Ladies and gentlemen, good day, and welcome to the Q2 FY 2022 earnings conference call of Page Industries Limited. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the 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. V. S. Ganesh, CEO. Thank you, and over to you, sir.
Thank you. Thank you so much, and good evening, everyone. It's a pleasure to talk to all of you. Today, I'm joined by Mr. K. Chandrasekar, our CFO, Mr. Gagan Sehgal, our Chief Sales Officer, and Mr. Rahul Shukla, our Chief Retail Officer. Let me start the discussion by saying that the demand environment is as good as it can get. The continued increase in demand is in fact leading to a situation wherein our supply is very tight. We are firing all cylinders to increase the supplies, working hard on improving our capacities. This is reflected in the Q2 numbers. With mobility and market functioning being near normal, there's an improvement in out-of-home purchasing, and this is reflected in the channels like modern trade and general trade, where we are seeing an increasing business.
Our Q2 revenue grew by 116% quarter-on-quarter and 46.6% year-on-year. Volume grew by 122% quarter-on-quarter and 43.6% year-on-year. At end of September, all our channels are fully functional. We're happy to report that we have crossed 100,000 MBOs in October and 1,000+ EBOs in September. Our manufacturing and warehousing facilities have returned to normalcy, and we are taking all necessary precautions to ensure safety of all associates. As we speak, 98% of associates have at least got one dose of vaccination, and 75% have got both the shots. The sales has been on an increasing trend since last year, and we continue to see that in this particular quarter as well.
Our branding efforts continue through multiple channels, including online, media, and point of sales. E-commerce sales channel continues to be robust. As you may know, in 2019, we have set up a dedicated sales team for athleisure business. This has resulted in rapid expansion of our distribution footprint even during the pandemic. This comes not just from new apparel stores, but even from our existing innerwear stores. The new retail identity in our EBOs lends itself beautifully to showcase our range of athleisure products. With the recent increase in demand for athleisure, we have managed to acquire and serve a large consumer base for Jockey athleisure. We are very confident that this increased demand, expansion of distribution, introduction of new and exciting products and styles, this category will continue to show increased growth year-on-year.
Similarly, we are also seeing huge potential and growth opportunity in the women's category. In the last four years, we have built an extensive and strong product portfolio to specifically target women. Since 2018, we have launched sub-brand Jockey Woman with distinct identity to communicate and build awareness portfolio meant for women. Women's business is growing at a very healthy pace, and we have aggressive plans to expand this business through focused initiatives. We believe that women's innerwear will be one of the biggest pillars for Jockey in our journey of becoming a billion-dollar company. Our kidswear business continues to be a special focus area with very encouraging customer acceptance and feedback. We now have 51 EBOs that are exclusive for Jockey Juniors. We have also appointed Jockey Juniors-specific channel partners across 50 cities as phase one.
Starting this year, we have a separate business vertical with a dedicated sales team and distributors to cater to women's innerwear and kidswear business. We continue to expand our depth within existing market geographies, as well as strengthen distribution in markets which are witnessing expansion of mature retail formats. Jockey is now present throughout India in 2,895+ cities and towns. We see great potential in the rural tier three and tier four cities as well, and we are strengthening our distribution network in a phased manner in these markets. We will continue our focused approach on our core business verticals of men's innerwear, women's innerwear, athleisure, both men and women.
Socks and towels. We are very confident of maintaining growth going forward. We continue to innovate in areas of customer acquisition, cost control, cash management, and investing in the well-being of all associates. I once again thank you for dialing in, and I look forward to our interaction. I will now pass on to Mr. K. Chandrasekar, our CFO, to give you the financial update. Thank you, and over to you, KC.
Mr. Chandrasekar, we are not able to hear you, sir. Please unmute your line.
Thank you. Thank you very much, Ganesh. I'm very happy to report the best quarter in the history of Page both top line and bottom line. The previous best was last year Q3. This is definitely a very good performance for us. The Q2 revenues are INR 10,840 million. It compares with INR 5,015 million of the previous quarter, which is a growth of 116%. If you go back last year Q2, the growth is 46.6%. The revenue then was about INR 7,400 million. The EBITDA has grown 583% over the Q1 and about 41% over the year-on-year last year Q2. INR 2,334 million as compared with INR 342 million in Q1.
The last year Q2 of INR 1,654 million. The EBITDA margins are 21.5%, which again compares favorably with 22.3% year-on-year, FY 2021 Q2. The gross margins are also 39%, which again is in the ballpark of 39%-40%, which we have been achieving historically, being purely variable costs associated with revenue. The Q2 PAT is INR 1,605 million, which compares with just INR 109 million in Q1. Last year Q2, we had INR 1,009 million, which is a 45% growth. We're also doing and maintaining all the practices which we have talked to you about on the balance sheet. The balance sheet strength of zero debt, the cash flow management, the OPEX controls, everything continues.
We have not diluted any of those practices which have taken us here. The cash equivalent is in excess of INR 5,300 million, and that has also grown compared with last year Q2 of about INR 4,000 million. The net working capital is about INR 6,100 million, and this again compares with INR 5,100 million last year. The inventory was about INR 6,400 million, and this again compares with a similar INR 6,000 million number last year at June. Of course this is in terms of number of days, it is much healthier. Because of the higher revenues, we have this kind of inventory and working capital. In terms of H1 also, you know that this year Q1 was better than last year Q1.
The H1 revenues are INR 15,855 million. This compares with INR 10,251 million for the last year H1, which is again a growth of 55%. The EBITDA margins are only 16.9% for H1 because of the Q1 impact, and which also compares with 12.7% last year H1. The H1 this year PAT is 10.8% and compares with 7% in the H1 of last year. I think enough of the numbers. I request now we go into the Q&A, please.
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. Reminder to the participants, anyone who wishes to ask a question may press star and one at this time. The first question is from the line of Avi Mehta from Macquarie. Please go ahead.
Hi, sir. Thanks for the opportunity. I had a few questions. First on the sales front, sir. We've definitely seen very healthy growth in 2Q. Just wanted to understand if there's any material divergence between primary and secondary growth rates, given that we've added a large number of MDs.
Mr. Mehta, the primary, the secondaries are in line with primaries. You know, actually, the distributor inventory health has improved with all the interventions which we have taken over the months.
Okay. So despite the MD addition, there is no material difference between the primary and secondary growth. Got it, sir. Sir, secondly, could you know, give us a sense on how growth rates have trended in October? I mean, the reason was I want to just get a sense of the impact of any pent-up demand on 2Q growth or, you know, in whatever you could help us understand that, sir.
Well, October continues to be very robust. The demand, you know, the
The demand has been very, very high for the last two quarters, and we can see a similar trend even now. We expect this to continue.
Sir, when you say expected to continue, do you think we are back to or should we start kind of looking at 20% annual growth rates on a normalized level as we go forward? Is that what you would look or 15%? I mean, I just wanted to get some sense on the expectations as we go forward.
Well, Mr. Mehta, like there's so much headroom, there's so much growth possibilities which we are seeing. Because, you know, from a penetration point of view, when it comes to men's innerwear category, we are around 17%-18%. On all other categories we are in single- digits. There is so much which we can grow. We have been also expanding aggressively our footprint in the marketplace. We are looking at a very robust growth. In fact, as you know, we are chasing a billion-dollar dream by 2026. That means the business should grow by more than 2.75x of what it was last year. We are well poised to have that trajectory.
Thank you. Mr. Mehta, may we request that you return to the question queue for follow-up questions. The next question is from the line of Ravi Naredi from Naredi Investments. Please go ahead.
Thank you very, very much, the team of Jockey India. Sir, on occasion of 1,000 EBO in October, Mr. V. S. Ganesh elaborate company expansion plan and aim to reach $1 billion sale in five years. How much CapEx we need? Will you expand twenty percent CAGR to attain $1 billion turnover in five years? How you will do since last four year we are growing at 9% top line only.
Well, I will take this question in two parts. You were talking about how much CapEx we may need. We have been spending around INR 300 crores-INR 400 crores year- on- year on CapEx, and that will continue because as you know, we are balancing between growing capacities in-house and we also have a strong outsourcing arm wherein we have got a very robust supply base today, wherein they are an extended arm of Page when it comes to process adherence, quality and service levels. You know, we will continue that growth trajectory as well as expansion is concerned, the same pace as we have been doing before. As far as growth is concerned, we see the demand is so high that we have been working very hard in expanding our capacities to meet the demand.
If you see, we are now showing a very robust growth and, we are seeing signs of this continuing. You know, if you look at how we increase our footprint in the MBOs, we started with 77,000 MBOs in the beginning of the year and we have crossed 100,000 now. Our EBOs have crossed thousands. We have been expanding. We are working very hard on the rural side of the business also. There are emerging categories like athleisure, the women's innerwear. These have huge traction and, the men's innerwear has also shown a very robust growth. It has been as well as all the other categories. We don't see any issue in growing at a high speed to achieve this.
We have a very robust plan in place to achieve this target. You know, for us, we are very, very optimistic and very sure of hitting these numbers.
Thank you, Mr. Naredi. May we request that you return to the question queue for follow-up questions. The next question is from the line of Nihal Jham from Edelweiss. Please go ahead.
Yes, thank you so much and congratulations. A couple of questions from my side. First, I think you highlighted just in the statement earlier, but just to confirm that is there any divergence worth highlighting between the growth in athleisure, menswear and womenswear for this specific quarter?
Mr. Jham, I didn't get you. Can you please repeat?
Apologies. I was asking that is there any divergence in the growth between the menswear, womenswear and athleisure segment specifically in this quarter? That is there a significant growth in any one of these three categories versus the other?
In fact, be it the men's innerwear or athleisure or the women's innerwear, the growth has been equally robust. In fact, all of them have clocked around 40% or more than 40% growth. It has been consistent across categories.
Thank you, Mr. Jham. May we request that you return to the question queue for follow-up questions. The next question is from the line of Shalini Gupta from East India Securities. Please go ahead.
Yes, sir. I wanted to ask you've added very significantly to your MBOs. I think it's about a 17% growth over end of financial year 2021. I just wanted to ask you where are these MBOs located? As in they are in the metros or tier one, tier two cities or what?
Gagan, you want to take this question?
Sure, sir. Thanks for your question, Shalini. We have a very robust plan of expansion of our MBOs, and it's not restricted to only one kind of a city tier. To give you a perspective, almost 50% of our MBO growth has come in tier three and tier four cities, and equal number in tier one and tier two. You know, our population, the Jockey target population, almost 45%+ population is in tier three and tier four. Wherever we feel that there are gaps and there is an opportunity, be it a metro or a tier one or tier two, going to the last mile to the tier four, we are expanding our footprint.
We are doing it in a very scientific manner, that where there is an opportunity, where we need to penetrate, which is the town which is uncovered, and we need to expand our footprint. We are doing it very scientifically, and the growth is across all city tiers, if that answers your question.
I mean, my aggressive follow-up question on this. I mean, I appreciate that you are expanding in a big way, but I'm just wondering how will expansion help you? Because Jockey products are available everywhere.
Ma'am, you know, the nearer you go to the customer, the more the frequency of purchase. Now, if there is a tier four town where, say, the customer today travels to the nearest town, you know, which is, say, 20 km-30 km away for his shopping, and we are not present there, obviously, you know, the frequency is gonna be low. We have to go as near to the consumer, and this is what we have done. What we have seen is that our throughput of the outlet in the tier four towns is almost at par with tier one and metros. That is why, you know, there is no subsidy given. We see that opportunity of the throughput, it is self-sustaining, and the cost to serve is absolutely in line with what it is in metros.
It is helping us by getting nearer to the customer. At the same time, you know, the range selling part. If there is only men innerwear present, say, in a certain city, then, you know, our expansion of distribution footprint of the other categories to offer our entire range to the consumer. This is how it is helping us. Hence, if you look at in the pandemic period, we have expanded our distribution footprint by 60%, from 65,000 outlets to 100,000 outlets right now. All of them, most of them have given us a repeat purchase order in the next two months itself, which shows that there is an actual healthy tertiary happening in these outlets.
Thank you. The next question.
Thanks.
The next question is from the line of Ashit Desai from Emkay Global Financial Services. Please go ahead.
Yeah, hi. Thanks for the opportunity. Two questions. Firstly, if you can highlight what is the production outsource today, and are there any supply chain challenges that we have faced like many other retailers have announced, and also what measures we are taking for that? Secondly, we've been very optimistic on women's growth. We've also done some recent campaigns on it. Besides these marketing campaigns, if you can highlight some thoughts as to what we are changing in the category and what is the kind of growth aspirations or growth targets that we are looking in this category. One last third question, quickly, if you can highlight the scope of expansion in MBOs. We've already reached 1 lakh. Where can we expect this number to go in the next two, three years? Thanks.
That's it.
Okay. Mr. Desai, I will first answer about the outsourcing part of it and the supply chain which you were talking about. You know, coming to outsourcing, we are at around 30% capacity as far as outsourcing is concerned. Of our total sales, around 30%-33% is outsourced. The balance is produced in-house. We have been growing the outsourcing side of it quickly because of the robust demand we are seeing. The fastest way we can increase capacities is through that. We are also increasing capacities on the in-house side. Coming to the constraints part, yes, we did have few challenges because of the change in demand pattern and some of the disruptions in supply chain. This was particularly bad during the first wave, but we were armed with the learnings from wave one.
During wave two, I think we were able to manage it much better. That's why we are able to see these good numbers there, because there is always a lead time between sourcing, supplying and reaching it to the market. We did pre-position raw material, we did create those buffers, we did nearshoring, we improved our supply base so that there is always a contingency plan. We strengthen our planning processes. With all that, we were able to manage it much better. Of course, you know, when you have a long association with your supply partners with good payment record and good track record, your suppliers become your partners, you know, and that really helps and that helped us. Having in-house manufacturing capability also gives you a lot of speed and flexibility.
In that sense, I can say we were better off in meeting the demands of the market. Coming to the women's innerwear segment. I think you were asking about the women's innerwear segment. As you know, we are a fashion basic and provide high value for money option, and are growing in absolute volume and in brand presence. Our women's range is very well received by all our consumers who like the fit and the comfort, you know. We have been creating that awareness through all these campaigns, as you rightly said. Our new products are well received with a lot of excitement in the market. You know, we have created the Jockey Woman distinct identity, which really helps us to communicate to our consumers and build that awareness in the portfolio for the women's.
We also have dedicated leadership team for the women's, and we have also rapidly expanded the distribution network there. As you know, as I told you, we are single digits as far as market penetration is concerned on women's. With our acceptance of the products and the quality of our product, the fit and comfort, there's so much demand that, you know, we are optimistic of seeing, you know, very, very robust growth in this side of the business. So much so, we are also augmenting a lot of capacities for future in the back end to ensure adequate supply for the business category, both in-house and outsourcing. We associated with some reputed international suppliers who have great expertise in women's lingerie, who do for the premium brands globally. We have sourcing partnerships with them.
We also have a very strong manufacturing capability in-house to meet the growing demands.
Thank you. The next question is from the line of Prerna Jhunjhunwala from B&K Securities. Please go ahead.
Thank you for the opportunity, and congratulations on strong set of numbers.
Thank you.
Just wanted some qualitative color on the sales growth. Two points of data. One is your volume growth on a YoY basis stood at 43.5%, if I heard correctly. You had much higher growth on your distribution network. Is it fair to assume that majority of the sales came in from the distribution expansion? If you could give some color on the actual underlying demand against the distribution network driven demand for you.
Well, you know, you are right. Our volume growth was 43.6%. You know, it is through distribution, modern trade recovered substantially because the malls are open, and also our new EBOs are so exciting. You know, people enjoy shopping. There is more of an experience in there. It has shown lot of robust growth. E-com has also grown substantially. In fact, e-com used to be 2%-3% or 3% of our business before the pandemic. It's now 8%-9% of the business. All the channels has grown and shown good traction.
Thank you. The next question is from the line of Gaurav Jogani from Axis Capital. Please go ahead.
Thank you for the opportunity, sir. I have a couple of questions. First, sir, you know, in terms of the CapEx in H1, it seems quite low at only INR 30-odd crore. We were looking at INR 500-odd crore, what you think for a year. Is it a large part of expansion expected to come in the second half? Second question is in terms of, you know, the pricing part, sir. While we see the volume growth at around 43.6%, you know, which indicates that you haven't take much pricing. If you can help us out what kind of pricing you have taken, what kind of inflation that you are seeing in the RM price and what's the plan be?
On the first question, you are right. You know, quite a big part of the CapEx plan is going to happen during the second half of the year because we did pause some of our expansions during the pandemic. With all these lockdowns, obviously we couldn't have much activity on the ground. As you know, we are rapidly increasing our capacity, and we need to do that to meet the growing demand. You know, quite a bit of the CapEx is going to happen during Q3 and Q4. We actually are having an expansion project in Noida also happening in full swing, which is a major project for us. Regarding the price increase, yes, we did increase the price during the first quarter by around 4%-5%.
This is what we have done historically. We always adjust price around that range. With a lot of other measures taken by finance and all of us in controlling cost, having much better discipline, improving the hygiene, overall, we were able to manage our EBITDA. We are keeping a close eye on the raw material price movements. So far we are well under control. You know, the raw material price increase for H1 was around 4%-5%. This way in budgeted lines, this is something we factored in when we touched our MRPs. Things are well under control as of now, and we are keeping a close eye on it.
Thank you. The next question is from the line of Sameer Gupta from IIFL. Please go ahead.
Hi, sir. Thanks for taking my question. Just to follow up on the previous participant's question. You mentioned that RM inflation of 4%-5% in first half. But sir, other companies or, you know, in general, cotton yarn prices are up by more than 20%-30% is the general feedback we are getting. How are you able to offset this kind of unprecedented inflation via just cost productivity measures?
As I told you, Mr. Sameer Gupta, you know, we have worked quite hard on budgetary controls, you know, and overheads control. We have worked quite a lot on increasing our productivity. All this is helping us to mitigate part of the problems. Secondly, we also had some good buffer. In fact, during the pandemic, it is not only because of the price increase, we knew that the market or the supply chain would be disrupted, there will be uncertainty, so we were investing in stock. That it came handy. It is coming handy even now. That's why we were able to more or less manage it better. Yes, you are right. The price increase which we are seeing is very, very unprecedented, which is very volatile now. We need to keep an eye on it.
I'm not sure whether this increase can sustain, whether it will soften. Only time can say. It has been very turbulent. We are keeping a very close watch on this.
Thank you. The next question is from the line of Trilok Agarwal from Aditya Birla Sun Life Insurance. Please go ahead.
Yeah. Hi, good evening, sir. Just kind of two questions. On the MBO expansion, could you just, you know, tell us what is the total addressable, you know, market size in the number of MBOs? So you are at 100,000. What kind of market currently is, you know, available for you? And second is, in the other expenditure part, is there, you know, so other expenditure has gone up sharply. Is there something that we should read into it or, you know, it's. Any comment on that will be helpful.
Thank you. I can request Mr. Gagan to reply the first part of the question. Gagan, if you can.
Sure. Thanks, Mr. Agarwal. When you look at the addressable market, more or less, you know, Jockey footprint is there in all 50,000+ population towns. Right? But there is a large part of population that is also in below 50,000 towns. But at the end of the day, we are covering all the customer base. Our only endeavor has been to go more nearer to the customer. As you would know that there are almost 3.5 lakh towns which are less than 10,000 population, which do not even have a proper market. But there is a Jockey customer there who comes to the main town to purchase.
From that perspective, I think the NCCS A&B population is around 39 crore, which is the Jockey target audience, and we are very well placed in terms of being near to the customer. Having said that, our expansion by 60% of MBOs is to continue to go near to the customer, as I said, not only in the metro. Because even if in the metro city we feel customer has to, say, travel 2 km, we'll wanna go even more closer to the customer to give him the right experience and convenience. We are present in terms of the entire PG, but our endeavor to go more and more closer to the customer to the last town will continue. If we are at a 100,000 MBOs right now, there was a previous question, how much can it be?
I would say we should target anywhere close to in the next couple of years to reach 150,000 outlets and get closer to the towns which are even, say, around 25,000-30,000 population towns.
Thank you.
Sorry, I think, Mr. Agarwal had a second question also, which I think KC can clarify.
Yeah. Thanks, Ganesh. I think it's a good question. One of the things that we have is over the last year and even before that, most of our OpEx is variable. We have made it related to the volumes that we are doing. That's how we are able to retrace and retract the OpEx when the volumes are not coming. This quarter the volumes have come. Most of these expenses, of course, we had a larger outlay for advertisement in this quarter because of the growing volumes and the more positive outlook on the going forward future. There are expenditures like, you know, freight, which are volume related, the e-com selling expenses. We have concession counters in the malls and LFS which are open.
We also have spent more on, as I told you, advertisement, the warehousing and so most of the increase that you are seeing are volume related. Of course we, because of the growth, we are also recruiting people mostly at the front end.
A little bit of increase is coming in the salaries. If you look at the back end, you would be spending more on power and fuel, on employee welfare, transportation. Most of it is productive. I hope that answers your question, Mr. Agarwal.
Thank you. The next question is from the line of Pankaj Garg from Shree Consultancy. Please go ahead.
I just wanted to know what is the capacity you are operating at currently?
Yes. We are operating at 260 million pieces and 80% capacity utilization, if that helps you.
What are your targets for this in the next three to four years?
Mr. Ganesh?
On the capacity.
You know, we are expanding our capacities to meet the demand. We will be touching around INR 400 million-INR 420 million in the next three years. Along with that is the expansion. You know, we've been working on the outsourcing side of the business as well.
Thank you. Reminder to the participants, anyone who wishes to ask a question may press star and one at this time. The next question is from the line of Nihal Jham from Edelweiss. Please go ahead.
Yes, sir. Thank you so much again. Sir, I just had one question, that if we look at how our sales has progressed over the last couple of years, we've obviously incrementally seen a growth of, say, around INR 250 crore-INR 300 crore in our revenue base, what we used to do a couple of years earlier. Over these last two years, we've taken various initiatives that has obviously been in terms of the distribution expansion, getting into incremental categories like kids, and also there has been the e-com side of it that has taken off post-COVID. If it's possible, you know, just to give a sense of that, where is majority of this incremental growth really generated from? Is it mainly the athleisure which has taken off along with the distribution expansion and e-commerce?
If you could just, you know, help give clarity on that'd be really helpful.
Nihal, athleisure has shown tremendous response. You know, the market has received it so well. Especially during the pandemic, it was so well received, and we were able to penetrate. There are repeat buys, so we have much more loyal consumers now on the athleisure side of the business. I can say last year, yes, athleisure grew so much, and really it was a growing category, and it continues to be one. This time, all our categories have shown equal resilience. They have grown equally well. Athleisure has done exceedingly well, so is the case with all other categories. We are happy that, you know, all categories are showing that growth.
As I told you, since we are in single digits on all the other categories other than the men's innerwear, we actually have lot of potential. But the good news is men's innerwear has also shown very, very robust growth equal to all other categories. You know that as you rightly said, with the expansion of the footprints, we are able to, you know, increase and capture the markets much better. The other area has been e-com. It has grown close to three times, so that has really helped. I think that trend will continue because the purchasing habits have changed. I think e-com will continue to grow for us.
The next question is from the line of Arpit Shah from Stallion Asset. Please go ahead.
Yeah. Hi, congratulations on good set of numbers. Just wanted to understand. Hello? Hello?
Yes, yes, Mr. Shah.
Yeah. I just wanted to understand how ARS is helping you, to drive MBO growth and how we drive volume growth. My second question is, where do you see the men's, innerwear, segment, the revenue share moving to the next five years from the current levels?
Actually, it was not clear, you know, I think you were asking about where do we see our men's innerwear in the next three to four years?
Yeah. Men's innerwear segment revenue share, how would it look like in the next three to four years? The first question was how ARS is helping you to drive MBO growth plus volume growth. Just some insights on that, some qualitative insight.
Okay. Men's innerwear has shown tremendous growth for us in the market, especially in the last quarter. It has grown very, very well. We are seeing the continued traction for those products even now. You know, men's innerwear will continue to be a major category for us. You know, I don't see a huge shift happening because all categories are growing equally well. I don't know the equations will change, but there is tremendous potential on the women's innerwear category because the market size is much bigger than men's innerwear market. The products, the price and the products, it has hit the sweet spot, and consumers have well accepted it. We do see that there can be accelerated growth there, right? Men's innerwear will grow well.
We see much more accelerated growth happening on the women's innerwear side because, you know, because of the potential which it has, it has got. Same is the case with athleisure. We are actually focusing on all these categories with equal focus and trying to push them well, coming with very exciting products. In fact, our new products are so well received from the market that, you know, we are working hard on expanding our capacities and augmenting more supply. I think all categories are showing good signs. To answer your question, yes, men's innerwear will continue to grow, and ARS is definitely helping us. ARS will be going to all ranges. We started off with this, and it has helped.
Not only ARS, our closeness, working closely with the distributors, we have worked very hard in improving the inventory health of all our distributors. We are also now improved our turnaround time as well as fulfillment, as the distributors are concerned. The reach to the market has become faster, and we are taking more initiatives to reach them much more faster. With all that, the inventory health will improve, so that will again help us in having much better turnover.
Thank you.
Can I just add one thing here, sir? Your question on ARS, yes, our secondary sales have been last year ahead of primary, and they are in line with primary this year. That has also happened because of the superior service. All our outlets are serviced directly by the distributor salesman because we are into direct sales. While we have increased the number of MBOs with the ARS generation, you know, to fulfill the secondary, we have also increased the number of distributor salesmen, which has helped us a lot. The distributor salesmen have doubled. The number of feet on the street has gone up, so the service is far better to the MBOs.
The MBOs who used to give order once in two months or once a month are now giving us orders twice a month. This entire direct service through increase in manpower and ARS run, which is helping us drive secondaries and MBO expansion, is really helping us, to answer your question.
Thank you. The next question is from the line of Akshen Thakkar from Fidelity Investments. Please go ahead.
Thanks to the team on a great set of numbers. Two questions from my side. One, could you just, you know, help us understand the 4%-5% price hike that you have taken. In your view, does that cover the kind of inflation that you're seeing in yarn, cotton, et cetera? Or, because, you know, you might have locked in some rates, that you might need to take some price hikes, you know, later in the year. Question two was, could you just, you know, refresh us what's the kind of GST rate that you see on your product? Because that could go up from price point. I don't know if that becomes a fee. Those are two questions from my side. Thank you.
Yeah. Mr. Thakkar, you know, you, if you have seen our Q1, Q2 numbers, in fact, especially in Q2, our EBITDA is in line with what we always decide to be. You know, we always work on a 20%-21% EBITDA. You know, when we budgeted, we did consider this raw material price increase, and we passed the MRPs based on those assumptions. So far, as I told you before, we are well under control. I do agree, since it's very volatile, we need to keep a very close eye on it. If there's further very substantial increase in raw material price, then we may have to pass on part of it to our consumers.
We are trying our best to manage it and continue to be a value for money brand for our consumers, you know. So far we are well under control, but we are keeping a close eye on this. I think, KC would be able to enlighten you further on the GST part of it.
Thanks to you, Mr. Thakkar. GST, you know, most of our products are below INR 1,000 MRP, so we have an output tax of 5%. If you look at the input taxes, for example, the man-made yarns and fabric have rates of 12%, 18%, and of course the services have come under the ambit of GST. Therefore, in terms, if you look at the revenue, the output taxes are 5% and the input taxes are in between, somewhere between, I mean, 5.5%-6%. This is what is called as the inverted duty structure. It is not just for Page or apparel industry.
There are a lot of industries and you know associations have represented that what happens to that extra money which keeps accumulating and is with the GST authority. When will that be refunded?
Of course, recently, some indication has come. One of the options is to increase the price of the output to whatever that is, 6% let us say. Then we have enough input to pay the output. The MRP will go up, but in terms of financial impact on us, it would be zero because the excess GST is in the balance sheet. If the input tax GSTs are reduced, then that will also benefit us. In terms of this is quite an issue in terms of revenue for the government, and no notification has yet come. But if you ask vis-à-vis Page, we will not be, in fact, the P&L will not be affected.
Thank you. The next question is from the line of Ankit Kedia from PhillipCapital. Please go ahead.
Sir, couple of questions from my side. One is on the number of distributors. While we have increased our MBO presence by 14,000 for the quarter, our number of distributors continues to remain at around 4,100-odd distributors. So has the productivity of the distributor, you know, significantly increased? They are going more in the interiors, 50,000 population points, so their expenses are increasing. Second question is regarding the EBO target. You know, in one of the interviews you had said you want to double the EBO count to 2,000 in next two to three years. Do you sense cannibalization happening between MBO and EBOs and between EBOs as well, which could, you know, slightly impact revenues going forward?
Gagan, you want to take that? Maybe on the EBO part, Rahul can also add value.
Sure, sir. Thanks for the question, Ankit. In fact, I'm happy that this question came along. You know, while we are growing at a very healthy pace, our call was that we will ensure that our distributors also grow along with us. What is distribution? Distribution really is not just the number of distributors. It is the number of distributors salesmen on the street. It is the number of MBOs. Once you know, our number of MBOs has grown by almost 60% in the past, but the number of distributor salesmen has grown by 100%. Our distributors and our secondary has consistently been equal or higher than primary, which means the distributors' ROI is healthier than ever before.
The same set of distributors with the same set of fixed expenses today are getting a higher revenue. I would say that all the distributors are in a happy space as of today, because the distribution expansion has happened. All they've had to do is invest in the manpower, and that manpower has more than, you know, double paid them back with the kind of growth that we have had. We are very happy, and we look at the distributors' ROI since the last mile. From a Cat A distributor, Cat B, Cat C. Our call is very clear. If Page Industries is growing, we are having a healthy growth, let our distributors grow with us. Just because we are growing, we will not increase the number of distributors unless it is really required.
We will definitely increase the number of salesmen, distributor salesmen, which has happened. I'm sure this will be the feedback from the distributors that their ROIs are better than ever before, and I think they are in a very happy space. Yes, we extend all support to them to make sure, you know, that our distributors' ROIs are healthy. Does that answer the first part of the question? I will hand it over to Rahul for the EBO part. Thanks.
Thanks, Gagan.
Thanks.
Yeah, Mr. Ankit Kedia, you know, I think what I've observed in the last couple of years, our rate of expansion of EBO has been in the zone of around 150-200 stores every year, despite the constraints of the pandemic. There is no reason why this pace cannot be continued. In fact, it would be accelerated. Our intention is to accelerate the pace. Despite all the expansion that we've done with 1,000+ stores, our retail presence is still in only 350 cities. So there is an enormous opportunity for us to expand and increase our reach and penetration. We'll certainly look at doubling up our EBO base over the next four or five years.
With regards to your second question on cannibalization as we expand, the consumers. There are all types of consumers who are shopping from different places. There is consumers who are shopping from e-commerce. People are shopping from MBOs. They're also shopping from EBOs. We believe these are all synergistic. Our intention and our strategy is to reach out to every channel, every place where the consumers are shopping, and give them a wow experience and take up leadership positions in those channels. All these channels, particularly MBO and EBO, they are synergistic in nature. EBO acts as, you know, a mode of advertisement for the brand, so when the consumers go to MBO, they end up buying a Jockey over there.
There is a lot of recruitment of new consumers from competition, from elsewhere that happens in the MBO space, which then over a period of time become loyal consumers and then, you know, start helping the EBO sales. Both of them actually work very well in tandem and in a synergy. Considering the fact that we have a no discount policy, the products are sold exactly in the same price everywhere. There is no cannibalization. A little bit of cannibalization might happen, you know, when the stores open near to each other, but nothing that affects their viability or profitability. Does that answer your question?
Thank you. The next question is from the line of Varun Singh from IDBI Capital. Please go ahead.
Yeah, thank you, very much, sir. Sir, I mean, my question is how do you think about the emerging competition from, you know, online and so many new companies. A lot of MNCs coming to India and hello? I mean-
Yes, you're audible, sir.
Hello.
Please go ahead.
Yeah, yeah, sure. Yeah. Sir, how are you thinking about these emerging competitions from so many new players? Given now Amazon delivers to, you know, kind of, more than 99% of pin codes of India and, so on e-commerce platform, you have got so many, you know, new companies coming and competing and trying to disrupt categories. Not just e-commerce, even, a lot of MNC companies, they have come out with their private label and so many. I mean, customers are saddled with so much of options to buy from. Quality and price has always been, you know, not a great tool to compete. In a category like innerwear, in both men's and women's category, how are you thinking about this emerging competition, sir?
Your view will be very, very useful in terms of how should we understand, especially this gaining market share and growing the market. If you can name one company which you believe is a respectable competition to you. Yeah, that's it from my side.
Thank you. Thank you so much for asking that. As the product quality is unmatched with an equally strong distribution network, we are actually in a very good position to tap big potential opportunities in India as the total market is expanding at a very rapid pace. You know, the middle-income group, if you see the growth, there is room for competition and for us to grow. There is space for more than one player, to start with. We always see competition as good. It keeps us nimble, you know, we make ourselves very competitive. The growth in the market is so rapid that we are looking at it inward and we are seeing the opportunities to grow, and we are working very hard on that.
We have also been expanding into the rural tier two, tier three cities as well. Hence we are very confident of maintaining growth going forward. We don't feel that competition is going to kind of affect our growth. Because if we are very, very passionate about our products, if we give the right quality and the right value proposition to our consumers, and if we can keep offering them exciting products, and if we can reach them much better, there will be as we are seeing now, our products. There's a huge demand and it will continue to be well received. Along with that is the new categories which are going to be growth engines for us. For us, the athleisure is. We have just taken off.
We have a long way to go there. Even though it is well received, even though we are leading in this category, as if we look at it inwards, we are just in the starting point. We have to do much more there. Is the case with the women's innerwear, as I told you. We have just embarked on the juniors. You know, there is so much which we need to do, and there is so much market out there that we are looking at it very positively and looking at how we can grow with those opportunities which are presenting. That's why we also been expanding our footprint very aggressively. Now, when you talk about credible competition and, you know, rather than naming the brand, how I can say how we look at it, we look at it in two ways.
We have competition from each category. We may have one brand or a few brands which are competing with us in the women's innerwear segment, and it can be a different set of brands when it comes to men's innerwear, and so is the case with athleisure. Bras again, you know, it's a category for us. It's a category by itself where, you know, it can be another set of people or brands which may be competing. We always focused on how we can dominate the market, be much ahead of the competition so that we can see it as. Frankly, the competition is awesome today, how fast we can grow because the market is there and how can we compete with our mindset and grow much faster is what we are looking at.
I hope that answers your question, you know. When it comes to what you said about Amazon, yes, but they also. We are there in Amazon. I know, you know, there are less entry barriers for other brands to come in. We keep looking at it very closely because, you know, who would have imagined Paytm or Google Pay would be a competition for one of our banks? Today they compete with the banks. You know, if you ask this question some time back, a bankers would have talked about some other bank. Today, that is how the market is. It's very volatile. It's very agile, and we need to keep an eye on it. We are continuously at it. We are very passionately working on having the right product at the right price.
Place it rightly and service our partners well. As long as we do that right, the potential is tremendous for us to grow.
Thank you. The next question is from the line of Ashish Kanodia from Ambit Capital. Please go ahead.
Thank you for the opportunity, sir. Going back on the distribution expenses. I think during the call there were, you know, two, three points which was highlighted that first, Jockey is already present across all the target consumers. Whenever we are expanding the MBOs, it's basically, you know, we are going closer to the consumer, which also means that, you know, there is some cannibalization in sales from the existing MBO. I think when I look at the, you know, the volumes per retail outlet. I looked at this, you know, by 15 to 20. The volume per retail outlet or per touch point has actually declined by almost 25%-30%.
You know, when we talk about ROI for distribution as well as for the MBOs, can you please help me understand, you know, if there is no cannibalization, then why is the volume per outlet declining? And how do you think about the ROI or what is the feedback you are getting from the MBOs?
Gagan, you want to take that?
Yes, sure. Thanks. Thanks, Ashish. I'm not very sure about, you know, the throughput per outlet. Yes, after pandemic, what has happened is that some key outlets which were in the high street, which were high contributors, have definitely gone down because the consumer behavior has changed. Having said that, there are some smaller set of outlets which have grown phenomenally well. You know, all these outlets which have de-grown, some key outlets, will eventually come back on track. You know, as and when there is reverse migration and, you know, again, consumers come back to the key cities. That is why we have seen majority of the growth in tier three and tier four cities as well at this point of time. When we look at the throughput per outlet, it is very healthy.
What helps, you know, when we do the MBO expansion is we are able to offer a higher range. Now, if we depend, say, on a particular MBO or we do not have competition within, that MBO would only keep a certain range, but we have so much more to offer. You know, some MBO might just keep men's range, but not women's, and not juniors, for example. Our distribution expansion is then keeping in mind that we do not just open a MBO in an arbitrary manner adjacent to the existing MBO, but by getting closer to the consumer where the consumer finds it difficult and he has to travel. As I said, we have geotagged all our outlets on the map. We know exactly in which town, in which village, and which place our existing outlets are, where the consumers...
You know, where there is a decent population and they need to really cover some distance to come there. Hence to offer convenience to the consumer, we are managing our distribution expansion in that scientific manner. We have not really seen de-growth in the MBOs where we open a new outlet, to be very honest. I will have to again re-look at the data. To answer your question, definitely it has happened because of some key outlets not firing, because consumers are not going to highly densely populated markets right now. It is just a matter of time. Through distribution expansion, we have not seen any dip in terms of any MBOs. We have only seen all of them are thriving and the throughput is healthy everywhere.
That is our observation, to be honest.
Thank you.
Thanks.
Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to Mr. K. Chandrasekar, CFO, for closing comments. Thank you, and over to you, sir.
Thank you very much, as always. This earnings call is something we look forward to from Page, and we learn a lot, equally, and for your support and faith in Page management. I hope all of you had good festival and hope to see you soon. Thank you very much.
Thank you. Ladies and gentlemen, on behalf of Page Industries Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.