Release Date: February 09, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Rupa & Co Ltd (BOM:533552, Financial) reported a 35% year-on-year revenue growth in Q3 FY24, reaching INR319 crores.
- EBITDA for the quarter grew by 131% year-on-year, with margins improving by 430 basis points to 10.3%.
- Net profit for the quarter increased by 276% year-on-year, with PAT margins rising by 420 basis points to 6.5%.
- Sales volume showed robust double-digit growth, with a 45% increase in Q3 and 21% growth over nine months of FY24.
- The company significantly reduced its net debt from INR134 crores in March '23 to INR13 crores in December '23.
Negative Points
- Exports remained muted and contributed only 3% to overall revenue in the nine months of FY24.
- Gross margins declined on a quarter-on-quarter basis due to a change in product mix and additional dealer incentives.
- The women's wear segment saw a decrease in contribution, dropping from 12-13% to around 10%.
- Thermal sales underperformed expectations, contributing only 8% to total sales, below the anticipated INR100 crores.
- The company is still in the process of finding a suitable CEO, which may impact long-term strategic execution.
Q & A Highlights
Q: Our exports continue to remain muted this quarter as well. When do we expect that to normalize?
A: We are hopeful from quarter four, it should pick up. And in coming quarters, then it should start growing. - Vikash Agarwal, Whole-time Director
Q: Can you throw some light on the performance of our subsidiaries, Rupa Bangladesh, Rupa Fashion, Euro Fashion, Oban, this quarter?
A: Out of five subsidiaries, three subsidiaries, Euro Fashion, Oban Fashion, and Imoogi Fashion, are both EBITDA and PAT positive. Rupa Fashion and Rupa Bangladesh operations are not yet started, so they have negligible losses in terms of EBITDA and PAT. - Sumit Khowala, CFO
Q: Could you give us the contribution in terms of numbers or percentage for athleisure and thermal segment?
A: Athleisure contributes approximately 7.5% of the total revenue for nine months, and thermal contributes approximately 8%. - Sumit Khowala, CFO
Q: Could you share the revenue contribution in the segment on the basis of the products like economy segment, mid-premium, and premium segment?
A: For nine months, the value growth in the economic segment is around 20%, mid-premium segment is 22%, and premium segment is 40%. In terms of value, the economic segment is 9%, mid-premium is 14%, and premium is 30%. - Sumit Khowala, CFO
Q: What are the CapEx plans going forward? What are the expansion plans for the EBO?
A: CapEx is around INR15 crores to INR20 crores every year. We have around 29 EBOs so far, and around four to five further EBOs should be coming up in quarter four. - Vikash Agarwal, Whole-time Director
Q: Why have the gross margins come down on a quarter-on-quarter basis?
A: The main reason is the change in mix. The contribution from a higher-margin business is lower than in the second quarter. Additionally, some extra schemes have been passed on to dealers to incentivize them. - Sumit Khowala, CFO
Q: Do you see any price hikes possible in the short to medium term?
A: Not in quarter four as of now, but it depends on raw material prices. If raw material prices firm up further, we might consider it. - Vikash Agarwal, Whole-time Director
Q: What would be the key growth drivers to take our numbers back to the stellar growth seen in 2021 and 2022?
A: We are focusing on six to seven different areas, but the core line, which is the core of Rupa, should drive the growth. We are also focusing on exports, modern trade, and athleisure. - Vikash Agarwal, Whole-time Director
Q: What is the current industry scenario, and when can we get back to the previous margin levels of around 20%?
A: Achieving 20% EBITDA margin looks difficult as it was a unique COVID year. However, anywhere between 13% to 15% is achievable in the coming years. - Vikash Agarwal, Whole-time Director
Q: How is the channel inventory with the retailers in the distribution chain?
A: Previously, dealers used to maintain at least a month’s stock, but due to price instability, a lot of destocking has happened. Currently, it is probably around 10 to 15 days. - Vikash Agarwal, Whole-time Director
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
