Ladies and gentlemen, good day and welcome to Flair Writing Industries Limited Q1 FY 2026 earnings conference call hosted by MUFG Intime India Private Limited. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star, then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Ms. Darshi Jain from MUFG Intime. Thank you, and over to you, ma'am.
Thank you. Good afternoon, everyone. Welcome to the Flair Writing Industries Q1 FY 2026 earnings conference call. Today, on the call, we have Mr. Vimalchand Rathod, Managing Director, Mr. Mohit Rathod, Whole -Time Director, Mr. Sumit Rathod, Whole -Time Director, and Mr. Alpesh Porwal, the Chief Financial Officer. A short disclaimer before we start this call: this call will contain some forward-looking statements which may be based upon our belief, opinion, and expectations of the company as of today. These statements are not a guarantee of future performance and will involve unforeseen risks and uncertainties. With that, I would now like to hand over the conference call to Mr. Vimalchand Rathod, the Managing Director, for his opening remarks. Thank you, and over to you, sir.
Good afternoon, everyone. I want to express my gratitude to all the participants who have joined the call. I hope everyone had the opportunity to go through our investor presentation and press release that have been uploaded on the exchange. We delivered strong revenue growth in Q1 FY 2026, mainly driven by our own brand portfolio. It was heartening to see that both domestic and export market demonstrated robust demand of our branded products. This quarter has been particularly a standout quarter for our Creative segment, as new product innovations over the past year are finding their footholds in the market while the existing product portfolio continued to mature. Additionally, ramped in-house manufacturing of Creative products has allowed us to respond more effectively to growing consumer demand and strengthen our position in the segment.
We achieved broader segment growth in all the three business verticals with new product launches catering to a wide spectrum of customers. Our CapEx timeline remains on track with construction already underway at our new manufacturing facility at Valsad, spanning around 2 lakh sq ft. As part of this expansion, we have placed orders of 60 injection molding machines, molds, and assembly machines. This investment will greatly boost our production capacity and drive further growth in the coming quarters. Given the flexible nature of our production and machinery, the upcoming facility will benefit both Pen segments as well as the Creative segment. I will further our commitment to increase shares in-house creative manufacturing. I now hand over the call to Mr. Alpesh Porwal, our CFO, to discuss in detail about our Q1 FY 2026 financial performance. Thank you.
Good afternoon, everybody. Moving to the consolidated performance of the company for Q1 FY 2026, revenue from operations for Q1 FY 2026 was at INR 288.5 crores, an increase of 16.8% year-on-year compared to the corresponding quarter of the previous year. Gross profit for the quarter was INR 144.2 crores, which increased by 17.3% over the corresponding quarter of the previous year. Gross profit margin came in at 50%, closer to the historical range of previous financial years, mainly due to a change of product mix in favor of certain higher-value products. Gross profit margin was approximately 24 basis points higher year-on-year and 138 basis points higher sequentially. EBITDA for the quarter was INR 49.5 crores, registering a growth of 17.9% year-on-year compared to the corresponding quarter of the previous year. EBITDA margin was at 17.2%, 16 basis points higher compared to Q1 FY 2025, and 146 basis points higher sequentially compared to Q4 FY 2025.
Profit after tax for the quarter was at INR 29 crores, increasing by 10.5% on a year-on-year basis. PAT margins for the quarter was 10%. On the qualitative front for the results, the overall revenue growth is in line with our stated growth guidance for a 15%-16% CAGR over the medium term, driven by a mix of stable compounders and high growth achievers. There are certain areas which I would like to throw light on. About our employee expenses, as stated in the previous call, we have been working towards stabilizing employee expenses. During this quarter, employee expenses registered a 5.4% increase on a quarter-over-quarter basis. Going forward, we remain focused on maintaining these costs at a steady level.
While employee costs seem to have risen sharply when compared to Q1 FY 2026, this growth has been underpinned by rising headcount and hikes, which includes rising sales and marketing team as well as manufacturing workforce, as we look to quickly scale up our two divisions, that is, Creative and Steel Bottles, through higher in-house manufacturing. Both these businesses delivered very high growth during the quarter, and it is for these scenarios for which we have been investing in our teams and would look to do so in the near future as well. However, as guided earlier, the sequential pace of increase will tend to moderate as we enjoy an operating leverage as the year progresses. Overall, our other expenses grew modestly over the previous year and saw a decline over the Q4 FY 2025.
While I would refrain from commenting over the quarter-to-quarter trend of expenses, however, I wish to emphasize something. Over a period, you would see expenses associated with higher in-house manufacturing increase and being balanced out by a reduction in job work charges. This gives us a greater operational control. However, at the same time, we would also be open to leveraging the option of job work to meet a swell in demand. It's a mix of proactive and reactive decision-making, but it is important to us, given the dynamic market condition with respect to consumer needs and new emerging trends. Thus, while absolute numbers may rise as the business scales up, we do not foresee any sudden hike spikes in expenses. We are confident that the EBITDA margin trajectory will be maintained and will glide upwards as the year progresses.
Through the past couple of quarters, our organization has been undergoing qualitative business transformation. This process is fueled out of the need to build dependable pillars as we look to enter the next phase of growth. You may be aware of the more pronounced aspects of this plan, be it our ongoing CapEx cycle, augmenting our teams, increasing our range of products, and entering into high-potential segments. However, let me also share with you some of the softer aspects of this transformative journey. As part of our sustainability and growth initiatives, we have installed a rooftop solar system with a capacity of 1.85 MW at an approximate cost of INR 4.5 crores. This investment is expected to reduce our dependence on grid electricity and lead to a measurable decrease in Scope 2 GHG emissions, apart from bringing cost efficiencies.
Besides the rooftop solar project, we have, in the recent past, invested in institutionalized practices such as rainwater harvesting and established robust effluent treatment plants, ETPs, to recycle water within our operations. Besides integrating sustainability within our operations, we are also leveraging technology in our operations. There has been an increased focus on automation within production and assembly lines to enhance efficiency. We already had a dedicated field force application to enhance efficiency and accountability of our sales and marketing teams. The digital tool facilitates real-time tracking of secondary sales, daily coverage reporting, and the generation of actionable MIS reports. Also, we have recently kick-started a major digital transformation initiative through the replacement of our legacy ERP system, which will be undertaken shortly. This transformation will span multiple functional areas, providing a more cohesive platform for decision-making.
It will also enable us to streamline business processes with a particular focus on manufacturing. Environmental stewardship combined with effective technology implementation will further improve our organizational agility. Now, on the business segment highlights, our own brand sales have continued a strong upward trajectory with consistent growth across both the domestic market and export market. Overall, our own brand sales grew by 23% year-on-year to INR 264 crores. We are pleased to see strong performance from the export market, similar to the domestic market, registering a heartening rebound from stable growth of the previous financial year. Coming to our OEM sales, overall OEM sales declined by 24% year-on-year, driven largely by the decline in domestic OEM sales, specifically related to our pen OEM customer. Export OEM was stable at INR 17 crores in Q1 FY 2026 compared to INR 18 crores in Q1 FY 2025.
Coming on to the product segments, Pen business, the Pen segment grew 3% year-on-year to INR 202 crores for Q1 FY 2026. During this quarter, we released eight new pens across all three price segments: mass, mid- premium, and premium. Because the pen segment's revenue is made up of different pieces, some nuances are necessary from our side without getting into specifics of numbers. First, the own brand sales, specifically domestic own brand sales, which forms the largest part of the pie. Domestic own brand sales grew in high single digits with a mix of both volume and value growth. Second, our own brand export sales, which grew strongly in high double digits. This was a very encouraging rebound from the past year, which was largely marked by geopolitical turmoil. Traditionally, LatAm and the Middle East have been important contributing markets.
We're actively trying to diversify our presence by exploring new countries that are underserved and show good potential. Third, export OEM, we share a long-standing relationship with our export OEM partners, as you all are well aware. In the quarter, this piece of business was stable and, in fact, grew marginally. Fourth, domestic OEM, of which pen is a part, and this was a sort of growth dragger during the quarter. It saw a material decline, but as previously stated, we have not taken its contribution while setting up for our consolidated growth expectations set for the medium-term guidance. With respect to the domestic OEM pen segment, we are quite confident in creating alternating channels through other segments that would support our overall business. We achieved our revenue growth guidance in quarter, despite domestic OEM pen segment being impacted.
In terms of new diversified revenue channel, we have distributed a distribution partnership with Maped for the creative products, which will be revenue-accretive. However, let me preface that currently, it is at a nascent stage, and we would develop this business over time, and thus, it too will further contribute to our revenue. Other than Maped, there is still some CapEx underway at Flomaxe Stationery's facility in Surat for a new range of products within pencils. With its commencement expected soon, it too will further provide an additional revenue stream. Thus, overall, as these new channels mature further, we are confident that we would be undeterred from achieving our consolidated revenue growth expectations of 14%-15%. Next, our standout, the Creative segment. The Creative segment achieved impressive growth of 77% year-on-year for Q1 FY 2026. The revenue contribution stood at INR 65 crores for the quarter.
We expanded our product portfolio by introducing six fresh offerings under the Creatives range during the quarter. As of June 30th, 2026, we have a total of 223 product offerings in Creative. Our focus within the segment is twofold: introduce new innovative products and build in-house manufacturing capability. Among the product categories, we are approaching pencils with a renewed focus by also leveraging our strategic venture in Flomaxe Stationery. We believe our strength in Pens will translate us to being another major player within the broader pencil space in the near future. Coming to Steel Bottle segment, we continue to scale the Steel Bottle segment, as revenue contribution for the quarter increased by 55% year-on-year to INR 13 crores. We are consistently working to expand our portfolio base and strengthen our distribution network.
Consumer demand alternates between single-wall and double-wall bottles based on the season, and our goal is to have a very comprehensive portfolio of attractive and innovative production bottles, flasks, mugs, etc., catering to wider corporate and educational sector. Looking back at the quarter, we are pleased with our business performance and look forward to building on this growth trajectory. We remain well-equipped to scale as a resilient organization that is known for its ability to deliver standout quality products from time to time, all the time. Thank you, and I request the moderator to open the floor for a question-and-answer session.
Thank you very much. We will now begin with the question-and-answer session. Anyone who wishes to ask a question may press star and one on the touch-tone phone. 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 Sneha Talreja from Nuvama. Please go ahead.
Hi, good afternoon to you, and congratulations on raising a set of numbers, both on the revenue as well as margin front. Just a couple of questions from my end. While you've seen a great amount of growth in Creatives and others, why are your OEM business, both on the domestic and export side, seeming to be down on a Q-o-Q basis? Could you give some color on that?
Yeah. Hi, Sneha. Thank you.
So answering your question on the OEM front, so as we mentioned in the last couple of quarter calls also, that as far as the domestic front is concerned, in our growth projection, we haven't taken any of that factor into consideration that will hamper our growth going forward. But yes, when we talk about exports, it's been stabilized. Of course, OEM is a major chunk in export business, and it has stabilized over the years. And I think going forward also, we're going to see a consistent level of business in OEM. There's not going to be a major change in OEM as far as exports are concerned.
Thank you. Secondly, on the Creative side, of course, you've guided for a 40% growth during the year, but you've started on a great note of 77%. What's driving this growth?
On an annualized basis, would you like to revise your numbers or guidance?
Yeah. So basically, in Creative segment, as we mentioned in the last couple of quarter calls, that we are building our in-house capacity for meeting the demand of Creative products in all the categories that we have entered, be it from the scholastic range of pencils, erasers, sharpeners, geo boxes, to the office supply ranges, to the kits and the coloring range. So all the categories we are doing, the demand has been very, very positive. So the overall contribution of 77% growth in Q1 is because of those factors. And also, lately, the last couple of products which we have launched in the last few quarters have been doing exceedingly well. And going forward also, we are expecting a similar trend. Of course, when we compare Q1 last year, the base was low.
But going forward, we're going to streamline at 45%-50% growth going forward.
That's helpful. Thirdly, on the employee expenses, I recall you stating in the last con call also that you're building up new divisions, be it Steel Bottles, be it Creatives. And that is where you're seeing around 30% growth on a Y-o-Y basis on this employee expenses side. But what's the run rate likely to stabilize as we move forward?
Employee stabilization. As far as the employees are concerned, see, with the higher employee expenses on a year-on-year basis, on account of strengthening of sales and marketing teams in the previous period, overall employee headcount increased and given the trend of higher in-house manufacturing also, which added to the increase in the wages and salary hikes. And if I were to talk about, can you repeat the question once again, Sneha?
Just wanted to understand what would be the annualized level of employee expenses. Can we see further increases happening even from here?
No. The employee strength that we have put it as optimal now here. Like I said, we would not shy away if we have to kind of add employees. But as of today, this number is moderated. And going forward, it will be within these moderated limits.
Thank you. And just last question, if at all, I may. On the Steel Bottle front, as far as I understand, this is purely driven by the domestic market. Any visibility that now we have found from the export OEM front?
So for the Steel Bottle perspective, yes, we are trying to have a little traction in the international market as well. But I think still our major concentration is still more towards the domestic front.
And still, there's a long way to go only in the domestic front as well. But we are trying to open new avenues in the export market as well.
Thank you. Thanks a lot, team, and all the very best.
Thank you very much. Thank you, Sneha.
Thank you. The next question comes from the line of Aradhana Jain from B&K Securities. Please go ahead.
Hi. Thank you for the opportunity. I have a couple of questions. My first question is on the Pen segment. If we see that the Pen segment has just grown by 3%, and the guidance that was given was around 19% for the entire year, so do you think that you will be able to still reach that 9%-10% growth with just 3% growth in the first quarter?
Given that the domestic OEM in the Pen segment has seen a bit of drag because that has not done well for us, so do you think that that will revive from these levels, or should the overall 14%-15% growth be driven by the other two categories and Pen would still be in the maybe 5%-6% range for the overall year? That's my first question.
Yeah. Thank you, Aradhana. To answer your question regarding the Pen growth, we would still stick to the guidance, what we have stated in high single-digit growth. Of course, OEM was a drag considering the other two categories doing well in terms of creative and houseware at 77% and 55% growth. Yes, the OEM overall was a drag in the Pen category.
But the growth, if we look at the overall growth barring OEM, we are still at the high single-digit growth, which we had projected. So as far as the traction is concerned in the domestic market as well as the export market, the traction is still the same. It's extremely good, what we have been seeing for the last two quarters. We're going to continue the same level of traction in the next few quarters as well. So overall, the guidance for the pens would remain the same as what we had guided during the early, early year.
And how much of this pen segment growth was value and volume?
So if you look at the overall thing, when we talk about 3%, it was mainly value growth. Because of the drag in the OEM thing.
How much of the contribution was from above Rs 10 category and the Rs 5 and Rs 10 category? What was the sort of mix?
See, same as compared to what we did in Q4. There is no change in the ratio between the mass and mid-premium and premium category. We are still at the similar level of what we did in Q4.
So close to like 50%, or 60% coming from sub-10?
It was 62% and 38%.
62% coming from sub-10?
From mass, yeah. INR 10 category, yeah.
Okay. One thing I wanted to understand on the own brand segment. What I understand is that obviously the own brand segment is better margin business for us, right?
So given that the contribution of own brand has increased from, say, 87% to 91% in this quarter, why has the margins not improved in line to the improvement in the own brand contribution going up? Is the understanding correct?
Are you referring to the PAT, or are you referring to EBITDA ?
No, I'm saying own brand business contribution has gone up on a year-on-year basis. Last year, first quarter, the contribution of own brand was around 87%. This quarter, it's around 91%. So I'm just trying to understand that will that not help in also improving our margins, or there is no direct correlation with own brand business going up and margins?
Aradhana, just to add here, since our own branded business is going up, and also we need to understand the fact that we are also entering into a lot of new creative categories where we are new in terms of the new verticals within the stationery category, where as a new entrant, we have to let go in terms of margin, but we are focusing more on the market share in that category. Overall, if you look at it, yes, there is an improvement in overall EBITDA level margins compared to what we did in Q1 FY 2025.
Okay. Just two more questions from my end. One around the steel bottles. The last three quarters, if I see, we've been hovering around the INR 12 crore-INR 13 crore number.
So what is the expectation for the entire year, given that we were expecting like a 50% CAGR growth in the steel bottle segment that would take us closer to the INR 70-odd crore number for the entire year? So are we still in line to reach those sort of numbers? Because if I see the current run rate, we clock maybe to INR 55crore-INR 60-odd crores. So how are we expecting the growth in the Steel Bottle segment to improve from the current levels? Because it's been stagnated in the last three quarters.
So currently, I would say from the overall perspective, we are still targeting and going to maintain the same growth trajectory that we have mentioned earlier.
Regarding the current quarter, I would say still there's a lot of material in the market from the import perspective, which was already in the market, which is slowly getting lowered in the market. But one of the good positive notes from our side is that we are getting a lot of traction in terms of volume growth as well as a little bit of value growth. And we are penetrating more and more into the domestic market, and we are getting a lot of traction even for the new range of models that we have launched in the last quarter. And going forward, I think we are going to increase as we keep on increasing our portfolio in terms of the product list. I think this traction will keep on increasing. And we are quite confident that we'll maintain the trajectory that we have aimed for.
Sure.
Just last thing. In terms of guidance, is it fair to assume that the pen segment will contribute like close to 9%-10% for the entire year? I just wanted to understand in terms of whether we are sustaining our guidance or not segment-wise. So 9%-10% of growth in Pen, 30%-35% of growth in Creatives, and a 50% growth in Steel Bottles. Is it fair to assume that we'll be able to deliver on these sort of growth?
Yes, Aradhana, we are maintaining our guidance.
And the EBITDA margins closer to 17.2%-17.5% range?
The operating leverage.
So yeah, as the operating leverage kicks in, we would try to maintain the EBITDA level margins. Yeah.
And any sense on how much of the Creative business is coming from now, the Disney products and Maped, in terms of contribution? Any sense?
No.
So we just mentioned that Maped is at a nascent stage. So while we build the market for these Maped products, which is a different range of products, we are testing the waters. We're testing the market. And once we are kind of through, we will see the accretion from Maped also.
Just too early stage. I think in the coming quarters, you will see more of a traction from a Maped sales.
And Disney?
Disney is stable of what we were doing earlier in the last few quarters. So the main traction, what you see in Q1, is mainly in our own brand.
Okay. Got it. Thank you so much. Thank you for answering all my questions.
Thank you.
Thank you.
The next question comes from the line of Jaiveer Shekhawat from Ambit Capital. Please go ahead.
Sure. So my first question is on your creative business.
It doesn't seem that you're winning market share or the growth that you're seeing is by aggressively discounting because you've not really seen any impact on margins. So if you could possibly expand in terms of what you're doing right, what product gap you're able to address effectively, and also who do you think, in your opinion, you're taking away market share from, this is the market research you might have done. Also, we are hearing more legacy pen players also trying to enter into the creative and office supply range. So how do you sort of plan to, again, continuously grow on this segment? That'll be my first question.
Yeah.
Thank you, Jaiveer. So answering your question regarding the Creative, as we mentioned that in the last couple of quarters, we have entered into many verticals, be it geoboxes, wooden pencils, the kit categories.
So all those categories are performing well. So overall, if you see the kind of growth what we got in Q1, it's to do a lot with the kind of innovation and the kind of the freshness we have brought to the entire product portfolio. And when we talk about the market share, I would say we are gaining market share. And at the same time, we are also benefiting from the overall increase in the market. Industry. Industry as a whole. So I wouldn't pinpoint any particular competitor, but yeah, it's overall the market is also doing well.
Understood. Second, on your expenses, I see that there is a sequential Q-o-Q decline that has happened. How much of that is due to the shift to the in-house manufacturing from job work that you were doing earlier? We won't have the exact numbers of the shift because from in-house.
Or if there are any other larger reasons which has driven that decline in expenses, Q1 to Q1.
The components which you're talking about.
Employee benefits.
Employee expenses.
And job work.
Other expenses.
Other expenses is because of the job work charges, etc. We have rationalized the employee expenses. So Jaiveer, to just answer your question if I've understood correctly, let me know. But then if you're talking of other expenses, the major part is job work, which is a part of the other expenses. And then it has gone down because that's where we see we're bringing more optimization in the leveraging and optimization in the employee cost. And employee case, when I say, if I were to look at the total employee cost, the line item which you see is the employee benefit, and the other one is what comes from other expenses, the job work, which appears in other expenses.
If in-house production increases.
Yeah. And as in-house production increases, we will see the expenses coming down gradually.
Understood. Very well understood. Last question. Could you talk about your existing capacities that you have across all these segments? And then given that you have outlined INR 80 crores-INR 90 crores, I mean, how would those capacities impose that?
So from the overall perspective from the capacity, I think in the steel bottle, as we have mentioned earlier, the Steel Bottle segment, we still have the capacity in line to grow with the target that we are aiming for. And when it comes to Creative and Pen as a category, I think along with time, along with time as the requirement arises, we have already planned in the CapEx for the future growth of these particular two segments.
As new and new categories come in-house, we will be adding more facility for those respective portfolio.
Or if you could just break down how much of CapEx is going into different segments. I understand not much is going to Steel Bottles, but between Creative and Pen, how would that split between that INR 80 crores-INR 90 crores?
INR 2.4 billion.
So overall, from the pen perspective, you say the overall volume will be around INR 2.4 billion as an overall in terms of Pen as a category. And when you're talking about the CapEx, for FY 2026, a planned CapEx of INR 80 crores-INR 90 crores has been earmarked to support the key strategic initiatives, including the establishment of new manufacturing facility in Valsad dedicated to writing instruments as well as the Creative as a segment. And of this, INR 26 crores are deployed in Q1 FY 2026 as a part of budgeted capital plan.
So we have placed orders for new injection molding machines and tip making machines. And we are planning to expand the Valsad manufacturing facility, expanding to 2 lakh sq ft in overall, which is going to be a new under-construction facility.
And also to add here, Jaiveer, to answer your question, as you know, most of our facilities are fungible. So it will be very difficult to say whether we are building capacity for Creative or the Pen division. So it's more to do with more fungible asset we are building. So I would say it's going to be contributing to both the categories.
That's very clear. Last question, if I may. I see a lot of your new product launches. I think these also, as you were rightly mentioning, are more appealing, especially to kids. You've got a lot of these cartoon characters as well, Avengers, Disney.
Is that also one of the factors that's helping you in terms of gaining market share? Are those sort of products not available? And then, of course, there must be IP rights as well associated with them. It sort of also insulates competition from copying you?
Yeah. It's also to do with, I would say, as I mentioned earlier, it's the overall change of portfolio of what we have done in the last couple of quarters. Our focus is more, and our endeavor is to bring more and more freshness in the product and the innovative side to do with the combinations and the overall designing. We have really worked very hard. The entire R&D team has worked hard on the designing part of it. So I think now we are seeing in the kind of response we are getting, we are seeing that result.
Sure.
Thank you so much and all the best.
Thank you.
Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants in the conference, please limit your questions two per participant. Should you have a follow-up question, we would request you to rejoin the queue. The next question comes from the line of Aliasgar Shakir from Motilal Oswal. Please go ahead.
Yeah. Hi. This is Ali from Motilal Oswal Mutual Fund. So a couple of questions. One is on the margin. You have indicated that you have scope to improve margin by 200 basis points, and part of that can come from operating leverage. So just if you can share what kind of revenue scale or what kind of growth in the next couple of years will make you achieve? Again, we have indicated maintenance kind of growth.
So I just wanted to understand how much is the margin linked to the revenue and the mix of the business so that we can measure the improvement in margin from that point of view.
So Ali, as you're aware, just to share with you that we maintain the short-term and the medium-term projections, which we have shared with you earlier. So the margins are also like last quarter, we had said that the projections for the coming period, we'll maintain a minimum margin, which we saw, EBITDA margin, which we saw in the previous year, the entire year. And we only kind of see it going up north. And that was the reason because we have creative as a segment where we are doing a lot of in-house manufacturing. And that adds to the margin.
And that is where we have also kind of invested in man and machines here, which we'll see the operating leverage to improve the EBITDA margin in the coming quarters. So in the short and medium term, we look at a growth of 14%-15% categories for the next two years. And this is with a given set of production range and the given set of business which we are in.
Got it. So can you just indicate, I mean, if you are doing this mid-teens growth, then with this mid-teens growth, you should be able to achieve the 200 basis point margin improvement in what, two years, three years' time? And what mix do we believe by then creatively achieve?
A mix of, can you repeat the question again?
The question is, just follow up on this is basically when you're seeing mid-teens growth that you can do at overall basis, and then this should allow you to reach 200 basis points margin improvement, right, in the next two, three years, correct? So if you can just indicate what is the mix of creative in the overall business till that time.
The revenue mix has been changing since last year where we see the creative's contributions increasing with our spends. But then that is all given within the total revenue going up. So none of the individual segments' revenue will only increase, but the proportion of creative is certainly going to increase in the coming period for the next two periods. Still, we see a stabilized number of whatever because the base is still very small.
Last year, we were just at 170 basis points, and this year we're going to just grow year -on -year. So revenue mix of steel bottle and creative will increase.
Okay. Okay. I'll take this offline and have some follow-ups here. Second question is on the Creative side. So Creative growth obviously is coming also from a lot of new product developments that you are doing. But can you just explain what is the overlap and distribution? Is the creative entirely part of the Pen's distribution? And what is the penetration today in our overall network that we have in creative and how much scope do we have? So I was just trying to understand the growth that creative can get from distribution expansion.
Yeah. Yeah. And so when we talk about the overall coverage of Creative as a category, we are already at 68,000 outlets.
We are planning to grow from here further, but at the same time, consolidating the distribution network of 68,000 outlets. We would like to further increase the per outlet share for at least the next few quarters. And from there on, we will try to increase the number of outlets. Yeah.
Got it. So the lever is more basically increase in consumption per outlet than actually the increased expansion.
Yeah.
Yeah. Got it. Okay. Understood. That is clear. I'll come back in the queue for if I have any follow-ups.
Thank you.
Thank you. The next question comes from the line of Rajesh Joshi from Chrys Capital. Please go ahead.
Yeah. Good afternoon, sir. Am I audible?
Yes, sir.
Yes. So my first question would be on the gross margin. You alluded to the fact that the gross margin expanded due to a change in the mix.
So was this mix largely market-driven, or did we take some portfolio changes during the quarter, and how do you see this going ahead?
So the margin of when you say asking, was it because of the portfolio change of products mix? It was a combination of both. It was market-driven. Obviously, when we kind of are introducing products in the market, like we got in the Creative segment, it is all market-driven. We cater to the market taste and expectations. Plus, we also have our own innovations which can create new market for our products. So our products also create new market. So the entire thing is a mix of both.
That's very good. So I was actually coming from the sense of mass versus premium mix which affected the gross margin. So on that front, how are we seeing things?
No.
So the gross margin, when you're talking about the gross margin, it is obviously because of better product mix, the change in the product mix, and sale of high-value products. Company enjoyed higher ASP in Q4. Company was trading and increasing its creative portfolio, and there was a lower share. So once we started off, we increased the share of in-house manufacturing. Obviously, it increases our gross margins too.
Got it. Got it . And on the segmented margins, so EBITDA margins specifically, the Bottle business, I believe, was breakthrough last quarter. So this quarter, how would that be?
Yeah. So the Bottle division, the last quarter, we were EBITDA positive. So we came EBITDA positive, and we continue to kind of scale up on that front.
Okay. Got it. Thanks a lot.
Thank you. The next question comes from the line of Resha Mehta from GreenEdge Wealth. Please go ahead.
Yes. Thank you. Compliments on the margin comeback, and good to see some very differentiated new product launches on the presentation. So the first question is on the sales growth. So sorry for just harping on this, but if we look at so while in the last two quarters, both Q4 and Q1, we've grown very heavily. But if I look at H2 of the last financial year, the base was very high. We grew by 18%. So on that base, just wanted to check, is a 15%-16% kind of CAGR that we have spoken about, is that something that is possible?
Yeah. Yeah. Exactly. So we are working towards that only. And so that 15%-16% growth is very, very achievable looking at the current trend and the traction what we are getting from the market.
Got it.
On the margin side, so when you say the margins will be maintained, so when you say maintained, do we look at Q1 margins for the full financial year, so at 17.4%? So what FY 2026 margins, what do they look like? So do they tend to be more towards the 17% that we have seen in Q1, or they may go up to like 18% kind of a number?
No. Resha, here what happens when we say maintain is that we had the entire FY 2025 margin, which was at 17.1%. And there would be different margins for Q4 and other quarters. When we say maintain that, we are going to maintain this margin and only go northwards once we kind of start benefiting from the operating leverage, which will go to increase the EBITDA margin.
Got it.
At least 17.12% is something that we'll try and maintain for this financial year. Right?
We will maintain that.
And in Creatives, what is our target for in-house manufacturing share for this financial year? And what were the margins in FY 2025 for Creative?
So as such, we don't have any separate data for Creative as a category or Pen because the facility and the resources used are common for stationery and pens. So we don't have a separate percentage category-wise. But yes, to answer your other question, almost 70% of the products now are in-house, which will go further increase to almost 80%-85% in the next couple of quarters.
Understood. And on the working capital, we had guided for some modest improvements in working capital. So in this quarter, have we seen some improvements in inventory and debtor days?
Working capital. See, it's a mix of new products which we are getting in. And also, every time we have these new products, we say that the working capital goes up. But I would say that it is just a matter of time as the new products, the new launches stabilize. We will see the working capital coming back to our original levels. So because previous call also we are discussing, we are expanding our product basket. And as a result, we must stock up on multiple SKUs before these levels rationalize as the products discover it, right? So once the products mature, you will see the inventory levels coming down. On the receivables front, we have extended higher credit period driven by typical business nature of the export on the export front.
So I think would it be safe to assume that sequentially working?
Sorry, Resha, ma'am.
Maybe request that you return to the questions.
I just have two quick questions if that's okay.
Yeah. Go ahead.
Yeah. Thank you. So would it be fair to assume that maybe working capital would have kind of seen slight deterioration sequentially?
I wouldn't say deterioration, but I would share the numbers in the half-yearly outlook. And when we say it is going to be at the same levels, and only better. So when we share the numbers.
Right. And on the exports front, you mentioned that Bottles, we are not seeing any export revenues. But on the Creative side, are we seeing any export revenues beat in our own brand or OEM? And the last question is that maybe while it's at a very nascent stage, but how's the response wherever we've launched it in the limited number of markets?
Do we also get the mandate for manufacturing for them sometime soon?
When we talk about Creative as a category in export market, the demand is there, but we are not able to meet their expectations. We are focusing more on domestic sales rather than exports for the Creative as a category.
Okay. On Maped, and just to follow up there, when we say we are not able to meet their expectations in terms of the product, probably it is not as per their specification or what is it?
Capacity. Maped, I think, like you mentioned, it's very early, I think. In the current quarters, the product mix that we have for the domestic market, it's a very mid-premium kind of a category.
Along with time, I think we are quite confident that we'll be able to penetrate the market and create a substantial growth number, or I would say a contribution number by Q3 and Q4. You will see the number.
And on your previous question, it is not about the expectations of the product lines. It's more of the capacity constraint, and we are focusing more on domestic to increase our market share.
Understood. And Maped manufacturing?
Overall Creative. Overall Creative as a category. Because as we said, we are increasing the manufacturing base for creative to increase it from 70% to 85% to bring it in-house.
But I think initially the mandate was just for distribution. So have we also now got the balance?
So this is for Creative from a domestic, our own brand perspective. When you ask the question for the export market.
And for Maped, yeah, it is for marketing and distribution for the domestic market.
Got it.
Thank you. The next question comes from the line of Kishore Kumar from Unifi Capital. Please go ahead.
Thanks for the opportunity. I just have one question. So given the sizable growth in Creatives and Bottle segment, is the aggressive marketing because of the credit period or the higher credit period is actually driving the demand, or organically the industry expansion is also helping the brand?
So the credit period, what we are talking about, has been same as what we have been doing for the last couple of years. There's no increase in the credit period. But yes, the product appreciation and the response and the traction what we are getting is much better than what we were getting earlier.
So we just and last year also, a couple of quarters, we could not grow because of the capacity constraint. But once the capacity, we built up the capacity. Now we are growing because we are able to meet the demand in the market.
Got it, sir. So overall, you mentioned 70%-80% is in-house now. Is this number for the Creatives or for Pens as well?
No, no. For Creatives, Pen is 100% in-house.
Okay. 70%-80% for Creatives in-house. Got it, sir. Got it. Thank you.
Thank you. The next question comes from the line of Deepesh Sancheti from Maanya Finance. Please go ahead.
Hi. Am I audible?
Yes. Yes.
Okay. Congratulations on a great set of numbers. Just one question. ROE has dipped from almost 24% to 11%.
Now, I heard that you were mentioning that you were planning to grow about 15%-16% CAGR every year in terms of revenues. Just wanted to know what ROE we should be looking at, which the company will be able to maintain over the next two, three years?
So primarily with the operating leverage kicking in once the new plant also gets operational and as the EBITDA margins further improve, the bottom line contribution will definitely is targeted that we improve on the ROE, definitely. But it will be not the right place to give you the guidance on that at this stage. Let at least one more quarter go, and we will be able to tell you that.
As in, are we looking at a particular number of 15% or something?
I mean, should we as an investor look at around 15% as a reasonable ROE the company will be able to maintain in the next two, three years?
Yes. Our target would be to achieve even slightly higher than that as we go because we have the right product mix. The installed capacity would be in place at that time. On all fronts, we are growing. So definitely, we will look forward to that.
And where does this growth come from? Because this time the Pens revenue was about a growth of about 3%, whereas Creative and Houseware actually got our revenues up. So I'm talking about the next one or two years. Where will the actual growth come from?
So from Pens, high single-digit growth is what we are envisaging.
This particular 3% is only because of a drag on the domestic OEM primarily, which has been a known factor to all of you. So on own brand, of course, we have grown substantially. And that actual contribution came to about higher single digit even on the own brand. So hopefully, we will continue to maintain the 9% what we had indicated.
Okay. And are we planning any significant CapEx and any debt which we are going to plan for this kind of CapEx?
We already explained in the part of the call, CapEx, that we have an ongoing CapEx program of INR 80 crores-INR 90 crores, of which INR 26 crores were deployed in the Q1 of FY 2026. We ordered about 50-plus injection molding machines. So it's part of the growth plan as envisaged.
And this is going to sustain this kind of CapEx.
So we should expect around a CapEx of around INR 1,900 crores coming every year?
No, no. This was part of our IPO process also and the regular growth that comes in. We have been investing in our molds and all from time to time with new product launches. So every year, there is always a CapEx program. But this year, we are ending with all the what we had been committed on the IPO.
Thank you. The next question comes from the line of Aradhana Jain from B&K Securities. Please go ahead.
Thank you for the opportunity. Just a couple of follow-up questions. One on the capacity utilization. While you did mention that you have CapEx across Pen and Creative, and then there's a fungibility aspect to it.
Just in terms of capacity utilization across Pen/Writing instruments, Creative, and Steel Bottles, if you could just throw some light on that, how's the utilization spending?
Historically, also when we reach an optimum of around 70%-75% of our capacity, we tend to develop new manufacturing facility for the same. Like mentioned earlier, we have a CapEx in plan, and we have already in the momentum towards installing a new manufacturing facility in Valsad, for which we have already given a molding machine, and we already placed the molds order. And also, assembly machines are in place. I think for the future growth, for the growth coming forward, we are in place with the CapEx and the facility, which will help us assist in the targets that we have for each respective brand, especially for the Creative and Pen as a category.
Is it fair to assume that we've reached the 70%-75% peak capacity for Writing and Creative? That is why we are expanding the capacities with the new CapEx.
Yeah, more or less, we are on that line of 70% capacity. But because, as you know, we'll have to pre-advance because we have to create a facility. As per our historic norms, we are moving towards creating a new facility.
And in Steel Bottles?
Steel Bottle, like I mentioned earlier, we have a capacity for this year's target. So we have little room to achieve those numbers. But going forward, as our overall turnover increases, we will be adding facility as and when required.
With the INR 40-odd crores that we've put in, that has us at a turnover close to around 3x, right?
So maybe till the time we reach INR 100 crores-INR 120-odd crores of top line, the current capacity should be sustainable, right?
Yeah. So more or less on the similar lines, other than some minor small machines here and there.
And in terms of Steel Bottles, where are we selling it? What are the channels where we are selling these Steel Bottles? And what is the TAM for your Steel Bottle coverage, the retail footprint that you can reach?
I think overall, from the domestic front, we are available in all the fronts. We are actively and aggressively making traction in the domestic front as well as the modern trade and the e-comm platform. And we are also trying to focus a little bit from the international market perspective, where we are trying to make little room and trying to get little export done in our country.
So have you started exporting to Newell again for the steel bottles?
So very small volume we have been exporting for the export market. So I think going forward, we will try and increase that share as well.
And in terms of your Creative, like you said that around 68,000 outlets you've reached, and you said that you want to now focus more towards increasing your throughput per store. But what would be the TAM there, and why are we wanting to settle down at the 68,000, 70,000 outlets right now, in case the TAM is higher? And do we have all our products across all the outlets, or it's selective? And what is the update on your mechanical pencils, and how much is the contribution of mechanical pencils and creatives right now?
So, see, the overall TAM, as you compare with the overall stationery market, is huge, of which we are doing only 68,000 outlets. So I would say, and also when we look at the individual product-wise coverage, we feel there is still a lot of room left for us to improve in that. And that's the reason why we want to consolidate and increase our throughput in those 68,000 outlets rather than focusing on getting new outlets. So that is number one. Number two is when we talk about the mechanical pencils. I would say it has helped us, but also the other products have helped us achieve this kind of growth and this kind of number.
My question was more to understand the new mechanical pencils that we introduced last year in the second half.
How is that coming out, and have we been able to reach pan-India with those pencils, or there's still supply constraints there? Just to understand growth aspect.
As we said last time, also the response was very good. And now there is no supply constraint, and we are launching almost pan-India. We have launched the product, and we are just hoping to grow from there.
Okay. Just last, in terms of any hero product that you have across all your three categories, is there anything that's standing out across all your three categories, which is Pens? I know Hauser XO is your.
Sorry to interrupt, Ms. Aradhana?
Yeah. I just have this last question. So Hauser XO is one. So if you could just help me understand that, is there in creative any particular product that's standing out?
So it's competition-sensitive data, so we would not like to talk about it. But yes, there are many products. As I said, there's not individual products, but there are many products which are doing well. And the kind of projection what we have, I think we will need we have to be dependent on seven, eight categories rather than one category to grow. So I think we are in the right direction in terms of the kind of products what we are launching and the kind of response what we are getting. And we are quite confident that by the year end, we will be meeting our expectation. Thank you.
Sure. Thank you.
Thank you.
Thank you.
Ladies and gentlemen, in the interest of time, that was the last question. I would now like to turn the conference over to management for closing comments.
Thank you, and over to you.
Thank you, everyone, for taking time out to participate in this call. In case of any queries, reach out to our investor relations advisor, MUFG Investor Relations. We wish you all the best and hope to interact with you soon. Thank you so much.
Thank you. On behalf of MUFG Intime India Private Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.