Ladies and gentlemen, good day and welcome to the Flair Writing Industries Limited Q4 and FY25 earnings conference call. As a reminder, all participants' lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star, then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Devansh Dedhia. Thank you, and over to you, sir.
Thank you. Good afternoon, everyone. Welcome to the Flair Writing Industries Q4 and FY25 earnings conference call. Today on the call, we have Mr. Vimalchand Rathod, the Managing Director, Mr. Mohit Rathod, Whole-Time Director, Mr. Sumit Rathod, Whole-Time Director, and Mr. Alpesh Porwal, the Chief Financial Officer. 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 we have uploaded on the exchange. It gives me immense joy to inform for the first time our company has crossed INR 1,000 crores in revenue in FY 2025. During the quarter, we have kept building on our key product segments with new and attractive product launches, catering to a wide spectrum of consumers. We continued our growth during the quarter and over the broader second half of the financial year, with our pen division leading the front, supported by growth momentum in our diversified segments of Creative and Steel Bottles and elsewhere. The foundation of revenue continues to come from our very strong portfolio of own brands.
Among the other important highlights of the quarter and financial year was our announcement of strategic investment in Flomax for building a renewed focus on the pencil category. We have also undertaken a distribution partnership with Maped for its stationery products. Maped is one of the largest European stationery brands, and we are hopeful to deepen our business relations with them in the near future. I am happy to announce that the Board of Directors has recommended a dividend of ₹1, that is 20% of face value per share for the financial year 2024-2025. I now hand over the call to Mr. Alpesh Porwal, our CFO, to discuss the financial performance. Thank you.
Good afternoon, everybody. Moving to the consolidated performance of the company for Q4 FY2025. Revenue from operations for Q4-2025 was at INR 298 crores, an increase of 19.2% year-on-year compared to the corresponding quarter of previous year. Gross profit for the quarter was INR 145 crores, which increased by 16% on a year-on-year basis corresponding quarter of previous year. Gross profit margin came in at 48.6%, down by 130 basis points year-on-year. EBITDA for the quarter was INR 47 crores. Margin was at 15.7%. Profit After Tax for the quarter was at INR 31 crores. Margin is at 10.3%. Moving to the FY25 results, consolidated performance of the company for FY25. Revenue from operations for FY25 was INR 1080 crores, an increase of 10.3% year-on-year. Gross profit for full year was INR 548 crores, which increased by 11.1% on a year-on-year basis. Gross profit margin came in at 50.7%.
Gross profit margin remained stable over the year. EBITDA for the full year was INR 185 crores, declining by 3% year-on-year. EBITDA margin was at 17.1%. Profit After Tax for the period was at INR 119 crores, remaining stable year-on-year. Profit After Tax margin for the year was at 11%. On the qualitative front for the results, the employee expenses and other expenses have increased at a higher pace compared to our revenue during the financial year. This was primarily due to an expanded employee team as we invest to build capability for accelerated growth in the upcoming financial year. Manufacturing expenses remained elevated on account of higher expenses due to job work and other related expenditures as we ramped up our workforce due to volume demand. Utility expenses rose due to higher manufacturing activity as highlighted above.
As a counterbalance, we have undertaken a major sustainable green initiative with installation of rooftop solar-powered projects at our manufacturing unit in Valsad and Daman, which on completion will be about 1.85 megawatts. We shall share with you all the accrued benefits of the renewable power project in the upcoming call. The total employee expenses for the year increased by INR 26 crores from INR 146 crores to INR 172 crores for the financial year, which is 18% year-on-year. Our growth this year has been significantly supported by continued investments in our people. We have strategically expanded our workforce, which is a critical pillar as we scale. The expansion of workforce was undertaken across functional teams of Sales and Marketing, R&D, Administration, etc. These steps align with our commitment to remain competitive in the talent market and to recognize the valuable contributions of our employees.
Going forward, we are confident that for these costs to normalize at the same levels, and we should get benefit of operating leverage from 2025-2026 onwards. Our working capital cycle has reduced by 33 days quarter on quarter to 113 days and has been lower compared to the average working capital cycle for FY2025. First, the inventory days. As a growth-oriented company, we constantly introduce new products in the market. Every new product launch is followed by a demand discovery and feedback phase wherein during this period, we must keep our inventory for those products at a certain level to be able to cater to the demand for our newly launched products. Post the market feedback, this inventory levels get adjusted based on inputs and forecasts of demand by our sales and marketing team, which completes the cycle of a new product launch.
On the Debtors' front, export sales and high share of premium and premium production sales contribute to a typically higher credit period. Our credit period in export sales ranges from 90 to 100 days. Thus, given the nature of our operations, debtor days and inventory days have historically remained a little heightened and thus contribute to an overall larger working capital cycle. Going forward, we hope to optimize our working capital by increasing our payable days, rationalizing our inventory levels both at factory level and at product segment level. Overall, our efforts are towards reducing working capital cycle by 5-10 days for the coming year. Our capital expenditure for FY2025 stood at INR 131 crores. We continue to invest in our fixed assets and expanded the base of operational assets with investments in plant and machinery and molds.
We envisage a CapEx program of INR 80-90 crores in the next financial year for setting up a new unit in Valsad for writing instruments, fund CapEx for our subsidiaries, and for potential growth opportunities. Now, on to the business segment highlights. We achieved healthy year-on-year growth across all business segments. Our own brand sales. Own brand sales have continued their strong upward trajectory with consistent growth across the domestic market. Overall, own brand sales grew by 18% year-on-year to INR 251 crores. For full year, this number stands at INR 940 crores, registering a 12% growth. Domestic market has been a constant source of strength and underscores the favorable market positioning of all our products. OEM sales. OEM sales showed strong momentum for the second consecutive quarter across both geographies, with total quarterly OEM sales growing by 26% on a YOY basis.
It pleases me to report that we are able to maintain the OEM contribution at INR 139 crores for the full financial year despite challenging market conditions. Coming on to the product segments, first, the pens business. The pen segment grew 8% year-on-year to INR 222 crores for Q4 FY25. The segment also reported a 4% growth on a full-year basis to INR 828 crores, which was heartening to note given the stable performance during H1 FY25. We are pleased to report impressive growth of 9% year-on-year in our pens business in the second half of the financial year. Our robust performance in the second half boosts our confidence on maintaining this growth trajectory for the upcoming years. During this year, we released 65 new pens, of which 43 are targeted to mid-premium and premium segments, and 22 new pens launched in the price category of INR 10.
We continue to execute on our premiumization strategy with two-thirds of new releases geared towards the mid-premium and premium segments. Creative segment. The Creative segment achieved impressive growth of 48% year-on-year for Q4 FY25 and 18% for FY25. The revenue contribution stood at INR 48 crores for the quarter, that's Q4, and INR 171 crores for the full financial year. We expanded our product portfolio by introducing nine fresh offerings under the Creative range during the quarter and overall 34 new products during the financial year. We established a wholly owned subsidiary under the name of Monte Rosa Stationery Private Limited, which will cater to the business of distribution of Creative products of Maped. Maped is the biggest French stationery brand. It's a specialized stationery-focused brand with a strong legacy and an extensive global footprint.
Maped products will augment our mid-premium product segment and improve product basket within the Creative offerings. We also forayed into a strategic venture through the incorporation of a step-down subsidiary called Flomax Stationery Private Limited. In this subsidiary, the company has partnered with other experienced industry partners to manufacture polymer pencils, wooden pencils, sharpeners, erasers, etc. The facility for this subsidiary is based out of Surat, and an annual production capacity of 130 million pieces. The existing expertise of both partners, shared manufacturing skills, and deeper consumer knowledge will enable creating quality and innovative range of new stationery products, particularly aimed towards pencils. Pencil is one of the biggest product categories under writing instruments, and we will now be addressing and servicing this category with a renewed focus.
We have invested INR 14 crores in fixed assets with potential to generate revenue of two times asset turnover within the first year itself. Coming to the steel bottle segment, we continue to scale the steel bottle segment, as a revenue contribution for the quarter increased by 74% year-on-year to INR 12 crores for the corresponding quarter in the previous year. On full year, the segment generated sales worth INR 44 crores in revenue, providing us with substantial growth delta. During the year, we have added 30 new SKUs, more than doubling our existing SKU count, which now stands at 52 SKUs for the financial year, and we look towards two key levers for growth in the business: expanding portfolio and increasing distribution reach in the general trade as well. Our outlook on the upcoming year remains quite optimistic with aspirations of broad-based growth across all segments.
This would be driven by new product launches, enhanced manufacturing capability, efficient distribution for effective granular reach. Capacity addition of 0.2 billion pieces will operationalize in the next financial year. This 10% rise in installed capacity and given typical capacity utilization levels in the business, which is 7%-7.5% increase in effective capacity, will be a key lever for growth within the writing instrument segment. We will also actively scout opportunities for increasing our export sales. We remain steadfast to our core strategies for sustainable growth. These include, first, innovation and feedback-driven portfolio expansion, addressing market requirements across price points. Second, deepening distribution throughput from our existing network. Third, exploring partnerships and new avenues for growth. Fourth, focusing on quality operations with a greater share of in-house manufacturing. Fifth, concentrated efforts for successful execution of premiumization policy.
Thank you, and I request the moderator to open the floor for question and answer session.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles.
[audio distortion]
The first question is from the line of Shraddha Saurabh Kapadia from Asian Market Securities. Please proceed.
Hello. Hello.
Yes, ma'am. Hi.
Okay. Yeah, yeah, sure. Thank you for the opportunity. So I have a few questions. So firstly, what is the domestic and the export mix for the current quarter and the full FY?
In the past, the management has mentioned the plans to enhance the in-house manufacturing. So how should we think about EBITDA going forward in light of this? Additionally, are there any key levers expected to drive the EBITDA margin improvement in the coming quarter?
Yeah. So answering your first one, which is about the revenue from operations. So in Q4, the domestic top line was at INR 240 crores, which was up by 27% corresponding quarter in 2024. And the export revenue was at INR 58 crores, which was lower by 5% compared to last year, Q4. And the overall revenue grew by 19% at INR 298 crores compared to INR 250 crores in year 2024. And when we talk about the overall yearly revenue, the domestic revenue increased by 13% to almost INR 900 crores, and export revenue was at INR 182 crores, which was stable compared to last year.
Overall revenue grew by 10%, which is at INR 1,080 crores. This was the other question, Shraddha.
Plan to enhance the in-house manufacturing. So how should we think about the EBITDA going forward? Additionally, are there any key levers which are expected to drive the EBITDA margin improvement in the coming quarter?
Hi. So yes, the increase in capital expenditure, CapEx, which we talked about, is closely linked to our strategy for driving future EBITDA growth. Though it's important to understand the timeline and the nature of these investments. Currently, 70% of our Creatives are now produced within our in-house manufacturing facility, marking a strong step towards backward integration. This has been due to constant efforts and focus towards realizing the same. As we continue to scale the capacity and efficiency of this in-house setup, we expect to see gradual improvement in margins from this segment.
The strategic benefit of backward integration lies in our ability to gain tighter controls over production cost, improve quality consistency, reduce reliance on third-party vendors, and streamline our supply chain operations. So as we expand our in-house capabilities, we anticipate lower per-unit costs, faster turnaround times from ideation to commercialization, and greater flexibility in responding to market demands. So over time, with increased volumes and optimized resource utilization, we are confident that the Creative segment here, for example, will increase its margins across products. This transition not only enhances profitability but also strengthens our overall competitive position by ensuring that we retain more value across the entire production and distribution cycle. So in a sense, expanding in-house manufacturing is just not a cost-saving measure. It's a strategic enabler that positions us for long-term sustainable growth and improved EBITDA performance.
The rising share, secondly, one more thing, the rising share of mid-premium and premium products in our pens category, which attract higher margins, is expected to have a direct and positive impact on our EBITDA margins. These products typically offer better pricing power and contribute to a higher gross profit per unit sold compared to that mass market offerings which we have. So as their proportion in our overall sales mix grows, the blended margin improves, leading to enhanced operating leverage.
Since many of the fixed assets costs related to manufacturing, distribution, and administration will now remain constant, which I mentioned earlier in my opening speech also, that we see this has reached its levels and plan to continue at the same levels going forward, since it will remain constant, the higher revenue contribution from these premium segments scales more efficiently, allowing us to retain more of every rupee earned at the EBITDA level.
Thank you for the details. So I also wanted to understand that is the company still targeting the EBITDA margin of 19%-20%, or is there a revision to that? And also, if you could give a basic guidance in terms of the revenue for future, that would be great.
So Shraddha, Shraddha, as we grow now, we are investing, as I explained to you, and we are investing in CapEx. We are investing in human capital, plant and machinery. There's a lot of backward integration going, new products being launched, enhanced the cycle of the number of new products you will see where we have grown, for example, from Creative, in-house manufacturing has gone up, which we were doing at 40%-45% is now up to 70%. So all these things will start. The investments will start paying off after one or two quarters of in-house manufacturing. And hence, the EBITDA levels, which we say today, will improve marginally or maybe a little more in the coming quarters.
However, two years down the line, where we say that keeping everything constant, which is not going to happen, but that we are not going to have additional segments or more investments, if everything remains constant at this late, the growth rate at which we are going, we will go back to the EBITDA levels of earlier levels.
Sure. Thank you so much. I'll fall back in the queue for the question.
Thank you. Thank you.
Thank you. The next question is from the line of Atul Mehra from Motilal Oswal. Please proceed.
Yeah, team, good afternoon, and thanks for the opportunity. My question is top-line growth. So as you head into the current financial year, what are the various levers you see on top-line growth, and what should be the expectation for the current financial year in terms of growth that you are targeting internally?
Yeah. Hi. Hi, Atul.
We are sticking to our overall target of 15%-16% growth in the coming year, with growth coming from all three divisions, which is pen, which we are targeting about 10%. Because if you look at the second half of the year, 2025, we have almost grown by 9%-10% in Q3 and Q4 as well. So keeping that momentum going forward, we are very confident that 10% growth is achievable in the coming year. As far as Ceative is concerned, there were a few hiccups in H1, which we overcame in Q3, and Q4 was much better in terms of sales because a lot of products we started making in-house. And those projects, which we are launching one by one, are giving us the fruits. So going forward, also, we are expecting at least 40% growth in this division alone from the coming year.
Also to accelerate the growth in Creative, the main reason why we invested in Flomax was to help us in Creative for better growth in terms of the basic range of pencils, polymer pencils, wooden pencils, eraser sharpeners, which will help us to accelerate the growth in Creative. When it comes to bottles, of course, we have grown to the level of INR 44 crores in last year. Coming year as well, we will keep the momentum. A lot of verticals within the bottle segments are coming up in the coming this quarter and Q2, where the growth will further accelerate. We are very confident that to cross about 50% growth in bottle segments, steel bottle segments as well. Overall, it will be around 15%-16% growth year on year. Yeah.
And just to end.
Yes, please go ahead. Yeah. Yeah.
Just to add to what Mohit said now, as our steel bottle segment began scaling meaningfully over the past financial year, I'm pleased to share that it has now turned EBITDA positive, a significant milestone in its growth journey. So this turnaround marks the major transition of the segment from an investment-heavy phase to the one that is now contributing positively to the company's operating profitability.
Got it. Got it. And thanks for that. Secondly, in terms of EBITDA margins, say, for the current financial year, would it be safe to assume that it would be aggressive given a large part of OpEx investments have been already made? So 17.1% where we ended the current financial year at versus 19.5% the previous year.
So would it be safe to assume that we would see an expansion, maybe not to the fullest content that could be achieved maybe over two to three years, but from year on, margins should be on the higher side versus where we ended?
Yes. It certainly all our calculations also point towards the same thing. We have planned out, and the numbers will certainly go up. Like I put up earlier also, I would not like to use the word plateau, but yes, we have reached at the peak of all our expenses when it comes to investment in manpower and other expenses. So we have plateaued out there. Now, this is just an accretion out here. Any additional rupee earned will be added to the EBITDA numbers.
Got it. Got it. Sure. Thank you very much. Thank you so much.
Just to complete the answer, that it will be aggressive. Yeah. It will be aggressive. It will be.
One final question, if I may, on the working capital side. So this financial year, there has been a slight increase in working capital days. So what is the outlook for that in FY26?
So working capital, what we see out here is this year also we have improved on the working capital front, like on quarter on quarter, if I see from 146 days to 113 days is where we moved, and our endeavor out here is the next financial year, we improve this further by around 10 days out here. Given the nature of our business and our credit policies in the industry, a good 10% would be a good improvement in the coming year.
10 days. Got it. 10 days.
Yeah. All right. Thank you and all the best.
Thanks.
Thank you. Thank you.
Thank you. The next question is from the line of Jerrish Hakavat from Ambit Capital. Please proceed.
Sure. Thanks. And congratulations, team, for crossing 1,000 crore milestone. I think I just want more clarity on the margin side. So the decline that we see on the gross margin side on both our YoY and QoQ basis, is that also in part because you might have increased your trade margins for pens in order to counter off the competition? Because you've also seen your competitor has aggressively scaled up in pens. And also, what will be your strategy to protect and grow your market share here? That'll be my first question.
Yeah. So to answer that, I would say it's more to do with the product mix, what we have sold in Q4.
As we mentioned earlier, we've launched about 22 products in the entire year in mass segment, and particularly the 10-rupee segment, which is doing exceptionally well for us, and also, you can say as we have re-entered in the five-rupee segment, we have launched five to six models in that category as well, and it's just picking up. So if we see overall as a category, our volume has gone up by 9%, which is a positive sign in terms of market share, what we have taken from others, and at the same time, it's going to continue the same momentum going forward, and also there is the Hauser XO, which is also at 10-rupee price point, is now, I think, one of the largest selling products in pen at 10-rupee segment in India.
It's also to do with that where there's a little contribution coming from that as well in pen.
What I understand is because you've also re-entered into the INR 5 price point, that has also contracted some of your margins. How large do you expect that segment to be out of, let's say, the INR 900 crores of revenues that you're targeting next year from pen?
We are targeting not more than 5%. We are going to restrict ourselves to 5% in that category, not grow further.
Sure. On the steel bottle side, I mean, if I see quarterly revenue run rate that has been flat over the last three quarters at around INR 12-13 crores per quarter, have there been any challenges either probably from the government side or possibly in terms of reception of your product in the market?
And then, of course, you've already guided for the outlook, but seems somewhat reduced versus the earlier guidance. So any challenges there?
So no, there are no major challenges. In fact, if you see, there's been a drastic increase as compared to last year. And even for the coming period, we have almost in the last quarter, we have launched almost 30 new products, for which the momentum majorly into the domestic and the MT and the e-commerce market will show in the coming quarters. And also now that we have stabilized the distribution network to almost 55 distributors, that will help us penetrate in these particular segments.
Sure. My last question is on your OEM business. So it seems like there's a good pickup that has happened.
So if you could help me understand what has happened there, and then how has been the pickup across both domestic and exports?
So overall, OEM business compared to last year has been stable at INR 139 crores, where in export, we have seen a rise of almost 9% because of the demand coming back globally. And at the same time, domestic, the sales have gone down by 9%. So more or less, we are at stable. And going forward, also, this looks to be stable, and export will grow further in OEM business.
So this 4Q, I mean, should I call the growth that you've seen in 4Q on a YOY basis, is that more of an aberration? And you expect this OEM business to remain stable? Is that understanding right?
Yes. Yeah. Yeah. In export. Primarily in export.
With the domestic, we don't consider any major increase coming from that segment we were dealing with. But export is increasing in the OEM business.
I mean, are there any geographies, particularly, let's say, Africa, Middle East countries, or US? I mean, I understand you also do business with Newell, but any specific geographies which are doing well, or is it largely Newell?
So it's mainly U.S. and South American market. [audio distortion] .
Understood. Thank you so much and all the best.
Thanks. Thank you. Thank you. The next question is from the line of Sneha Talreja from Nuvama. Please proceed.
Hi. Good afternoon, team. Just a couple of questions from mine. I think largely an extension to the previous participant's question. We have seen a sharp jump in OEM this time, both in our own brand business as well as export OEMs.
What's the most sustainable number for own brands and, I mean, on the export OEM front?
Yeah. Hi, Sneha. So going forward, when we talk about OEM, export OEM, as I mentioned earlier, it's going to grow further. Whereas the domestic, we don't see any growth happening there. But overall, OEM is going to be at the current level where we are.
This quarter's increase of domestic OEM, we can see that coming back to the original level.
Yeah. But that's very, very nominal. If you see, it's only a few crores. It's not much. It's only six, seven crores. So looking at the overall, yeah, of course, in percentage, it looks bigger, but overall, number-wise, it's not that great.
Understood. The second year in the steel bottles business, also, we've seen roughly around a run rate of about 12-odd crores for the consecutive three quarters now.
Of course, we are building around 40%-50% growth, which is what I think you mentioned for next year, 50%. What would likely lead to that? Is there any seasonality that we'd be seeing that from the second half of the year? Maybe start seeing it from the next quarter itself. What are you doing, basically, to achieve that 50%-odd growth number here?
Yeah. There are multiple things that we are doing in this particular category. Like I mentioned earlier, we have increased the number of SKUs, which more or less in the Q1 and Q2 will start showing penetration in the domestic front in all the categories with this GT, E-com, MT, and also a little bit in the quick commerce.
Going forward, we are also adding a couple of other categories in this particular segment to help us achieve that 50% growth target that we are aiming for. So overall, with the stabilized distribution network, I think we are quite confident with the range that we are adding that we'll be able to achieve that number.
Understood. And especially on the own brand domestic sales in pens now, if I take your own branded business and exclude your Creative and the Steel Bottles part, the growth is actually not very meaningful. What can actually lead to your own branded domestic high-end pens business growing? I mean, what's something which has been a challenge here in case you can speak about the challenge? And what can lead to growth coming back here?
Yeah.
If you see overall, see, there's no major challenge, as we mentioned earlier, that we have grown in terms of volumes by almost 9%. Overall, if you see the Q3 and Q4, the pen as a category, we have grown at the rate of 10%, which is majorly because of the domestic sales. So it is picking up. H1 was a little sluggish, but H2 has changed, and I think the momentum is going to continue in the coming year as well.
Understood. Understood. And on the margin front, if I'm not wrong, you said that anything over and above 17% is what you're looking for FY2026. Is my understanding correct there?
Yeah. With all the economies of scale coming in from the capacity increase and the operating leverage that has been just explained by the CFO, this should be further going up from the last number.
But the original 18%-19% levels will only come back in the next how many years?
We should be there by the end of the next financial year, which is 2026, 2027. However, I said it can also come in prior to that, but by end of next financial year, we'll be there. Looking at the current scenario and the investments and the kind of segments which we are in and the products which we have introduced.
Understood. One note. Thanks a lot, team, and all the very best.
Thank you. Thank you.
T hank you. The next question is from the line of Resha Mehta from GreenEdge Wealth Services. Please proceed.
Yeah. Thank you, team. So clearly, the high growth is coming at the cost of deteriorating working capital as well as margins, right?
So, just wanted to understand on the margin side, right, that whatever investments in terms of adding people to R&D, sales and marketing, all of that has happened necessarily only on the new categories, Creatives and Bottles, or has it happened even for pens?
Absolutely. So it's all across. It's all across, even for writing instruments, because since we are targeting almost 10% growth, to achieve that number, we have added in all the categories.
And what would be the capacity utilization for our Creatives and Bottles plants?
So for the Creative range, as you know, we have increased the in-house capacity. The earlier the training that we used to do from third party, now we have increased the in-house capacity to almost 70% of the goods being manufactured in-house.
Steel Bottles.
For the Steel Bottle, like we had said, that still the capacity and overall turnover, still it's a long way to go. But currently, we are almost achieving almost 40% of the capacity.
Okay. So that's at 40%. And what can be the optimum utilization level here?
So it can range in the 80%. It can range in the range of 75%-80%.
And sorry, I didn't get the utilization for Creative.
75%-80% utilization can be optimum. And in terms of revenue, this capacity can take us in the range of INR 120 crores approximately.
Right. And the Creatives, what is the current capacity utilization? I understood that 70% is in-house sourcing, but what would be our capacity utilization for Creative?
So all the new capacity is fully utilized, and so it's going to increase further.
It takes time since the installed capacity is, say, 100. Gradually, it's increasing, but yes, it's almost about 70% utilized. And going forward, also, this is going to continue to at least 75%-80%.
Our endeavor has always been, and our experience has been that it peaks up at 75%-80%. What Mohit just mentioned was that the new CapEx, which we are doing, gradually goes up and peaks up to those levels going forward.
Right. Also, can you just break down the INR 135 crore CapEx that we did? It was for which segment? How much has that enhanced our capacity by across different segments?
Segment-wise, I'll tell you the additions during the year, the breakup of INR 131 crores. Majorly it is into buildings, plant and machinery, and molds, and the other expenses, electrical resources.
So that.
Yeah, but this is for which category?
Yeah. INR 110 crores is only in buildings, plant machinery, and molds, out of which almost 60% of the investment is done on Creative front, where also we need to consider that most of the capacity, what we are building, are fungible. The machines can be used for both, for writing instruments as well as Creative division.
Okay. And the balance, 40% of INR 135 crores, that's into more like electrical instruments and molds?
Yes. It's mainly into writing instruments.
Okay. Okay. And the INR 1890 crores CapEx that we are planning for the current financial year, that will be in which category?
That will be primarily new building, which is under construction. That will take about INR 51 crores, and plant and machinery will be about INR 24-25 crores. So this is a Valsad unit, right? Yes. Yeah. Yes.
What are we planning to manufacture here?
Both. Both the Creative and Writing Instruments.
So basically, the Creative and Writing Instruments are fungible in terms of their capacities.
Right. Yes.
Okay. Okay. And so because we continue with our CapEx, right, and our investments with the INR 189 crore CapEx that we are going to be doing this year, which effectively means that we will probably have to make further investments, even in terms of people and some additional overheads, right? So the path to reaching expanding our EBITDA margin. So when you said you will essentially see an uptick from here, so when you mean here, do you mean the quarterly 15.7% margins that we did, or do you mean the full financial year margins that we did, 17%?
So see, it will be from a full financial year angle.
But also, when you talk about the investments, a major part of the investment in terms of the manpower, more or less, like Alpesh mentioned, it's already peaked in that department. But the major investment which will come in the near future will more be guided towards automation and the new category addition in terms of increasing the product range. Right. But I mean, as we proceed, quarter one, quarter two, basically, we'll see an uptick from the margins from the current level of 15.7%. Yeah. So I would say more or less you will see more in H1 and H2 comparison rather than just quarter one because a lot of these categories we have just invested recently. So till they get installed and they come to its full-grown production cycle. So I think more fair comparison will be from H1 to H2 comparison.
But if we are at around 70, we are close to the optimum capacity utilization in Creatives. And bottles is a small part, right? And bottles will achieve EBITDA break-even, which means Creatives are still not EBITDA positive?
Creatives? No, no. Creative is EBITDA positive. Bottles was a specific case which we mentioned that it is turned EBITDA positive now, considering the investment which we made earlier. So that has become EBITDA positive. Creative, we have already been. Creative and Creative has been long EBITDA positive. And with the in-house manufacturing, the EBITDA margins only will increase over the next two, three quarters, as we see, with more and more in-house manufacturing now getting into the operationalization.
And one more thing. When we say, no.
Just to add, because you made a statement about capacity utilization that we have reached 70%, there is still scope for the new machineries, the new machineries and molds which we bought for new range. We still have the space to grow out here because we have still not reached the optimum level of capacity that.
Even if you see from the angle of Flomax investment, which is just a recent one, I think that whole capacity will also add to the Creative range in terms of production and top line. Plus Maped. And also the Maped.
And for the next three years.
Hello? Sorry to interrupt, ma'am. May we request you to return to the question queue for a follow-up question as we have several other participants waiting? Thank you. Thank you. The next question is from the line of Aradhana Jain from B&K Securities. Please proceed.
Hi.
Thank you for the opportunity. A couple of questions. First, on the steel bottles, the 50% growth that we are expecting in FY2026, that is going to come entirely from domestic consumption, or are we also planning to do export, and where are we on the export side?
So definitely, it will be a combination of both, where the major contributor will still be the domestic front. But we have already started initiating certain areas for the export market as well because I think in the long-term perspective, we would like to grow our brand in this particular segment, even in the export market.
Okay. So the 50% growth, we are considering both domestic and export?
Yeah. It will be a combination. Yeah. But major concentration is still the domestic, but there's a long way to go.
Okay. And second, on the Mechanical Pencils, is the supply constraint issue over?
Are we able to now supply the pencils across Pan India, or where are we on that?
So we haven't launched Pan India as yet. But yeah, in coming months, we will be gradually increasing slowly, slowly and catering to the entire demand, what's been there in the market. So we are scaling up the production. So it's going to be, it's going to take another couple of months till we reach the level where we would be able to suffice the demand.
Okay. And in the Creative segment, how much of the revenue contribution is currently coming from Disney and going forward from Maped and Disney and mechanical pencils, any color as to how much revenue contribution do we expect? And what is the major contributor in the Creative segment?
So in Disney, we have launched only a couple of products, which are mainly to do with the kids for gifting. So it's not, so we don't have a separate revenue breakup as such. But yeah, going forward, Disney is, we are adding a few more products in Disney range in different verticals like Geo boxes and kits, of course, more new kits and also some basic coloring range for students. And when we talk about Maped, yes, it's just started, and we're going to get, it's mainly to do, see, the business is going to be starting only in the next two to three months, although we have started distribution in a few states of Maped.
And in terms of margins across all your categories, the margins would be similar, right?
Be it Pens, Creatives, any of the Creative products or Steel Bottles, or is there some bit of margin differentiation?
Mostly, the margins are same. So within the segment, there can be a complementary or a supplementary product which we work out with, but the overall margin for that group or batch would also remain the same. And at segment level, obviously, we aim to get to the same margins.
So just to add to what Alpesh has said is that the writing instrument and the Creative margins have to actually come around the same levels because the production facilities are the same. And with in-house manufacturing, the margin accretion will definitely happen. On the steel bottle, it will gradually come to that level of the company level average.
Okay.
Are we planning to also increase our export contribution going forward, or it's expected to be in the current level?
No, no. Of course, export is going to grow. We are expecting export to grow in double digits in the coming year.
So the contribution of export, which currently would be at around 18%-20%, going forward for the next two, three years, would it be in the similar range, or should that continue?
Yeah, it's going to be in the similar range.
But the combination will be similar, but year on year, export growth we expect to grow over the normal average. We are speaking of 15% overall company guidance. Export should do a little better than that in the current.
And the margin for exports, how much delta is there within this domestic?
So it's more or less the same because as we don't have a separate balance sheet for domestic or export, but looking at the prices and what we are selling, it's more or less at similar levels.
Got it. Thank you so much from my side. Thank you.
Thank you. The next question is from the line of Hitesh Parmar from Sharekhan Limited. Please proceed.
Ma'am, my concern is all the concerns have been clear. Thank you very much.
Thank you. The next question is from the line of Megh Shah from Prospero Tree Asset Management. Please proceed.
Hello.
Hi.
Hello. Am I audible?
Yeah. Yeah.
Thanks for the opportunity. Sir, my question is very simple. Sir, this year, our revenue grew by INR 100 crore, and the GP is average 50%-51%. So we are making a gross profit of INR 50 crore.
But at the same time, our employee cost increased by INR 26 crore and other expense by INR 36 crore. The sum of these two expense is INR 62 crore. So we are losing at the EBITDA level by INR 8-10 crore. So how generally the growth in the revenue generates the higher profit at the EBITDA level, but in this case, the EBITDA has degrowth. I understand that we are increasing our staff strength to expand our position, but when the EBITDA growth will be higher than the revenue growth? I want to understand that thing.
So basically, it is about the operating leverage. As we have invested in the manpower, for example, in the sales team alone, we have increased about 160 people. On the workforce level, there has been a lot of rationalization, including bringing contract labor into the mainstream.
A lot of other costs, all that has happened in the last quarter. So this will give a positive effect in the coming quarters. So if you want a very detailed explanation, you can write to our CFO. He can take care of it.
No, no. I understand that. I understand that you increased the workforce and contract labor are converted into the permanent employee or whatever it is. But am I expect that in the future, the revenue growth will lead to the higher EBITDA growth?
Yes. Yes. Absolutely.
And because we consider that or anybody can consider that the salary is a fixed cost, and if that will remain the same and our revenue will not grow, then it will impact our EBITDA also. In our case, currently, the EBITDA is degrowth because we have increased our workforce in the anticipation of the higher revenue growth.
And in the future, I expect that the company is thinking that the revenue will grow faster than the cost increase. Is it correct understanding?
Yes. Yes. We agree with you on this. So what has happened is the investment is for future. When we invest in people, we invest in facilities. This is all investment for future. And like you rightly said, any incremental revenue will be more than the incremental cost which will incur in future. So hence, the EBITDA will start improving on that front.
So more or less, the employee cost will remain flat for the next at least one to two years?
One to two years is something which we cannot commit today, but yes, looking forward for the next couple of quarters, we see it as flat unless we have a change in our plans to kind of introduce new products, new facilities, new things, something which changes will be. But yes, the incremental revenue will be more than the incremental. It will outpace. In fact, the contribution to the EBITDA margin will outpace the growth which we have seen already in this segment.
Right. Okay. Sir, so for next quarter, there will be an EBITDA growth higher than the revenue growth?
Yes.
Okay. Thank you. Thank you. Thank you.
We are talking about next few quarters. It will be the operating leverage takes time to accrue. It will come over the few quarters.
But does the company have any policy of incentivizing the employee which generates the higher business for the company, or it is a fixed model, fixed salary model irrespective of their performance?
No, we do have incentives placed for the employee. Incentives for the sales and marketing.
Yeah. Because in the many pharmaceutical companies provide the incentive to their MR, and the MR who generates the higher business are incentivized. So in our case, suppose we have increased our sales workforce, then there should be something like that. Otherwise, our fixed cost will remain fixed. Right.
Right. Right. No, no. So we have incentives in place.
Okay. Okay, sir. Thanks.
Thank you. The next question is from the line of Sahil Doshi from Thinqwise Wealth. Please proceed.
Good afternoon, sir. Thank you for the opportunity. Just one first clarification.
When you said pens volume growth is 9%, this is for the full year, right, sir?
Yeah. For the full year.
So that essentially means our realization has degrown by 4%, and we've seen a volume growth of around 27% in Q4. Is that understanding correct?
Right.
Okay. So just is this the inference why the gross margins have come off in this quarter? Could you just throw a little more light on what is the reason for the reduction in gross margins? And incrementally, as we enter the INR 5 and INR 10 rupee category, the realization trends, is it fair to assume that we'll see a similar kind of realization trends, and possibly there could be a pressure on our gross margins?
So as we discussed earlier, it was mainly in Q4 due to the product mix what we have sold during that period.
Of course, when we talk about Hauser XO, which is doing exceptionally well, it is priced at INR 10. So we have seen a considerable quantity increase in that. Other than that, also the other INR 10 products which we have launched in the last two quarters, we have seen a significant growth of that range. That's the reason why we have seen an increase of 9% quantity growth.
So in the coming quarters, as Mohit earlier also explained, that we are going to keep the INR 5 and this category around 5% of the overall. So the major part of the sale will be again focused almost 45 products of the 65 we launched were in the mid-premium premium. So those benefits will continue to grow in the coming quarters.
So just could you possibly help elaborate a little better?
Because what you've seen as the gross margins used to be 50% plus, and in Q2, Q3 was 52%, 53%. This quarter, we've seen a sharp reduction. So I'm just trying to understand why has this happened, and if you can quantify what is the mix of INR 5 pen in this quarter?
So if I have to give you one example over here, which is a major contributor over here, in case of gross margin, we have also launched a lot of new products this time. Introduce new products in-house manufacturing. And that has led to a little, see, we kind of stabilize every production process, stabilizes over a period of one or two or three quarters, depending on the kind of product or the complexity of the product. The last quarter has seen a lot of new in-house manufacturing processes being introduced in our company.
And hence, this stabilizes. You will see the impact, again, the numbers going back to the previous consumption levels in the coming quarter. See, the strategic benefit of backward integration lies in our ability to gain tighter control over production cost, improve quality consistency. And that is what, as we expand our in-house capabilities, we anticipate lower per unit cost, faster turnaround times, and from ideation to commercialization, and greater flexibility in responding to market demands. So that should bring back to the margins here.
Okay. So see, next two years, at least we are on a growth trajectory where we are adding new products and Creatives and P ens as well as Steels. So don't you think a similar scenario will be there? So what gives us the confidence our gross margin should improve?
So what has happened, I'll let you know. We have, for example, Creative.
We were doing only 40% in-house. Now the number has gone up to 70%. So when we are already making 70% and when we kind of reach the peak of capacity utilization and also in terms of manufacturing cycle, we will see that this starts giving us the kind of margins which we expect from our other established range of products. So that is what will add on to my incremental profitability. And like you said, you're right in one other part that we are going to continuously innovate new products. That is already this cost of innovation of new products and introduction of new products is already factored into our entire margin which we calculate.
Okay. Sure. On the other side, on the employee cost, I understand there has been a 16% increase in the headcount.
So now that there is no more increase, at what rate, what absolute number do you think you'll be working with for the next two years if you can quantify this?
It will be difficult to quantify at this level because but a steady increase which normally goes into the employee cost will always be there in terms of inflation adjustment increments which we do year on year. Otherwise, in terms of the adding of the workforces, more or less has been done to get to the level of growth for next two years, we are there. And we'll continue to do marginal increase in both sales and the team as we grow further as the need arises.
The increase is primarily driven by three key areas: workforce expansion, inflation-adjusted compensation, and ongoing talent retention initiatives.
We can say we have control now, and we are sure about the numbers on workforce expansion. And we cannot do away with the inflation-adjusted compensation and talent retention initiatives either. So to put a number today, fix a number today and say, "This is going to be the number," will be difficult. But more or less, there won't be a sharp increase because of expansion of workforce.
Okay. Got it. And on the other expenses you mentioned about the solar, so could you just quantify what's our power cost today and what kind of benefits could possibly accrue?
Let me take that. See, yeah. We have installed this being installed and as we move forward, so the total capacity between Daman and Silvassa, we have done an installation of 1.85 megawatts.
And see, we anticipate these initiatives to begin delivering measurable savings in the coming year, which we'll be able to share as we move forward. As we move forward, yeah.
Okay, sir. Thank you so much. And best wishes to the team.
Thank you. Thank you.
Thank you. The next question is from the line of Naitik from NV Alpha Fund . Please proceed.
Hi, sir. Thanks for taking my question. So my first question is, can you call out the split between in our Steel Bottles, the split between branded and private label that we are doing currently?
So the business value of then last year is 95% is in our own brand.
Right. And so my second question is regarding our receivables. We've seen it increase.
So I just wanted to understand, is it because of the newer products that we have launched, we sort of have to give incentivize by giving higher credit?
Sorry. Can you come again, please?
No. So my question is, we have seen our receivables increase compared to last year. So just wanted to understand, is that increase due to the newer products that we have launched, and we have to sort of give higher credit period for those products?
See, many times we have to kind of give additional credit when we are trying to penetrate the market. Introduction of new products has two impacts. One is in terms of credit which we give to, and also the discounts that you give.
Because of the high competition, many times if it is a unique product, then it's a different story altogether where there's a kind of a monopolistic which is not monopoly growth, but kind of situation we are in. So as we introduce new products just to test the waters, just to kind of create the market and understand the market, sometimes we have to give extra credit. So if you see tomorrow, if we're buying shirts, manufacturing shirts of a different brand, and you go to the market and you say that, "Okay, why don't you house my shirts?" you will give some kind of credit for some new entrant since you are a new entrant in that category.
Got it. Got it, sir. And we expect this to normalize in coming years?
Yes.
These are on an ongoing basis which we see where we at times have to give more credit when we introduce new products. But if you see the numbers this time also, quarter on quarter, we are improving and we'll control this thing.
Right. Got it, sir. Got it. So my next question is regarding Flomax. So Flomax, I just wanted to understand, is there any revenue contribution right now coming from Flomax? And if we are integrating, will it be full integration or?
So it's a marginal revenue. So we started Flomax in the last quarter, and since it's a brownfield project, there's a marginal revenue which is coming. This year, we should see a good growth or good numbers coming from this initiative which we have taken.
As we mentioned that we had total investment is about INR 15 crores, and it should give about 2x of the fixed assets in the current year from this segment. It will add to the overall Creative. And you own 51% of this? Yes.
Got it. So just my last question, if you could call out the number, the volume number of pens for the full year. Yeah. For the pens? For the full year? Yeah. June. No.
So in terms of value or in terms of volume?
Volume, sir.
So volume this year, we have sold almost about INR 155 crore pieces.
Got it. That's very helpful. Thank you. That's it from my side.
Thank you. The next question is from the line of Ashok Shah from Eagle Avenue and Westcott Family Office. You may proceed.
Thank you for taking my question. Sir, as part of restructuring and to reduce the employee cost, we are replacing employees by the robots. So can you throw some light on it? How many employees currently are one employee is handling three machines or four machines, and the robot will be doing how much cost savings we are going to get from it? And we are also ordering further new robots also.
So when we talk about semi-automation, automation, it's not only in terms of robots, but also in terms of certain products that we recently brought in-house. And as it scales up to the scope of mass volume, we convert those products into machine manufacturing. So when we say automation, it's a combination of both.
That is not a one-on-one parity between a robot or a machine to manpower, but the overall direction as a company where we are going, which we want to divert more and more big projects or mass production projects into semi-automation and automation respectively.
So what's the purpose?
This is not to replacing manpower. This is not to substitute the manpower, but it is more to kind of bring in efficiency. Efficiency, yeah.
Okay. So what is the cost last year and what will be cost in the next year to install new robots?
So see, we don't have any specific cost like this. So it is the processes which we try to automate. So it is included in our fixed assets addition cost. Plant and machinery, it is already included in plant and machinery.
So there's no specific one-on-one robot cost kind of thing which we work on.
So would it improve the quality or the perfectness or the speed and cost will be also saved?
So in certain projects, it's to improve the quality, and in certain product line, it's to increase the efficiency and the production speed of a particular product.
So that's the company will be doing similar adding robots in the future because currently we are only doing 60%-70% in-house production, and remaining still we are procuring from outside.
So yes. So as mentioned, as we scale up a particular product and as the product requires, we will be going on in this direction. And it's an ongoing activity for manufacturing unit, which for us will continue to pursue in this direction.
Just to clarify, only on Creative side, we have some trade purchases, whereas in the pen writing segment, substantial manufacturing is happening inside the company.
Okay. Okay. Thank you, sir. Thank you. That's all from my side.
Thank you. The next question is from the line of Mr. Dipesh Sancheti from Manya Finance. And due to time constraints, that will be the last question.
Hi. My question is regarding the projection of sales growth with the new CapEx coming in. And will that be at the same ROE? Because I mean, ROE for this year has been around lower double digits. So what is your projection on the ROE also going ahead? Hi. Am I audible? ROE? Yeah. Yeah. Okay.
So ROE, which we see from FY25 to FY24, it's gone down to 11.7% and from 13.2%.
The ROE means what we expect is to kind of gradually increase over here in this case because whatever investments which you're talking about today will start giving us the operating leverage and ultimately give a positive impact to our bottom line.
Yes. And that should take back us to the previous ROE level.
The previous ROE for around 17% which you had come up with when there was the IPO?
Yeah. This will be a gradual increase as we go forward.
See, we are doing substantial CapEx over the last two years, including what we explained during the call in the current year. So all that advantages will start accruing over the next two to three years. At that time, you will see coming back to the ROE to the similar levels what we were doing pre-IPO.
Okay.
With this current expansion, I mean, the first part of my question was, what is the projected sales growth for the next two years?
So going forward for next two years, as we mentioned, we're going to have a stable, steady growth rate of 15% year on year going forward.
Okay. So in line with the ROE, which I should expect that the sales growth as well as the ROE should be around 15% for the next two to three years?
It will go up to 15%. See, when we are talking about this again, ROE is a result of the kind of investments which we do and the kind of top line which we achieve. And the return on investments, I would say any additional investment, the return is gradual. And hence, when we say whatever investment additions we make, it will be a gradual increase going forward.
Okay. My last question is about the marketing expense. Can you just throw a light on how much has been our marketing expense for this year, say 2024, 2025, vis-à-vis the previous years? And what is going ahead, how much will it increase or will it remain the same?
So marketing expenses have marginally gone up, gone down, in fact, rather. Sorry. So advertisement expenses, year on year, it has been almost the same, only with the difference of a couple of crores out here. This time, we were a little slow on marketing, but going forward, we see an uptick to a little extent in the coming years on marketing.
If you could quantify the numbers, please.
It would be for what? For the coming year? No, for the marketing expense this year vis-à-vis last year. This year, yeah.
So in FY2025, the total advertisement expenditure was INR 14.39 crores compared to INR 16.15 crores in the previous year. Okay. This is including hiring, I mean, brand ambassadors like Ranveer Singh and Ranveer from SIF?
Yes. Yes. Obviously, major number was incurred in the last year.
Okay. And going ahead, we should expect the similar kind of numbers or should it increase?
Similar. Similar. Similar numbers.
Great. Great. Thank you so much, team. Thank you. Thank you.
Thank you. As that was the last question, I now hand the conference over to the management for the closing comments. Thank you and over to you, sir. [audio distortion].
Thank you. Thank you. Thank you, everyone, for taking some 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 Flair Writing Industries Limited, that concludes this conference. Thank you for joining us, and you may now disconnect the line.