Ladies and gentlemen, good day, and welcome to Lux Industries Limited Q1 FY 2021 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 this conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Saket Todi, Promoter and President, Marketing of Lux Industries Limited. Thank you, and over to you, sir.
Good evening, and a very warm welcome to everyone. Along with me, I have Mr. Udit Todi, Promoter and President, Strategy; our CFO, Mr. Ajay Patodia; and SGA, our Investor Relations Advisor. I hope you have received the results, press release, and investor presentation by now. For those who have not, you can view them on our website. I hope everyone is safe, and my prayers of speedy recovery for the ones who are fighting this out. The outbreak of COVID-19 pandemic and subsequent lockdowns has impacted major economies and sectors global, across the globe. The quarter gone by was quite challenging, as the impact of pandemic and the lockdown on the innerwear industry was no different. Consumers across geographies were in no mood to spend much on clothes and other fashionable items, while our production and distribution activities also got impacted due to the nationwide lockdown.
Despite the challenging environment, our overall performance and profitability for the first quarter have been quite strong. This proves strong resilience of our business model, which has helped us to continue our growth trajectory even in the challenging times. I am happy to share that we have been able to deliver profitability metrics, which are well above the industry averages. Our revenue has seen a slight degrowth of 6%, even though our plants were shut for almost a month and a half due to the lockdown. Despite these, our EBITDA and PAT registered an absolute growth of 34% and 64%, respectively, due to improvement in operating efficiencies and cost reduction measures. We continue to endeavor healthy profitability ratio by focusing on better product mix and rational cost optimization.
Now, coming to our working capital, as committed, we have undertaken several measures to reduce our working capital requirements. Even after the impact of COVID-19, we have been able to reduce our working capital by almost INR 80 crores from March 2020 to INR 413 crores as on June 30, 2020. Our operating cash flow for the quarter stood at INR 132 crores, as compared to INR 59 crores as on June 2019. With gradual lifting up of the lockdown restriction and economic activities progressing towards normalcy, we are seeing green shoots in the demand and expecting coming quarters to be much better than over.
Our strong distribution network, with over 900 + distributor and nationwide presence, mainly in the northern, eastern, and western part of the country, has helped us continuously engage with our dealers and customers, which in turn has helped us to gauge the on-ground market sentiment. I am happy to share that we are receiving positive response and inquiries with each passing day. Now, I hand over to Udit to provide you an insight of our future strategies.
Good evening, everyone. I hope everyone is safe. It has been more than five months now, we all have been facing hiccups of the pandemic and the lockdown. The quarter gone has been challenging for us, both in our personal and our professional aspect.
While during the first two months of the quarter, exports were restricted globally due to COVID-19, we are seeing good pickup of volume in domestic market and expect overall demand to return to pre-COVID levels in the coming quarter. Also, exports have begun since June 2020, and we expect the sales to normalize in a few months. On the brand investment side, over the past few years, we have invested approximately INR 566 crores across our brands, as it has been our constant effort to maintain our branding and marketing expenses in the range of 7%-8% of our annual turnover. However, considering this year to be one-off and full of challenges, we have decided to keep investment in brands at about 4%-6% of our turnover.
This step will help us rationalize costs and also focus on operational efficiencies, which in turn will help us generate better profitability as well as return matrices. Our technology and automation-led manufacturing has helped us to maintain high quality standards and deliver consistently superior quality products to our customers. With our decades of experience in the sector, extensive know-how, well-established brands, and our ability to gauge the market sentiment, we are confident in fulfilling the needs of our customers and offer them favorable price-value proposition. Our merger of J.M. Hosiery and Ebell Fashions with Lux is on track and is on the last leg of its regulatory requirement.
However, we saw some delay in timelines due to remote functionality of regulatory departments, which now seems to be regular. This merger will lead single market strategy and single company brand image, leading to a stronger market presence and higher confidence level with all its stakeholders. We are committed to a long-term vision and goal to provide highest level of customer satisfaction and long-term value creation for our stakeholders. Now, I hand over to Mr. Ajay Patodia, to provide you an insight of our financials.
Thank you, Udit. Our revenue for the quarter stood at INR 247 crores, as against INR 263 crores in Q1 FY 2020. Revenue for the quarter has shown a slight decline of 6%, considering our plant operations were at halt for a month and a half due to nationwide lockdown. Our EBITDA has seen an absolute growth of 34%, which is stood at INR 47 crore, as against INR 35 crore in quarter one FY 2020. We have seen a significant improvement of 560 basis points in our EBITDA margin on account of prudent cost rationalization and improved operating efficiencies. Our EBITDA margin for the quarter stood at 19%, as compared to 13.4% in quarter one, FY 2020.
Profit after tax growth rate is 64%, which is stood at INR 31 crore, as against INR 19 crore in Q1, quarter one, FY 2020. Our tax margins have also improved significantly by 530 basis points, which is stood at 12.5%, as against 7.1% in quarter one, FY 2020. With this, we now open the floor for question 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 their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We would request the participants to please press star and one to ask a question. The first question is from the line of Nihal Jham from Edelweiss Securities. Please go ahead.
Thank you so much. Good evening, Saket and Udit, and congratulations on the good performance. Three questions from my side. First, could you give the contribution of exports in this quarter and the same one in the last corresponding quarter?
Exports for this quarter stood at around INR 15 crores, as against INR 27 crores for the corresponding quarter last year.
That's okay. The second one was on the other expenses, which have obviously significantly reduced. So if you could just give a breakup of which has been the main, you know, cost component. I would assume it's advertising and marketing, but just if you could break up, where have we managed to, you know, reduce costs? And how sustainable is this going forward?
So as you've correctly mentioned, the main reduction in the other expenditure account is mainly due to advertisement expenses. So as we mentioned in our speech, we generally earmark about 7-8% of our top line for ad spends, which for the current year, we are keeping it about 4-5%. So that is one of the main reasons why you see the margins to be improving. And so, I mean, current situation being a COVID situation, it's a one-off kind of a thing. Going forward, we believe that we'll in the next coming few quarters, we'll continue to see improved EBITDA margins on account of reduced ad spend.
Going forward for the next, say, next financial year and the next to next financial year, we'll be again starting to invest in our brand, and we'll ultimately see the effect in the top line.
So, last question on my side. Lux obviously has the highest reach in the country. So, you know, if you could just give a sense of, you know, current consumer trends in the innerwear space, both in terms of recovery for rural as well as for the cities. And even in, are you seeing a trend of, you know, your economy range seeing more traction than the premium range? You know, what are the insights that you've seen over the last couple of months as the recovery happened?
Like in the last couple of months, the economy range is definitely seeing more traction. And, the main demand is coming from the rural market, which is still continuing. Urban market is still weaker, but, the rural market demand, we expect the strong demand to continue and move towards the winter wear segment.
Any initial trends on how winter wear demands on the distribution among distributors?
It is very strong.
Sure. That's helpful. I'll come back in the queue with another question.
Thank you. We would request the participant to please press Star and one to ask a question. The next question is from the line of Sunil Jain from Nirmal Bang Securities. Please go ahead.
Hello? Hello.
Yeah, yes, we can hear you.
Sorry. One or two questions. If I see your financials, there is some drift in the gross margin.
... if you take year-on-year and quarter on quarter, can you give me some reason? We were expecting, like, if the yarn prices are soft, then it should have been on the gross margin.
This is mainly due to, as I just said sometime back, due to the mix change, the mass segment, the basic segment is moving much faster than the premium wear segment. So we had a drastic mix change in the last quarter, where the basic segment has a huge up movement than that of the premium segment. So going forward in the coming quarters, this should normalize back.
So, we are seeing pickup in the premium segment now? Or composition is reverting back to its normal level?
Yes, yes. For the current quarter, to some extent, it will improve, and in the next quarter, it should improve further.
Okay. And second question is related to one of our associate company, which we are merging, Ebell. Can you, because there the decline is very sharp, so how is the trend now? Is there a pickup we are seeing or that will make compared to the overall company?
Talking about Ebell Fashions, but mainly it's dealing with women's wear. And overall, if you look at the industry and the economy, women's wear as a segment overall has taken a big hit because women are not stepping out and purchasing product. It is only... I mean, the situation as it stands as of now is that it's mostly men's products which are selling, and that too, more of rural, more on the rural side than the urban side. So that has been the trend overall for the first quarter, but going forward, like, in the current quarter, we have seen much improvement compared to Q1, but we believe that it should still take some more time for it to come back to pre-COVID levels.
Okay. And last question is about the current month. Are you seeing year-on-month, means year-on-year growth in first forty-five days, or how is the trend?
I believe right now we were mostly discussing about Quarter One results, and so it will not be. We cannot give you a very exact quantitative outlook when it comes to Q2. But yeah, just to give you an idea, overall we believe that when it comes to men's segment and Lux overall as an entity, the demand side has been pretty much good. It's been pretty well. I mean, you can see the results in Q1 as well. We've been able to achieve over 95% of our Quarter One sales year on year, and we believe that Quarter Two should be something similar, if not better.
Last question is, can you spell out, how much is the debt at the end of the June quarter?
Debt at the end of the June quarter, it's. Just give us a few moments.
It's at INR 52 crores.
Okay, fine. Great. Thank you.
The same, we have a term deposit of around INR 55 crores against it.
Oh, so net debt, zero.
Net-net, net debt is negative.
Yeah. Fine. Great, sir. Thank you very much. Hello? Yeah, I'm done, sir. Thank you.
Thank you. We would request the participant to please press star and one to ask a question. The next question is from the line of Giriraj Daga from K.M. Visaria Family Trust. Please go ahead.
Yeah. Hello, team.
Giriraj, sir, your voice is not quite audible.
Hello. Is it audible now?
Yes, you can go ahead.
Yeah. What is the volume and absolute number we've done Quarter One versus last year?
So talking about volume, the volume has been pretty much flattish. And so last quarter, I mean, last Quarter One, FY 2020, we had done volumes of about 4.7 million. And even in the current quarter, the volume is about 4.7 million.
Okay, and the next question is related-
It's forty-seven million.
Forty-seven million. Okay.
Yeah.
Next question is related to export. So last year for con call, you mentioned that exports might be, like, basically lower than last year. So how is the trend you are looking now? You said June, we are seeing good pickup. Would we be able to match last year number? Would we be able to grow from last year number? Any thoughts there?
Last year number, it's too difficult to predict as of now, seeing this COVID situation in different countries. But, quarter two number, we are expecting to have a growth as compared to Q2 to Q2 basis.
... So Q2 to Q2, you expect growth in export market?
Yes.
Okay. Can you let me like, on the working capital, would you be able to give me, the inventory debtors and, creditors separately? You gave the combined number, but would you be able to give me separate numbers for that?
The inventory, as in June 2019, was at INR 306 crores.
Okay.
June 2020 inventory is at INR 277 crores.
Okay.
Receivables as in June 2019 was INR 271 crores.
Yeah.
On June twenty, it was INR 258 crores.
Okay.
The payables, on the other hand, on June nineteen, was INR 156 crores.
Yeah.
On June twenty, it is INR 129 crores.
Okay. Thank you. My next question is related to the cost reduction. You mentioned A&P was a large number there. Would you be able to give an absolute number, how much was the A&P in quarter one and how much we did in this quarter one?
We have saved approximately around INR 10 crore-INR 12 crore from advertisement.
Okay. But when you look at the numbers from INR 48 crore to INR 20 crore, we are looking at a almost INR 28 crore reduction in the ad spend. So would you give any other head which has resulted in such a sharp cost reduction?
We also had a reduction in the administrative expenses. The senior level management, everyone has taken a salary cut for the month of April as well as May. There was a major reduction out there as well.
And that must be reflected in the employee expense, right?
Right.
I'm talking about other expenses, which is down from INR 48 crore to INR 20 crore. So anyway, your employees down 11.5 to 8.8 crore, which is well understood. But your 48.5 crore of other expense, it's down to INR 20 crore.
So the absolute number of advertisement in quarter one, I just got the numbers right now, was at INR 33 crores.
Okay.
June 19 and June 20 was at 10 crores. So there is saving of 20-
Last question on my side. Lux obviously has the highest reach in the country. So, you know, if you could just give a sense of, you know, current consumer trends in the innerwear space, both in terms of recovery for rural as well as for the cities. And even in, are you seeing a trend of, you know, your economy range seeing more traction than the premium range? You know, what are the insights that you've seen over the last couple of months as the recovery happened?
Like in the last couple of months, the economy range is definitely seeing more traction. And, the main demand is coming from the rural market, which is still continuing. Urban market is still weaker, but, the rural market demand, we expect the strong demand to continue and move towards the winter wear segment.
Any initial trends on how, on winter wear demands from the distribution or from our distributors?
It is very strong.
So that's helpful. I'll come back to you if I have any questions.
Thank you. We would request the participant to please press Star and One to ask a question. The next question is from the line of Sunil Jain from Nirmal Bang Securities. Please go ahead.
Hello? Hello.
Yeah, yes, we can hear you.
Sorry. One or two questions. If I see your financials, there is some drift in the gross margin. If you take year-on-year and quarter-on-quarter, can you give me some reason? We were expecting, like, if the yarn prices are soft, then it should have been on the gross margin.
This is mainly due to, as I just said sometime back, due to the mix change, the mass segment, the basic segment is moving much faster than the premium wear segment. So we had a drastic mix change in the last quarter, where the basic segment has a huge up movement than that of the premium segment. So going forward in the coming quarters, this should normalize back.
So, we are seeing pick up in the premium segment now? Or composition is reverting back to its normal level?
Yes, yes. For the current quarter, to some extent, it will improve, and in the next quarter, it should improve further.
Okay. And second question is related to one of our associate company, which we are merging, Ebell. Can you, because there the decline is very sharp. So how is the trend now? Is there a pickup we are seeing or that will make compared to the overall company?
Talking about Ebell Fashions, but mainly it's dealing with women's wear. Overall, if you look at the industry and the economy, women's wear as a segment overall has taken a big hit because women are not stepping out and purchasing products. It is only. I mean, the situation as it stands as of now is that it's mostly men's products which are selling, and that too, the trade across the channel had gone down considerably, obviously, because owing to the COVID-19 pandemic situation. That was one of the main reasons why you see better cash flows coming in for the first quarter, but we believe that going forward, it should normalize to some extent as the lockdowns will be relaxed, and credit period should to some extent normalize to pre-COVID levels.
So pre-COVID, what was the type of credit we were giving? How much did it go down? And even,
So credit again will start flowing in once the COVID situation is normalized. But as we have been stressing over the last few conf calls, you can see that over the past few quarters, the company has always made it a considerable effort to reduce their working capital. And we have been able to do that. Even despite of the COVID situation, we have been able to achieve reduction in working capital. And if you look at over the past few quarters, when the COVID situation wasn't there, the company was able to reduce its working capital requirements.
Oh, that is, I think, very visible and very well appreciated. My question is that, how much of this, reduction in number of days that we have seen in the last three, four months, is sustainable, and how much will it normalize? If you could just tell us, what was the credit that used to be pre-COVID, and what do you think will be a new sustainable number, once things normalize another month or two?
So we believe that, going forward, in the long term, the company is looking at achieving about, one twenty-five, one thirty days of working capital levels.
What was it pre-COVID?
So pre-COVID, we were at about 140, 145.
Okay, so 10-15 days of savings, you think, is sustainable?
Right.
Secondly, this, you mentioned that the volumes have more or less been flat, and well, obviously, the demand has seen some impact. So how much of this is basically that, you know, selling of the channel inventory? Or is it that both the wholesalers and retailers also have been able to liquidate, and the overall channel inventory is more or less remained the same?
So in fact, you, you've put up a very good question. And so in fact, it, the fact, what it remains is, in fact, very opposite. So what happened was, during this situation, all the partners in the channel were more and more concerned about liquidating what stock they had. So everywhere across the channel, the level of inventory has gone down, and even despite that, the volume has remained flattish. So we believe that in the coming quarters, even if we are looking at replenishing the channel inventory, the volume should increase on that front. So right now, if I'm talking about in the first quarter, in the first three months, it was not that the channel inventory was going up. In fact, it was the contrary. The channel inventory was going down. Everyone...
No one was willing to take any kind of a risk of stock on their shoulders, so everyone was liquidating whatever stock they were having.
And that is, when you say channel, it is also including the end retailer?
I'm sorry?
When you say channel, it is including the end retailer, the final point of sale.
When I say channel, I mean company, wholesaler, retailer.
Okay. So does it then mean that, because, see, my sense is the market would definitely gone down. At the retail level, on the point of sale, the market share has gone up significantly? Because, while your volumes are flat, my sense is that the market would have definitely seen some correction, right, in terms of overall demand.
More of, rural, more on the rural side than the urban side. So that has been the trend overall for the first quarter. But, going forward, like, in the current quarter, we have seen a much improvement compared to Q1, but we believe that it should still take some more time for it to come back to pre-COVID levels.
Last question is about the current month. Are you seeing month on month, means year-on-year growth in the first 45 days, or how is the trend?
I believe right now we were mostly discussing about Quarter One results, and so it will not be. We cannot give you a very exact quantitative outlook when it comes to Q2. But yeah, just to give you an idea, overall, we believe that when it comes to men's segment and Lux overall as an entity, the demand side has been pretty much good. It has been pretty well. I mean, you can see the results in Q1 as well. We've been able to achieve over 95% of our Quarter One sales year on year, and we believe that Quarter Two should be something similar, if not better.
Last question is, can you spell out, how much is the debt at the end of the June quarter?
Debt at the end of the June quarter, it's. Just give us a few moments. It's at INR 52 crores.
Okay, fine. Great. Thank you.
The same, we have a term deposit of around INR 55 crores against it.
Oh, so net debt, zero.
So net debt, yeah. Net, net debt is negative.
Yeah. Fine. Great, sir. Thank you very much... Hello? Yeah, I'm done, sir. Thank you.
Thank you. We would request the participant to please press star and one to ask a question. The next question is from the line of Giriraj Daga from K.M. Visaria Family Trust. Please go ahead.
Yeah. Hello, team. Volume and quarter versus last year?
Giriraj sir, your voice is not quite audible.
Hello. Is it audible now?
Yes, you can go ahead.
Yeah. What is the volume and absolute number we've done quarter one versus last year?
So talking about volume, the volume has been pretty much flattish, and so last quarter, I mean, last quarter one FY. So see, as the basic fundamental of this entire analysis is that although we weren't quite categorized as an essential commodity, but in practical, in all practical uses, it was an essential commodity. During this lockdown, all the consumers who are our target audience have been consuming our products. So as soon as the lockdown was opened up and people started to go out, when they were stepping out to buy food and grocery and everything, people were also ending up buying their basic essentials. And that is one of the main reasons why consumption was never, in our particular product, consumption was never stopped. Even during the lockdown, people were consuming our products.
So even if you're looking at the retail level, we do not believe that there will be much of an inventory pressure at that point.
No, my question was that at the retail level, do you think you've gained market share, or is it that, market has more or less remained same, and that is why we are more or less the same?
No, so we definitely believe the overall, the market has been good for the entire industry. There is no doubt about that. And when we talk about our particular market share, we believe that, because being a big organized player within our own industry, the overall organized share during this lockdown period has increased vis-a-vis the unorganized sector, so on that account, we definitely have gained market share.
Sure. My last question is regarding the merger of the two group entities. So you mentioned in the presentation that because of this COVID, some of the hearings have got delayed. So, can you give us any sense on, when do you see now this, final, final hearing happening, and by when we can see the consolidated numbers?
So see, our application is pending before the NCLT, and right now, as the situation stands, that I mean, the court is not functioning as regularly as it used to during the pre-COVID levels. So that is why the waiting line or the waiting queue, so as to say, the waiting time for a case to get heard has increased quite a lot.
Mm.
So from the company and the management side, all the regulatory, so we have taken all steps, and we have already filed the application. Now, it entirely depends as to when the NCLT takes up the case for hearing and gives us the green signal.
That is the only approval which is pending?
So that we are pending at that stage. We've already filed application.
Okay. Thank you.
Thank you. The next question is from the line of Manish Sonthalia from Motilal Oswal Financial Services. Please go ahead.
Thank you, ma'am. Thanks for the opportunity. So would you, would it be possible for you to share us the gross margins on each of the segments, menswear, womenswear, athleisure? And I also wanted some color that during this pandemic, what is the level of disruption in the unorganized space? Obviously, the organized space, like yourselves and others, would have gained market share, but if you could shed some color on how this disruption has impacted the unorganized space.
So with this pandemic coming in, see, it's become much more difficult for the unorganized guys, definitely, because we being an organized player, we pulled across all our resources, and we tried to make sure that we could produce as much as possible and then also sell as much as possible. When you're talking about the production process, it's quite a lengthy, long process. Twenty, we had done volumes of about four point seven million, and even in the current quarter, the volume is about four point seven million.
Okay, and the next question is related-
It's forty-seven million.
Forty-seven million. Okay.
Yeah.
Next question is related to export. So last year con call, you mentioned that export might be, like, basically lower than last year. So how is the trend you are looking now? You said June, we are seeing good pickup. Would you be able to match last year number? Would you be able to grow from last year number? Any thoughts there?
Last year number, it's too difficult to predict as of now, seeing this COVID situation in different countries, but quarter two numbers, we are expecting to have a growth as compared to Q2 to Q2 basis.
From Q2 to Q2, you expect growth in export market?
Yes.
Okay. Generally, like, on the working capital, would you be able to give me the inventory debtors and creditors separately? You gave the combined number, but would you be able to give me separate numbers for that?
The inventory, as in June 2019, was at INR 306 crore.
Okay.
June 2020, inventory is at INR 277 crores.
Okay.
Receivables as in June 2019 was INR 271 crores.
Yeah.
On June twenty, it was INR 258 crores.
Okay.
The payables, on the other hand, on June 19, was INR 156 crores.
Yeah.
On June 20, it is INR 129 crores.
Okay, thank you. My next question is related to the cost reduction. You mentioned A&P was a large number there. Would you be able to give an absolute number, how much was the A&P in quarter one, and how much we did in this quarter one?
We have saved approximately around INR 10-12 crores from advertisement.
Okay. But when you look at the numbers from INR 48 crore to INR 20 crore, we are looking at a almost 28 crore reduction in the other expense. So would you give any other head which we have there resulting such a sharp cost reduction?
We also had a reduction in the administrative expenses, the senior level management. Everyone has taken a salary cut for the month of April as well as May. There was a major reduction on there as well.
That must be reflected in the employee expense, right?
Right.
So I'm talking about other expenses, which is down from INR 48 crore to INR 20 crore. So your employees down 11.5 to 8.8 crore, which is understood. But your 40 and 48.5 crore of other expense is down to INR 20 crore.
The absolute number of advertisement in quarter one, I'll just get the numbers right now, was at INR 33 crores.
Okay.
June nineteen, and June twenty was at INR 10 crores. So there's a saving of 20. So for any unorganized player, even if he gets stuck at one point, the entire product does not get manufactured. And even right now, after the lockdown getting eased up, we can still see a lot of hiccups and a lot of hurdles at different points of production processes. But being a big player, we somehow manage one way or the other. For an unorganized player, we believe that it would be quite, quite difficult under the current circumstances to function as we would in the pre-COVID situation. Yes, there has been significant disruption when it comes to the unorganized sector.
Talking about your margin levels, we do not have it handy right now, so you can obviously reach out to our IR people, and they can get back to us, and we'll get back to you as soon as we have the figures with us.
Yeah, just the gross margin numbers on the menswear, womenswear, and the athleisure segment.
Women's wear, for us, is basically Ebell Fashions Private Limited.
Yeah.
So, the figures were already. The balance sheet, you can obviously look at, the figures which we have achieved in the last few years, so gross margins will be quite visible over there. When it comes to menswear, menswear is primarily Lux, to which hover somewhere around 30-35%.
And athleisure segment, like Lyra and all those things.
So Lyra is basically menswear. We do not have the athleisure gross margin levels currently now, right now with us. We'll surely get back to you.
Okay. Thank you.
Thank you. The next question is from the line of Ankit Pande, CFA, from Quant Mutual Fund. Please go ahead.
Hi. Thanks for taking my question. I hope I'm audible. My question is regarding a channel mix. Could you just break it down into, you know, general trade, modern trade, or indeed online, and your exclusive channels? Also, and then a follow-on from there, if you could talk about, you know, behavior of inventory stocking, de-stocking, or maybe pricing action amongst the big dealers versus the not so big dealers versus your own channels, if you could. If at all this is appropriate in this time. Thanks.
So basically, the channel mix is basically general trade, and online sales are definitely applied to the premium category only, where there is a percentage of online sales and modern trade is higher compared to Lux. Lux being a very mass brand, is quite available in the market, so bulk of our sales is generally comes from the general distribution, general trade itself. And talking about channel levels of stocking and de-stocking, we've just spoken about it a few moments back. For the first quarter, everyone was working on a so as to say hand-to-mouth basis, where whatever products were getting manufactured were getting sold the same day, and even the wholesalers were selling it the same day on a cash basis, and so were the retailers.
So the entire channel was working on a very hand-to-mouth basis. So, there was no question of, stocking up of goods arising. It was everyone... In fact, were having quite lower levels of stock than they usually would have. So the channel has dried up quite a lot in the first quarter, which, we believe in the coming quarter, they - even if we look at replenishing the channel stock, we some sort of a volume growth will, come on that account.
Okay, thanks for that, and secondly, if you could talk about any imports of any materials that you have, specific materials from Southeast Asia. If you do that, and if you could break that down as percentage of cost.
We generally, most of our materials are sourced locally. We are not dependent on imports. We only import machinery. We do not import any raw materials.
Okay, fine. And for the remainder of the year, what is the CapEx outlook, and how has it changed versus at the start of the financial year?
So going forward for the current year, we're looking at incremental marginal CapEx, which is regular maintenance of machinery. We're not looking at any major big-ticket CapEx going forward as of now.
... Okay, what would the numbers be?
So that, the number will be somewhere between about INR 10-15 crores.
Okay, fine. All right, all right. Thank you so much, and all the best.
Thank you. The next question is from the line of Riddhima Chandak from Rohan Asset Managers. Please go ahead.
Good evening, sir. Am I audible?
Yes.
Yeah. So, basically, what is the contribution from the rural and urban?
The contribution of rural market is approximately 65%, whereas the urban is approximately 35%.
And going forward, is this percentage would be same or we are sort of increasing in the urban market?
That is, that is very hard to decide as seeing the COVID situation, we don't know where the urban market would head to, but rural market is definitely strong. And if there's a solution comes of COVID-19, then the urban market will also boom in.
Okay. And what is the contribution from the economy versus premium? As economy contributed more in the Q1 FY 2021. So in general, what is your contribution in economy range versus premium range that is on end?
Economy range contributed to around 90%, whereas the premium range contributed to around 10%.
Okay, okay. And are we tracking the sales, secondary sales or tertiary sales, as primary is almost covered to 90%-95%, as you stated earlier? So is there any clarification on that front?
There is no exact tracking of it, but, but with the experience and getting the feedback from the market, the tertiary sales is much more than the primary sales, as we rightly said sometime back, that, the channel inventory is getting lessened by each passing day.
Okay. And, as a subsidiary, that is Ebell and J.M. Hosiery. So, out of total revenue, how much these two subsidiaries contributing? And, from the longer term perspective, say two years, how this number, what-
Closes out, yeah.
Okay, okay. So large part was the A&P sales.
As well as there was a two crore saving from miscellaneous expenditure, which mainly includes rented places as well as administration costs.
Okay, and understood. Understood. Okay, thanks a lot and all the best.
Thank you. The next question is from the line of Tanvi Shetty from Axis Securities. Please go ahead.
Hello. Thanks for taking my question, sir. I understand that most of your revenue comes from the central and eastern states, but I wanted to know what is the demand situation like in other parts of the country, like western, in Maharashtra, Gujarat, and also south?
The demand position overall has been all across India. I think it will not be correct to say that it was a biased sort of a demand coming in. The demand has been scattered all across, and we were seeing good demand coming in from, in fact, north, west, central, east. All the areas were, the demand was, pretty much well distributed. Compared to the rural and the urban mix, we felt that the rural was performing better than the urban.
Okay, okay. So, now in Q2, like I understand, you can't reveal much of the Q2 numbers, but on a qualitative basis, I wanted to understand that with the sporadic lockdowns in Bihar, sorry, UP and floods in Bihar, do you expect Q2 to be better than Q1?
So we believe that with the easing of the lockdown, Q2 should definitely be better than Q1. And even if you look at the seasonality of the sales, I mean, Q2 as a quarter is always bigger than Q1 quarter. Even if you look at last year's figures, Q2 is always bigger than Q1. And plus, with the easing of the lockdown going ahead, we believe that Q2 numbers should definitely be better than Q1.
Okay, okay. That's all from my side. Thank you, sir. Thank you, and all the best.
Thank you. The next question is from the line of Sachin Kasera from Swan Investment Managers. Please go ahead.
Yeah. Hi, good afternoon, Gentlemen. My question is regarding this cash flow that we have shown, a significant improvement. My sense is that large part of that is driven by the reduction in working capital. So from what I can understand is that because our production facilities were closed for almost one after two months, a part of it is that we produce less and we obviously liquidate the inventory. So is this reduction in working capital because of lower inventory, is it now a sustainable thing, or it's a one-off and it will normalize by the end of Q2?
So, see, the reduction in working capital obviously has been handsome for quarter one, mainly because of change in terms of trade. Because, given the COVID pandemic situation, the credit period, which was netted out, was much lesser than in a normal circumstances. And it was the same even going ahead into the channel. The wholesalers were almost selling on a cash basis, and so were the retailers. So the credit-
What number...
...On an average, both the entities combined contribute to around 50% of the sales of that of Lux.
Okay. And going forward,
Like, on a long-term basis.
Yeah. Okay, so this 50% you are looking, from the longer term perspective, say, two to three years?
Yes.
Currently, how much it is?
Last year, last financial year, it closed at around INR 600 crores. So currently, it seems just one quarter won't be wise, because it will give you a very few numbers, because one of the company contained women's wear segment, which took a big hit in the quarter one, but in the coming quarters, this will again rise back as soon as the lockdown opens up. But on a general level, 50% of the sale of Lux is contributed to JM and Ebell put together.
Okay, okay. And for this year, this FY twenty-one, for the full year, how much revenue growth we are expecting? As we said that Q2 would be better than Q1. So overall, how much we are expecting growth in terms of revenue and what sort of EBITDA margins would be there as in the current year, as you said, A&P spends will be less as compared to FY twenty levels? Yeah.
Can you please repeat yourself?
Yeah. So how much revenue growth we are expecting for the current year, and what EBITDA margin guidance you would give? And you said that it will improve in the next few quarters, because as you said, A&P spends will reduce will be lesser as compared to FY 2020 levels.
Correct, correct. So going ahead, we believe is for the entire financial year. As of now, as the COVID situation stands, as of now, we believe that we should be able to achieve our last year sales. In fact, to some extent, we believe that we kind of should be. We are estimating we should be able to achieve single digit growth figures. It looks a little tough, but we believe that we should be able to do at least the last year figure. We should be able to match what we have done. And talking about EBITDA margins, as we mentioned, that we have reduced our A&P spend. So we believe that about 400-450 basis points increase in EBITDA margins should be seen for the current financial year.
Okay. Okay, sir. Thank you for answering my question.
Thank you. The next question is from the line of Sandeep Abange from Samco Securities. Please go ahead.
Hello?
Hello.
Hello, yeah, can you hear me?
Yes.
Yeah, thank you for taking my call. Actually, I wanted to know what was the reason for increase in the other income part? Like, it was almost for more than 400% increase. So can you, like, give me some breakup, like what were... I understand there must be rental income would be there, rental waivers, and what else could be there in that? I wanted to understand that.
Just give us a few moments. We'll just come back, and I'll see you then. If you have any other question, you can repeat that.
Yeah, so and one more question I had regarding the pent-up demand. Like, so, during the last quarter, many your competitors have also mentioned that there was a lot of pent-up demand during the quarter. So what are your comments on that, and what do you feel like, whether it is going to sustain or how it's going to pan out in coming quarters?
Obviously, there has been some effect of a pent-up demand is there, because if you are, if you know, if you are in a complete lockdown situation for one, one and a half months, so some sort of a pent-up demand has to be there. So some, so as you can see, Q1, the some amount of pent-up demand has obviously played in. But going forward, we believe that, now supply should remain a challenge for quarter two and quarter three are the quarters when we witness winter wear sales a lot. So winter wear sales for us has, been quite a big percentage of sales. So for, just to give you a flavor, last year we did about 200 crores of winter wear sales. And bulk of the sales, are accounted for in quarter two and quarter three.
So going forward, right now, as the situation stands, it's becoming tremendously, increasingly difficult to produce winter wear products. So right now, we believe that with the, with the onset of winter, the demand for the winter goods should be quite, quite strong, because not many people are able to manufacture the winter wear products. We, having our own company, has its own setup for manufacturing winter wear products, therefore, we should be able to achieve the kind of production levels which we are looking at. But overall, at the industry level, the production of the winter wear segment should take a big hit. So we believe that right now, quarter two and quarter three should see good demand for the winter wear products coming in.
To answer your first question, for the other income, 1.3 crore gain was from the foreign currency fluctuation, which was there in the price of the USD dollar, and the remaining was from the interest received to the company, on the 55 crore deposit, which has been made during the quarter.
Okay. Thank you for the detailed answer. Thank you.
Thank you. The next question is from the line of Hiten Boricha from Sequent Investments. Please go ahead.
Hi, good evening, sir. Just want a small query, clarification. You mentioned EBITDA margin guidance. I missed on that side. Can you please repeat it?
EBITDA, so we're looking at an increase of 400-450 basis points, increase in EBITDA margins for the year FY 2021, which is primarily on account of reduced A&P spend.
400 basis points, right?
Yeah, 400-450.
Okay, okay. That's okay. So that's all from my side. Thank you, sir.
Thank you. The next question is from the line of Sachin Kasera from Swan Investment Managers. Please go ahead.
Yeah, two questions. One was on the EBITDA margin. So you also mentioned that, the A&P spend will normalize for next year. So over a two-year period, how should we see? While this year there will be a 400-450 basis points, is it that while A&P will go up because of the better premiumization and some of the other initiatives you will sustain this next year, or you think there could be a drop of 150-200 basis points in FY 2022?
So, see, right now, talking about FY 2021, we spoke about 400-450 basis points increase in EBITDA margins, primarily on account of A&P. But, again, talking about FY 2022, FY 2023, A&P spends should tend to go back to normal. But, again, the product mix will change. The company will be launching newer products, and whatever investments are being made in branding exercises in the year FY 2022, will result in higher sales coming in the next two, three years. So, generally, when you start advertising a product and when you start investing in branding, the results generally come with a lag effect. So that is the main reason we believe that going forward, our investments in brand should again tend to go back to somewhere close to normal.
But again, the entire 400 basis points increase in EBITDA will not get erased, because obviously the product mix is changing and the company is being able to realize the better margins.
So fair to assume that the management and the company will put all the effort to try and sustain as much as, the four hundred, four fifty going forward also?
Definitely, definitely. The company will put in all the effort to maximize its EBITDA margins going forward.
My second question was a follow-up regarding this, distribution and the market share gain for organized. So as you mentioned, that, one of the key reasons why the organized, industry gained market share was that the organized, especially larger players like you, were able to manage the supply chain production far better than the unorganized players. So over the next two, three, four months, once things are unlocking and started, things normalize, and the supply from the unorganized players comes back. So you think the market share gains that have come by will again go back to pre-COVID levels? Or you think part of the market share gain that the organized industry has got in this, COVID era, will be sustained?
Sir, we just spoke about it a few minutes back. Quarter two and quarter three, bulk of the sales are coming in from the winter wear products. And winter wear production has been a very, very big challenge for the current, financial year because of the COVID situation. So we believe that in the current two quarters, it will become even more difficult for the unorganized player to manufacture winter wear products.
So my question was actually not even two quarters. My question, sorry. My question was more when things normalize on the supply from the organized. Maybe it is two quarters or three quarters. Once they come back in the market, some part of them, they will... That part of time, you think this share will remain, or you will have to give back the share gain that you have got?
So that is something we can believe that obviously, no, whatever market share we are gaining, some of it will obviously remain with the company, because whenever a customer starts wearing a more branded product, not all of them go back to wearing an unbranded, non-branded product. So some sort of customer stickiness is also there. So even in your entire channel of distribution, the, you know... So the level of confidence that the distributors, wholesalers have over an organized player is much more. And once they start working with an organized player, they generally do not go back to the. Everyone, everyone in their life wants to upgrade, when it comes to using or consuming a product or selling a product. So some sort of stickiness will obviously be there.
So we do not believe that whatever market share gains are getting made will not get lost.
Sure. And just one lastly, is there a debt also on the balance sheet of those two companies, Ebell and J.M., or they're also debt-free like Lux?
If you look at both the entities combined, they are debt-free.
In that scenario, now that we are more or less debt-free and our focus is on generating free cash flows, is there any internal strategy as to next two, three years, what is going to be the capital allocation policy? Are you going to look in terms of doing some acquisitions to use this cash, or will it be more in terms of paying out to shareholders, in terms of buyback or dividend, any thoughts on that?
So we already have our dividend policy in place, whereby we try and give a 25% payout ratio. So that is what we are looking at, maintaining that even for the current year, that whatever free cash flows or whatever profits are getting generated, about 25% of it will be used to paying back as dividends to our shareholders. And right now, until now, we've been using all our cash to reduce our debt, which right now has almost come to a net debt free kind of a situation.
Mm-hmm.
Going ahead, obviously, we are scouting for opportunities where to invest the money and what else the company can be doing in order to increase their margins.
Sure. Thank you.
The capital will obviously get deployed in a manner in which your return on capital stands at a fair value.
Sure, sure. Thank you. Thank you.
...Due to time constraints, that was the last question. I would now like to hand the conference over to the management for closing comments.
I take this opportunity to thank everyone for joining on the call. I hope we have been able to address all the queries. For any further information, kindly get in touch with us or SGA, our investor relation advisor. Thank you once again.
Thank you. On behalf of Lux Industries Limited, that concludes today's conference call. Thank you for joining us. You may now disconnect your lines.
Where there is a percentage of, the percentage of online sales and modern trade is higher compared to, Lux. Lux being a very mass brand, is quite available in the market, so bulk of our sales is generally comes from the, general distribution, general trade itself. Talking about, channel levels of stocking and destocking, we've just spoken about it a few moments back. For the first quarter, everyone was working on a, so as to say, hand-to-mouth basis, where, whatever products were getting manufactured were getting sold the same day, and even the wholesalers were selling it the same day on a cash basis, and so were the retailers. The entire channel was working on a very hand-to-mouth basis, there was no question of, stocking up of goods arising.
It was everyone, in fact, were having quite lower levels of stock than they usually would have. So the channel has dried up quite a lot in the first quarter, which we believe in the coming quarter, they even if we look at replenishing the channel stock, we some sort of a volume growth will come on that account.
Okay, thanks so much. And secondly, if you could talk about any imports of any materials that you have, specifically specific materials from Southeast Asia? If you do that, and if you could break that down as percentage of cost?
So, so we generally, most of our materials are sourced locally. We are not dependent on imports. We only import machinery. We do not import any raw materials.
Okay, fine, and for the remainder of the year, what is the CapEx outlook, and how has it changed versus at the start of the financial year?
So going forward for the current year, we're looking at incremental marginal CapEx, which is regular maintenance of machinery. We're not looking at any major big-ticket CapEx going forward as of now.
Okay, what would the numbers be?
So that the number will be somewhere between about INR 10-15 crores.
Okay, fine. All right. All right. Thank you so much, and all the best.
Thank you. The next question is from the line of Riddhima Chandak from Rohan Asset Managers. Please go ahead.
Good evening, sir. Am I audible?
Yes.
Yeah. So, basically, what is the contribution from the rural and urban?
The contribution of rural market is approximately 65%, whereas the urban is approximately 35%.
And going forward, is this percentage would be same or we are sort of increasing in the urban market?
That is very hard to decide as seeing the COVID situation. We don't know where the urban market would head to, but rural market is definitely strong, and if there's a solution comes of COVID-19, then the urban market will also boom in.
Okay. And, what is the contribution from the economy versus premium? As economy contributed more in the Q1 FY 2021. So, in general, what is your contribution in economy range versus premium range that is on end?
Economy range contributed to around 90%, whereas the premium range contributed to around 10%.
Okay. Okay. And, are we tracking the sales, secondary sales or tertiary sales, as primary is almost covered to 90%-95%, as you stated earlier? So is there any clarification on that side?
There is no exact tracking of it, but, but with the experience and getting the feedback from the market, the tertiary sales is much more than the primary sales, as we rightly said sometime back, that, the channel inventory is getting lessened by each passing day.
Okay. And, as a subsidiary, that is, Ebell and J.M. Hosiery. So, out of total revenue, how much these two subsidiaries contributing? And, from the longer term perspective, say two years, how this number, what, what number...
On an average, both the entities combined contribute to around 50% of the sales of that of Lux.
Okay. And going forward,
Forward, like, on a long-term basis.
Yeah. Okay, so this 50% you are looking from the longer term perspective, say two to three years?
Yes.
Currently, how much it is?
Last year, last financial year, it closed at around INR 600 crores. Currently, seeing just one quarter won't be wise, because it will give you a very few numbers, because the company contains segments which took a big hit in the quarter one, but in the coming quarters, this will again revise back as soon as the lockdown opens up. But on a general level, 50% of the sale of Lux is contributed to JM and Ebell put together.
Okay. And for this year, this FY 2021, for the full year, how much revenue growth we are expecting? As we said that Q2 would be better than Q1. So overall, how much we are expecting growth in terms of revenue and what sort of EBITDA margins would be there as in the current year, as you said, A&P spends will be lesser as compared to FY 2020 levels? Yeah.
Can you please, can you please repeat yourself?
Yeah. So how much revenue growth we are expecting for the current year, and what EBITDA margin guidance you would give? And you said that it will improve in the next few quarters, because as you said, A&P spends will reduce will be lesser as compared to FY twenty levels.
Correct, correct. So going ahead, we believe is for the entire financial year. As of now, as the COVID situation stands, as of now, we believe that we should be able to achieve our last year sales. In fact, to some extent, we believe that we kind of should be. We are estimating we should be able to achieve single digit growth figures. It looks a little tough, but we believe that we should be able to do at least the last year figure. We should be able to match what we have done. And talking about EBITDA margins, as we mentioned that we have reduced our A&P spend, so we believe that about 400-450 basis points increase in EBITDA margins should be seen for the current financial year.
Okay. Okay, sir, thank you for answering my question.
Thank you. The next question is from the line of Sandeep Abange from Samco Securities. Please go ahead.
Hello?
Hello.
Hello, yeah. Can you hear me?
Yes.
Yeah, thank you for taking my call. Actually, I wanted to know what was the reason for increase in the other income part? Like, it was almost more than 400% increase. So can you, like, give me some breakup, like what... I understand there must be rental income, would be there, rental waivers, and what else could be there in that? I wanted to understand that.
Just give us a few moments. We'll just come back and answer your query. That's fine. If you have any other question, you can email that.
Yeah. So, and, one more question I had regarding the pent-up demand. So, during the last quarter, many, your, competitors have also mentioned that there was a lot of pent-up demand, during the quarter. So what are your comments on that, and what do you feel like, whether it is going to sustain or, how it's going to pan out in, coming quarters?
So obviously, there has been some effect of a pent-up demand is there, because if you are, you know, if you are in a complete lockdown situation for one and a half months, so some sort of a pent-up demand has to be there. So as you can see, Q1, some amount of pent-up demand has obviously played in. But going forward, we believe that now supply should remain a challenge. So quarter two and quarter three are the quarters when we witness winter wear sales a lot. So winter wear sale for us has been quite a big percentage of sales. So just to give you a flavor, last year we did about INR 200 crore of winter wear sales. And bulk of the sales are accounted for in quarter two and quarter three.
So going forward, right now, as the situation stands, it's becoming tremendously, increasingly difficult to produce winter wear products. So right now, we believe that with the onset of winter, the demand for the winter goods should be quite, quite strong, because not many people are able to manufacture the winter wear products. We, having our own company, has its own setup for manufacturing winter wear products, therefore, we should be able to achieve the kind of production levels which we are looking at. But overall, at the industry level, the production of the winter wear segment should take a big hit. So we believe that right now, quarter two and quarter three should see good demand for the winter wear products coming in.
To answer your first question, for the other income, INR 1.3 crore gain was from the foreign currency fluctuation, which was there in the price of the USD dollar, and the remaining was from the interest received to the company, on the INR 55 crore deposit, which has been made during the quarter.
Okay, thank you. Thank you for the detailed answer. Thank you.
Thank you. The next question is from the line of Hiten Boricha from Sequent Investments. Please go ahead.
Hi, good evening, sir. Just want a small query, clarification. You mentioned EBITDA margin guidance I missed on that side. Can you please repeat it?
EBITDA, so we're looking at an increase of 400-450 basis points, increase in EBITDA margins for the year FY 2021, which is primarily on account of reduced A&P spend.
Four hundred basis points, right?
Four hundred, four fifty.
Okay, okay. That's okay. So that's all from my side. Thank you, sir.
...Next question is from the line of Sachin Kasera from Svan Investment Managers. Please go ahead.
Yeah, two questions. One was on the EBITDA margin. So you also mentioned that the A&P spend will normalize for next year. So over a two-year period, how should we see? While this year there will be a 400-450 basis points, is it that while A&P will go up because of the better premiumization and some of the other initiatives, you will sustain this next year? Or you think there could be a drop of 150-200 basis points in FY 2022?
So, see, right now, talking about FY 2021, we spoke about 400-450 basis points increase in EBITDA margins, primarily on account of A&P. But, again, talking about FY 2022, FY 2023, A&P spends should tend to go back to normal. But, again, the product mix will change. The company will be launching newer products, and whatever investments are being made in branding exercises in the year FY 2022, will result in higher sales coming in the next two, three years. So, generally, when you start advertising a product and when you start investing in branding, the results generally come with a lag effect. So that is the main reason we believe that going forward, our investments in brand should again tend to go back to somewhere close to normal.
But again, the entire 400 basis point increase in EBITDA will not get erased, because obviously the product mix is changing and the company is being able to realize the better margins.
So fair to assume that the management and the company will put all the effort to try and sustain as much as the four hundred, four fifty going forward also?
Definitely, definitely. The company will put in all the effort to maximize its EBITDA margins going forward.
My second question was a follow-up regarding this, distribution and the market share gain for organized. So as you mentioned that, one of the key reasons why the organized, industry gained market share was that the organized, especially larger players like you, were able to manage the supply chain production far better than the unorganized players. So over the next two, three, four months, once things are unlocking and started, things normalize, and the supply from the unorganized players comes back, so you think the market share gains that have come by will again go back to pre-COVID levels? Or you think part of the market share gain that the organized industry has got in this, COVID era, will be sustained?
We just spoke about it a few minutes back. Quarter two and quarter three, bulk of the sales are coming in from the winter wear products. And winter wear production has been a very, very big challenge for the current, financial year because of the COVID situation. So we believe that in the current two quarters, it will become even more difficult for the unorganized player to manufacture winter wear products.
My question was actually not even two quarters. My question, sorry. My question was more when things normalize on the supply from the organized. Maybe it is two quarters or three quarters. Once they come back in the market, some part of time, they will... That part of time, you think this share will remain, or you will have to give back the share gain that you have got?
So that is something we should believe that obviously, no, whatever market share we are gaining, some of it will obviously remain with the company, because whenever a customer starts wearing a more branded product, not all of them go back to wearing an unbranded non-branded product. So some sort of customer stickiness is also there. Even in your entire channel of distribution, you know, the level of confidence that the distributors, wholesalers have over an organized player is much more. Once they start working with an organized player, they generally do not go back to the organized player. Everyone in their life wants to upgrade when it comes to using or consuming a product or selling a product. Some sort of stickiness will obviously be there.
So we do not believe that, whatever market share gains are getting made, will not get lost.
Sure. And just one lastly, is there any debt also on the balance sheet of those two companies that are being merged, or they're also debt-free like Lux?
If you look at both the entities combined, they are debt-free.
In that scenario, now that we are more or less debt-free and our focus is on generating free cash flows, is there any internal strategy as to next two, three years, what is going to be the capital allocation policy? Are you going to look in terms of doing some acquisitions to use this cash, or will it be more in terms of paying out to shareholders, in terms of buyback or dividend, any thoughts on that?
We already have our dividend policy in place, whereby we try and achieve a 25% payout ratio. So that is what we are looking at maintaining that even for the current year, that whatever free cash flows or whatever profits are getting generated, about 25% of it will be used to paying back as dividends to our shareholders. And right now, until now, we've been using all our cash to reduce our debt, which right now has almost come to a net debt free kind of a situation. Going ahead, obviously, we are scouting for opportunities where to invest the money and what else the company can be doing in order to increase their margins.
Sure. Thank you.
The capital will obviously get deployed in a manner in which your return on capital stands at a fair value.
Sure, sure. Thank you.
Thank you.
Thank you. Due to time constraints, that was the last question. I would now like to hand the conference over to the management for closing comments.
I take this opportunity to thank everyone for joining on the call. I hope we have been able to address all the queries. For any further information, kindly get in touch with us or SGA, our investor relations advisor. Thank you once again.
Thank you. On behalf of Lux Industries Limited, that concludes today's conference call. Thank you for joining us, and you may now disconnect your lines.