Ladies and gentlemen, good day and welcome to DOMS Industries Q2 FY 2026 earnings conference call. Before we begin, a brief disclaimer. The presentation which DOMS Industries Limited has uploaded on the stock exchange and their website and the discussion during the call may contain certain forward-looking statements concerning DOMS Industries Limited's business prospects and profitability, which are subject to several risks and uncertainties. The actual results could materially differ from those in such forward-looking statements. As a reminder, all participant lines will be in 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 touchstone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Aniruddha Joshi. Thank you, and over to you, sir.
Yeah, thanks, Shravani. On behalf of ICICI Securities, we welcome you all to Q2 and H1 FY 2026 results conference call of DOMS Industries Limited. We have with us today senior management represented by Mr. Rahul Shah, Chief Financial Officer. Now, I hand over the call to Rahul for his initial comments on the quarterly performance, and then we will open the floor for question and answer session. Thanks, and over to you, Rahul.
Thank you, Aniruddha. Good afternoon and a very warm welcome to everyone to the conference call for Q2 and H1 FY 2026. We hope you all had a wonderful time celebrating Diwali with your loved ones, and take this opportunity to extend our best wishes to all for a prosperous new year. Joining me on this call is the team from Marathon Capital, our investor relations advisors. I hope everyone had an opportunity to go through the investor presentation and the results release that have been uploaded on the exchanges and our company's website. I'm happy to share that despite the impact of GST 2.0 transition, we continued our growth momentum in Q2 FY 2026 with an increase in sales of over 24%, marking yet another milestone in our journey, showcasing the resilience of our business model and reflecting the strength and demand of our products.
A notable highlight for the quarter was the government's announcement of GST 2.0 reforms, slashing rates across some of our key product categories. Although we believe GST reduction is structurally positive, it led to temporary disruptions in September, including inventory clearance and order postponement by trade partners. Despite this, we achieved positive sales growth, demonstrating our strategic agility and the ability to navigate transitional challenges while capitalizing on market opportunities. We believe these reforms, coupled with the income tax reductions introduced in Budget 2025, will have a long-term positive impact by increasing the disposable income and uplifting consumer sentiments, thereby creating a favorable environment for business growth and boosting demand. Coincidentally, aligning well with the planned commercialization of our flagship 44-acre expansion project.
Furthermore, the GST rate reduction on some of our core products creates a level playing field between organized and unorganized players, providing better market penetration opportunities and shift in demand towards branded products. In terms of operational highlights, we continue to leverage our widespread product portfolio to enable us to effectively service consumer demand and deepen our presence and market share. We continue to expand our product portfolio with the introduction of new products across all our product segments, with additions in categories such as scholastic art material, kits and combo packs, office supplies, and scholastic stationery, like the launch of a vibrant new range of beautifully designed mechanical pencils in exciting colors and features. Furthermore, the performance of Uniclan Healthcare, our baby hygiene business, also yielded positive results, contributing to our overall growth, reflecting market acceptance and validity of the baby hygiene products.
As a part of our Consumer Connect initiatives for enhancing the brand aspirational value, we continued our marketing campaign, including digital connect initiatives to event sponsorship. Among others, we have also entered into a strategic partnership with Kaun Banega Crorepati as an official partner for the show, which we believe has helped the brand reach out and connect further with millions of consumers across age that are spread across the country and overseas. Coming to our expansion initiatives, we are progressing steadily on our expansion trajectory with our 44-acre project, albeit with slight construction delays on account of prolonged and intense monsoon conditions. We are confident of getting the possession of the first building in Q4 FY 2026 and start commercial production from Q1 FY 2027. This capacity expansion, along with ongoing brownfield initiatives, has been strategically planned to support our growth objectives in our core stationery and art material segment.
Coming to the details of our financial performance, consolidated operating revenues for Q2 FY 2026 stood at INR 567.9 crores, a growth of 24.1% compared to the same quarter last financial year. This increase in sales was predominantly on account of impressive performance in domestic markets, backed by volume growth as well as marginal increase in average selling prices. Our international business continued its steady growth trajectory, recording an 18.5% growth in gross product sales year-on-year and during the quarter. During this period, the domestic gross product sales grew by 28%. The consolidated EBITDA for Q2 FY 2026 grew by 15.8% to INR 99.5 crores as compared to INR 85.9 crores in Q2 FY 2025. The EBITDA margin for the quarter stood at 17.5%.
This consistent maintenance of EBITDA margins towards the upper end of our guided range of 16.5%-17.5% demonstrates our operational efficiencies and our robust business model of balancing growth-led approach with prudence execution. The profit after tax for the quarter stood at INR 60.9 crores, with growth of 13.4% over the same period in the previous financial year. The PAT margin for the quarter stood at 10.7%. As mentioned earlier, we continued aggressively with our expansion initiatives. For the six-month period, we have done a consolidated CapEx of approximately INR 150 crores, including capital advances, and are on track for our guided full-year CapEx estimate in the range of INR 210 crores-INR 225 crores. Looking ahead, we continue to remain optimistic about the second half of the year, backed by continuous product introduction, strategic expansion initiatives, and increasing market penetration, positioning us well for sustained growth.
This optimism is poised to receive further boost from supported government initiatives, including GST and income tax cuts, and DOMS remains strategically positioned to capitalize on these emerging demand opportunities. With this, I would now request to open the floor for questions and answers. Thank you.
Thank you. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchstone phone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handset 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 Sneha Talreja from Nuvama. Please go ahead.
Good evening, congratulations and great numbers once again. Just two questions from my end. Firstly, I think in the opening remarks, you were mentioning that, of course, there was GST impact for a few days because in a lot of your products, GST going down to 0%. Just wanted to understand, would we be able to quantify where exactly in which particular segment impacts would have been higher? More importantly, if that was not the issue of destocking, where we would have landed up with respect to growth?
Hi, Sneha. Thank you. In terms of the product categories where GST has come down from 12.5% earlier to 0%, it currently contributes about 45% of our overall sales if you look at FY 2025. Then there is the Baby Hygiene segment, which in FY 2025 was about 6% of our total sales, where the GST rate reduction has come down from 12% to 5%. Overall, between 45%-50% of our total products have been impacted by this GST transition. It's really difficult to quantify as such how much we would have done better if this transition impact was not there. We believe that if this transition impact would not be there, our sales could have been about 3%-4% higher than what we reported for the quarter.
That was quite helpful, Rahul. I'm sure by now you would have also done the backward analysis of the GST input credit that you were getting. Any meaningful impact, or based on that itself, you've just passed on the prices? What I want to impact is the understanding on your profits, the way they would move with GST cut.
Sneha, a lot of our products move down to about 0%, and therefore ITC becomes ineligible on these products, and therefore it becomes a part of the cost. The cost will rise, but similarly, the selling prices will also rise. When this GST transition was happening, we reworked all our cost sheets. After figuring out how much the cost would increase because of ITC, we came up with the revised MRPs, and those MRPs were then introduced in the market. Overall, I do not see a significant impact of this on the margins of the company.
In fact, we would have seen approximately how much increase in your pricing of the product on an approximate level. I understand it will be different from product to product, but on a range basis?
Pricing of our product. In fact, all our MRPs have come down, Sneha. A pack of pencils which were earlier selling at INR 60 MRP is now sold in the market at INR 58. In terms of the company sales at the primary level, if you are asking me, the sales would have increased by about 3% to 4%, not more than that, 3% to 4%.
Understood. Understood. Thanks a lot, Rahul, and all the very best.
Thank you. The next question is from the line of Kunal Vora from BNP Paribas. Please go ahead.
Yeah. Thanks, sir. Thanks for the opportunity. Congrats on the good quarter, Rahul. First question is, you've not advertised in the past, but are now advertising on KBC. What is the change in thought process? Which products would you look to push through marketing? What is the incremental cost which you are looking at? How has the response been to your marketing campaign?
Kunal, KBC was not specifically for any particular product, but it was more for the overall brand. It was just that the entire DOMS brand and our entire range of scholastic stationery, scholastic art, office supplies were distributed to the kids who were coming to that show for a specific period of time. It was just an opportunity we got through our marketing references, and there was nothing like a planned thing or something. In terms of how it helps is something which will come to know in the mid to near term, but overall, it adds value to the brand's aspirational value.
Okay. So would you look to continue?
No, in addition to KBC, before KBC, we also did some partnership with a leading cinema chain in India where this child-centric movie, Sitaare Zameen Par, was released. There we advertised one of our pens in the theaters. These are now small initiatives that we are taking. Again, it is very specific to our consumer, towards our target audience of children. Even in this KBC partnership, it was not for the entire season, but for a few weeks where children were called as participants.
Understood. Okay. Second one is, can you talk about some successful product launches which you had with mechanical pencils, glue, marker, bag, games? What's really doing well right now? Anything which you can highlight in terms of what's done well?
I see across the products where we've added capacities, they've done well. You would have seen from the presentation in office supplies, the growth has been significant because that's where capacity had added. Mechanical pencils, we just launched towards the end of the last quarter. The initial response has been positive. Adhesives also, though there have been no new SKU additions in the segment, but there are the brownfield expansion that we were doing in the adhesive segment. They are slowly coming on board. That segment's doing well. Across categories, there are new products being added. Even in scholastic stationery, in our core category of pencils, you remember we have a partnership with Warner Bros. There we introduced a Superman-themed pencil pack. Again, very different from what otherwise you get in the market, like co-branded pencils. This is packed also differently.
Across products, no specific as such, Kunal, that I would want to highlight or something like that.
Understood. Third is on U.S. tariffs. You had mentioned last time that it could have an adverse impact on the business. I still see the exports having seen a healthy growth. How did the U.S. market, U.S. sales stand? Did you find other markets or U.S. sales have held up well despite tariffs?
U.S. sales, because in the month of September, it was during the quarter that U.S. tariffs were introduced. All the open orders that we had were fulfilled by our consumer. In the last quarter specifically, we did not see any significant impact of U.S. tariffs on our sales. Going forward, certain orders have been postponed, and the capacities for that have been diverted to other growing markets, both where DOMS was already significantly present and the distribution partnership with Fila that we started. For example, in Chile, where we initiated this Fila distribution arrangement, we are seeing good repeat orders also coming in. We believe that while from a U.S. perspective in the current quarter and going forward, there will be an impact until the tariff issue is not resolved.
There have been alternative strong demand from markets, like I said, Chile is one, Middle East, we are seeing good demand. Our core neighboring countries of Sri Lanka, Nepal, there also the demand is positive. Because of these regions, we do not see overall there would be any impact on export sales.
Understood. Lastly, how are you doing on Quick Commerce? Are your products available across all firms? Are you supplying directly to Quick Commerce or to distributors?
We are present across Quick Commerce channels, Blinkit and Instamart, and all channels we are present. Again, the focus there is to be available from a convenience perspective. It's not a major push or a focus area. The consumers who want that convenience of being present, of getting goods very fast, for there we are present on Quick Commerce. Focus continues to remain general trade. Again, with a lot of our new product launches happening, the first priority is definitely towards general trade because they are the ones who help us in getting the product reached to our consumers. Yes, Quick Commerce as a business segment is also growing, and our presence there is also increasing.
How are you ensuring that? I mean, let's say you're doing it directly or let's say what kind of contribution, what kind of growth you are seeing there? Because many of your products look very interesting from a Quick Commerce perspective. How are you ensuring that you're getting the right sales?
We partner with these Quick Commerce operators directly. We sell to their dark stores, and from there they distribute. We service them directly.
Understood. Okay. Okay. That's it from me. Thank you.
Thank you. The next question is from the line of Hitesh Doshi from PL Capital. Please go ahead.
Yeah. Thanks for the opportunity. Sir, my question is on pens. I mean, if I remember right, I believe we do not have the capability to manufacture MIB, and the full backward integration advantage in this category is missing. So just wanted to know, I mean, has it got to do with the.
Which category? Sorry, which category I missed?
Pens. Okay.
Yeah. MIB. MIB. We do not manufacture, right? Right. Just wanted to know, I mean, has it got to do with the technical capability, or is it related to the missing skill advantage? Once we achieve a desired production level, perhaps we can consider exploring in-house manufacturing. That is one. Secondly, also, if you can share how much typically does the MIB cost in the overall cost structure of a pen?
Okay. Hitesh, to answer your first question, definitely it has nothing to do with capabilities. As you know, for DOMS, our constraint has always been in terms of capacities, right? Today, whatever infrastructure we have, for us, it is like taking a decision on how do we utilize that infrastructure. Right now, do we utilize it for manufacturing tips or manufacturing the pens?
If you look at the tip manufacturing infrastructure in India, there are a lot of players who are focused on this manufacturing segment only. They manufacture only tips, and they are reasonably large and cater to all our requirements. Therefore, we've not prioritized manufacturing tips right now because we are constrained in terms of the capacity that we have in terms of physical infrastructure. Now, with the new 44-acre plant soon coming into production, we definitely intend to get into manufacturing of tips. This is not a very technically superior sort of a process. You get good imported automatic manufacturing lines, and the process, once it is set, can do mass production. We've already placed orders also for these machines, and soon we will have some new machines for tips also coming in and starting production of our own tips.
Given the size and the scale at which we are growing our pen business, we will continue to purchase tips from these third-party partners, and the quality that we want and the type of tips that we want are available from these partners. In terms of cost, tip manufacturing tip cost to the overall cost is not a very large component. Polymers and ink is higher than tips.
Understood. Understood. Secondly, I just wanted one small clarification. The channel MIB data that we have given on slide 22 of the PPT, does it include revenues from the hygiene business? I just thought of asking because if I look at FY 2025, our GP contribution was 77%, and now it has declined to about 71%. I believe some of the other channels like e-com and MP have a higher share in the hygiene business. If you can just clarify that part.
Yes. On slide 22 that you're referring to, the gross product sales of INR 593.7 crores includes the hygiene segment also. In terms of general trade contribution that you see that has sequentially decreased is because of two reasons. One, the overall contribution of baby hygiene products to the sale in the current quarter has increased, and in the baby hygiene segment, almost 35% of sales come from e-commerce. Therefore, you'll see the modern trade and e-commerce segment on an overall console basis increasing and GT coming a little low. Also because of this GST 2.0 transition impact, the sales to the GT segment were a little affected. Plus also this being an onset of the festive season where generally GT sales come a little low because stationery shops start selling a little more of your gifting and your decorative and such items.
Because of both these factors, you will see the percentage contribution of GT coming down a little in this quarter. Going forward, GT will continue to be close to about 75% of our overall sales.
One last question from my side. Sir, is it possible to share what is the contribution of INR 10 price points in our pen portfolio? Also, on the pencil expansion side, I believe additional capacity was supposed to come on stream in Urdh. Where are we on that?
Hitesh, to answer your question on the pencil capacity addition, the first building that we will get in the 44-acre complex would be dedicated for expanding our capacity for pencils. Like we had highlighted in the previous call, also those earlier or the backward processes before finishing of pencil has already been capacity increase there has already happened. We are just waiting for the possession of the building from the 44-acre complex. Once we get that, we will see capacity addition in pencil coming in. To answer your question on the pen, honestly, my friend, right now, I really do not have data on how much is the contribution of INR 10 pens on the overall segment. What I can say is the INR 5 price point pens continue to be the largest contributor to our overall business of pens and office supplies.
Sure. Thank you and all the best.
Thank you, Hitesh.
Thank you. The next question is from the line of Rajna Chen from 360 ONE Capital. Please go ahead.
Hi. Thank you for the opportunity. Just to continue with the previous participant's question on the pen segment, what was the capacity of pens a year back versus where are we right now as on one edge? Given that you said that the increase in the office supply sales has primarily been on the back of pens, and that has happened because of the capacity expansion. Could you just highlight how much capacity has expanded on the pen side in the last one year? That is my first question.
I had on the pen. If we just talk about the ballpoint pens where we've added a significant capacity, I think about a capacity increase of 1 million pens a day has been added. I had on this has been through the period. It's not that on day one, 1 million was added. Incrementally, as soon as the infrastructure is ready, we install like five machines, then another five, five, five. That's how the capacity build-up has happened. Today, we should be close to about 3 million-3.25 million pens a day in terms of our pen manufacturing capacity.
Going forward, where do we see that increasing to in the near term, or is this the level at which we'll be operating?
Right now, like I said, the next large chunk of infrastructure that we will have is from the 45-acre project where the first building we are going to use for expanding our capacity for pencils. After that, we will again start increasing capacities for other writing instruments like pens, highlighters, markers, sketch pens. Overall, definitely, this capacity is likely to increase, but when it will happen will depend upon how the build-up of the 45-acre complex comes on.
On the sort of growth that we've seen in this space, is it fair to assume that this momentum will sustain in the second half as well, given that fourth quarter is a quarter where back-to-school starts happening and examination-based sales also start picking up? Is it fair to assume that this sort of 80% growth that we've seen in this quarter or the high double-digit growth that we've seen in the first half could sustain in the second half?
80% growth in the pen business you're talking about?
Office supplies. Office supplies have grown at 80%.
It will always, yeah, it will be linked to capacity, Arana. It is not something which will be sustainable because capacity will become a constraint. Yes, this segment will continue to see healthy growth, but that will all be backed on capacity addition. We target that by the end of this year as combined capacity for pens, which includes the regular ballpoint pens and one-time-use examination pens, all put together to be close to 5 million pens a day.
Understood. Second, I wanted to understand on your core stationery categories. If I see, say, the scholastic stationery, scholastic art, and kits and combos, if I combine all three, the growth has remained largely flat year-on-year in the second quarter, and it was up like 3% in the first half. Is it fair to assume that it was largely driven by the capacity constraints, or are you also seeing some sort of moderation in the underlying demand or channel inventory levels, or is it purely because of the capacity constraints? Going forward, if it is purely because of capacity constraints, from which quarter can we expect a more visible pickup in the core scholastic categories?
So Arana, if you combine scholastic stationery, scholastic art, and kits and combination pack, year-on-year, quarterly growth was about 4%, and H1 growth was about 5.5%. Like you said, this growth has been lower purely because there have been no significant capacity additions that have happened in this segment. It's purely been growth due to change in product mix and slight increase in ASPs. In terms of actual pickup in revenue in this segment, like I said, we are hopeful that from Q1 FY 2027, we'll have our additional pen capacity, sorry, additional pencil capacity being coming in production over a period of time. I think Q2 FY 2027, you'll see a decent amount of contribution coming from new capacity in the scholastic segment. Also, like we recently launched mechanical pencils, which also gets categorized in scholastic stationery. That ramp-up in production is also underway.
Going forward, I think incrementally, you'll see some growth coming in the next couple of quarters and then major growth coming from Q2 FY 2027.
Understood. Just two more questions if I can squeeze in. One was we've seen 25% of growth in the first half of the year, right? Do you feel that you need to up your guidance from the current 18%-20% that you've highlighted in your press release that for the entire year, we are expecting 18%-20%? Do you think that that could be closer to, say, a 25% number for the entire year, given that fourth quarter for us is expected to be good compared to, say, our second quarter?
Arana, see, if you look at first half of the year and compare it with the first half of the previous year, a significant growth in the first half in the current year was due to the consolidation of impact of Uniclan. In the last financial year, we consolidated Uniclan only for 15 days of the first half, while in the current year, Uniclan was consolidated for the full period, and therefore, the growth has been higher, close to about 24%-25%. If you see in the second half, in the base period, Uniclan was already consolidated. There we'll see the growth in line with our 18%-20% targeted range.
Understood. Just last thing on the regional performance, there's some bit of divergence seen with respect to South India has grown at, say, 60% plus versus East India hasn't grown like it's sub 10%. What is the reason for such a sharp rise? Is it purely because of Durga Puja being in East India and demand not picking up, or?
Absolutely. So Arana, I think this metric is something if you look on a full-year basis, will give you the correct picture. Looking at quarters sometimes distorts the data because, like you said, in East India, in the month of September, there was Durga Puja, and practically the entire Eastern region comes to a standstill during those 10-odd days. The channel starts, like I said, stationery shops start selling a lot of decoration and gifting and such related items. Therefore, there is always in during I would not say Q2, but whenever there is Durga Puja months, you see impact on sales in East India. I think this is a metric you should always look from a full-year basis that gives a correct picture.
Understood. This was really helpful. Thank you and all the best.
Thanks, Arana.
Thank you. A reminder to all the participants that you may press star and one to ask a question. The next question is from the line of Priyank Chheda from Vellum Capital. Please go ahead.
Hi Rahul. My question is on the employee cost. It has gone up significantly. In general, of course, with the Uniclan sales consolidating, I am aware, with the sales growing, even X of Uniclan sales growing at 20%, we do not find that operating leverage playing out in our EBITDA margins. Why would that be so? Also, on the question on the employee cost, quarter on quarter inching up.
Hi, I'm Priyank. So Priyank, the employee cost as a percentage of sales increased by over 1% sequentially and 0.85% year-on-year during Q2 FY 2026. The key reason for this increase in employee expense was due to the overall increase in workforce, both in our sales and production team. As we plan to ramp up our production activities, the hiring has to happen a little in advance. Similarly for the sales team, because there's a lot of training and all they have to go through. Also because of this disruption in sales due to this GST transition, which happened in the month of September, when I see specifically my month of September and compare it to employee expense and the percentage-wise, it went higher because, like I said, our sales were impacted during this month.
Because of these two reasons, you see our employee expense increasing as a percentage of sales. Priyank, sorry, if you could repeat your second question.
Second question was on the operating leverage kicking in. Of course, I now understand that there is a cost which has been loaded up of the new plant, right? Would it be possible to quantify over the last six months what kind of a cost would have got loaded up in the expectation of the new plant starting up?
Priyank, it's very difficult to quantify because something, like I said, we've had a significant increase in our sales team also. If you see over the last few quarters, our sales team now is more than 900 people. If I remember correctly, last year, same time, we were close to about 800 people. This all is happening in anticipation of the increased volume and sales that we'll have. This is not only for the new plant, but for other expansion like office supply, sorry, adhesives, a new category that we got into, mechanical pencils. For this, we need to ramp up the teams well in advance. It becomes a little difficult to quantify as such.
Other in terms of operating leverage, like I said, even last time when we gave this entire guidance of EBITDA guidance of 16.5%-17.5% was keeping in mind one, Uniclan, and second, also the higher employee cost that we'll have both because of one, ESOPs, and second, ramp up in the team size.
Sure. I got it. Now, on the office supplies, what would be the mix roughly between pens, highlighters, and markers?
Honestly, Priyank, within the category, we'll not have a lot of details ready on this. Right now, majority, I could say, would come from pens, followed by markers, and then highlighters. I wouldn't have exact data on how much comes from each of these categories.
Got it. One last thing. On the discount incentives and rebates, if I have to collate that data from the annual report, for the full year last year gone by, it was roughly 3.7% of the sales, which is netted off, of course, from the sales, but it went up year over year, almost the percentage of sales from 2.5% to 3.7%. What was this because?
In the current quarter?
No. I'm asking for the full year. FY 2025, I'm asking for the previous year. The discount incentives and rebates, which get netted off from the sales, almost doubled from INR 37 crores to INR 71 crores. Was it a no?
Basically, see, discount rebates and all includes all schemes and cross-product schemes also that we run. Generally, it is more a factor of the price list rather than actually giving certain cash or kind discounts in the market. Typically, what happens is, let's say I'm introducing or I want to push product A, I'll start giving product B as a part of the scheme. You buy so much of product A, you'll get so much of product B. The value is all incorporated inside the costing. It's not that we've given more schemes and discounts, which is actually bringing down your EBITDA, that's more in terms of how the sales and how the price list metrics is working in the market.
In this quarter, we've had a slight impact, a little more schemes, discount, rebates given because, again, because of the GST transition for whatever stock the channel had and the reduction in MRP that we did, we had to give a little, we had to issue credit notes for that. Therefore, in this quarter, there was an impact, which was more from a transition thing rather than any product-specific schemes and discounts.
Sure. One last thing, sorry. On the new plant, for the first full year, say, even if we were to ramp up, we would say ramp up, say, at around 35% or 40% of the utilization, and then year over year keep scaling up that. Of course, still certain percentage of utilization, the cost would get loaded up for the full plant. Would you guide that for the first year of the operational of the plant? Because it would be suboptimal, the EBITDA margins and the other expenses would take a hit to the EBITDA margins for the first year, second year, and then gradually it would again recover it. Would that be the fair assumption in the trend analysis for the margins?
Priyank, see, this is like an ongoing cycle, right? Today, already for the ramp-up that is happening in the other brownfield investments, like last quarter, we informed you all that we had added a few, we purchased few more land and building close to our existing facilities where the ramp-up in production is happening as we speak. This is like a continuous process. Today's numbers already include the impact of the ramp-up of the brownfield investments. The numbers of next year will include the ramp-up of the 44-acre, but this current period ramp-up will have a full impact. I do not see a major problem. See, it is a continuous cycle because we have been in this CapEx cycle continuously.
Sure. The message that you're trying to give out is that because of.
I don't see that because of the ramp-up, there would be any significant impact on the margins.
You continue with that 17.5% or 18% kind of EBITDA margin guidance for.
16.5%-17.5%. 16.5%-17.5% is a decent range that we'll be comfortable operating in.
Sure. Thank you.
Thank you. A reminder to all the participants that you may press star and one to ask a question. The next question is from the line of Manan from DOMS Industries. Please go ahead.
Hi sir. Good afternoon. Congratulations on the good set of numbers. I just have one question. The revenue grew by 24% year-on-year. Can you give a breakup about how much is this volume and value growth?
Hi Manan. Manan, it is majorly volume growth, again, in key categories of office supplies, paper stationery, adhesives, and kits and combination packs. Only a very small portion, about 2%-3% of this growth comes from ASP increase.
Got it. Another question is, what EBITDA margin did the company expect from this 44-acre project expansion? Is this the same margin the company is operating, or does the company expect some other higher margin from this capacity?
The company's margin philosophy for DOMS has always been same. For every product, it's like cost sheet driven. We drop our cost sheets and work with a targeted margin of 15%-16%, which, because of operational efficiencies, then results in reported margins of 16.5%-17.5%. We continue with the same philosophy for the 45-acre expansion also. Because there, actually, we are not going to add new product categories, more of increasing capacities for the same product categories where margins are already defined and well set.
Understood. Thank you so much, sir. That's it from me.
Thank you.
Would like to clarify that Mr. Manan was from the company ICICI Securities. The next question is from the line of Anj from ANJ Capital Advisors. Please go ahead.
Hi, congratulations on the decent set of numbers. I just wanted to know that because of the GST 2.0, earlier you mentioned there had been some postponement in the orders. Do you think that influx will be, what do you say, shown in the next quarter in the sales, or what is your opinion on that?
Sir, coincidentally, the GST reforms was clubbed with the onset of the festive season also. Typically, otherwise, also during the Diwali period and all, which was in the Q3, the sales get impacted a little. The channel clearance that happened a little faster in the month of September, which otherwise we'd anticipated would happen in October. The restocking at the distributor and the retail level will be an ongoing process and coincide with the back-to-school period, which will start from December. You'll not see something significant in the third quarter. Third quarter, as it is, because of Diwali period, gets a little slower. Even at the plant level, manufacturing level, we are on a short Diwali break of four to five days, so the production also gets impacted a little. You'll not see any significant impact in the third quarter.
It will be a slow process moving into third and fourth quarter both.
There will be some gradual growth, right?
Yeah, there will be some gradual growth, yeah.
Okay. The second question is, what's the current capacity utilization you're running at?
It's very difficult for us to give because all of our products have different capacities. Some products have interchangeable capacities, especially those which are manufactured using polymers and in our molding infrastructure. For us, at a product level, having capacities defined is a little difficult and challenging. Having said that, across all our core products like scholastic stationery, scholastic art material, our capacity utilization is upwards of 95%. In products like office supplies and hobby and craft, there is continuous capacity addition, ramp-up happening. For already which we've installed, we would have reached about 75% plus. Again, new capacities are coming as we speak and during the next quarter, quarter and a half. There we will have growth coming in from.
Okay. The CapEx that you are planning on doing, when that is fully finalized and that's in production, what do you think that will, how long do you think that will last you for?
Hopefully, within the last four.
No, in the sense that how much capacity will that run at? Do you almost have some projections on that now?
Basically, for us, whenever we are investing one rupee in building capacities, we target to achieve revenues of INR 3 . As soon as we believe that for a particular product or a category where demand also is still strong and we believe a lot of value DOMS can add, as soon as we reach about 50%-60% utilization, we plan for other capacity enhancements. This, at least for the next three to five years, we believe, considering the total market environment, both in the domestic market and the opportunity in exports, is something which will be a continuous process. We will keep investing in building our capacities, at least for the next three to four years, to drive growth in the business.
Got it. Got it. Thank you so much.
Thank you.
Thank you. Ladies and gentlemen, that was the last question for today.
Hello?
Ladies and gentlemen, we will take one last question. The last question is from the line of Priyamm from Antique Stock Broking Limited. Please go ahead.
Hi Rahul sir. Priyam here. Am I audible?
Yes, we are loud and clear.
Yeah. So I just wanted to ask more clarity on the GST side, right? Most of the scholastic stationery products have seen 0% GST rate, right? If I'm assuming pencils and scales and stuff like that. If you sell this product in kits, do we have a GST rate on kits as a basket?
See, basically, what the GST law—yeah, Priyam, can you hear me?
Yeah, yeah. I can hear you.
Yeah. So basically, what the GST law says is when you bundle products, you need to first check whether it's a mixed supply or composite supply. Most of our kits fall under the category of mixed supplies. In mixed supplies, whatever is the highest GST rate in that mixed supply needs to be applied. For most of our kits and combination packs, they are sold at a GST rate of 18%. For the 0% items that go in that kits and combination pack where you're actually charging 18%, you become eligible for input tax credit. It complexes the entire process, having different GST rates and with a lot of products being milled. Yes, that's something that we'll have to live with.
This means that.
This is.
Yeah. Sorry.
Yeah, yeah. Go ahead.
This means that we'll focus more on the kits or something like that to get the input tax credit on the.
Maybe not. Absolutely.
There will be some dynamics. There will be MRP dynamics changing the product portfolio in the kits versus the standalone products.
Both are not comparable. Somebody who wants to buy pencils only will buy pencil pack only, which will be still sold at 0%. There we've passed on the benefit to the consumers by reducing the MRPs of the product. Somebody who's buying a gift and combination pack, either for gifting purpose or consumption purpose or for any reason, will buy. Kits does not replace the requirement for a pack of pencil or vice versa, right? People will not, consumers will not start buying or we will not start pushing more sales of kits or combination packs that way.
Sure. Okay. Thanks.
Thank you. Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to the management for the closing comments. Thank you. Over to you, sir.
Thank you, everyone. Thank you once again for joining us. We appreciate your continued support and confidence in our journey. Should you have any further questions, clarifications, please reach out to our investor relations team. Thank you and have a great day ahead.
Thank you. On behalf of DOMS Industries, that concludes this conference. Thank you for joining us, and you may now disconnect your line.