Dinesh Gogna – Director and Sandeep Jain – Executive Director addressed the call:

Highlights of the call:

In Q4 of 2019 revenue increased 14.5% year-on-year, backed by robust growth for the all segments. Gross margin declined on account of additional discount of Rs 19 crore due to higher discount sales during March 2019 quarter.

In FY 2019 the company recorded a robust revenue growth of 14% backed by improved traction across all business segments.

In FY 2019, the woolen segment grew by 14% yoy and the cotton segment grew 16%. Home furnishing segment grew 41% and gift segment grew by 22%.

Out of total FY 2019 sales., MBOs contributed along with the distributors Rs 313 crore, EPOs contributed Rs 259 crore, corporate sales contributed Rs 65 crore, E-commerce sales contributed Rs 21.55 crore.

NCS sales accounted for 10% of total sales in FY 2019. Basically the company is consciously not increasing its sales from NCS to over 10% because it negatively impacts margins a lot. Thus the company has made a policy that it should not go beyond 10% because of higher discounts and higher consignment sales.

Gross margin percentage declined primarily on account of higher discount sale in the fourth quarter.

The company kept its operating costs under control but there was significant increase in advertising and marketing expenses.

The company continues to aggressively invest on brand building and marketing initiatives.

Its advertising expense increased to Rs 36 crore compared to Rs 24.8 crore. These initiatives are helping it to strengthen brand recall across all segments.

The company continues to enjoy strong customer response for woolen wear collections and cotton wear collection.

Over the years, cotton segment has also been displaying robust growth.

Fitness and sportswear collection, Rocket, continues to witness good growth.

As on March 2019, it had cash position of Rs 124 crore.

Its working capital position remained stable while it achieved 14% growth in revenues.

Return on capital employed was 19%.

Going forward, it will focus on delivering robust and profitable gross across all business segments.

It has a strong distribution network across India of around 2,500 plus MBOs (Multi-Brand Outlet) and distributors 256 EBOs (Exclusive -Brand Outlet) and 306 national chain stores.

Majority of its revenues come from MBOs and franchisee EBOs, where it primarily sells on preorders and on outright basis. This helps it remain insulated against any inventory and credit risk.

It has sufficient capacity to grow its business over the near term and it does not foresee any major capex for the next two years.

In Q4 the main reason for increase in discount is that the discount which normally is 20%-30%, actually went to 40% and 50%. Therefore, because of higher discounts slabs the overall discount increased in the quarter, which actually hurt the profit margin.

Other brands started 40%-50% discounts too early as compared to last year so the company also had to follow.

The company had provided the CSR expense for the last three years and so it's a cumulation of the CSR expense for all the three years together, in FY 2019. From the next year onwards it will be a normal one-year expense.

Cotton segment has been growing better as compared to woolen wears for the last couple of years that is why the contribution from cotton has increased to more than 60% in FY 2019.

Cotton segment would continue to grow faster than the woolen segment. For FY 2020 the management is optimistic as far as woolen growth is concerned, since in FY 2019 it saw the stock levels at the retail level for woolen suitors going down. Thus the management is very optimistic that it should have at least 15% growth in woolen in FY 2020.

Margin in cotton is better than woolen as of now. However the difference is just 100 basis points.

There are challenges as far as southern and western markets are concerned. The company has not been able to grow much in FY 2019 in the Southern region. It accounted 18.24% of sales in FY 2019 and 18.83% in FY 2019, but the management is trying to achieve more revenue growth in FY 2020 collaborating with some of the Southern India's big chains.

The trade receivables number of days stood at 123 against 121.

Since most of the winter sales booking is over, the management guided that the company could grow sales around 15% in FY 2020 with margin of 16%-17%.

The company has been growing sales at 18% CAGR from last 10 years.

Basically, the winter season is divided in to two parts. One is October, November and December and the second is January, and February.

Buyback was triggered because the share price fell way below the IPO price.

Current cash on books is Rs 130 crore.

The management feels that the worst is over.

In FY 2019 volume for Woolen categories sales stood at 13.24 lakhs as compared to 10.89 lakhs. For cotton categories it was 63.95 lakhs as compared to 52.7 lakhs. Home furnishing the volume was 4.66 lakhs as compared to 3.25 lakhs. Kids volume was 6 lakhs as compared to 5 lakhs.

Rocket sales were Rs 2.55 crore as compared to last year's Rs 2.5 crore. For FY 2020 it has raised target to Rs 4.5 crore as it has entered into some tip ups.

In FY 2020 the company is targeting a growth of 30% in Kids' category.

Basically, it has three brands right now. They are Monte Carlo, Cloak and Decker. Smaller brands do take some of the time in the beginning. Similarly Rocket is also taking some time.

The company has around 8 EBOs in the south as of now and it plans to open three more company operated EBOs just to be more visible. However the management admitted that South India has not been that easy which it thought of in the earlier year's report.