Ladies and gentlemen, good day, and welcome to Sheela Foam's Q4 FY23 Earnings Conference Call, hosted by Investec Capital Services. 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 touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Ritesh Shah, Head of Mid-Market Coverage and ESG, Investec Capital Services. Thank you, and over to you, sir.
Thanks, Tanvi. We have with us the entire Sheela Foam management. We have with us Mr. Rahul Gautam, Chairman and Managing Director, Mr. Rakesh Chahar, Whole-time Director , Mr. Nilesh Mazumdar, he's newly appointed Chief. We also have with us Mr. Amit Gupta, who has recently joined, and-
Sorry to interrupt you, Mr. Shah. Your voice, we are experiencing audio loss from your connection.
Am I audible now?
Yes. Sir, I would request you to please introduce the management again.
Sure. We have with us the entire Sheela Foam management. We have with us Mr. Rahul Gautam, Chairman and Managing Director, Mr. Rakesh Chahar, Wholetime Director, Mr. Nilesh Mazumdar, who joined recently as Chief Executive Officer for the India business. We also have Mr. Gupta, who has recently joined as Group Chief Financial Officer, and we have Mr. Davinder Ahuja, Group Financial Controller. I request take the call for-
So operator, are you there? I think we're facing some connectivity problems with Ritesh.
Yes.
Yeah.
So, Mr. Rahul Gautam, I would request you to please proceed further now.
We probably request him to use another device.
Sure. Members, I'll just reconnect the line for Mr. Ritesh Shah. Ladies and gentlemen, we have the line from Mr. Ritesh Shah reconnected.
Right. Hi. Thanks, Tanvi. So I'll hand over the call to Mr. Rahul Gautam. Sir, I would request you for initial remarks, post which we'll have a Q&A session. Over to you, sir. Thank you.
Thank you, Ritesh. Thank you, Ritesh. I must apologize to everyone for the little connectivity problems that we had. So I just want to thank you, Investec, for holding this call, and, on behalf of Sheela Foam, for our annual results for FY 2022-2023. I welcome you all, on this, at least in Delhi, is an extremely hot afternoon. And I must also say that we are in the middle of May. The earlier part of May was an extremely cool one here, unusual. But like this inclement weather, the business conditions are also suffering, almost a long COVID and do not appear to be getting out of it.
The macroeconomic average indicators that we see do not tell the entire story, as industry segments are each having different performance experiences. For example, we supply to the auto industry, which is doing extremely well. However, as far as consumers are concerned, or the B2C business is concerned, for mattresses, they are sort of preferring to postpone their purchases, and the footfalls in the stores are extremely low. So I think these unusually different conditions in different parts of the business or different segments of industries is the norm of the day. However, we expect all this to settle down very quickly. And while when I was giving you examples of the automobile and the mattress industry, both are, by the way, discretionary products.
However, I must also say that there is some kind of stability returning back, and we can experience it starting from the highly volatile raw materials that have to use. You are all aware of it. There are two major ones, polyol and TDI. They are now back to some kind of normal levels, and with fingers crossed appear to be steady, at least for the past many weeks. As you can see from the annual results, the performance has been flat across geographies of India, Australia and Spain. Though the reasons for this flatness in each of these regions, each of these countries, has been different. In Spain, it is the Ukrainian war which is impacting.
In Australia, there was a second bout of COVID in the earlier part of this year. And India, of course, we are all aware that the uncertainties that kind of prevail. But there, the reasons are completely different. The company is also taking steps which are different in each country. And we feel that sooner rather than later, the economy has to and should look up. For that time, we prepare, and ensuring that we do not have any supply constraints then. New plants in India and Australia, and then capacity increase of almost 60% in Spain, are all in their final periods of closing. And by Q2 or the end of Q2, we should have each one of them ready to deliver as the market demands.
Also, happy to share that our long and much-awaited project M5, which is a mattress for every Indian, has now reached the final stages and is ready to be launched. Pilot works have begun, and distribution is soon going to be there. We expect that from Q3 onwards, it should start contributing to the business of the company. As you all know, that this is aimed at the low-income consumers and consumers who are at a distance or far away from existing markets or towns. We had our board meeting, the final board meeting yesterday, and the board of the company continues to be of the view that plowing back the profits is in the best interest of the shareholders.
I had already mentioned to you the organic investments that we have done in each geography, and shared that there are also inorganic opportunities. Those still in work in progress status, but are getting nearer to finalization. Last time, I had shared with you that Sheela Foam does take its responsibilities in the CSR and ESG areas seriously. Our first BRSR is ready, and I'm happy to share that on a comparison basis, whether with similar industries elsewhere in the world or comparable industries in India, our status and our goals that we take are very good. I will now hand over the mic to Ritesh Bhai for moderating the questions, and me and my team will be happy to take them. Over to you, Ritesh.
Yeah, thank you, sir. Tanvi, if I would request you, if you could please open up the Q&A queue.
Sure.
Thank you.
We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use hands-free while asking a question. Ladies and gentlemen, if you have any questions, please enter star and one. We will wait for a moment while the question queue assembles. The first question is from the line of Nihal Jham from Nuvama. Please go ahead.
Yes, thank you so much. Good evening to the management, and good evening, Rahulji. So the first question was on the mattress business. You did allude to the fact that there is an overall weakness. But just as an observation, if I look at the volumes, they are maybe trending even lower than what they were pre-COVID, whereas we've obviously seen an increase in, I would assume, in the sale of Starlite. So just wanted to understand that, is it that the impact on the Sleepwell brand, which is more premium, is much more intense? And if you could just give any comments around that.
Nihal, you'll just have to repeat the last part of the question, please.
Yes. I was saying that the observation was that the volumes were maybe even lower than what they were in FY 2019 for the same quarter. And is it... And I know that we've obviously scaled up for the Foam as a brand. So is it that Sleepwell as a brand has seen a higher contraction versus pre-COVID?
I would say yes, if you look at Sleepwell by itself. But you must also appreciate that both Foam and Starlite are endorsed by Sleepwell. And it is just that it is for catering to the different segments of distribution or different lines of. Because for Sleepwell, currently we have exclusive distribution. And therefore, it would be a good idea to look at them as consolidated.
Sure. Point taken. The only observation there was that given the channels are very different, that we have the EBOs which sell Sleepwell, so that separately would be, as you said, seeing lower footfall, and maybe the intensity there would be higher?
You're quite right on that. The footfall numbers which we measured all the time have been lower. Now, there are a couple of reasons we believe that to be, and we are taking corrective steps. One is that definitely an exclusive mattress store which needs some more stuff to attract the consumer. And the other belief is understanding from the market is that there has been and the average selling price, you know, pressures on the selling price to come down, especially post-COVID and during the COVID periods. So, you know, the journey that we were in, which is to just keep pulling up the clip and price, and keep adding value and move ahead.
COVID has done this, and we are reviewing the entire portfolio, and we'll be taking our actions from there.
That is helpful. I had two other accounting-related questions. The first is on the reclassification that we have done. While I do see the note, maybe incremental details on that, I don't know if I missed, but what exactly have we reclassified, both on revenue and expense to see the difference that has happened?
The biggest, so the first thing is, of course, that this reclassification has no impact on the profitability or on the business.
Yes.
These are two expenses which in our belief till now were supposed to be as expenses, but our auditors felt that the interpretation of the Ind AS would be that if they are reduced from the top line itself, and therefore that's the reclassification that has happened. So a few expenses, selling expenses, which have been reduced from the top line and have also been then removed from the lower portion of the balance sheet.
Sure, that is helpful. Just one final question. You were obviously mentioning about the fact that there are multiple M&A opportunities that you are evaluating. Just wanted to get a sense, is there a cap in terms of the amount that you want to spend or the number of transactions that we are looking at? Just to put it another way, is there a possibility of maybe looking at more than one target, and you're looking at maybe one or two acquisitions? Just if I could get a sense of that.
Nihal, the only thing that I can say is that you do pursue these opportunities, and you have sometimes very little handle on when they will be ready for it to happen, you know? And even if you would, if you want to plan that they don't happen all at the same time, sometimes they do, because there are so many other reasons for it to happen. On the cap part of it, of course, we will keep that in mind, that what is definitely digestible and affordable, that we would do. Mm. But again, as I said, when you look at the opportunity at 10, 15, 20% this side or that side, honestly, you cannot control that.
Okay. That is very helpful. I wish you all the best out there.
Thank you. Please, gentlemen, if you wish to ask any questions, please enter star and one. The next question is from the line of Ritesh Shah from Investec. Please go ahead.
Yeah. Hi, sir. I have a list of questions, sir. First, I'll start with the rationale for the new management structure. So that would be the first question for you. And after that, if Mr. Mazumdar could come in and give his thoughts on how he sees things over the next three years, five years, that, that's the first question, sir.
So let's go question by question before we forget what the question. So, look, there was... Let's say if we come back to pre-COVID times, and we'll just divide it like that, there was, I was in charge of three things: being the Chairman of the company, the Managing Director, and also looking after the Indian business. And then we made the first stage where Tushar took over the Indian business, and I continued to look after the Chairman and the Managing Director. Now, we are in the process of Nilesh, who has just joined on the first of February, to take over the Indian business. Tushar would move differently or move out, and we would also get into the stage of splitting the entity.
Now, this is all on the cards. We haven't made any announcement, but this is just the thought process that we are saying. And it is also to provide the time to the Indian, or at least the directors or the top management, to be able to spend time and energy over inorganic possibilities that we can be right in. And of course, the last rationale or reasoning is that we had all been running the Indian business for quite some time, and it definitely needed a different experience, at least in the standard parts of business, which is the distribution, the supply chain and logistics and the brand, et cetera. And therefore, Mr.
Nilesh Mazumdar, who comes, who's been, who's taken over this responsibility, he comes with a rich background of H&M brand, brand to delight, where these things have probably been already done a couple of times over. So that was the rationale behind. Now, Nilesh, why don't you just tell about yourself a bit and maybe whatever experience that you have in the last couple of months and what you think of this industry?
... Sure. Thank you. Thank you, Rahul, Rahulji. Thanks, Ritesh, for that question. As a matter of introduction, I had spent about more than a decade with Pidilite Industries, handling different portfolios there. I have handled the waterproofing, the Dr. Fixit business, for the last couple of years. Before that, I have handled the Fevicol business, the consumer product business. Before Pidilite, I have largely spent my balanced career across two organizations. One was Onida in the consumer electronics space, and before that, in Asian Paints. So about three decades of experience is what I have, working for strong Indian brands and Indian organizations.
I joined on first of February, and I have had a brief look at the kind of opportunity that both the category of mattresses have and the brand Sleepwell. And I must say that it is extremely exciting. I think, as far as the entire category is concerned, there are two large opportunities that I see. Number one is the trend that we are seeing across most of the industries, which is movement from the unorganized to the organized segment. So that is one big opportunity. And the second is look at the bottom of the pyramid, which is by upgradation of consumers who are using cotton mattresses, charpoys, et cetera, to using a good quality foam mattress. So these are, I think, the two big opportunities in India, as I see today.
This will be possible to be exploited if we have, A, the right sales and distribution channel, so that we are able to reach the product as close to the consumer as possible. Number two, we have the right product offering at different price points for different segments in the market, with the right to win. And third, is being able to connect the brand Sleepwell with the consumer, and that's how we will be able to position the brand in the mind of consumer space. It's obviously, Sleepwell is a b- as a brand, is a couple of decades old in the country and has a strong equity. In some parts of the country, we are fairly strong. So how do we build on that further? And also, again, share in some of the comparatively weaker markets as we move ahead.
Broadly, that's the structure and format that I have in mind of how we will be taking ahead the India business.
That's useful. I have a few more questions. Tanvi, you can make an announcement if anybody has any questions, as probably I have, like, a list of few more questions.
Participants, if you wish to ask any questions, please enter star and one. In the meanwhile, Mr. Shah, you may continue.
Yeah, perfect. Thank you so much. Coming back to Rahulji, I think a couple of quarters back, you had indicated exports was clocking around INR 1.5 crore, which was quite low from a utilization standpoint. Is there any uptick over here? Are we looking at green shoots? We understand the challenges in US, European market on the inventory, destock or the overhang, which is there. So that was one. Second is basically Indian Railways. Any incremental numbers? That would be very useful. Third is, based on our checks, we do find people from Quess at EBOs and MBOs trying to move around things.
So are there any new initiatives to increase footfalls, conversion, from a MBO, EBO count standpoint, or incentivizing more of our own people from a variable component, and things like getting Quess folks on the stores to increase conversion? So I asked, like, a few questions. First was export, second was Indian Railways, and third was related to footfalls and conversions.
Thanks, Ritesh. That's... This is a very exhaustive part of the, the business. Anyway, as far as the exports and railways, Rakesh, would you be able to take care of those two areas, the exports and, railways?
Yeah, I will. As far as exports are concerned, so they are still holding around INR 1.5 crore per month. The markets are still slow, but recovering. So we are getting orders of the inventory, which is getting low. So that process has started, which is a good sign. We have also changed a bit of strategy of also working with retail brands to develop products for them. So those are the two long-term programs, but the process has started. On the railway side, the traction in Q4 has been good. It was in line with what we had anticipated.
And going forward also, besides the product that we have supplying that, we are also in a process of developing a new product which will also increase our share in the market. So that process is also on. So on both sides, I think, railway is definitely more promising and export is slowly coming along.
Okay, thanks,
So would you like to put your numbers on Indian Railways? How much are we, have we... How much have we clocked, or how much do we aspire to reach, say, in a year or two years, three years?
So it is, we have done more than around INR 60 crores in the year gone by. So that now, in the coming year, the target is more, but at the same time, there are also more players who are coming the way and bidding for the tenders. So that, so we are, as far as the potential is concerned, potential definitely is much higher. So we are also, besides catering to the current requirement, we are also developing a product which will give us a competitive edge by which we can increase our market share substantially.
So which is a work which is under process, and that will give us a good competitive edge.
So Ritesh, I can try and put some numbers, and Rakesh, I'm sure you will agree, that at the moment, the estimate of the market is about INR 800 crore annually for these sheets and cushions. In about three years' time, we should be looking at about INR 300-350 crore.
That's encouraging.
Is that right? Yeah.
So-
So at the moment, we are doing annually about INR 60 crore, and that's, and the rate of growth is on the rise. Ritesh, so the second part of your question, which was on Quess and the footfalls and the conversions, et cetera, Nilesh, I would like, you know, with the fresher look that you have had, you can-
Yeah, thanks, So, Ritesh, frankly, the two drivers of business for us is footfall, and second is conversion. Now, the Quess initiative was really to try and see if we can get a higher uptick on conversion. Now, conversion, what we are realizing is already a pretty healthy percentage for us. Our conversion rate is anywhere between 50%-60%. So the challenge today for us as a brand is really footfall, and how do we therefore get footfall for the brand in the marketplace? So A is in the footfall which is happening in the marketplace, how do I participate in that more? And that can happen through having an intelligent channel expansion in markets, to markets where I'm not currently represented adequately, and therefore, that's a drive which we can forward from quarter four onwards.
Hopefully, we will start seeing some results of that as we move into quarter two. Going down the POP data also, going into towns which are smaller in size and seeing how we increase our representation there, that will be the other program that we will add. We've also engaged with a new advertising agency called Sideways, and as we speak, sometime in quarter two, end of quarter two or beginning of quarter three, we will have a new campaign around Sleepwell in order to connect with the consumer. So these are some of the initiatives that we, besides, of course, what Rahulji in the beginning mentioned about our program for upgrading the bottom of the pyramid, that pilot is, as we speak, just about starting.
But by the end of quarter two, we would have seen some results of that initiative, which is to upgrade the cotton mattress users. So that's the other part that we are looking at. So it's basically between footfall and conversion. Footfall, how to get more footfall is really the business challenge which we have to solve for.
Sure. And sir, would it be possible for you to comment whether do we have a variable component for the workforce, and the incentive schemes? I think we had taken a back seat, I think, during COVID, but has all of it got imposed again? How are we looking at it?
Yes, very much. We have now a variable pay, which is a substantial portion of our workforce, our sales force, total, salary and CTC. So that's been brought back now.
Sir, incentives for the channel?
Yeah. Okay. Sorry, I missed that question.
Sir, incentives for the channel, for distributors, retailers.
Yes. So for retailers also, the performance-based incentive is back for the sales force. It is back for employees, it is back. So the variable component, the performance-linked incentive for all stakeholders, is now at play.
Sure. Sunny, I'll request to take Hitesh, please, for the question . Thank you.
Thank you. Participants, if you wish to ask any questions, please enter star and one. The next question is from the line of Hitesh Taunk from ICICI Direct. Please go ahead.
Thanks for the opportunity. Sir, my question on the demand front again. Most of the discretionary space universe, be it paints or be it, you know, electrical consumers or be it, you know, pipes, which are generally used for a home improvement segment, have seen a kind of a minimum double-digit growth, at least, for a year-on-year basis. But, we have, we haven't witnessed kind of a improvement in demand. That's a big surprise to me. I just wanted to know, whether we are, we have lost any market share, or, is it a kind of a industry, where, where the demand was lagging? This is on my first question, sir.
And the second question, sir, again, on the gross margin point of view. I mean, despite raw material prices are coming down, and we have been introducing a new product category, the gross margin profile still, you know, it are lower than our pre-COVID level margins. So, so now when the raw material prices are on a declining mode, do we see a further recovery on the gross margin from here on, or, or, or are we going to focus on the market share? That, that's—these are two questions as of now for me.
Thanks, thanks, Ritesh. So let me take the first one first. Oh, sorry, the second one first, on the gross margin part of it. So if you will see the past couple of years, you know, just because the raw materials have been fluctuating so much and so widely, that it may not be fair to just talk of pre-COVID and post-COVID, you know. And my response to your question regarding gross margin changing as we go forward, is that if Q4 is any indication—it's not any indication, is the indication of the raw, the stability of raw material prices sort of contributing to the gross margin, this is going to continue. And therefore, if you will look at the gross margins, for Q4, I think it was more like 11.9% or 12%.
Devender, is that right? 12%. And as we go forward, this will only increase because of the stability that is coming in with the raw material prices. Going back to your first question of saying that in the discretionary stage or space, there has been double-digit growth, and therefore the question is that are we kind of losing out on market share? So one of the indicators of the market share is that this industry goes through regular market researches, which are done every half year. And the last one that has come out has only shown that the share of Sleepwell, and of course, we are including for the moment Starlite, has increased as far as the industry is concerned.
So which definitely indicates that the market share, there has not been any loss of market share. However, on this part that comparing it to the other discretionary space, why is mattresses kind of lagging behind? All I can say is that it's just a question of one following the other, and it will happen. It has to happen, and there is no reason why it might be just lagging behind a little bit. Anybody else from our team who would want to sort of add to this?
So I would in, Devender.
No, that's fine. I think I responded well, and that, that's what is happening in the market. And as there was a mattress industry, the industry also experienced a pent-up demand. So that's also impacting the current purchase cycle. And the footfalls, especially on the mattress side, we have exclusive stores, so we have a clear understanding of the micro market and the footfalls coming in. So there is definitely a slowdown both on the furniture, furnishings, and on the mattress side.
Yep. Okay.
Yes, one addition from my side, Davinder, also this side, sir. So EBITDA margins are 11%. Gross margins have improved to 39%, versus last year's quarter four, 32%. So we have seen, we have seen a journey of 5% improvement, over a year's time, in the, in our gross profit margins level.
Okay. Thanks, Davinder. Yes, Ritesh, sir.
Uh-
Ritesh, do you have any further questions?
Yeah. If I can allow for another two questions. I have two more questions.
Okay. Please, sir.
Sir, I understand there was a, you know, a delay, maybe delay in demand. Sir, can you throw some light how our advertisement expenditures, you know, have, have moved over the last one or two years, and as in, as in percentage of sales, if you can guide? And, what is our plan to, you know, take it forward? If you can quantify some numbers, on that front. The first thing is that. And the second thing is, if you can, if you can, share what is the channel, what is our distribution channel network as of now, in terms of number? And, and, in your opening remarks, you said, like, the focus is on channel expansion in tier two, three cities.
What kind of expansion growth are you expecting, or are you planning anything on sort of that going forward? That will be my two questions. Thank you.
Rahul, I think-
Sorry?
You want me to take that?
Yeah.
Ritesh, as far as advertising expenses are concerned-
... obviously, during the COVID times, et cetera, we would have cut down majorly on advertising for obvious reasons. But going forward, I would want to keep advertising expenses between 5%-6% of the net sales, and that's how we will plan as we move ahead, with higher spends happening during certain quarters when we have some amount of seasonality in, let's say, in quarter two, quarter three, to invest on ATL campaign, digital, et cetera. So that's as far as the advertising planning is concerned. As well as, as far as the network expansion is concerned, we usually have an addition of, say, 8%-10% maybe happening in a year. That was the plan, but we are thinking a little bit more aggressive.
We were looking at almost about 20% expansion in active channel, which means, over the next three months, add anywhere between 800-1,000 outlets for Sleepwell as a brand. So that's, that's the channel expansion plan that we're looking at, especially looking at those markets where, we are not adequately represented.
Hello?
Hitesh, do you have any further questions?
No, thanks. Thanks. I'll come in the queue if I have more.
Thank you. Participants, if you wish to ask any questions, please enter star and one. The next question is from the line of Ritesh Shah from Investec. Please go ahead.
Yeah, hi, sir. A couple of questions. First is, sir, can you spell out how much did we drop on the online sales on D2C in FY 23, and any guidance on those numbers going forward?
This is Rahul. Sorry, I, I didn't quite hear it. Is it, a question on online sales?
Yes, sir.
Okay. Nilesh, you want to take that? Yeah. So our current sales on online will be approximately between 8%-9% of the mattress sale.
Sure. Sir, probably I'll link it with the next question that I had. How do you see this number going forward, or how would you look to balance volume growth versus profitable growth, for D2C and traditional business?
You see, mattress as a category, if you were to look at even internationally, the online sale is it, in the developed countries, what I am given to understand, is about between 12%-15%. Because this is as a category where, the consumer would want to have a touch and feel of the product before buying it. Of course, the reach, the, the percentage of the online sales went up during COVID, but after that, even internationally, what I understand is that it is hovering around that level. So for us, it is just not about online, online sale.
What we have to be clear on that there is obviously a lot happening on, the digital experience and digital marketing, which is required because consumers would do search online, perhaps, and then go and buy offline after a touch and feel of the product. So our ratios would perhaps remain at that level of around 10%. But if the question is around that, what do we need to do for the more digital-savvy consumer? Yes, a lot of searches happen digitally, and there we will need to enhance our presence.
Sure. This is helpful. And last one for Rahulji. Sir, we had earlier indicated that we were looking to extend it to living room from bedroom, wherein we were looking at sofas or some options over there. I do understand from our checks that we did some pilot runs in Delhi around markets. Any takeaways from there? Are we looking at any initiatives on that side?
May I also take that, Rahulji? Yeah, absolutely. Yeah. So frankly, with the current level of performance, what we have internally, strategically decided is that since given the fact that the volumes are, under pressure, and we need to get the volume, and the top-line delivery, online, so we are now focusing on the core more. So hence, the focus on mattress and furniture cushioning and the technical foam would be far higher. And for the moment, we are saying that we may do small pilots here and there, to just get an understanding of the category, et cetera. But strategically, for this quarter, the next quarter, our focus on the core is going to be higher.
Sure. Thank you. Can we, I would request you, if you could please take Hiten for the next question?
Yes. Before that, participants, if you have any questions, please enter star and one. The next question is from the line of Hiten Bohra from Sequent Investments. Please go ahead.
Good evening, sir. Thanks for the opportunity. So most of my questions have already been answered, so I have only one question left. So as you mentioned, the demand in export market as well as the, you can say some kind of recovery in demand in Indian market as well. So just wanted to understand, what kind of growth we are looking as a, planned as a company? And also on the margin side, as TDI and other RM prices are coming down, so any scope of margin improvement from here, because even operating leverage is also going to play. So just some thought on that.
So on the growth side, and as I said, of course, this is with a bit of an if, to say that things begin to stabilize and are stabilizing as they are appearing right now. It should be a double-digit growth and should be more like 12%, 13%-14% growth per annum. And on the just the blended one that you said, you know, which is the export and the domestic sides. And on the margin side, I have already indicated, I said that we are experiencing the expansion on the margins, so the Q4 was an indication of that. And as we move forward, this should be higher than the 12 that we had achieved in Q4.
So, we can expect at least 100 bits of margin expansion this year, right?
Yes. Yes.
Okay.
Thank you.
Okay.
Nitin, you have any further questions?
No. Thank you.
Thank you. Participants, if you wish to ask any questions, please enter star and one. The next question is from the line of Hiren Trivedi from Axis Securities. Please go ahead.
Yeah, thank you for the opportunity. Just wanted to know this data point. What part of your demand for mattresses is coming from replacement versus those which are, you know, buying it for the first time? So is there any observation or any number you can share with us?
Does anybody want to take that question? Otherwise, I will attempt.
I will take that question. So, you see, and this is the understanding that if a consumer is buying more than one mattress at a point of time, it would probably be a new house that he's occupying, and therefore buying a mattress for that. And whenever a single mattress is being bought, it is probably as a replacement. So each one, we are working with that assumption. Then currently, from our understanding, about 42% of the business is from new and balance is from replacement.
Thank you. Thank you. That helps. Yeah.
Thank you. Participants, if you wish to ask any questions, please enter star and one.
Yes. Hi, Tanvi, I'll just take the last one. So, Rahulji, I would request you if you would like to spell out some guidance for next year. I think margins you did indicate, but any specific volume value guidance for the next fiscal and any closing remarks, that would be great, sir. Thank you so much.
Thank you, Ritesh. Generally, I would, I mean, in these kind of uncertain times, I would not hazard any guesses as to what kind of future are we looking forward to. But let's say the indications or the directions that we see and the steps that we have taken, and I will go a little geography by geography. I am already expecting that Australia should have a high single-digit growth. And this is, mind you, in the environment or a market where there is complete saturation.
However, there is a change that is happening post-COVID, and that's a bit of nationalistic feeling coming in, and people want to buy Australian-made stocks, and therefore, I expect that all the imports of mattresses that are happening in Australia, there would be some part where we will have some part to play in that. Spain, I have or I have indicated that many times, that the entire European market, we have been an extremely small part of it. In the last years, there has been a reduction in the market size by almost about 25%, while we had suffered a fall of about 7%-8%. And that's indicating that we are doing on, gaining on market share.
The opportunity is large, both for manufacturing in Spain itself, and the second is the bit of exports that takes place, across the Atlantic route to the U.S. I expect that Spain should grow again by low double-digit numbers. As far as India and all the steps that we have taken, whether it's the new product, which is the M5, all the steps that we have taken to strengthen the Sleepwell brand, the steps that we have taken to increase the footfalls and a general stability and improvement in the economy that we all expect to happen, it should be again a double-digit growth that we should experience.
As a closing thing, Ritesh, I just want to thank you and your company for Investec for hosting this call for us. Thanks a lot to Tanvi for doing a great job coordinating everything. And of course, thanks to all the investors and all the questions that you have put forward. Like always, they are initiatives, a learning exercise for us. Maybe some of the answers that we knew, but it definitely helps us to focus on areas where they may have slipped out of our radar. I also take this opportunity to, because we just concluded our annual board meeting yesterday, so to thank the board members and also the senior management and the company for helping in the year that's gone by.
Of course, last but not the least, I thank the team which has been there with me on this call. So thank you very much and look forward to seeing you soon.
Thank you very much. On behalf of Investec Capital Services, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.