Release Date: May 24, 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) achieved a healthy 17% annual growth in volume, driven by a 16% growth in the economy segment, 17% in mid-premium segment, and 25% growth in the premium segment.
- The company reported a 48% year-on-year growth in EBITDA for Q4 FY24, with EBITDA margins improving by 340 basis points to 10.1%.
- Rupa & Co Ltd (BOM:533552) significantly reduced its net debt from INR134 crores to INR6 crores as of March 2024.
- The company invested approximately INR66 crores in branding and advertising, enhancing brand visibility and contributing to increased sales volumes.
- Rupa & Co Ltd (BOM:533552) launched new pilot projects under the Pragati Scheme, a loyalty program for retailers, which is expected to improve secondary sales mapping and retailer engagement.
Negative Points
- Despite a 17% growth in volume, the company's revenue grew by only 6.4% year over year, indicating pricing challenges.
- Initiatives to boost revenue from export, thermal wear, and the women's segment did not materialize in FY24.
- The company decided to discontinue licensed brands FOTL and FCUK due to underperformance post-COVID disruption.
- Working capital increased from INR736 crores in December to INR762 crores, raising concerns about cash flow management.
- Rupa & Co Ltd (BOM:533552) acknowledged losing some market share to competitors, with a lower growth rate compared to peers.
Q & A Highlights
Highlights of Rupa & Co Ltd (BOM:533552) Q4 and FY24 Earnings Call
Q: How is the progress on opening new stores in places like airports and train stations, and how do you think they will help our sales?
A: Opening stores in airports and railways is a great idea. We are trying with airports, but rentals are quite high. We are talking to railways to have space there. Currently, we have 29 EBOs and plan to open another 20 this year. (Vikash Agarwal, Whole-time Director)
Q: Can you provide us with the revenue contribution across our segments for the quarter as well as for FY24?
A: For Q4 FY24, the revenue contribution from the economy segment is around 45%, mid-premium is around 50%, and premium is 5%. For FY24, the economy segment is 47%, mid-premium is 50%, and premium is 3%. (Vikash Agarwal, Whole-time Director)
Q: What was our total CapEx in FY24 and our CapEx plan for FY25?
A: The total CapEx for FY24 is around INR7 crores to INR8 crores. We don't have any capacity expansion plan for FY25, so there will be a routine CapEx of INR12 crores to INR15 crores. (Vikash Agarwal, Whole-time Director)
Q: Can you talk about the channel inventory in the system now? Has it gone back to the old days of 30 days or below, or is it still in the range of 10 to 15 days?
A: The inventory level is still low with dealers. It is not very high. Once the yarn prices stabilize, dealers will start building more inventory. (Vikash Agarwal, Whole-time Director)
Q: What steps have been taken to revive growth, given that we seem to be losing some market share?
A: We expect around 15% growth for the coming financial year with a 10% to 11% EBITDA margin. Initiatives include building a strong team, endorsing celebrities for our economy range, launching new brands, and focusing on exports and modern trade. (Vikash Agarwal, Whole-time Director)
Q: What is the current status and impact of the big stores and exclusive brand outlets that we have opened?
A: We currently have 29 EBOs. Once we reach a landmark of 50-60 EBOs, it will make a significant difference. We are still in the process of opening EBOs and making it a viable model. (Vikash Agarwal, Whole-time Director)
Q: Can you share the price trend of raw materials for FY24 and how they are faring right now?
A: Yarn prices are stable now, around INR285 to INR290 for a 40s count. In Q4 FY23, it was INR350. (Vikash Agarwal, Whole-time Director)
Q: What is the Pragati scheme, and how will it impact the company going forward?
A: Pragati is a retail loyalty scheme to incentivize retailers. It helps in secondary mapping and encourages retailers to buy a wider range and do regular business. It has been launched in two states and is expected to stabilize in a quarter or two. (Vikash Agarwal, Whole-time Director)
Q: What are the top two drivers of growth for the next two to three years?
A: Athleisure and women's wear are significant growth drivers. Both segments have huge opportunities, and our size in these segments is not very big, so the potential for growth is substantial. (Vikash Agarwal, Whole-time Director)
Q: What is the growth outlook for the next two to three years?
A: We are targeting 15% year-on-year growth for the next three years. If we achieve this, we can return to our historical margins of 14% to 15%. (Vikash Agarwal, Whole-time Director)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
