like, say, almost doubling year on year for the full year or even beyond that, considering that there is new capacity coming in, like in next month or so?
So Kunal, honestly, at a product level, we are not giving any sort of a guidance in how much sales we'll be able to achieve. But like I said, with this capacity being added, we believe that this would be a key driver for the growth in the current year.
Okay. Sure. And, what about international revenue? That seems to have declined or it seems flattish, on a year-on-year basis, considering that contribution is down from 18% to 15%.
You know, in terms of a geographic sales analysis, domestic market continues to be our primary contributor and our primary focus for our sales jump. You know, we continue to focus in strengthening the presence of DOMS brand to capitalize on the demand for the product. You know, there were, in spite of certain geopolitical issues, our export to third party under the DOMS brand witnessed about a 5% increase year-on-year, while intercompany exports, you know, the exports that we do to FILA have been flattish. But it's more, you know, for significant growth in the domestic market has been basically our focus there, and the demand that we are seeing for our products in the domestic market.
But international, what is the outlook? I mean, we expected that international will, like, keep pace with domestic, but that doesn't seem to be happening in the near term. For the full year, would you expect international to, like, say, what, 20%, or that seems difficult?
So now, like, you know, there is, like, you know, enough demand from international markets. But there's always, you know, the top priority is always, you know, the domestic markets, which is like, you know, which is, which, you know, been made up, you know, with a lot of effort. So the priority right now, you know, with the capacity what we have is, you know, dedicated to domestic. Once we have new capacities, discuss, you know, with our principles and other, like, you know, other items, I'm sure there would be a positive outcome on international front as well.
Okay, thanks. And the last question is, for the full year, are you on track for the 20%-25% growth, considering that you started the year with 17% growth?
Yes. So we have, we are optimistic of, you know, being at, you know, close to.
Sorry, I missed that, Santosh Raveshia. Can you repeat that?
So we have this objective of, you know, being at, you know, pretty close to 10, and this is going to be our objective.
Understood. Thank you. That's it from my side.
Thank you. The next question is from the line of Meet Jain from Motilal Oswal. Please go ahead.
Hi there. I have a few questions. First, on the current quarter, like, we saw a very good growth in our numbers, in the margin expansion also, and we integrated our Skido brand this quarter. So can we attribute some kind of margin expansion due to that as well and growth also?
Meet, sorry, but can you just speak in the handset? Because, you know, again, the voice echoes a bit.
Audible now?
Y es.
Hello, yeah. So I just wanted to ask, this quarter, we have integrated our Skido brand, right? So, the part of our margin expansion can be attributable to, to that also, because that also helps in the backward integration and, also adds up the segment.
So, Meet, Skido is very early days with Skido. In the quarter, the revenues from Skido were approximately INR 1.4 crore, and the company did EBITDA margins of about 8%-8.5%. Out of that, about INR 40 lakh was sales from Skido to DOMS, which is a part of our backward integration play, and about INR 1 crore was to third-party orders. But like, you know, we are right now at Skido developing the range of products and being ready for the upcoming back-to-school season, and that is where we believe, you know, once the product gets launched very close to the prior to the back-to-school season, there we see, you know, a sharp jump in revenues from this company. But otherwise, right now it's very early days with Skido.
It's been just a quarter. They started operations from first April, you know?
Got it. And another question is regarding this integration of Uniclan. So we mentioned that, transaction will be completed in September. So from Q3, we can expect the dip in the margins going ahead, right, with that integration?
So there will be some amount of, you know, adjustment that would happen in margin, considering that it's a growing company and their current EBITDA margins are close to 5.1%. So, yes, we will see the integration in the margins happening from Q3.
Oh, understood. I missed the point on our guidance regarding the top line growth.
Meet, we are at about 20%, close to 20%.
Okay, 20% top line growth.
Yes.
Okay, understood. And last thing is that, on the strategy part, so we have our new land parcels, and we mentioned that we'll be focusing on stationery, capacity expansion there. So, and your strategy has been partnering with companies across India and a good segment. So can we, can we expect the partnerships to have their own manufacturing facilities, and we'll look for that itself, rather than focusing on building capacity or the manufacturing?
To me, it would be a, you know, mix. There would be, you know, like, certain products, for example, you know, like diapers, bags, probably in back-to-school, you know, we are still not sure. But all that we might look at inorganic as an option. But our core stationery is something which we are there, and we would definitely, this entire 44-acre expansion plan is gearing up towards adding capacity for our core products.
So we feel like, you know, we are more skilled, you know, for stationery and scholastic. So we would, as a, you know, as a management, you know, we would like to more focus on, you know, what is our, you know, our core and our skill. And for the skill sets, you know, where we need, you know, like, you know, skillful people, you know, then we would like to depend on inorganic route. This is what the ideology is of the company.
Understood. Understood. And, just wanted to elaborate on one question that one participant asked regarding the distribution channels, as these are very different categories. However, the target audience is the same, but the categories are different, like for diapers. So we have to create a new distribution channel and to grow that as a new entity. So what is the strategy towards that?
So today, for example, you know, whatever distribution channel, you know, we are operating are extra distribution channels, more of, you know, FMCG distribution channels. So there are a lot of distributors of DOMS who could actually, you know, distributing, food and hygiene as well. So, as far as, you know, we don't have a common, you know, seller, which is a retailer for sure. But, you know, the super stockists, and the distributor channels, are very complementing, for both the, both the businesses. We can, easily we can leverage, you know, our distribution channels, help them, you know, to reach out to more states where the presence is right now, 13 states.
So maybe with our support, you know, this particular business reach out to, you know, all the states and union territories.
Got it. All right. Thank you for all the answers. Thank you, sir.
Thank you. The next question is from the line of Onkar Ghugardare from Shree Investments. Please go ahead.
Hello?
Yes, you're audible.
Yeah. My question was regarding actually, hello? Am I audible?
Yes.
Given all the manufacturing capacities you have, like, can you quantify how much of pieces of pens and pencils you make, and what is the targeted numbers in the future, given you have expanded recently and upcoming expansion?
Right now, you know, we, we, in terms of pens, with this new plant operational, we are, we'll soon be to a capacity of 3 million pens a day. In terms of pencils, during this term, we've not added any significant capacity. It is similar to the capacities that we had last year. But in this coming year, we have plans to add capacities, which would be coming up by the end, by the last quarter of this year, early quarter of next year.
That would be by how much, approximately?
Right now we are at about 5.7 million pencils a day. With the new plant, we'll be adding another 2.5 million pencils a day. These are wooden pencils.
Around close to 8-8.5 million pieces a day?
Yes.
Okay, thank you.
Thank you. The next question is from the line of Jinesh Joshi from Prabhudas Lilladher Private Limited. Please go ahead.
Again, I'll just move to the entry in baby care, which was the center point of the call. So can you highlight how big is the opportunity size here, and what is the market share of Wowper? And also the fact that in FY 2024, we saw the revenue decline a bit. So if you can explain what was the reason behind it, and how do we plan to scale it up from here on? And also a related follow-up is that you mentioned that the EBITDA margin for Uniclan is about 5.1%, and maybe it is in an early growth phase, and hence the margins are a bit lower. But on a steady state basis, what can be the EBITDA margin for this particular product?
So, in terms of, market opportunity, in diaper market, it's around $2 billion, and it is expected around, you know, $3 billion over the next few years. The penetration of diapers today is about 10%, which is very low compared to, you know, the global average, you know, which is upwards of 20%, and in developed countries, upwards of 50%. So hence, we believe the opportunity in terms of market size is, very large. You know, Uniclan, with its brand, Wowper, is, you know, more of a new entrant in this segment, where they started their operations in 2020, when they did sales of about, you know, 30-odd crore, and they've grown up to about 144+ crore now.
So, they are growing, and with our, you know, the synergies that we see in this acquisition, we'll be able to grow the business a bit faster. So the market share right now of this brand is very small, but the opportunity is very big.
Got that. And sir, you also mentioned during the call that the money which we are putting into the company, the 52% stake for about INR 55 crore, some bit of it is a fresh infusion, which is coming into Uniclan, and some bit of it is pertaining to the shares which you are planning to buy from the existing promoters. So can you highlight how much fresh money is coming in? You also mentioned that you're looking to expand the capacity. So if you can share what are your plans on the expansion side?
The primary infusion is close to approximately INR 29 million, but the balance could be for secondary purchase of shares. The company today has two lines for manufacturing diapers, and they've already placed an order for acquiring a third line. The current capacity is about 400 million pieces of diapers per year, and about, you know, with the new wet wipe machine, which they've already acquired and are in the process of installing, the capacity would be around 1.7 to 4 [audio distortion] . With the new diaper manufacturing capacity being added, you know, another 250 million pieces a year would be the capacity that happens.
Sorry, sir, your voice was not fully audible, so I'll repeat. The primary infusion number, if you can just share. Sorry, I just missed that. You were not audible at that point in time.
Sorry, so, am I audible right now?
Yes, yes.
Yes. So the primary infusion is of approximately INR 29 crore, with the balance secondary purchase.
Got that. Got that. And the incremental capacity which will come is 250 million, right? That is what you mentioned. Current, current capacity is 400 million, and incrementally will be 250 million, right?
Yes, yes. With the two machines that they already have, the capacity is 400 million, and with the third machine, which will be installed, it would be another 250 million installed capacity.
Got that. Got that. So one last question from my side. I think in the call also, it was mentioned that some of the distributors of DOMS are probably distributing some food and hygiene products, and perhaps they may not have to take or rather create a separate distribution channel, if I heard right. So, out of 125 super stockists that we have, how many are also distributing the food and hygiene products currently?
So, about 15-20 are already in this business, but like I said, there are related lines like pharmaceuticals and all, you know, which can be leveraged for this. So that's an additional amount.
Okay, sure. Thank you. Thank you so much. All the best.
Thank you. The next question is from the line of Yash from Stallion Asset. Please go ahead.
Hi, thank you for the opportunity. Am I audible?
Yes, yes, yes, loud and clear.
Thank you. Thank you. Congratulations again on a great set of numbers. So my, my question was basically on, on clarification on the revenue guidance, because if I understand last call, we had said revenue guidance was 22%-25% for FY 2025, right? And, given the, you know, the ramp-up that you're seeing in your office, office supplies, so the pen category as well as the inorganic acquisition, acquisitions that you're doing, so my, my, you know, assumption was that we, we can grow at 25% this year as well. So I, I just wanted to understand your take on that.
So, okay, yes, we just want to clarify, I think, the inorganic opportunities that we just talk about, you know, pen being additional. So our core business guidance, for, like Santosh mentioned, is about 20% and plus inorganic, what we add, what comes from land. That would be in addition.
Okay, okay. So it's 20%. Fine, got it. And so, second question was that, you know, as far as the margins are concerned, because, you know, this again, 19.4% is one of the highest margins that we've seen in the company. So, do we believe that, you know, the margins can sustain to about, 19%-20%, given the decrease in the manufacturing cost and direct cost that you're seeing? So broadly, my estimate for PAT was about INR 210 crore. Is that, is that, will I be way off or, or, or are we closer to the number?
So, you know, margins, like we said, you know, the consumption costs are increasing, so these costs increase and as they also, you know, the cost is affected. Polymers, waxes, and some other products continue to bear, and therefore, we believe the consumption cost to... We already see efficiency payout, further improvement.
Sorry to interrupt, Mr. Rahul. Your voice is not audible.
Okay. Is it audible now?
Yes, sir.
Yeah. So, you know, raw material prices continue there. We have seen prices of polymers and waxes and other items to increase, and that trend is expected to continue. And therefore, whatever benefits that we get from efficiencies are likely to offset. And plus, like we mentioned, Uniclan would, which would be consolidated at least for 6 months at minimum in the books, will, you know, have a little bit of a negative impact on the margins. And, similarly, the ESOP plan, you know, with the company's proceedings, with the ESOP accounting, we believe there would be further, a little bit reduction in the margins, and hence we believe that we will be close to 17% on the margin in the full year.
... Thank you very much.
Thank you. The next question is from the line of Mohammed Patel from Care Portfolio Managers Private Limited. Please go ahead.
Yeah, hi. So my question is: How has the stationery industry performed in the Q1 season, and which segments were the best and the worst performers?
So, the industry, you know, there have been a little bit of challenges, especially because of the weather conditions during the first quarter, you know. There was an extreme heat wave in North India. Schools got shut early, opened late, which was followed by very heavy rains, which again impacts the functioning of schools. So, the market environment was definitely a bit challenging. But like I, like we earlier said, we, you know, we saw a little bit of positive start at DOMS. So we could, we believe, you know, this momentum that we are seeing right now will continue in the full year as well.
So my second question was on this line only. So our performance was much better than the listed peers, so they experienced, you know, flatness or a negative sales growth. So what explains the better performance for DOMS?
So, you know, it's the same thing. You know, we believe in making good products. We continue to focus on innovation, product designing, product engineering. We believe in, you know, getting close to our distribution network, our consumer engagement. We are doing the same thing that we've been doing, and we believe that's working well, and, you know, we are really happy with the continued love and affection that we continue to get from our consumers.
So the external environment would have impacted us also, right?
Yes. The external environment, yes, you know, if things would have been normal, I think we would have done better.
It's all about like, you know, I would have also like to, you know, appreciate we are, you know, our distribution. Like, you know, when the, when the scenarios are, not in, like, you know, the favor, our distribution partners have always, you know, performed and resulted beyond expectation. And the same happened, you know, in, this quarter as well. They all, went all out, and I think, you know, market also, you know, the retail market also subscribed well. We got the priority, you know,
In actually , I think we increased our market share, and the distribution and the innovation has led to this.
Yes.
Thank you.
Thank you. The next question is from the line of Percy from IIFL Securities. Please go ahead.
Hi, sir. So just... Sorry, I got disconnected. So, you said that you wanted to expand your area of operations and be connected with growing children and their needs. So just wanted to understand what comes within this playing area. So would you sort of say that at some point of time, something like a baby food would also be part of your endeavor or something like a clothes for toddlers or children would also come under this umbrella? Because that sentence which you mentioned, that opens a very, very large sort of number of industries or categories. So as investors, how do we sort of judge what you would be okay entering and what you would stay away from?
So, like, Percy, we evaluate every opportunity from many perspectives for finalizing upon. So there is a detailed thought and discussion, how it fits to our future growth objective, and is, financially, sticking to all the stakes in the ground. However, at this time, you know, it is difficult to find or deliberate upon any specific categories that, that-
Understood.
I can say that, you know, this plan was, you know, one of the opportunities from the positive angle, you know, from our perspective.
Understood. Secondly, would you be able to tell me on pens, how is the current run rate progressing in terms of your monthly run rate of sales? Secondly, are we still focusing only on the INR 5 price point here or we are more sort of balanced in terms of our price point focus now?
So, Percy, we are in the process of launching many additional SKUs within the segment. And, you know, during the last quarter also, a couple of new SKUs in the segment were launched. In terms of run rate, and like I said, you know, we are in the process of building capacity. The 1 million per day pen facility got, you know, operational towards the end of June and steadily will increase our capacity utilization there as well. So, it's happening organically there, but wouldn't want to give any specific numbers in terms of, you know, how much sales are we looking at or what are we planning to do there.
Understood. Understood. In terms of the price point, would 5 INR price point still be like 70%+ of our sales?
Yes. As of now, INR 5 is 7%. But we are bringing, you know, lot of new variants, you know, in INR 10 , and INR 10 as well. But, as you know, our target consumer is mainly kids. The more and more focus is more on 7 or 5, going forward with 10 and 10+, yes.
Okay, okay. Yeah, that's it from me. Thank you, and all the best.
Thank you. That was the last question. I would now like to hand the conference over to the management for the closing remarks.
Thank you everyone for attending this conference call. Thank you, the ICICI team, for hosting us. We look forward to your continued interaction, and we'll be in touch and happy to answer any other additional queries that you all may have.
We appreciate your interest, and thank you very much.
On behalf of ICICI Securities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.