Ladies and gentlemen, good day and welcome to Lux Industries Limited Q4 FY22 earnings conference call. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star and zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Saket Todi, Executive Director from Lux Industries Limited. Thank you, and over to you, Mr. Todi.
Good afternoon and thank you everyone for joining the earnings conference call for the quarter in the year ending March 31 2022. Along with me, I have Mr. Udit Todi, Executive Director, our CFO, Mr. Saurabh Kumar Bhudolia, Mr. Jitender Kumar Shah, VP Finance, and SGA, our investor relations advisors. I hope you have received our results and investor presentation by now. For those who have not, you can view them on our website. We have witnessed healthy demand across all our product categories in FY 2022. This growth was largely driven by our power brands, especially ONN and Lyra, as and as well supported by our flagship brand Lux Cozi, the brand which has delivered consistent growth over the past many years.
For the first time, our premium brand ONN has surpassed the revenue mark of INR 100 crores, registering a revenue of INR 120 crores, a growth of approximately 52% over the same last year. While Lyra, our women's flagship brand, has surpassed the revenue mark of INR 300 crores, registering a revenue of INR 302 crores, a growth approximately 34% over same last period last year. Lux Cozi too registered delivered the strong growth numbers of INR 619 crores, a growth of 12% over the same last year. We are seeing a shift towards aspirational buying. The innerwear industry is becoming more than a necessity. Over time, we have noticed a shift in consumer purchasing behaviors with a growing desire for mid and premium category products.
There is a notable shift away from choosing plain white wear towards a greater spectrum of purchase preference, with patterns, pictures, colors and fabrics becoming more and more popular. Lux being one of the largest branded innerwear players, has consistently assessed the market pulse and responded by introducing creative product lines in the mass, mid and premium categories. We are confident about the future owing to a strong demand scenario, a diversified product portfolio across all price points and our expansion into womenswear market. The company has posted robust performance for the year ended March 31 2022, despite the industry experiencing multiple challenges, especially in the last quarter of FY 2022. The company has reported the highest ever revenue of INR 2,312 crore, a growth of approximately 18% over the same last period.
The company has reported solid top-line and bottom-line growth, driven primarily by pricing power and increased demand for branded products from Tier 1, Tier 2 and Tier 3 cities, indicating recovery from the pandemic. The company has undertaken several price increases during the year, which has led to an ASP increase of 19% in our premium wear category, 14% in our mid premium wear category and 25% in our economy wear category. Sales of our economy segment, which include brands like Lux Venus, Lux Karishma, have increased by 19%, while sales of mid-premium segment, which includes brands like Lux Cozi, Lux Inferno, Lux Cottswool, Lyra and GenX, have increased by 13%. Our share of export has gone up too, which, for the year FY 2022 stood at 7% of our total revenues.
Our sale in the innerwear category, which includes brands like One8, ONN and Lux Premium, have seen a steady growth of 36% and now contribute 14% of the company's revenue as compared to 12% same period last year, indicating our brand building initiatives are paying off. We are pleased to report company's EBITDA for the year, which grew by approximately 25% and stood at INR 490 crores as compared to INR 390 crores same period last year, despite disruptions in supply chain, increase in raw material price and impact of the third wave of COVID-19 in quarter four FY 2022. EBITDA margin stood at 21.2%, an increase in 121 basis points as compared to the same period last year.
This improvement was largely facilitated by the command of pricing and the company's effective inventory and supply chain management across our vendor network, which helped them to mitigate the risk of price inflation to an extent. For FY 2022, our ASP increased by approximately 19%, while our volumes have seen a marginal dip of only 1% compared to the same last year. Now coming to our marketing and advertising spends. For FY 2022, we have done several marketing campaigns depending on market condition, and they have paid off in terms of expanding our reach and tapping into new audiences. For FY 2022, we have invested approximately INR 153 crores in advertising and promotion, which is 6.6% of our revenue, while we have spent over INR 794 crores over the last period, which is approximately 8% of our revenue.
This has helped us to generate a revenue of INR 14.9 for every rupee spent. From FY 2023 onwards, we plan to progressively restore our ad spending. We are committed to remain flexible in the medium and the long term to handle these challenges and deliver consistent, competitive and cash accretive growth in the quarters to come. With this, now I will ask Mr. Udit Todi, who oversees the company's strategy, to share his thoughts.
Good afternoon and a very warm welcome to everyone. During the quarter, the company debuted its lingerie product line under its women's flagship brand, Lyra, and promoted it through a targeted television campaign. Previously, the majority of this market was unorganized and import dependent, but there has been a significant shift towards branded products for wearing the right fit and comfort. The company is transforming Lyra from a single product category, which was primarily leggings, to a multi-product, multi-category women's wardrobe brand with this launch. Increased penetration in the womenswear category will not only assist Lux in creating brands across genders, but has also contributed to increased sales and profitability. Lyra, our womenswear brand, accounted for approximately 13% of our overall revenue of INR 2,312 crore in FY 2022.
Our men's premium wear brand, ONN, has reported net sales of INR 120 crore, with an overall growth of 52% over the same period last year. With an increased penetration and having balanced focus between outer and innerwear both, ONN has established its own visibility in men's premium wear segment. In FY 2022, the company was able to manufacture approximately 34 crore garment pieces across brands through its seven state-of-the-art plants and has a market share of approximately 15% in the organized men's innerwear market. Our expansion strategy is in place to improve manufacturing and supply chain capacity in order to capture market share in the women's and kids segment as well. In terms of supply chain, we have one of the largest distribution networks, which is our company's core strength.
We have been able to maintain long-term relationships with our distributors, dealers and retailers, thanks to our strong brand equity and goodwill. We are the largest domestic innerwear player by volume, with a strong presence in the country's north, east and west. As on March31 2022, we have been associated with 1,170+ dealers, where we have less than 1% distribution attrition rate. For faster distribution of products across the country, we have set up 11 depots and 19 warehouses spread across 12 states across the country. We aim to further strengthen and streamline our distribution network to reach the untapped and undertapped markets of South India, where our sales contribution right now stands at 4%. We are also extending our e-commerce presence by partnering with prominent e-commerce companies like Amazon, Flipkart, Myntra and AJIO.
We already ship over 4,000 orders daily, each day, and intend to achieve INR 100 crores in online sales revenue over the next three years. With this, I would now request Mr. Bhudolia to take you through the financial performance. Thank you, Ranjit. The company has posted robust performance for the quarter and the year ended March 31 2022, backed by accelerated demand across categories. Our revenues for the quarter stood at INR 593 crores as against INR 601 crores, registering a de-growth of approximately 1% compared to the same period last year. During the quarter, the industry encountered multiple challenges, including Omicron COVID-19 wave early in the quarter and higher raw material prices due to supply chain disruptions, as well as rising demand for cotton in international markets.
Our EBITDA for the quarter stood at INR 113 crore as against INR 129 crore during the same period last year. The EBITDA margin is at 19.07%. Our quarterly profits stood at INR 73 crore as against INR 91 crore in the same period last year. PAT margin for the quarter stands at 12.33%. Now coming to the yearly performance. Our revenues for FY 2022 stood at INR 2,313 crore as compared to INR 1,965 crore in FY 2021, registering a growth of approximately 18%. The region-wise revenue contribution for FY 2022 is as follows: North India is having a contribution of around 36%, while East India and West India at 22%, well supported by Central India and South India with 16% and 4% respectively.
While revenue split from segment stood as follows: mid-premium 54%, economy 32% and premium 14%. EBITDA for FY22 stood at INR 490 crore as compared to INR 393 crore in FY21, with a growth of approximately 25% YOY. The EBITDA margin has seen an improvement by 121 basis points, which stood at 21.2% versus 19.99% in FY21. PAT for FY22 stood at INR 338 crore as compared to INR 269 crore in FY21, registering a growth of approximately 25% same period last year.
The PAT margin stood at 14.5%, an improvement of 91 basis points as compared to 13.7% in FY 2021. Debt equity ratio stood at 0.26x. Interest coverage ratio stood at 29x. Our working capital cycle stood at 188 days as of March 31, 2022, and was slightly on a higher end. This is mostly due to management's deliberate decision of stocking the raw materials, leading to a higher number of inventory days. Our inventory days stands at 132 days as compared to 90 days same period last year. The company, on the other hand, is continuously monitoring and managing all levers to optimize its working capital cycle and to reduce working capital days in the coming few quarters.
As of the closing date, the company has a cash and cash equivalents balance with a gross cash balance of INR 140 crore. Before we open the floor to questions and answers, I would like to emphasize that as a responsible company, we are always striving to increase our stakeholders' accountability. In all of our business operations and transactions, we are guided by our long-standing dedication to the highest ethical standards and transparency. With this, we will now open the floor for questions and answers.
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 the touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we'll wait for a moment while the question queue assembles. We take the first question from the line of Bhargav Buddhadev, B from Kotak. Please go ahead.
Yeah, good afternoon and thank you for the opportunity. My first question is that we've seen extremely strong performance in nine months. However, in the fourth quarter there has been a significant dip in performance, especially double-digit volume decline and also significant deterioration in balance sheet quality with cash cycle deteriorating to about 190 days. If you can just sort of briefly explain in terms of what led to this kind of a performance, that would be helpful.
See, if you see the top line, the top line is almost flattish in the quarter four, and definitely we were very much conservative and we were very proactive to manage our working capital, and that was the reason we have not allowed to dilute our credit control cycle, which we have already put on the radars. That was the one reason we kept top line in our control. From the working capital cycle days, anyway, the way we have explained is there was a lot of ambiguity in the market, and in recent past we have seen that there is a sharp increase in the raw material prices.
Company has taken a calculated decision that instead of keeping the money in the FDs or in the investments. We wanted to invest our money in the inventory so that at least the margin can be protected, and in the coming few quarters we can see the good result out of that. That was the only reason we have stocking the inventory by seeing the near future requirement, and which is that how much the margin we can safeguard by keeping the working capital cycle on a bit of higher days.
When do we expect improvement in terms of working capital cycle? Because earlier we were net cash, I think we are now net debt as well.
As Saurav has already mentioned, during the last quarter, overall across the industry, the raw material prices have shot up very high. Even if you happen to follow the news, there was a ministerial-level meeting headed by Piyush Goyal, where they were deciding what steps can the government take with regards to the cotton prices. The cotton prices right now standing at about INR 400-INR 450 a kg, which on an average last year, say about twelve months back, used to hover around INR 250-INR 300. The prices are on a very sharp rise, and the customers generally take some amount of time to adapt to the new price regime. Although we all the ma
Across our brands also, we have taken a price hike and are in the process of taking a price hike. On account of cotton prices moving up sharply, the cash requirement and the working capital requirement of the company has gone up significantly. B, because of an inflationary trend in the cotton prices, generally, if you used to keep a stock of, say, 15-20 days of yarn in hand, now we are maintaining a 30- to 35-day stock of yarn in hand. On both the accounts, because of the number of days of inventory and because of per unit price of cotton, both of these accounts, the price being high.
You know, the working capital requirement of the company has really shot up, and that is why you see that from a net cash we went into a net debt situation. As you know, if you look at it from a long-term perspective or from medium-term perspective. All of this raw material, which is of a, you know, a lower price, which we right now have in hand, later on will ultimately convert to profitability for this one. Because, even, you know, the average price of this yarn compared to right now what the prevailing price of the yarn is, we are standing to benefit.
As a prudent measure, we were, you know, taking this step that we have to first of all have enough yarn stock in hand and also enjoy the increase in price of the yarn.
No, because I was referring more to the debtor days, which have also jumped up for 17 days to about 103 days. We were earlier keeping a very tight control on the receivable cycle.
It's correct, Bhargav. Just as I'd already mentioned, quarter four for across the industry, if you look at it, the mid segment and the economy segment have grown slow, as you know, in fact seen a very slight volume degrowth. Whatever growth is being visible is because of price hike. With cotton prices being so high, the customers are taking some amount of time to adjust to the new pricing.
Okay.
That is why, because of slightly sluggish sales, that is why we are seeing the debtor days going up slightly.
Sure. Yeah, go on, please.
Yes, please. Please, you were saying something.
On the March 11th, there was this BSE notification which said that the board has granted leave of absence to Mr. Pradip Kumar Todi and Mr. Udit Todi. If you can just elaborate on this because as shareholders we didn't get the message properly.
The idea was, at that point of time, the notice has been served by SEBI on the company. Actually, from the prudent point of view, Mr. Udit Todi and Pradip Kumar Todi being the related party, they have served the notice to the company that till the time the investigation is not getting over, they do not want to participate in the agenda in which these discussions are going to be discussed. That was a temporary.
Because of that, they have taken a temporary absence to conduct or to participate in the board meetings wherever the matter of this insider trading and the notice, which was served by SEBI, was getting discussed.
There is no change in roles, right? I mean, the family is together and the roles are intact, right? We can assume that business is as usual, especially given that now the confirmatory order has come in favor of the company.
No, again, if you see since beginning till now, there was no allegations on the company. It was the 14 parties which were involved. SEBI wanted to have a complete investigation against those 14 parties. Even if you refer the confirmatory order which we have received on 27th of May, 2022, and has now modified the restriction imposed in the interim order. The only restraint remains is that they cannot deal in the scrip of the company, that is Lux Industries Limited. Otherwise, now they are allowed to deal in any other scrip of any other listed entities until further order pending completion of investigation.
In terms of business roles, there is no change in business roles as far as responsibilities are concerned, right? Within the family.
No. Initially they took the leave of absence because they wanted to have the independent view going on.
Sure.
To maintain the good corporate governance, I think that was the measure. Independently they have chosen and they have given this request to the company.
Okay. Okay, great. Thank you for the clarification and all the very best.
Thank you.
Thank you. We take the next question from the line of Amit Shah from Deep Research Capital. Please go ahead.
Hello? Hello, am I audible?
You're audible.
Yeah, please go ahead.
I have just one question. Actually the market chatter does suggest that there is some kind of brand separation which has happened among the two families. Some of the brands have got to Ashok Ji's family and some of the brands have come to the Pradeep Ji's family. Just a follow-up on that, if that is true and that split is gonna happen between both the families, how will the company operate? Would there be an alternate structure to support the same? How will everything look like if the market chatter is true?
I don't think there is any kind of official statement for, from the company side on this topic. I believe this is more of a rumor and the speculation in the market. Unless and until we don't get a clarity, we do not want to comment on this issue.
Is it something which has been on discussion for a while, on the board level?
No.
Okay. Thank you. Thanks.
Thank you. We have the next question from the line of Rishabh Shah from Anubhuti Advisors.
Thank you for the opportunity. Just one question on the inventory part. We have largely built up the raw material inventory. Would it be possible to break up of how much would be the basic, how much would be the finished goods in terms of the total inventory breakup?
Yeah, that breakup is not immediately available. We'll share it with our IR, and meantime they can share the data with you.
Perfect. Largely it would be the basic raw material, no? Just wanted to understand that part.
It is a mix of all the three factors put together between raw material, WIP, and the finished goods. Yeah, definitely the inventory has gone up because we have increased our inventory days in the raw material largely.
Understood. That's all from my side. Thank you.
Thank you. Anyone who wishes to ask a question may press star and one at this time. We take the next question from the line of Anurag Jain from Greenlands Capital. Please go ahead.
Yeah. I hope I'm audible. Yeah, am I audible?
Yes. Yes, you are.
Yeah. Thank you. My question again was on working capital. Essentially if I look at it, you know, credit days, debtor days, everything has worsened. While I can understand that we would have supported, you know, our vendors payments or our distributors, but even, you know, our vendors also we sort of made early payments. Is that it? The other part was on the inventory really. You know, when cotton prices are so high and, you know, we are actually seeing some kind of a demand disruption happening and, you know, some resistance in passing on, you know, cotton and yarn prices, is it prudent to sort of hold on to such high levels of inventory at this point in time? Just want your thoughts.
Could you please repeat the last part of your question?
Yeah. What I was saying was that cotton prices have gone up so much.
Yeah.
This kind of demand disruption which is happening, it's difficult to pass on the price increases to the market. In such a scenario of cotton prices, the likely hope is that they would come down at some point in time. Does it make sense to hold on to such huge levels of inventory at this point in time?
So-
It would rather be advisable to be lean on the inventory.
We have taken a very calculated decision, and, when we see that, you know, the yarn prices are on the rise, we would rather want to hold on to that yarn price rather than buy it at the highest price. Whatever, as I had earlier mentioned, yarn prices or yarn also that we are holding on our inventory, the value of those yarn prices, if I do a mark-to-market position, we would stand to gain. Had we not purchased the yarn at that point of time, we would have to purchase it at a much higher price. You know, the purchase of yarn was done quite sensibly and, we still believe that, it was a very good decision on part of the company that we still.
You know, actually there are two things. One is price and the other is availability. At times, you know, even at whatever X amount of price you pay, the yarn is not available because most of it ends up getting exported. In order to maintain our supply chain throughout so that, you know, the supply chain is working smoothly and on top of that you also get to know that the yarn prices are on the rise, so you have to take care of both of these factors. On both of these factors the company in fact took a very sensible decision and stood to gain.
Got that. At some point in time you would take a call to normalize these inventory levels as well.
Going forward, how will the yarn prices play out? It's difficult to comment. Right now it's standing at a lifetime high and there are no, you know, we do not see any signs of it coming down for at least the next month or so. Beyond that it's difficult to comment. You know, ultimately.
Oh.
It's ultimately a global commodity. You know, there are many factors influencing the price of a global commodity. You know, it's difficult to comment.
The only thing I had was just that at lifetime high prices we are holding very huge inventory. That was the only thing I had. That's all from my side. Thank you so much.
Thank you. We take the next question from the line of Dhiral from Phillip Capital. Please go ahead.
Yeah. Good afternoon, sir. Thanks for the opportunity. My question is if I look at our competitor, so despite the price hike they have been able to show the volume growth in FY 2022, so which is not the case for us.
Dhiral, even if you see, if you're comparing us with our peers, like we have managed to at least sustain our margins. We wanted to be very clear that unless and until we are not very much profitable, we are not going to run behind the top line. If you compare with our peers they have lost a considerable amount to secure their margin, whereas Lux is considerably almost flat as far as margin is concerned. We were more eager to have a profitable growth instead of just having a top line and to manage the
This will remain same even for FY 2023 or are we looking for any volume growth?
Sorry, come again, Dhiral.
This will remain even for FY 2023, you know, focus on the profitable growth or we would be looking at volume growth also?
No, definitely. Yeah, sorry. That would completely depend on the cotton prices. As it would pan out in the coming financial year, if there is a continuous increase in the cotton prices as it was in the last financial year, we would. Our main focus would be to maintain the margins. If the cotton prices stabilizes in the next few quarters, then our focus would shift back keeping the same margins, then we can have a volume growth. While our peers who are at a lower margin, it would be difficult for them to increase their margins to our standards and have a volume growth. The cotton prices get stabilized. In the last four to five quarters, what we are seeing is a continuous upward trend in the price of the cotton.
We believe that someday or the other, it might take two months, it might take six months, it might take 12 months. When the cotton prices get stabilized, then we would have the long-term benefit from it.
Okay, got your point, sir. Sir, for FY 2023, are we also looking for improvement in margins as we did in FY 2022?
See, as would be-
Go ahead.
For the improvement in margin, whatever margin would be improved, that would be generally from the mix change. The margins would remain the same for every single segment. Whatever it will be from the mix change, as we have seen in the last financial year, that the premium segment has been growing at a much higher rate than the economy and the mid-premium segment. As we all know that the premium segment commands a better margin than economy segment. Due to this mix change, there has been a good margin increase also. In the coming year we can expect the same scenario happening. If the cotton prices get stabilized, then we will see a good volume growth in that.
Okay. What was the Q4 volume decline?
Quarter four volume decline is in the single digit only, but we are just overseeing the numbers. We'll share the numbers with our IR team.
Okay. What will be the ad spend for FY 2023-2024?
For FY 2023-2024 going ahead, see, as a policy we always maintain to try to keep it at around, say, 7%-8%. That is what we are targeting to do in the coming year as well.
Okay. Sir, lastly, what was the online sales contribution FY 2022 as we are targeting INR 100 crore kind of a run rate in next three years?
We have already established a run rate of around more than INR 50 crore. I believe on a 12-month basis, in another 12-18 months time, we should be in a position to get a run rate of INR 100+ crore kind of number.
Okay. Okay. Thank you so much, sir.
Thank you. Let me take the next question from the line of Vishal Bagadia from Roha Asset Managers. Please go ahead.
Good afternoon, sir, and thank you for the opportunity. My question is on the ASP side. We are seeing that cost specials are still going on. In the new fiscal, since half of the quarter is gone by, have we seen any price increase? In the future for the near term in this year, are we expecting any further price increases?
As the cotton prices are already on the highest, we have already taken a price hike, and we will be taking a price hike also again, depending on how the cotton prices move. For example, we are already in the process of taking a price hike in the current quarter as well. Yes, if I look at the entire overall fiscal next year, we always try and maintain, you know, our EBITDA margin intact, and that is how we try and increase our prices.
If you could quantify what is the price hike you have taken in the quarter, April and May month, sorry, as a percentage.
I said we will be going to take a price hike in the current quarter. It's not exactly April and May. We are gonna take a price hike within this quarter.
Okay. My second question is on the long run. We had set a target that we'll go up to about INR 5,000 crores in the coming three to four years' time. How are we seeing that as of now?
The person you are speaking with has put your call on hold. Please-
Sorry. Yeah. Repeating my question. On the long run we had set a target of about reaching the top line of about INR 5,000 crore in three to four years' time. How are we seeing, looking at the demand in the market, going forward? Are we on track or we should be able to achieve it on the lower side, like in 2.5-3 years' time? Because we have been aggressive on our growth strategy as of now. We are improving our brands, the product mix. Can you just enlighten more on that?
In 2.5, three years will be shorter. I don't think it will be possible in the next two years or something. Overall on the demand side, the demand overall in the economy is quite good because there is a sense of consumerism which is going on in the Indian economy. Even if you look at post-COVID, people are traveling like anything. Flights are full, hotels are full, and people just want to spend and splurge because everyone has now understood that there is the savings portion is going down and people are wanting to spend more. Yes, ultimately deep down fundamentally the demand side is there.
The only constraint or only restriction which we see is that because the cotton prices have gone up significantly, so, you know, it might just come with a lag effect. People take some amount of time to get used to the new prices. It is, you know, it is not that we increase. You know, we can just pass on the prices immediately. The price increase are always passed on with a lag effect. The customer also tends to adjust to the new price regime with a lag effect. So this, you know, this time lag is something which is the only constraint. Yes, deep down in, the kind of products which we are offering, they are not fashion wear products, they are basic essentials.
These are certain set of products which, you know, the consumers will have to consume whether today or tomorrow. They can postpone their consumption, but they cannot avoid their consumption.
Sir, we can say about 3.5-4 years should be a good target for INR 5,000 crore of revenue.
See, it's difficult to put a number, exact number to it, but yes, we are looking at a healthy growth rate and we're looking at capturing more market share and beating the industry growth rate. That is something which we are targeting ourselves at. How the industry pans out in the next few years is difficult to comment.
Okay.
Yes, you know, what we are aggressively looking at is capturing more market share.
Okay, sir. That would be all from my side. Thank you, sir.
Thank you. We take the next question from the line of Rajiv from DAM Capital. Please go ahead.
Yeah. Good afternoon, sir. Thanks for the opportunity. Sir, if you can help with the volume numbers across the three segments for the quarter. Because your slide number 35 has the full year number. If you can-
Yeah, full year number is there. The quarter numbers we'll share with our IR, and in turn they can share it with you.
Okay. Do you have it handy for Lyra? For example, that segment has done well for the
Sure. See we have the full year number with us. At full year, at the volume level, we have grown about 22%. We do not have the quarterly numbers with us. Quarterly, yes, we've seen a good growth coming in. We don't have the exact figures with us right now. On the fiscal year-over-year level, we've grown about 22% overall from fiscal year ended March 2022 over fiscal year ended March 2021.
Specifically if we net Lyra from FY 2022, as compared to FY 2019 levels, and then we compare against another listed peer in the bottom wear segment, do you think we are slightly under, a shade under the other player?
No, see I will tell you if you're the kind of peers which you are referring to, so we are operating in two very different spheres. They are mostly, I believe, into organized retail, whereas we are more into the general trade as well as a bit of organized retail. The kind of markets we are catering to are very different. Yes, see for example during COVID, our sales did not take a hit much because we were in the general trade as well. Whereas people those who are only into organized retail have taken a big hit. There are pros and cons to it both. Yes, we are not only into bottom wear, we are, as we mentioned, we are also forayed into the lingerie space.
We, you know, we see promising results coming out from the lingerie space because, as we have always mentioned in our previous con calls, this is one space which we believe is very undertapped and which is still in the hands of unorganized players. I should say non-branded players. We believe that if this entire category sees brands coming in at a, you know, at a reasonable price point, not at a price point which many people can't afford. If you look at a reasonable price point, say about approximately, say on an average of INR 300-INR 350, that is a price point which we believe that a lot of traction will come in. That is one of the spaces which we feel is very, very exciting going ahead.
Yes, bottom wear is definitely growing and doing quite well. At the same time we are also looking at the lingerie space as well as the lounge wear space.
This 22% growth will again be largely led by price, right? As we have seen for the segment.
No. I will break up for the year ended, Lyra would have grown 22% on volume-wise. If I look at turnover-wise, we have grown 34%. That would translate to 12% value growth. 22% volume and 12% value. Overall 34% growth.
Okay. Sure. If I look at your premium segment, I mean, last year it, I mean the margins you used to share for this segment, it used to be 18%-21% bracket, and then you shifted that to 22%-26%. I mean, possibly some of the price hikes would have been. This time around you have grown at 36%, but there is no increase in the margin profile of this segment. Shouldn't this be going up?
That bracket only. Even if you see the margin for the year-on-year basis is coming under that bracket. Last year, March 2021 versus this year, March 2022, the margin is almost in the same range. We change the bracket only in case there is non-fitment of the brand under that bracket. Otherwise we keep the brands under the similar kind of range.
Okay. Usually most retailers try not to touch their entry-level prices. Right? For example, your economy segment-
The person you are speaking with has put your call on hold.
Hello?
Yes.
Yeah. Coming on to the economy segment, usually, most retailers don't touch their entry-level segments, their entry-level prices. There also we have seen a very significant jump in the price. Or am I reading it wrong that the entry level has not been touched but the overall portfolio has seen a?
We could not understand your question properly with regards to the economy segment. What is it exactly that you are asking?
The ASPs have grown up. I think close to 30% in the last two years, 31%. Or put together. Usually most retailers don't touch the entry-level prices, where customers get intimidated or.
No, in economy segment, even if you see, there is an overall sales growth of 19% on an annualized basis. Even this growth has come after taking a ASP growth of close to 25% for the year.
No, I understand. Yeah, correct. I'm saying that 25% on the economy segment wouldn't it hurt?
No, no. See, cotton being a basic commodity, if the prices of cotton go up, all the other manufacturers within that space will have to increase their price. They will be left with no option. Because if you're selling an economy product, your margins are already quite reasonable. If the yarn prices are going up, then you're not left with an option but to increase your prices. You know, it is not that only we have increased our prices. If every player in that particular segment happens to increase the price, then you know, the customer has to end up, you know, the retailer and the customer ends up accepting that price.
No, I get it. My point is this volume decline which you are seeing -5%, is it going to somebody else or the I mean.
No, no. It is not that.
There is no response.
It is not that in terms of even if I look at the volume market share of that particular segment, it is not that we have lost any market share in that particular price point. It is just that overall in the economy, there was a decrease in consumption because, as I said, people tend to, you know, take on the price hike with a lag effect.
Sure. You're saying that in the economy side and in terms of price hike, there'll be more coming through in the current fiscal as well.
I'm sorry?
I mean, there'll be more price hikes which will come through in the current fiscal year.
There will be further price hikes coming in because the, as, the way the yarn prices are behaving, it is quite wild. It's on a complete wild run. The way the cotton prices are right now, every player in this sector will have to compulsorily end up increasing their prices. They'll. No one is left with an option.
You haven't witnessed downtrading, in the sense people going back from brand to a non-brand because of.
No, it is not that people move from a brand to a non-brand. What people might perhaps do is for something which we are yet to see, but what people might perhaps do is they might move from a mid-premium product to an economy product. They tend to re-stick to the brand. It is difficult for a customer to move from a branded to a non-branded product. Within the same brand, they might end up, depending on the prices and depending on their preferences, they might end up choosing a more cheaper product.
Thank you. We take the next question from the line of Ronak Vora from AUM Capital. Please go ahead.
Hi, sir. What kind of demand environment are we witnessing in Q1, Q2 as of now? Are we seeing that our inventory is getting picked up and will that lead to lower inventory levels going ahead?
See, it's quite difficult to, you know, comment on current quarter figures. Yeah, overall, we would say that, you know, it's a mixed kind of a response. It is still, you know, the yarn prices at which we were in Q4, we are standing at a much higher yarn price in Q1. You know, as I said that again, when we take a price hike, again, the customers tend to respond it with a lag effect.
No, no, I understand.
The yarn price is only keeping up, you know. It's reaching a lifetime high every day. At whatever price you end up buying, you end up tending to be a gainer only.
I understand the pricing environment. The environment that I want to understand is the volume environment. Are we seeing, you know, better volumes month-on-month levels or they have remained flattish or in a downtrend?
No, see, the volumes I would say are decent. They're not bad. Yeah, it's difficult to give an exact picture of the current quarter.
Okay. Thank you.
Thank you. We take the next question from the line of Prerna Jhunjhunwala from Elara Capital. Please go ahead.
Thank you for the opportunity. I had few questions. One is out of your total ASP growth of 19%, how much will be the total price hike that would be contributing to it?
There has been a slight product mix change also. We've moved. The premium product portfolio has done much better. I would still attribute most of the ASP growth coming in from the price hike. The bulk of it would be price hike and a bit of it would be due to mix change.
Can I assume 15%-16%?
Yeah.
Okay. Sir, you have mentioned your presentation is very detailed and just going through it and wanted to understand this accelerating digital adoption. What exactly are you doing here in terms of digital adoption? Could you please explain that slide?
Allow me to bifurcate this in two parts. One is from the governance point of view that we are in the process of digitizing all our SOPs. There is a workflow system via which the entire system can be connected with one wire and everyone can see that how the data is moving and how the approval mechanism should work in the system. The second part is from the business point of view that how we can more integrate with our retailers. We are working on few of the system where we can directly have a reach to understand which retailer is working for me, which retailer is not, in which area, how much is the scope, how many penetration we have done, and what is the scope to grow again further.
We have bifurcated the things into two parts. One, to have a smooth workflow. The second, how to scale up the business with the help of the data.
Okay. You've mentioned about detailed IT investment roadmap for the next 10 years. How much would you be investing as a ballpark number? As a result of this investment, what is the likely improvement in the distribution network that you would be looking at?
The company has always been very upbeat about, you know, investing in digital, investing in IT and investing in systems. We have always even with regards to SAP implementation and with regards to our distribution management and with regards to sales trend monitoring. There are different spheres where the company is investing in the IT. Right now, you know, it won't be exactly correct to spell out all the details, but yeah, what we can safely understand is that we would right now from a manual-driven process, we want everything gradually to move to an auto-automated kind of a process where the data is presented in such a format where things and decisions are taken quite automatically rather than with manual intervention.
That is the thought and with that thought we are proceeding and investing in the IT.
Fantastic. Sir, you've 18 EBOs now. What has been the experience, and what are the key learnings and how are you going to scale up this format, going forward?
We found a mix. We've got a mix sort of a response with the EBOs and some of the stores have performed fantastically. Some of the stores have been laggards. We, you know, we've seen both kinds of responses. Right now it's a learning process for us as well, and we are just trying to fine-tune the locations where we want to open.
Okay. Understood. There is no aggressive target to increase in EBOs. It's still under learning process right now, right? Hello?
The line for the management is.
Okay.
Please bear with us while we connect them back to the conference. Ladies and gentlemen, you all are requested to please be connected while I connect the management back to the conference call.
The person you are speaking with.
Participants are requested to please be connected while I bring the management back to line. Ladies and gentlemen, request you all to please be connected while we are trying to connect back the management. Ladies and gentlemen, you all are requested to please be connected. We are trying to connect back the management. Ladies and gentlemen, thank you for patiently waiting. The line for the management is connected, so go ahead. We have Ms. Prerna connected in the queue.
We are on EBO expansion strategy.
Yes, as we have seen, we've seen a mix sort of a response. Going ahead when we open a new EBO store, the company now has a learning from its past experience as to what sort of stores, what size of stores we need to open. Hopefully in the coming few quarters when we open new stores the results will be better.
Okay. Sir, last two questions. One is on the exports market. You've done extremely well on the exports side, at INR 159 crores of sales. How much growth can we expect in the next four, five years, three to five years, whatever period you're comfortable with, to in that category? Because, I mean, I believe that segment has done extremely well over the last few years, despite COVID-related restrictions and stuff.
Yes.
INR 169 crore is very good because you were around INR 110 crore two to three years back, three years prior to COVID.
We believe that going forward, we are expecting the export sector to grow around 15%-20%.
Okay. Sir, last question on inflation. We've seen a tremendous price hike in last 1.5 years in the economy innerwear segment, largely led by either supply chain or raw material or any other factor. Now, when eventually these things cool down historically, are price hikes rolled back or we continue with the same price levels and these remain fixed?
See, going forward, if the prices go higher, then we try to increase our product prices and vice versa. When the cotton prices go down, you know, it is not that the prices will stick to what they were. The prices will also come down slightly.
Okay. The entire pass on will not happen, so you'll retain some of the price hike.
That depends. That actually depends on what the market scenario is and how the market is playing out. Right now, see, as I said, a lot of people have already postponed their consumption. If the demand, you know, if all the pent-up demand comes in together, then the entire price hike is not rolled back. It actually depends on the market situation. Yes, if the yarn prices come down, then we also tend to decrease our prices. That has historically been the trend.
Okay. Last question on winter wear. Generally, you start winter wear production this time. How has been the demand in the winter wear from your distribution network and
See, last year, last fiscal year, the winter wear was a super flop season, and that was across the entire nation. Be it apparel, be it cosmetics, be it any other category which caters to the winter wear products. The overall winter wear demand was quite subdued due to the seasonal play. This year also we are expecting that, you know, we are expecting this year's winter season to be quite good, but it is actually something which is very, very season dependent and very weather dependent. It is, it'll be very difficult for any player in this economy to comment as to how the winter will play out, because it is something which, the season only know. The weather gods only know how the weather turns out to be.
As far as our products are concerned, our product is right now also the top-selling product in our category. If the winter season happens to fail, then it's in no one's hands. If the winter season turns out to be good. Generally, historically, you know, there are no two back-to-back years when the winters fail. If last year the winter was bad, then generally what happens is the next year winter turns out to be good. There are no two back-to-back failed seasons. We are expecting this year winter to be good. In winter we are, you know, we are the market leaders with our products like Lux Inferno and Lux Cottswool. In both of these categories, we are market leaders.
It is just for the season to decide as to how severe the cold ends up to be and at what point, you know, at what point of time the winter kicks in, you know, the cold breeze comes in. Last year, the season started to happen, I think end of December or early January, which was quite late for the winter season. If the winter sets in, if the winter sets in around mid-November, it's very good for everyone. If the winter sets in around mid-December or early January, then the winter season tends to fail.
Okay. Understood, sir. Thank you so much, sir, and all the best.
Thank you. Due to time constraint, I would now like to hand the conference over to the management for their closing comments.
I take this opportunity to thank everyone for joining the call. I hope we've been able to address all your queries. For any further information, kindly get in touch with us or Strategic Growth Advisors, our IR advisors. Thank you, everyone.
Thank you. On behalf of Lux Industries Limited, we conclude this conference. Thank you for joining us, and you may now disconnect your lines.