Q4 20/21

May 26, 2021

Ladies and gentlemen, good day and welcome to the Luxe Industries Limited Q4 FY 'twenty one 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 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. Please note that this conference is being recorded. I now hand the conference over to Mr. Saket Todi from Luxe Industries Limited. Thank you, and over to you, sir. Good afternoon, and thank you, everyone, joining the earnings conference call to Executive Director, our CFO, Mr. Saurabh Budolia and SG and A are investor relation advisers. I hope you and your family are keeping safe during these tough times, The 2nd wave of COVID which started in the Q1 of FY 2022 has been more severe than the last year. We at Lux Industries understand the importance of following the necessary COVID protocols issued by the authorities and we extend full COVID protocols issued by the authorities and we extend full cooperation in the fight against COVID. Our employees have been made aware of the need to adhere to These guidelines undertaking all the precautions. We are pleased to report the resilient performance for the quarter gone by After the initial challenges posed by the restrictions and lockdowns at the start of the year, we have bounced back extremely well to cover the lost ground but also outperformed last year numbers as well. The performance has been immediately driven by progressive Improvement in demand and consumption across the Innerwear industry. We witnessed healthy traction for our economy and midpoint categories and saw a gradual pickup in our premium and export segment. While demand remains strong, the supply situation over the next few months is likely to be adversely affected impacted by the disruptions from COVID-nineteen lockdowns in India. But we expect it to be better than last year as businesses are more prepared that last year and the lockdowns are restricted to certain states and not the entire country. We expect quarter 1 FY 2022 to be relatively weak due to the pandemic and expect to improve gradually from the Q2. We will remain well equipped to address these challenges and drive consistent competitive and cash accretive growth over the medium to long term. The Innerwear industry is constantly evolving, and we have always been at the forefront of this evolution, having implemented innovative ways of offering differentiated products in the market by undertaking breakthrough marketing and Brand Promotion activities. Our commitment towards addressing environment, social and governance related issues has been unparalleled. We understand the need of a sustained progress of society to pursue the long term goals that are beneficial for the community and helps us to make Our difference in society by giving back in equal measures. Coming to our performance for the quarter and the year ended 31st March 2021, FY 2021 net revenue is up by 17 percent INR2.1965 crores, whereas for the quarter 4 FY 2021 is up by 49% to INR 601 crores, highest ever quarter in the history of Lux. Between the categories, Premium segment has registered a total growth of 48%, whereas Mid premium economy has registered a growth of 42% 59%. Overall volumes for FY 2021 and quarter core 2021 increased by 13% YOY and 29% YOY respectively, which was well above the industry average. Given our steady increase in volume and other strategic initiatives, we have been able to increase our market share during the year. Lux enjoys approximately 15% market share in the organized men's innerwear category. In line with our guidance for advertisement and the marketing For FY 2022, our spending for the year stood at INR106 crore, which is approximately 5.4% of the total revenue. We expect to gradually reinstate and make it back to 7% of our revenue for the current financial year. With this, I will now ask Mr. Uddit Todi to share his thoughts. Hello. Good afternoon and a very warm welcome to everyone. I hope everyone is keeping safe and healthy during this situation. I am glad to share that during quarter 4 FY 2021, We have completed the merger of J. M. Hosbury Company and Eber Fashion Products Limited with the company Lux Industries Limited. The merger of these two companies with Lux will strengthen our presence across geographies and product categories and bring in a lot of operational and financial synergies. Our company has posted robust performance for the year ended 31st March 2021 despite COVID-nineteen pandemic induced challenges. Also, with the completion of merger, we are reporting the merged financials for FY 2021 as well as FY 2020. Besides, these companies will also help us strengthen our post merge business model. J. Hovindy and Company Limited with the brand Genex and others, while ebel Fashions Private Limited with the brand Lyra. Their coming into Luxe's umbrella will strengthen our overall portfolio. This in turn will help us leverage our men's innerwear portfolio with a value added women's wear portfolio, which will make it possible for us to carve away a larger share of the overall wardrobe spending. This merger will also help to unlock substantial value for our stakeholders and streamline the business as well as help us to achieve a newer growth trajectory. Our EPS post merger FY 2021 stood at 90.25 versus 48.66 pre mergers date last year. We have a strong presence in central, eastern, northern and western parts of the country and have plans to foray into southern region of India very soon. The region wide revenue contribution as of now stands at Northern India being about 30% Eastern India about 28% Western India, 21 percent Central India, 18% South India, 3%. While revenue spread from segment stood as follows: mid premium contributing 57%, economy about 31% and premium about 12%. Lux, which is a dominant player in the men's Innerwear segment, is also accelerating its growth driver via new expansion to capture market share in the ladies and kids segment. With the business of Genex and Lyra getting merged into Luxe, The company will have a larger product offering that also offers premium innerwear under the brand ON and 1.8. Post merger, Lux Industries Limited would be among the top company in terms of volume PAN India wise, reaching up to 300,000,000 pieces for FY 2021. Online sales, which has more than doubled in the last few quarters and continuously showing this same growth trajectory and is expected to reach the INR 100 crores mark within the next 3 to 4 years. EBOs under the name of Cosi World are the new offering, which will again help us to accelerate and achieve our vision. In working capital side, we have been able to continuously optimize our working capital cycle days. For the year ended 2021, our working capital days stood at 122 days, a significant improvement of 38 days over the last year. We continue to maintain our net cash company status and have a gross cash and cash equivalent balance of INR 261 crores. We believe despite the challenging situation caused due to COVID-nineteen, your company has demonstrated superior execution during the recent past and has successfully leveraged The power of our brand and our distribution network to sail through these tough times. We have always strived to make our products available with speed so that they are always available on the shelves when the customer needs them. This has been able to be achieved with a 95% fill rate versus an industry average of 80%. With this, I would now request our CFO, Mr. Saurabh Budolia to take you through the financial performance. Thank you, Didje. Hello, everyone. A very good afternoon and warm welcome to all. Our company reported a strong performance for the quarter and full year ended 31st March 2021. Our revenues for quarter 4 2021 stood at INR 601 crores versus INR404 crores registering a stellar growth of 49%. Our EBITDA holds true at INR129 crores as compared to INR66 crores in quarter 4 Financial year 2020, a strong growth of 95%. We have been able to improve our EBITDA margin by more than 500 basis points. So current EBITDA margin percentage is at around 21.45 percent as compared to 16.4% in quarter 4 2020. Our PAG for the quarter stood at INR 91 crores Versus INR 41 crores in quarter 4 last year, which registered more than double growth of 118%. Packed margin for the quarter stood at INR 15.07 percent, showing an improvement of more than 4 70 basis points as compared to last year same quarter. Moving to our yearly performance, Our revenues stood at INR 19.65 crores visavis INR 16.74 crores. We are happy We have registered the highest ever revenue in FY 'twenty one, registering a growth at a rate of 17% over the same period last year. Our sales and marketing expenses stood at INR106 crores, which is approximately 5 point In last 5 years, we have invested around 6.41 crores to build our brand. EBITDA for current year stood at INR393 crore as compared to INR 275 crores same period last year, Growth rate at a rate of 43 percent y o y. EBITDA margin has seen an improvement of 355 basis points, which stood at 19.99% versus 16.4% in FY 2020. PAGS for current year stood at INR269 crores as compared to INR177 crores last year FY 2020, Growth rate at a rate of 52%. The PAG margin has also shown a big improvement with 300 plus basis points as compared to last year same period. Our return on capital employed also went up by 2%. Last year, it was 34%, whereas in this year, the ROC is coming at 36%. As rightly said by Udit ji, our working capital days reduced to 122 days as compared to 160 days last year, Significant improvement by 38 days in the working capital cycle. The debt to equity ratio for the year stood at 0.13 multiple. During the FY 2021, Company has generated an operating cash flow of INR389 crores, out of which around INR66 crores will have been used for the purpose of CapEx, Another INR112 crores has been used to repay the borrowing. As on closing date, the net The cash Being invested in the bonds, the gross cash flow is coming at rupees 261 crore. Our prudent financial decisions have helped us reduce our debt and become a net cash positive company. Please note the numbers highlighted in the speech and the presentations are consolidated numbers post completion of merger with our group companies, J. M. Halsarian Company Limited and with Ever Pension Private Limited. Now let me quickly give you an update on the dividends. Considering the current pandemic situation, the Board of Directors of the company has decided to conserve the cash and postpone the decision to declare any dividend for the financial year ended 31st March 2021. Looking at how the pandemic situation will evolve, the Board of Directors will consider would consider rewarding the shareholders in the due course of time. Additionally, on implementing better compliance and governance, We have continued our engagement with E and Y as our internal auditor and we have also inducted Economic Law Practice, ELP, As our compliance consultant for the purpose of indirect taxes, the journey towards to appoint a Big 4 is already on and we are expecting that Big 4 should be on board in the next 12 to 18 months. 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. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Varun Goenka from Nippon India AMC. Please go ahead. Yes. Good afternoon, Saurabh ji, Saket, and Adit. Let me first Congratulate the exceptional performance completely unbelievable and a very good detailed presentation. I think in In terms of the brand wise data that you guys have given, it's very commendable the way you've presented it. I have 3 broad questions. One, like you say in your presentation, INR 30 crore pieces around INR 19.60 crore revenue. So our ASP Our average ASP comes to around 66. So I thought it will be good to have your view that how do you based on the product mix And how do you see this ASP moving? At what rate should it grow? That's 1. 2nd, In terms of our dealer throughput, where are we today and where do you think Because we are launching so many adjacencies of women's wear and kids wear, where do you think this can go to? And final point, our mix around top 8, 10 cities sales versus the next 15, 20 Semi urban, urban rural, however we capture it if we get that data? Those are the 3 questions, Thank you. Thank you, Varunji. I'd like to pick up that question. You first mentioned about how the ASP would evolve in the coming few years. So as you see that the product mix has now been changing with athleisure coming in, women's wear coming in. That is why a change in ASP has already been witnessed. And going forward, we are seeing that the yarn prices are on the high. The yarn prices are still on the increase. So as the yarn as the input costs increase, our output costs will also go up, which would result in a higher ASP, which would be an organic growth in ASP. Apart from that, we also we are expecting that in the current fiscal year about 5%, The ASP should go by about 5%. And at the same time, we will be also looking at a better product mix over the if I talk slightly medium term to long term, We would see that the product mix would be changing towards higher ASP products such as outerwear and garments. So as the company goes ahead, We'll be selling more of garment wear rather than inner wear, which will gradually lead to a higher ASP inorganically also. And coming to your next question, you'd mentioned about how about the dealer throughput. So in the earlier presentations, you have mentioned that we are having about 9 50 plus odd dealers, which has now after the merger and everything increased to about 11.50 plus dealers. So as a company policy, what we maintain is In any kind of a market, we assess the market situation, what is the depth of the market, what is the requirement of the market. And if we feel that we could So that decision is taken on a market to market basis Because in some markets, the distributors and dealers are so strong that they can handle maybe all the 2, 3, 4 brands combined together. Whereas in certain markets, the markets which are very remote and maybe a Tier 3 or a Tier 4 city, Over there you'll have to depend on a single particular dealer so as to say. So it truly, truly depends on the market. But yes, going ahead, We see that South India is one of the regions where the company is aggressively looking to market itself. So that will be one area where we believe that inorganic Growth in terms of sales, in terms of network and distribution, we will be seeing a good amount of sales going ahead from the South Indian market. Right, right. And our mix our sales mix towards however we capture So non metro, semi urban, urban, rural, if we have that. So we do not have that quite handy with us right now, But we'll ask our IR team to get back to you once we have the data. So you've done a more of a geographical split and category wide split, But I mean, Tier 1 and Tier 2 split, we do not have it handy because we'll get back to you. Thank you. Thank you, Saket, and wish you all the best. Just keep up this performance and thank you so much. Thank you. Thank you. Thank you. The next question is from the line of Bhargav Burdadev from Kotak. Please go ahead. Yes. Good afternoon, team, and congratulations for a very strong execution. Thank you. So my first question is that post merger, the revenue size has become close to about INR 2,000 crores. So do you believe that at this size, the acceptance of the brand amongst our customers as well as the trade channel can sort of significantly improve and this in turn can help us push our new categories like the ones you mentioned like women wear and Can you comment again with the question again? Actually, it wasn't very clear. Can you hear me properly now? Yes. Can you be a little loud? Sure. Sir, I said that our revenue size is now close to INR 2,000 crores. So given our size, do you believe that the acceptance of the brand with our customers as well as the channel partners Can see a significant fillip and they can sort of consider us more seriously given that we are now close to INR 2,000 crores. And for this, will that be easier to sort of push our new categories like women's wear and kids wear more successfully? Yes. As we can see that in the last financial year, there has been a very huge shift from the unorganized segment to the organized segment. And the brand which has the most pull towards the consumers, consumers are opting those brands in the organized segment. So we are seeing that the brand has a very strong acceptance in the organized market, meaning it was the mid premium and the economy category. And out there, we are witnessing a very strong growth, which we haven't witnessed in the last few fiscal years as well as To launch new segments, so we haven't concluded as of now that those new segments will be launched under The brand Lux or any other brand or it can be a new brand altogether in itself. So we haven't concluded that and as it will get concluded Then we can be able to give you a better picture that how the brand how that particular brand would be moving forward in its new segment. Okay. The second question is on working capital. So we've done a very good job in terms of Reducing our cash conversion cycle to about 122 days in FY 2021. Now that we are sort of a size To reconcile that INR 2,000 crores, do you think we can sort of go aggressive in terms of Improving this further and if so what could be the targets that we are looking at in the next 2 years? For this financial year, I don't think so it would be possible to reduce the working capital further Because as we are seeing the pandemic, which is spreading out throughout the country, so it would be very unclear for us as of now That's where the working capital would stand, but our target mainly, majoritably would be to maintain the working capital as it was last year. And for a long term view over 3 to 5 years, yes, our target would be to reduce the working capital if the situation in the country remains normal. And my last question is on price hikes. So do you believe that the inflation which we've seen in raw material Has been broadly passed on through price hikes? Or are we still in the journey of passing this entire inflation? Until now, we have passed on whatever inflation has been taken place. We have passed on completely that to our consumers, and it has been very well accepted in the market. The price hike started from the The price hike started from the month of November. The inflation starts from the month of November and the price hike started from the month of mid December. So December, January, February, March, there were different trenches in which the price act had been taken place and there has been no adverse effect because of that. Okay. Thank you for the answers and all the very best for the future. Thank you. Thank you. The next question is from the line of Nehal Jamm from Edelweiss. Please go ahead. Yes, thank you so much and good evening, Sarkit and Nudit. Performance of the 3 categories that is in the premium, the mid premium and economy. For the year as a whole, we do see the divergence that economy has definitely outperformed. I know you alluded to the fact that there has been a big shift of unorganized to organized. But other than that, anything worth highlighting about what has So as you see, during the last year, the COVID pandemic was in full swing. And it was the rural towns which are doing Tier 2, Tier 3 cities were doing much better than the urban areas. So when you look at the rural areas, the consumption is more for the economic product compared to the mid and the premium segment products. So that is why that is one of the major reasons because rural market being more functional and more operational, We saw a shift slightly the economic products fared well compared to the mid premium and the premium products. And that was primarily on account of, a, unorganized to organized shift and b, on account of the rural demand. And going ahead, as a direction, we have always maintained that we that we are looking at increasing our portion of our mid premium and premium segment. And if you look at if you give if you leave aside this With exception of the COVID year, if you look at the trajectory of the segment wide split, we have fairly moved more so towards the mid and the premium segment. That's helpful. Just a related question. So this quarter's performance obviously includes the consolidation. If you were to compare this number to 2 years back, not last year, because last year, I know you mentioned there was an impact which happened and that sales got spilled over to May June. But compared to say 2 years back, how has the growth been this quarter? You see, right now we are talking mostly on basis of the merged number because even the FY 2020 numbers were revised For a like to like comparison, we had revised the FY 2020 numbers again on a merged entity basis. So talking about any Figure for the pre merged basis, we'll ask our IR team to get back to you. Sure. I'll check that separately. The second question was now with JM and Ebel being merged and the process more or less clear, we also see that There is an addition to the Board related to those companies. But generally, as the new entity forms, what is the potential structure? Do we expect that You would have separate brand heads for those new brands. And what is it that would change now that it is a part of the Lux entity? I'm just trying to think aloud that Would the marketing spend potentially be higher or any other things that you may want to highlight post merger? So see post merger, the directors I have a very clear cut rule with regards to what brands they are looking after. So even apart from being collectively together in a strategic decision making process, But on a day to day operational basis, every director is taking care of a particular brand as per se. With regards to your marketing expenditure, Last year, we had seriously cut down on our marketing expenditure. And this year, we were kind of Contemplating on bringing it back to normalcy, but after the second wave of the COVID and supposedly tops of a 3rd wave also coming in, We will be looking at revising our marketing expense down again this year. Yes, we have also added a few independent directors on board with us. I would just ask our CFO to take you through them. Hi, Nial. So like this time, both of directors has approved to take 2 independent directors on the Board. One is Mrs. Ratnabali Kakkar, another one is Mr. Rajnish Ricky. So let me quickly take you through with the candidature of Rajnaji Kakkar. So like Kakkar is a graduate in B Honors from University of Calcutta and she has done the business Administration from IIM Calcutta. She has overall 40 years of rich experience in banking and financial services. She has taken the citizenship in London, based out in London, and she has a very good relation with several banking factor in based out in London. And I believe she will add so much of the value in Luck by bringing the financial decision and to make it more governance and risk client More Governance and Risk Compliance Companies. Whereas, Rasmus Riki, he is a law graduate on holds a master degree in business admin He has worked and advised clients across pharma, FMCG, education, etcetera. He has also served as the Chief Revenue Officer at TV Today Network Limited, India Today Group. He was also associated with The Times Group as Director Response, And he also served as the Group CEO and Business Director at Santipur Media. So I believe the company is moving towards to take the further step to professionalize The entire culture and the way of working, it should be more corporate governance, risk control managed company. And with this, I believe, once these two gentlemen will be on the board, it will really help company to scale up further. Thanks, Saurav. That's very helpful. I actually had my last question on this incremental aspect of corporate governance. It's a commendable part you mentioned that you're looking at appointing 1 of the big four auditors also. As a time line, isn't there a possibility that In the upcoming AGM, you can change the auditors or there are certain other processes because of which you're giving the 12 to 18 month timeline? Nehaan, like on these AGM, if you're asking specifically, it could be very difficult because just On a shorter view, it will not be before 12 months and on a larger time line basis not more than 18 months. So between 12 to 'eighteen, we are very confident that the Big 4 will be on board. Absolutely. Thanks, Saurabh, and congratulations, Mansur. We'll come back in the Q2. Thank you. Thanks a lot, Niyal. Thank you. The next question is from the line of Ajay Khandelwal from BOI Exa Mutual Fund. Please go ahead. Hi. Thanks for the opportunity. Sir, I wanted to know with the kind of Changes that we have done in our supply chain and considering that our fill ratio is highest in the industry, What kind of working capital we can expect? And maybe qualitatively, if you can highlight how we have achieved this and how is Trade has responded to this, how is competition responded to this? That will be helpful to understand. So see, as a company policy, we have looked at even within the last 4 to 5 calls, we have always mentioned that we are looking at bringing down our working capital deals. So there were a couple of levers which we have used to bring it down. IT has played a very important role, in fact, in bringing us down. So we have invested A lot of time and effort in setting up our IT team. So all our dealers and distributors have now access to their Set up accounts on their mobile phone itself. So that was one very big lever. And on the other hand, even in terms of credit period days, The company has become more strict with terms to credit days. Earlier, the company was slightly more flexible. But over a period of time, we have gradually reduced the credit days and because a good amount of brand pull is now there in the market for our products, So even the dealers are now paying up more in the dealers are now reducing their credit days and they've been paying up quicker. That was one of the major factors. The other factors, if you also see that we have kind of there has been slight change in the credit outstanding day for our vendors because we believe that we do not want to increase our working capital efficiency by penalizing our vendors. And thirdly, if you see our stock turn ratio has seriously increased. We've been able to manage our stock more efficiently. And so on basis of these 2 or 3 grounds, we've been able to reduce our working capital days. Right now, the current situation, it is difficult to project how this year will play out with regards to working capital, With regards to going forward, how the performance plays out, but going by the experience which you had last year, as soon as the markets open up, We see that our products are one of the basic necessities the customer needs. So when it comes to apparel, vest and brief is one product that you cannot postpone the consumption of. So given our past experience, we are optimistic about the way going forward, but Quite difficult to say how the year plays out. I think we'll be able to project it better at the end of quarter 1. So when we meet again at Once we meet again for the quarter one con call, we'll be able to give a clearer picture with regards to that aspect. Sir, I'm trying to understand from the perspective of Not compromising on our fill ratio, will these levels be sustainable? And if competition Extend credit period, then do we need to change our course? No, no, no, not at all, not at all. So we believe that even 122 working capital days is We believe that it's slightly on the higher side. And if I talk about medium to long term, we'll be willing it to reduce even further from here. And talking about competition, so see, every brand has their own brand strength and brand pull in the market. So we believe that The brand equity which we've enjoyed right now, the amount of money which we've invested in branding over the last 4, 5 years. So this is the time to reap the benefits. And we believe that any effect of competition extending their credit period will not have any impact on our credit outstanding. In fact, I think it even works out to be better because if the competition ends up giving more credit, your stock turn increases even better. It always works out it's a very counterintuitive fact, but in case the competition increases that territory, it turns out to be favorable for us. Great. Just one more question, sir. In our journey of branding, where are we? What kind of expenses because we are to the largest competitor in the industry, Our ad expenses are far higher. So where are we in terms of developing our brand and in terms of Because we are changing our product mix moving towards more value added higher premium brands. So where are we in that journey? I'm sorry, could you please be a little more specific as to what exactly do you want to know? What could be our brand expenses to sales? And where are we going to spend and put our energies? So at the company level, historically, we have maintained an average of 8% of our top line as brand expenditure. Last year was an exception because of the situation we had brought it down to 5. And this year, again, we will be reviewing it whether to maintain at 8% or maybe bring it down to 6% to 7%. And the way this ad expenditure budget is split across different brands depends upon different kinds of market situations and the company The company's policy as a whole, so as you very correctly mentioned, we are looking at premiumizing our product portfolio from economy to mid and from mid to premium. So the company spends more on their premium and mid premium offerings rather than the economy offerings. Great. So just one last question. Any kind of margin pressure do we Looking near term in terms of raw material pricing? So see, whenever the raw material prices increase, The company always ends up passing it on to the consumer. And we've done that historically. We've done that last quarter, last to last quarter, And we'll be doing it again. So our margins do not get affected by any inflationary pressures on the input side. Great, sir. Thanks a lot. Thank you. The next question is from the line of Ankit Kedia from Philip Capital, please go ahead. Sir, my first question is on the ASP. If I look for the full FY 2021, The ASP increase in premium was 10% visavis6%. But in quarter 4, the price increase in premium is 12% visavis18 percent in economy. So what would be the now the absolute price differential Between economy to mid to premium to premium category now, of course. So from a customer upgrade perspective, right, What kind of money does a customer need to spend to upgrade from economy to mid premium for us? So see, generally what happens is, Whenever the input costs go up, the percentage of cotton In the entire product is obviously more so in the economic product. And as you move up the ladder, the percentage contribution of the raw material drops down because the margins increase. So whatever inflationary pressure is there is definitely passed on to the consumer. So, Ankit, like as rightly said by Udit Jain, again, the question what you are asking like how much extra bucks a customer need to incur while moving from one basket to another Okay, right. So if you see my average pricing for the premium products, say like ON or 1.8, it is coming in the range of around INR 150 plus. Whereas my economy range starts from say INR 30, INR 35, still say INR 60, INR 70 types. So it all depends in which product we are buying, which Otherwise, the difference between the economy and the premium would be very significant. There is a range of around INR 30 to INR 80 in economy, whereas premium starts from say around 100 and 50 to 100 and 81, 90, 200 types. Sure. So my second question is regarding Genex. Now if I look at JMHL had a $300 top line which got merged. But if I look at the Atleisure part of Genex, it's only a $100 business. So the remaining $200,000,000 of business of this company predominantly lies in which brand or which category, if you can Help us understand because our understanding was bulk of that business is actually at leisure and genex. So actually the business in JM, which was majoritivly under the brand Genex, we have done a brand restructuring which started Last year and which is continuing for this year and we'll go ahead for the next year as well. So it's a complete 3 year project. And in that project, we have Many of our products under the Genex brand to come under Lux Venus and Lux Cousy because we have believed That such products can have a better pull in the market as they are dedicated to such kind of consumers, which are Very well attracted towards the Lux brand. So Lux Venus, Lux Kozia, Lux Karishma are the 3 brands which are carved out of the business of JM. And the Genex, which is mainly the Apsesia in it, has total revenue of around INR103 crores. And out of it is majoritically dominated by the Athleisure and the total Athleisure were in the company, which includes in Genex, Lira, ON and 1.8 is approximately INR 150 crores to INR 160 crores. Sure, sure. And so my last question would be on the margins front. Now with the merger coming in, Do we expect any merger synergies to come in given that as you just said that in Gen X, the brands have been restructured Some of the existing brands in the company, there could be HR advertising overlap, which could have happened. So the 20% margins, which we saw this Yes. Given that the ASPs were lower and even in FY 2022 you're guiding for lower A and P spend, Can we safely assume that the commodity price inflations remain the way it is, we will be able to achieve the 20% EBITDA margin even for FY 2022? So Ankit, Saurav here again. So the thing is that definitely as rightly asked by you, this merger is going to bring some level of the synergy on the table. We are also expecting the way we have restructured the brand and the way we are seeing the sales growth and the other aspect of the business, we are expecting around 150 basis point kind of margin improvement should be there for the current year. And like last year, we have strained around 5.5 But few minutes back as we clarified that this year again the advertisement cost can bounce back to around 7% time. So it may offset to my incremental margin. So EBITDA, definitely, we can maintain at the same level. That's helpful. Thank you so much, Sagab, And all the best to the team. Thank you, Ankit. Thank you. From all participants in the conference. Please limit your questions to 2 per participant. Should you have a follow-up question, we would request you to rejoin the question queue. The next question is from the line of Shalini Gupta from Quantum Securities. Please go ahead. Good afternoon, everybody. Sir, I had I wanted to actually see last year, a lot of the economy business was driven by rural sales. And now this year, we have a situation where rural sales are impacted because of Far higher COVID impact over there. So and also now the rural India, there are a lot of lockdowns and all that, which were not there last Yes. So we have a high base of rural last year in terms of income. So what is your outlook in terms of Top line growth going forward, as in which segments do you see pushing your growth in the future in financial year 2022? So for the rural urban share, the rural has approximately 70% 70% of the market share The urban has around 30% of the market share. Now coming back to the rural demand, would it be weak? What we have deciphered since the last 12 months That because of COVID, the unorganized production is getting shut down and that production benefit has been taken place by the organized sector. So even if the demand is going down by a few basis points, the production or the supply in In the economy segment, which is towards the rural area, rural part of the country, it is getting down by a much, much further basis. So that is why there has so there is a new market being created, new consumer segment being created in the rural economy and the Brands which has the most hold in the organized sector will benefit out of it. Okay. And sir, I had since you restricted the number Of questions, Tutu, a couple of like some data points which you had mentioned earlier in the presentation. You said economy segment grew by 42%, correct? Yes. And midpremium segment? So mid premium is are you talking about the year or for the quarter? We're talking about the quarter, I think. Yes. So Economy segment has grown at a rate of 30%. That is a complete sales growth for Economy. Mid premium is around 13% and premium is 7% that is for the year. Economy has grown by 59% in the quarter. Mid premium is 42% and premium 48. Put together, the total growth for the company is coming at around 48%, 49%. So, Economy segment has grown by 59% during the Quarter mid premium has grown by how much during the quarter? 42%. 42%. Okay. And Premium has grown by 48. Yes. Okay. And so you Even you can refer to Slide number 35, the date which is available on our company website, we have given the complete clarification over there. Okay. And so what was the volume growth The total volume growth for the quarter is around 29%, 30%. Okay. Okay. And yes, sir? Balance is because of the price growth and the mix. Okay. And okay. And sir, I wanted to ask you, if I can just Just squeeze in one question. So basically, you have seen a huge jump in your gross margins. So how much and okay, how much would you about 10% is because of price increase And the rest is because of your mix change? Yes, true. You are right Salini. Even if you see my presentation, we have Around 13% to 14%, we have gone the price hike in quarter 4 and balance is because of the change in mix. And that has given me a leeway to have my margin more stronger as compared to last year same quarter. Okay. So my last question, what is your raw material outlook? So the raw material prices Right now because majority of the raw material comes from Tamil Nadu and Gujarat. So Tamil Nadu again is a state which is under complete lockdown right now. Gujarat has just opened up, but talking to the people in this industry and the people those who are in the yarn manufacturing, We get a sense that the raw material prices are on the inflationary side. They are going once the market opens up, we expect the raw material prices to go up. But as we have always mentioned and we'll mention it again that if we face any increase in raw material prices, we increase the price of our products, Pass it on to the consumer and maintain our margins intact. Okay. Thank you so much, sir. Thank you, Salome. Thank you. The next question is from the line of Puneet Mittal from Global Core Capital. Please go ahead. Hi, thank you and congratulations for a good set of numbers. My first question is related to your ad advertising and branding spend. How much of the total amount that you spend as a percentage, how much is going towards the new gen digital And in terms of advertisements on Facebook, Instagram and so forth? So from this year, as we mentioned, one of our focus areas is growth coming in from our e commerce sales. And So we are getting our web page and we are getting our every the platform ready. And along with that, we'll also be looking at Increasingly spending on the digital platform. So right now, most of our sales are happening to 3rd party websites like Flipkart, Windra and Amazon. So whatever e commerce sales we get, so the company spends roughly about 5% of sales from the e commerce platform In the digital advertising space and going ahead, we believe that we are looking at Very high growth rate coming in from the e commerce sector. And therefore, we'll also be considerably increasing our ad Since diverting more of our ad spends towards the digital space because that is where we believe that the future lies. Okay, okay, got it. And a related question on that, so you highlighted historically you have spent about 8% of Revenues on advertisements and branding. Now given the base is very large of 2,000 crores right now and going And also the fact that you mentioned that you do enjoy a very Big brand pool and brand equity in the market at this stage. So given these two factors, do you think how do you explain that 8% which is Quite a sizable number and as the base effect goes higher, it's a large number to spend also given where the competition is. How do you explain that? And do you really think it's necessary for the company to spend that high number in terms of You see that the position that right now we've reached about roughly INR 2,000 crores in sales. And one of the major reasons for us outperforming our peers in the market was because we've always invested in our brand building exercise. And whatever brands that the company now has under its belt, every brand, if you see, is set to reach the INR 500 crores mark and become a INR 500 crores brand. So all of this is only achievable on grounds of Spending your hydro expenditure on maintaining the brand building exercise. And so that is one area where we believe that it is more so Rather than an expenditure. And over the past 5 years, we've always invested in our brands. And we believe that It's a number which has already been factored into our costings and into our margin. So Going ahead, it should be somewhere in the similar zone. Okay. And then my second question is regarding your Push into the southern region of India. So what is there a specific strategy that you're adopting for the southern market That's a new region for you and what are the challenges that you see for you to penetrate deeper into that region? So see, the South Indian market, if you see, is a very peculiar market. It behaves very differently from Northern India because there is a language barrier. The entire North India speaks and understands Hindi and English as a common language. But when it comes to South India, all the 4 states of South India has their own regional languages. And Hindi is not quite popular over there. So that is why our advertisement kind of do not make a mark in the South Indian market. So yes, as a strategy from in the next we believe in the next 2 to 3 years, we'll be kind of investing in local advertising, making adopting more of the local strategy to penetrate that market. They are having local pocket players in every state. And we believe that the company has always been very, very strong in its marketing strength and marketing team. So with the required amount of effort, dedication Thank you. The next question is from the line of Aditya from Stylen Asset. Please go ahead. Yes. Hi, management. Congratulations on a great set of numbers. I just had like 3 questions for you. If I look at the leader, leader is getting aggressively on the rural front of the new portfolio, right? And if you the leader is very aggressive on the rural spots, how do you look to defend Are you a player in that kind of a market? And even if I look at all other players, let's say Roopa or Adalar Industries, we are all focusing on Expanding distribution, they are focusing on premiumization of the portfolio. So how do you differentiate yourselves from that competition? See, the most differentiating factor is the brand. The most differentiating factor is the brand which is not available with our competitors. And as we see that in the market and the research which we also conduct in the market that our brand has been projected as the most pull brand. So we believe that this is our USP which we have, which our competitors don't have. And because that is the reason we have been able to lower our Better days in the market and our distributors are paying up pretty faster than that of our peers. Got it. As I look at your sales mix, we have seen a big jump in economy segment, right? And despite that, we have seen a big jump in margins and which is broadly matching to the leader. So where do you see the margins going, let's say, in the next 3 to 4 years? We are broadly 20%, 22% let's say, 4. So where do you see it going in the next 3, 4 years qualitatively? So for the current financial year, our target is to maintain The last year financial year margin, which is approximately 19.99 percent, so because we see a good improvement in the gross margins, which can be Adjusted with the margins going down due to advertisement, so the net margin should remain the same. Got it. Got it. Sir, if you can just provide some color on how the working capital can move in the next 3 to 4 years, we have broadly at 120 2 days right now. So how do you expect in the next 3 to 4 years? What would be the trend be like? So see, what we see that anyway in last 12 to 18 months, we have worked very vigorously to bring down our working capital cycle. And by seeing the current pandemic, it is not advisable as well as we are not taking any aggressive decision Further to reduce the working capital at least for this year, it will be very unfair if I can say anything immediately that how it will look like after 2 to 3 years because I believe we should wait for some time, let this pandemic get over. Our economy should get stabilized. We should be back to the normalcy. Got it. And what would be your reinvestment plans going forward given the cash that you're generating around INR 350 crores, INR 350 crores, What would be your typical reinvestment plans going on? Would you be spending on brands? Would you be spending on capacities? Would you be spending More on promotion, advertising, what how the reinvestments would look like? So see, the cash can be mainly used for 2, 3 different purpose. So like as you like you said, a part of the cash can be used for the purpose of expansion. Definitely, a substantial chunk The money should be used for the purpose of regarding the shareholders who has actually put their hard earned money in the company to get into the growth path. I believe these are the 2, 3 verticals where definitely companies evaluating that how and when, how much investment can be done. Thank you. Mr. Shah, may we request that you return to the question queue for follow-up questions. Thank you. The next question is from the line of Sofian Laparawala from Lalkar Securities. Please go ahead. Hello. Hello. Hi. Thank you for the opportunity. So I just want to know you had CapEx there of INR 5.10 So what it is towards that was premium products, premium segments and how much that can generate revenue? Yes, your voice is completely unaudible. Hello? Hello. Yes. Yes. Am I audible? Yes, I can hear. Yes. So company has a CapEx of INR 110 crores expansion plan. So will it be towards like this product segment? Okay. So the majority of The majority of the CapEx will be there, give the guidance. The majority of the EBIT will be dedicated to our economy and the mid premium segment because as currently we are seeing that the Demand in the economy in the mid premium segment is so strong that it might not be possible for us to cater the whole demand in the market. So our immediate requirement would be to set up the CapEx for economy in the mid premium segment. Okay. So what is the next total capacity? Can you give the segment, Raj? The total capacity would be very difficult to Project you as of now because the CapEx is the factory is still under construction and it will take at least next 12 months more to completely start up with it, but majoritably will be dominated by the economy in the mid premium segment. Okay. So the 110 is CapEx spend FY 2020 then? Can you come again, sorry? Total will be 110 So it will be over a period of 12 to 18 months, the CapEx, we have already started incurring the CapEx, But I believe I think the current pandemic it may be delayed by around 3 to 6 months. So there will be a spillover to FY23 as well. But the company is not holding the entire project as and when they one of the facility will be up and running, we will start using that facility. Okay. Yes. Thank you. The next question is from the line of Shirish Padeshi from Centrum Capital. Please go ahead. Yes. Hi, good afternoon. Thank you for the opportunity and good evening, Saket and Udita and Saurabh. It's a very good presentation I've come across Sir, from you and I really appreciate for the details. However, I have got 2, 3 questions. When I refer to your Slide 35 and which says that your ASP growth is 13%, while in reality the yarn prices has gone beyond. So would you be able to help me to understand what is the weighted inflation we are facing and what to what extent we have taken the price increases or is there any more price So actually, whatever there's an increase in the yarn prices, that doesn't reflect the Increase in the price of the product totally because there is a percentage of the yarn which goes into the production. Other processes which is stitching, Dyeing, bleaching, cutting, packing and all other overheads are also a part of the product. So according to that According to the yarn prices increment, there has been an increase in the actual costing of the product by approximately 13% And for which the increase in the cost we have taken place? So you mean to say that if I I understand correctly, the current inflation is 13%, which is weighted and you have taken a complete pass on. If there is further price increases, we will wait for another price round of price increase. So that completely depends on the yarn prices, how it reacts after the Tamil Nadu market is open. It completely depends on that. But what we are seeing and what we are All around is that there will be again an increase in the yarn prices, so there would be a further increase in our sales price. Okay. Wonderful. You did mention in the beginning, the 300,000,000 pieces is the Volume for FY 2021, correct? Sorry, can you come again? FY 2021 volume was 300,000,000 pieces. Yes. So does that include the 2 merged entity or it is outside? Yes, it includes all. Lux includes now everything. Okay. So it's the number of the complete consolidated Lux group of companies, Lux, Zeville, JM and Artemis. Wonderful. So thank you for that explanation. Would you be able to split like you gave me a split of revenue by Segment which is premium, mid premium and economy for value, can you split that 300,000,000 pieces for volume also? So in the percentage terms, it's already there in the deck. If you'll see like the volume percentage between premium, sub premium and economy, It is there on the slide number 20, but it is just from the growth perspective. If you need an absolute number, definitely my IR can provide those Thank you. Ladies and gentlemen, we will take the last question from the line of Nikhil from S. I. M. P. L. Please go ahead. Hello. Am I audible? Yes. Yes. Hi. Thanks for the opportunity and congratulations on a great set of numbers. Congrats for a great work. I have two questions. One is, if we look at our realization, it comes to around INR66 rupees per piece based on the total sales and volume. Now if you have to move on the higher price band, then our premium brands like On, 1,8, Lyra and some of the thermals and all have to contribute. Thermal has grown very strongly. On and if we look at the trajectory of the brand ON and Lyra and all, how do you see So what how do you see the growth for brand on and for Lyra? If you look at there is lot of competition, even organized, unorganized And even the listed players both are also there in the lagging segment. How do you see overall price range moving up for Lyra? And a connected question is, if you look at our P and L based on the annual report For Ebel, which we had shared, the ad spend and promotion is almost 12% to 15% of sales. Would you say that the Quantum of investment which we were doing behind Lyra will sustain or would that also come back to 7%, 8% which we are guiding for the company level? If you can just help me on these two brands because these will drive the premium journey a lot. Yes. So as you had mentioned, so last year was an exception because of the COVID scenario in which we had seen a slight decline. In Laira, we were able to capture 90% of sales of what we did in the corresponding period last year. So because as you know, in the COVID scenario, women's wear all across the economy, whether it is apparels, whether it is cosmetics, whether it is any other segment, women's wear as So even despite that situation, we were able to recover 90% of our sales, Which we believe was also a commendable task. And going ahead, as you mentioned, within the Right now, about 80%, 85% of our sales is being driven by the legging segment. And going ahead, We are expanding more so in the athleisure for women under the same brand, Lyra, and also in the innerwear space, which is launching for women. So these are the two areas which are our focus areas for growth within the same brand, and we believe those are the areas where we'll be able to build the brand better And at the same time, get better margins and better ASPs. So our products in the Athleisure and the Innerwear segment are already out there in the market, and they are doing quite well. It is just that in the next maybe 2 or 3 financials here, we'll be able to ramp it up and maybe multiply it 2x every year. So that is what we're looking at when it comes to the brand Lyra. So we believe that in the next 2 to 3 years, we'll be seeing a good A major driver of the growth coming in from Lira and as well as On is concerned, again, if you see making the exception of the last year, If you see the last 2 last year, the growth has always been there in the premium segment. And again, even within the portfolio of the on, athleisure as a category has been doing quite well and performing quite well. So these are the reasons I believe that the ASPs will be higher and at the same time, it will be one of the major growth drivers for the company. I believe I've been able to answer your question. So just two things. One is, since we are adding more product lines behind Lyra, So the investment behind ad spend and promotion, which was like fairly high as compared to our company average of 12%, 15%. So I'm just cutting you in between, but we believe that even if you look at the balance sheets of Ebay Fashions, which was mainly Lyra, Our ad expenditure has in fact been at par with what we do in Lux, which is about 8%. In fact, it was slightly lesser than 8%. It was about 6% to 7%. So we believe that 6% to 7% even during the current financial is what we are guiding as an advertisement expenditure And our added financials will remain in the same category. Sorry to was around INR 30, INR 40 crores on a top line of INR 200 crores to INR 300 crores. This is based on the annual reports which we had filed with the ROC. Probably I can take it offline. From 2018 to 20, 21 number we don't have. Okay. Sure. No issues. We are taking this question. Yes, you can take it offline. So, Raghuram, second point, yes. So second question was, sir, as you mentioned that on the unorganized side, as you said that in the rural many of the plants have been shut down and Supply is a major issue. And over the last 1 year, what we have seen is we have done a great job in reducing our working capital, but Even for our listed competitors, they've been able to do a decent job in reducing the net working capital days. And One thing which you mentioned that even if the players or the unorganized regional or the competitors, even if they increase the credit period, it will be beneficial for us. I didn't get it intuitively. If you can just spend some time and help me understand why it should be beneficial. I would have thought that the distributor would be Like going for a product there, he is getting a more credit period or probably better margin? So, see, it is a completely marketing market driven strategy. And it's a marketing call. So what happens is, see, what happens is It is not that the other credit period will get sold first. It is always what the customer is demanding in the market, what gets sold. So if the customer comes and demands that I want a particular brand called Lux from the market, so the distributor will always have to supply that brand first. So it is so the credit period is a direct function as to what your brand pool is. So that is why we mentioned that even after we have reduced our Credit period in the market, it will and if the competition reacts in whatever way, it will not affect Our brand pool in the market because ultimately when the customer is coming into the shop and asking you for a particular branded product, the retailer as well as the distributor has to supply that Please go ahead. Yes, I'm also Kiki. Kiki, yes. Thank you. Ladies and gentlemen, due to time constraint, we will take that as a last question. I would now like to hand the conference over to Mr. Uddit Thodey for closing comments. I would like to take this opportunity to thank everyone for joining this call. I hope we've been able to address all your queries. For any further information, kindly get in touch With our strategic growth advisers, those who are our Investor Relations advisers, thanking you once again for participating in the call. Thank you. Ladies and gentlemen, on behalf of Deluxe Industries Limited, we conclude this conference. Thank you for joining us and you may now disconnect your lines.