Creative Newtech Limited (CNL) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Q4 FY '24 Earnings Conference Call of Creative Newtech Limited. This conference call may contain forward-looking statements, which are based on the beliefs, opinions and expectations of the company as of this call. These statements are not guarantee of future performance and involve risks and uncertainties that are difficult to predict. [Operator Instructions] Please note that this conference is being recorded. At this time, I would like to hand over the conference to Mr. Ketan Patel, Chairman and Managing Director of Creative Newtech Limited. Thank you, and over to you, sir.

Good afternoon, everyone. Welcome to Creative Newtech Limited Earning Conference Call for the fourth quarter and full year ended March 31, 2024. I would like to start by thanking you all for taking time to join us today. On the call with me are Mr. Abhijit Kanvinde, our CFO; Mr. Vijay Advani, Wholetime Director; and Adfactors, our Investor Relations team. I'm happy to say that we closed the financial year on a strong note. Creative expansion has persisted amidst the dynamic market changes supported by its efficient business framework and selectively crafted product lineup. The year gone by has been particularly eventful for us with several of our initiatives been bearing fruit. I would like to take this opportunity to quickly recap the major business updates and milestones that we have achieved during this fiscal year. To start with, overall, we grew our top line by 24.15% and profit by 77.08% in spite of our March quarter-on-quarter being negative by around INR 90 crores. This is due to decline in enterprise business. Our enterprise business is opportunity business and our minimum benchmark is 20% ROCE. We are also in a period of transition where we want to focus on high-growth, double-digit profitable businesses. Coming to Honeywell, from a base of INR 80 crores odd, we grew the business by more than 100% to INR 170 crores. We announced the global launch of the next generation of Honeywell-branded Soundbars through our Hong Kong base subsidiary, Secure Connection. This launch underscores our commitment to delivering cutting edge audio solutions to customers worldwide. And we are confident that these soundbars will [indiscernible] the way people experience sound. We believe this category of product has immense potential for adoption among the masses and grow into a significant revenue on its own. We also launched our new range of car air purifiers. Air purifier business is a multi-decadal growth opportunity business. It's still a newer category, so not much data is available, but we believe that the opportunity is as huge as how air conditioners opportunity was there 30 years back. Today, almost more than INR 1 crores AC are now sold in India. As a leading brand in air purifier category, it is our responsibility to create the market also. Besides this, we launched almost another 50 SKUs for different geographies. Honeywell is going into a robust business for us, and we expect it to contribute incrementally to our top line as well as our profits. We also expanded our brand licensing line of business with the addition of CyberpowerPC, which is a major milestone in our overall journey. Cyberpower, Inc. is a U.S.-based gaming system giant. Through this licensing agreement, we are not only gaining access to cutting-edge technology, but also aligning ourselves with a global leader in gaming innovation. This partnership allow us to tap into growing demand for high-performance gaming computer, equipment and accessories in the India market. By tailoring our offerings to meet the unique preferences of Indian gamers, we are poised to capture a substantial share of this flourishing industry. Our aim is to set new benchmarks for gaming experiences through [indiscernible] offerings and established Creative as a frontrunner in the Indian gaming ecosystem. In terms of geographical expansion, we have taken several initiatives to proliferate our network across overseas market as well. Through Secure Connection, we partnered with Trigon LLC for distribution of our range of Honeywell products in United Arab Emirates. This partnership will ensure that our Honeywell products portfolio reaches customers efficiently in that region, which is a high margin area for us. Furthermore, we are thrilled to have joined hands with PT Bintang Mas Rezeki Nusantara, a leading technology product distributor in Indonesia to enhance consumer experiences by leveraging their extensive distribution network and Honeywell's innovative product offerings helping us to establish strong presence in the Indonesian market. Moreover, continuing on our selective technology to add niche -- selective strategy to add niche products in our portfolio, we signed up several new brands over the last few months, like [ Dahua ], pTron, Nokia, Dahua, Holoware to name a few. There are several brands in pipeline, which we have been evaluating. The momentum that we are bringing into the new fiscal year gives us an optimistic outlook for the near future in terms of both, distribution as well as licensing. The way that this Honeywell business is growing is in line with our strategy to increase our revenue share from licensing business, which is a higher-margin business for us. Our successful partnerships with leaders like Cyberpower Inc., and Palred Electronics underscores our ability to forge strategic alliances and capitalize on emerging market trends. Moving forward, our focus will remain on securing more such segments and expanding our presence in key growth areas, with the view to deliver sustained value to all stakeholders. Coming year, we want to simplify our segmental revenue reporting as our business primarily is divided into 3 categories: licensing business, distribution Business and enterprise Business, which is part of distribution. Now I hand it over the floor to Mr. Abhijit Kanvinde, who will take you through the financial highlights of the quarter and full year.

Thank you, sir, and good afternoon to you all. I will share the highlights of our consolidated financial performance. After which, we will open the floor for questions. Our financials are reported as per Ind AS guidelines. Looking at consolidated Q4 FY '24 results, the company reported total income of INR 320.44 crores, declining 20.48% year-on-year, relatively muted sales in enterprise business segment offset the growth in FMSG. However, we are seeing continued demand for several key brands like Samsung, Cooler Master, Honeywell, amongst others. In terms of segment performance during the quarter, the FMSG segment accounted for 24.69% of revenue. FMCT accounted for 18.98% of revenue and enterprise business comprised of 56.31% of revenue. The quarterly EBITDA stood at INR 28.05 crores and it was, again, INR 11.49 crores in the previous corresponding period, an increase of 144.05% year-on-year. EBITDA margin for this quarter stood at 8.75% higher by 590 basis points as compared to the corresponding quarter last year. Operational efficiencies and the higher contribution from Honeywell helped us improving the margin. The PAT for the quarter is INR 20.36 crores as compared to INR 6.45 crores in Q4 FY '23, an year-on-year growth of 215.55%. During the quarter, we undertook a slump sale of our Ckart division for a consideration of INR 10 crores, the company earned a profit of INR 9.9 crores on this transaction, which is included in the other income for this quarter. The EPS for the quarter is [ INR 15.11 ]. Looking at the consolidated full year results. The company's total income for FY '24 stood at INR 1740.91 crores, growing 24.15% year-on-year. This was mainly driven by healthy demand for the products like Samsung, Cooler Master, Honeywell ViewSonic and complemented by the growth in retail sector. EBITDA stood at -- EBITDA for FY '24 stood at INR 69.22 crores as against INR 45.12 crores in the previous corresponding period, an increase of 53.42% year-on-year. EBITDA margins for this year stood at 3.98%. Better operational efficiencies, coupled with high contribution from Honeywell helped improve in [ growth ] and in margins. The PAT for FY '24 came in at INR 48.25 crores as compared to INR 27.25 crores in the FY '23 year-on-year growth of -- and it is a year-over-year growth of 77.08%. EPS for FY '24 is [ INR 32.58 ]. The Board of Directors has recommended a dividend of INR 0.50 of face value of INR 10, and this is subject to approval from shareholders. This is all from our side. We can now open the floor for questions.

[Operator Instructions] The first question is from the line of [ Deepa Shah ], an Individual Investor.

Congratulations on good set of numbers. I just wanted to check for if we have any new tie-up on pipeline for the coming years?

Mrs. Shah, usually, we are always evaluating brand and products continuously around the year. And the process at least takes 3 to 4 months before you can sign a brand. So that's a whole year round process. Currently, also, we are talking to a couple of brands in the terms of trade and if all under conditions, both parties like then we will go ahead with that.

So do we have any -- like any specific target in mind that every year we need to add X number of brands to our portfolio?

So usually every year, we get an opportunity to add 2 to 3 brands to our portfolio. And the brand selection also has a couple of our internal criteria, whether it's an experiential brand, whether it has a good amount of sale in the country where it is present, whether they will have manpower years, all that kind of criteria are there, which we do. Usually, our thought is because we are in technology business and technology gets obsolete every 2 to 3 years. Our thought process is that our business from new age products should be at least 30% to 35% on a rotation basis. So whenever a product becomes -- brand becomes 3 years old, we put it into old brand bucket. So if that brand is giving INR 100 business, then we'll have to have INR 30 or 30% business coming from a new brand. So that's what is the internal criteria we follow.

Okay. So, sir, coming to the marketing of these brands. So is that marketing done by Creative in-house? And what is the like percentage in terms of expenses? In terms of revenue? Or is it done by brands themselves?

So 2 things are there on the money paid by the brand through us, because a lot of brands are not present in India. So they use the partner in India to pay for the marketing. That's the first point. Second, certain brands, for example, Samsung would have their own marketing and they won't require somebody like us to market that. And certain brands like Cricut, which is an experiential printer, which can cut, emboss, print, write on a variety of surfaces. That kind of a brand when it comes here, they usually have a brand strategy, which they want us to execute and our internal team executes that. Sometimes the brand has their own marketing agency and PR agency to build that up, so they do the top line execution, and we do the below-the-line execution in terms of going to the market, road shows and other part, that's the case. But except Honeywell, none of the other brands, we pay anything from our pocket for marketing.

Noted, sir. And just one last question with regards to Ckart. So like we have sold Ckart, so what was the specific reason of that? And how much percentage of a revenue loss can we expect from that in the coming year? And how will this affect -- basically how does it going to affect our financials?

Okay. So 2, 3 things are there. First and foremost, we will not have any revenue loss because Ckart was moreover go-to-market engine where we used to use it for people to order directly on our site. We have before selling of Ckart, we already have another software in place, which can help us to take orders from customers, which can help our field team to go to the market and take orders that's already in place. The major reason for Ckart was that marketplace was a big opportunity and a B2B marketplace definitely had a lot of traction. But the success metrics of a B2B marketplace and a success metric of a physical brand and distribution company is very different. The investors primarily in our company who like physical business, they are really wanting good PAT, goodwill rotation, good EBITDA, that's the case. If we have to build the Ckart business, it is all about lifetime value of customer, cost of acquisition of our customers, it is about earning a lot of money to get these customers, and we were in a dilemma, but then we decided that we -- our balance sheet can't afford burning money for the business. And we already have Honewell and Cyberpower, both are high-margin businesses. And we would not be able to devote time nor we had the resources to scale it up. And as you know, right, any opportunity if you don't exploit it in a particular period of time, then that opportunity will cease to exist. We've got a good offer, and we felt that let's do that. That's the reason. But again, reiterating, in terms of our revenue or profitability, there would be no loss in that space.

[Operator Instructions] The next question is from the line of Deepak Poddar from Sapphire Capital.

Yes, am I audible, sir?

Yes, [indiscernible] you are audible.

First of all, I just wanted to understand now this INR 10 crores of other income was due to this sale of Ckart division. But still, I think we reported other income of about INR 15 crores, INR 15.5 crores around. So what is the other INR 5 crores?

Okay. That is -- I take this.

[indiscernible], Abhijit will take this question.

So normally, if you say, without total other income for this quarter was [ INR 16.9 crores ], out of that INR 10 crores was Ckart. So rest of it was -- the major items were foreign exchange gains, that was INR 4.5 crores and there was some [ FD ] that was around INR 22 lakhs, okay? And we have some [indiscernible] drawback which was around INR 97 lakhs. So export incentive was INR 97 lakhs, gain on transaction INR 4.5 crores and rest to other interest and other income.

Correct. So majority about INR 14.5 crores is due to Ckart and foreign exchange gain rate?

INR 4.5 crores, not INR 14 crores.

No. So I included the Ckart as well.

Yes.

And this foreign exchange gain actually is [indiscernible], but the case is that when you import any consignment custom levies 1% charge. So you have to calculate the dollar 1% higher. But when you remit, it is 1% lower actually. So that's why due to statutory, we have to put it into foreign exchange gain, actually, it's a part of cost of goods only.

Yes. it is a part of cost of goods, but as per Ind AS you have to report that way.

I got it. I got it. Understood. Understood it. And when you spoke about so many brands that we have tied up recently in terms of equipments and many more we are looking at, so how do we see the growth, if I have to look at next 2 to 3 years?

Okay. So currently, what has happened is after the Make In India initiative by our government, a lot of Indian brands are coming up, right? So for example, there's a brand called Holoware. It's commercial PCs, which compete with the likes of HP, Dell and Lenovo. It's a product, which is made in India, 54% of the PC components are now made in India. Now these are the technology companies, who have this opportunity, and they are looking at somebody who has all-India reach, who can help them scale, take to the market. So one is that, that kind of brands are coming to us for that. So for example, 2 companies Palred, which was a predominantly online company, now wants to enter off-line and they approached us and Holoware that us, too. Now looking at some brands like Cricut, Ruark, these are world over demographics is in India's favor, right? 75% of our population is millennials. The China Plus One strategy. So the deglobalisation, right. That's also in our favor. So all these brands really want to enter India. And most of these brands are premium and are looking at -- giving a great experience to consumers, because the millennials, they value life experiences more than anything else, right? And these kind of brands then kind of want to enter India. These are all new age brands, always connected devices to the Internet, and they help today's consumer to either consume content or create content or share content and be a part of that community. So that kind of brands opportunity is coming.

Correct. Correct. But also given this new opportunities, so what sort of growth we are looking at for us over next 2 years, maybe some CAGR growth?

So Mr. Poddar, mainly, we have 2 businesses. One is the market entry business getting brands to India. And second is our licensing business, which is Honeywell business. And we see that there's a huge opportunity that every -- and that's our aspiration that every year, we can grow by at least 25%, 30%. And our aspiration is that every year, we at least for the next 4, 5 years kind of increase our PAT by 40% to 50%. That's the aspiration.

Next 4 to 5 years top line by about 25% to 30% and bottom line by about 40% to 50%, right?

Yes.

Okay. That's very clear. And just one last thing. What's the margin differential in licensing versus distribution? I presume the licensing would have much higher margin rate.

Yes. So licensing, usually, the gross margin is close to 35%, 36%. And in the distribution space, it varies from 7% to 10%, depending upon the mix of the products that point of time, which sells that's the tale. But both businesses cannot live without each other, because distribution business really amortizes the cost, increases our visibility, gets our foot in door and also helps us to see the market trend, that's the case. So on the back of distribution business, if you can build a good licensing business, it's a great opportunity. So we at Honeywell until now, now we have also the CyberpowerPC, it's a U.S. #1 esports gaming PC brand, which is come here. And they sell online and they sell through Amazon and they sell through Best Buy and similar channels are available here, and we have just tied up with them and that business. So that will be our second brand in licensing. So that's the aspiration that once Honeywell grows to the threshold of, say, INR 270 crores to INR 280 crores, then you would have one more licensing brand. That's the aspiration.

Correct. Correct. And what would be our revenue mix in licensing versus distribution right now?

Currently, it is -- so we did 17%, 50%, right? Roughly say, license is close to 11% to 12% of our business, aspiration is slowly take the licensing business to close to 25% to 30% in the next 2 to 3 years.

Next 2 to 3 years. And that is what will drive your PAT, right? I mean top line growth is 25%, 30%, your margin has to increase.

Correct. And we are quite confident on that, because now we have a grip on launching products and air purifier category, we have seen a good amount of traction there, in the home audio segment, especially the soundbars also, we are seeing a good traction. And now we also have partners in remaining countries. The licensing business is not just for India, it is for 38 countries. So now already, we are present in some other countries also. So we are already in Middle East, we are already in Indonesia, we are already in Singapore. So that also is going to help us to grow the business overall.

[Operator Instructions] The next question is from the line of Jyoti Singh from Arihant Capital.

Sir, I just wanted to confirm that top line, we have guided to 20%, 25% growth and bottom line, we are expecting 40%, 45% growth.

Yes, that's our aspiration.

Aspiration. It's not the guidance.

Estimation.

Yes, estimation. And sir, just wanted to understand this new brand that was supported by the government made of India -- made in India, how does this opportunity we are thinking going ahead in the next 3 to 4 years?

So government also after Make in India has its own buying portal called GeM, Government e Marketplace, right? Last year, a business of total INR 3 lakh crores happened on that platform. And Electronics also is a key part of that space. Now on that platform, you can't have products listed, which are from where your borders touch. You can't have any products from neighboring nations where your borders touch. So that's a great opportunity for Indian brands to really, really grow in that segment. And because of the PLI also, a lot of brands will grow. So the opportunity is huge. It depends upon our manufacturers and brands really scale up.

Okay. And sir, on this other segment that we have Honeywell is our biggest client, so any other in the pipeline or in active discussion we are expecting?

So currently, we had Honeywell, now we have Cyberpower. So currently, these are the 2 only, which are there on the plate in the licensing space.

Okay. So any other big brand that we are expecting or in active discussion, sir?

No. In the licensing space, no. In the distribution space, yes, but in the licensing space, no. So you asked something like Honeywell, Honeywell is our license brand. So nothing on the licensing space currently.

The next question is from the line of Pooja Thakkar from Seven Island PMS.

Sir, I have 1 question. Creative has recently signed a brand licensing agreement with Cyberpower, Inc for gaming computers. So what kind of opportunity with respect to this gaming computer you foresee in India?

Yes. As I mentioned previously, right, India's millennial population is 75% of our population is less than 35 years of age. And they prefer a lot of online interaction, they'll prefer a lot of -- they play also a lot of games where a large community playing a game, right? And they play games with people whom they don't know also. The company we tied up is -- has almost market share, along with them, there's another company called iBUYPOWER. So they together have given the license for India. Both put together, they have a 66% market share. And both put together do almost a business of $1 billion. Coming to data, IDC says that the gaming overall is growing at pace of 23%, 24%, the esports gaming and esports gaming is also now part of Asian games also. So it's a huge opportunity. Second, we have the first mover advantage today. If anybody wants to buy a gaming PC, there is no one website, which will come to your mind, right? And the website, which are there also, they don't have their configurators where you could configure your PC right from scratch. They don't have frames calculator because that's very important aspect for games. Plus, you also require partnerships to come from NVIDA, Intel, Microsoft, AMD. So with our partner, all these partnerships also come on a platter, plus they are our tech partners. So they've been in this business for 25 years. So how to build a great website, how to sell on a website, all that also they bring to the platter. What we bring to them is the on-ground logistics, the know-how of the Indian market. And we have picked up the best team from the industry who have been in that business. And I think we will be by 22nd of this month for that side will also go live. So by the next quarter, we'll be able to tell you that how we are tracking on that.

The next question is from the line of Rohan Patel from Turtle Capital.

Sir, am I audible?

Yes, Mr. Rohan, you are audible. What's your company's name? Turtle Capital, right?

Yes. Yes. How big is Honeywell opportunity for us at this moment, like it's a big brand, it is mass brand? So can we expect that Honeywell can be a INR 5 crore -- INR 500 crores business for us in 5 to 6 years?

Yes, definitely, that's our aspiration that the Honeywell business should become a INR 500 crore business in the next 2 to 3 years. And I will tell you why because if you see overall, in the categories we have, right, in the Honeywell space, we are in the air purifier category. Air purifier almost is a large opportunity. I said in my opening remarks that it is like how air conditioners where there 30 years ago, right? Last year, 1 crores air conditioners just sold in India. So it's a multi-decadal opportunity in air purifier. And if air purifier does well also it could be close to that. Second category is Honeywell Passive business. So Honeywell Passive is our networking cable business. And if you see Indian counterparts also, they would do around INR 800 crores, INR 900 crores, just one brand is doing INR 800 crores to INR 900 crores in that classic business, right, plus we have audio, audio is again INR 2 billion to INR 3 billion -- means INR 25 crores -- INR 25,000 crore opportunity for that. In the audio space, Honeywell brand [indiscernible] is not so great. But I'm sure that the opportunity is so huge that we can really make some dent with the Honeywell space. So looking at all this, if we get great products, and if we get the right skill set, we can do very well, plus we just don't have India as an opportunity. We have another 38 countries also as an opportunity. So yes, that's why we aspire that we should do INR 500 crores in Honeywell.

Talking about Cyberpower. So have we started the manufacturing of CyberpowerPC?

Yes. So I just say we will not be manufacturing, we'll be assembling the PCs. And so basically, it is that you go on a website, you decide what's your budget, what kind of a PC you want to buy and then you start picking up products, cabinet, power supply, mother board, a cooler, hard drive or memory, the type of monitors, the type of keyboard, the type of mouse, all that. And it also keeps telling you what will be the performance of that PC. And then once you order it, your custom-made PCs then assembled in a small factory and then it is shipped to you directly. And plus, you get a 3-year warranty, 5-year warranty, you get on-site warranty, all that you get with that.

Okay. See, I understand the India is dominated by millennials and young folks, but still the gaming culture in India is at a nascent stage. It is not that much big as it's in the U.S. or it's in China. So what steps are you taking with Cyberpower to increase the penetration or creating a gaming ecosystem?

So Rohan, so what is the gaming PC basically? So there's a big creator community also, right? Your first -- so your consumer has 3 avatars, right? The first consumer avatar is young millennials, who want to play games, right? That is the first avatar. The second avatar is the creators' community. So people who do animation, people who create -- do ad films, do products, they require a high-performance PC component, right? So your is somebody who requires to do stock trading, he requires faster desktops for HFT trading. Somebody in mining of crypto, right? So all this requires high-performance computer components. Gaming is the fastest and it has the best computer components. Today, with boom of AI, right, all this machine because it has NVIDA graphic card, all these machines can go to build a large LLM network. So that also is a part of that. So gaming, as you see, so core component in the creator community, the core component in crypto or high frequency trading or everywhere else would remain the same. So it's a very huge, huge opportunity in that space. Second, we already have the ecosystem, because we do a brand called Razer, which is an Apple of gaming, we do a brand call Cooler Master, it's also a big brand for us. So we really are very gung ho. And we have seen in Cooler Master also. So many of our power supplies are not bought by PMS, but are bought by server company, so many power supplies goes into people who are making their own servers for data centers and other stuff. So there's a huge opportunity in that space.

End consumer is well diverse in CyberpowerPC.

Yes.

And another question, how much will CyberpowerPC will add into your top lines in next 3, 4 years? Like it will take some time to create a market, so...

Correct. correct. So when we went on the drawing board, our aspiration, too, was to do in 5 years, close to $80 million to $100 million in that space. But we are still learning. And you know, right, India is a very different market from elsewhere. So I'll be able to better answer you in a couple of quarters' time. Second, it's part of our subsidiary, and I don't run that business. There is a gentleman Vishal Parekh, who runs that business. So over a period of time, we will be able to give a better idea. And let us launch this 22nd May and then we will see how it goes.

Okay. And just 1 last question. So as of FY'24, how much is contribution of Honeywell?

This year, means '24, '25?

'25, '26.

Current year is 12%. So INR 180 crores in.

INR 170 crores.

INR 170 crores in a total business of...

INR 1,713 crores.

Yes. So around INR 1,700 crores, 10%.

10%. Okay. Okay. And how much it was in FY '23? Just absolute number would be fine.

It was -- we were doing last -- '23, we did INR 1,375 crores, I mean, INR 1,375 crores, it was INR 80 crores.

INR 80 crores.

So it was almost 5%. 5.8%, 5.9%.

[Operator Instructions] The next question is from the line of Akash Jain from GT Financial Services. Our next question is from the line of [indiscernible], an Individual Investor.

So sir, I have a few questions -- am I audible?

Yes, yes. Mr. [indiscernible] you're very audible.

I just wanted to understand a bit, is there any new market or the region that the company is targeting for expansion?

Currently, no. Currently, because we have 38 countries, we want to first consol and establish that and go further for Honeywell. So out of 38 countries, still, we have reached 12 countries, 12, 13 countries. So we want to build that and go further.

Okay, okay. And how do you plan to increase that in the existing market?

So usually, if you take a manpower in that country, so currently in Middle East, we have the Middle East Sales Director, we have GCC sales Director, we have the passive components sales guy plus we have marketing team there. So then this team, once we have that in place, then we will get distributors in place. We check whether all certifications to launch product in that country is there and then take it further. So for Middle East, all of our certifications are in place, all of our manpower in place. Similarly for Singapore. So Singapore is a smaller market from -- but if you want to go to Southeast Asia, it's a very strategic market. So in Singapore, we have [ Christina ] who is our Director of Southeast Asia. Under her leadership, we opened up Indonesia, Thailand. Now this Malaysia is opened up, Singapore is opened up. So that's the plan. Then we've also seen that continue, countries which have a higher population we want to go there. And then Egypt and Turkey and South Africa, these countries then really pop up, Saudi Arabia pops up. We have a person in Saudi Arabia also. But Egypt and Turkey, there is a huge problem in terms of exchange. So if we get the right partner who is ready to pay cash, pick up the material on their own books and we will go there. Egypt, anyhow we just started, we picked up order in Egypt Amazon also. And as for building a consumer brand, nowadays, for sure, you will build the brand online, right? You require a number of reviews, you require a number of glance use, then the brand gets build. So we have spent a lot of time on Amazon currently to see most of our product, air purifier, more than 3,000 BUs, suppressors more than 3,000 BUs, audio we are building that space. Once that review starts following in, then you will have good traction in the coming times. So as we get the right skill set in terms of manpower and if we get -- our certification is almost done, but in certain spaces, it is that -- those are the certification, then you have to transfer the certification on the distributor. So as we get the right distributors, we will go ahead.

Okay, got it. And sir, are we [indiscernible] any technology to stay competitive in terms of cost cutting?

Currently, so whatever we can do in our space, like having the right ERP software, having the right system and processes, having the right website builders, having the right sales management tools, all that is in space. AI, as of now, only like how a KG student uses, so to generate your content for your social media, to generate your content for dealer postings all that, that our marketing team does that. But on the -- are we doing anything on the cusp of cutting-edge technology in terms of our system processes and cost cutting, currently no.

Okay. Okay. Got it. Got it. And sir, one last question. What is your outlook for the next quarter and the next full fiscal year? Are there any strategic milestone or targets you aim to achieve?

So as I answered in my previous question also, every year, we want to grow our top line by 25% to 30% and bottom line the same, around 40% to 50%. So that's what is kind of -- we are looking at.

The next question is from the line of Jyoti Singh from Arihant Capital.

Sir, my question is on the margin side. What are the expectations going forward?

I'll ask Abhijit to take that question.

So overall margins in distribution business, as Ketan mentioned, is in the range of 8% to 10% and overall margin in -- I'm talking about gross margins and overall margins in Honeywell business is in the range of 34% to 38%. Enterprise business also gives us a margin in the range of 1.5% to 2%, now that has been the gross margin. So always, this is a blend of these 3 businesses. As you are aware, as and when we will increase contribution of Honeywell business, then our margin structure would improve. Today we are at PAT margins -- at consol level of 2.36%. I'm removing the extraordinary after tax profit of Ckart. So we are at 2.36% almost. I reassure that going forward, in the coming years, our aspiration is to grow Honeywell. And if that happens, and we are working very hard towards that, if that happens when within 2, 3 years, the PAT margin, we look in the range of 4.5% to 5.5%, 6%, that's our [indiscernible].

So just wanted to understand this 1.5% to 2% for which segment?

That's the enterprise business segment. So usually, my business, it would be futile to look at the gross profit margin basis. We have an internal ROCE, we usually look at any business, it gives us 20%.

Today, ROCE, is at around 23% for the company.

So if anything which can give us a ROCE about 20% is a good business.

So these are guidance on the gross margin side, not on the EBITDA margin side.

No.

So what are expectation on the EBITDA margin side, sir. I think 7% to 8% that we have estimated.

Today, yes, we would like to move from 4.5%, 5% to almost 8%, that's 8% to 9%, that's the [indiscernible].

[Operator Instructions] The next question is from the line of Manoj, an individual investor.

Am I audible?

Yes, Manoj, you're audible.

First of all, congratulations on a wonderful set of numbers. So just wanted to ask that if we exclude the other income from the sale of the Ckart, our profit margin will be lower. So like what levels of EBITDA margin can be considered sustainable?

So clearly, Manoj, as I said, okay, we have -- at a consol level, we have reported a PAT margin of 2.82%, if you remove -- and an EBITDA margin of 4%. If you remove post tax effect of the profit generated from the Ckart, your margin as a percentage, consol margin as a percentage goes to 2.36%, okay? And EBITDA would not fall so drastically. So it will be around 3.6%, 3.7%. So my point there is we are aspiring to go -- take this EBITDA to almost 7%, 8%, 8% or more and PAT from 2.36% level to 4.5%, 5%, yes. This has been the aspiration. So what do you have to remove is this INR 7.71 crores from the EBITDA impact, yes, to get the figure.

All right. Fair enough. Sir, just my last question was about the -- basically the motive behind the share swap agreement to increase our stake in the Secure Connection Limited, if you can answer that, that will be great.

So in Secure Connection, we had an early investor in that space. And when we do consol, obviously, the minority share would go out, right? And it was not adding any value to him, plus it was not a tangible holding for him that was the case.

See basically, in a closely held company or a private limited company, what happens is if it is not listed, then exit to be given for a shareholder is very difficult. You will appreciate, right? So this person saw an opportunity, and he got, I think, 2, 2.5x his investment overall in 4, 4.5 years. He saw an opportunity -- please appreciate, our entire Honeywell business, okay, which is profitable business, [indiscernible] wherein our subsidiary, Secure Connections Limited Hong Kong, yes? So any improvement in the holding by Creative Newtech Limited will flow more money to the consolidation and ultimately to the shareholders. Do you agree?

Yes.

So what we have done is we've taken our investment, in phases, we have done it in 3 tranches, it has been 2 tranches, it was a herculean task to convince investors, existing investors, and we did it in 2 tranches. So from 52.5%, we took it to 77.5%, I think. So now there are only 2 shareholders. One is [indiscernible] and Mohit Anand.

The next follow-up question is from the line of Akash Jain from GT Financial Services.

Am I audible?

Yes, Akash, you're audible.

Sir, even though our other income increased because of sale of Ckart, but our overall total income for the quarter fell by around 28%. So what was the reason for the same?

You are talking about the top line?

Yes, sir, I mean the total income, right?

When you say income, is it the turnover or the profit?

Total income has 2 components. One, the sales -- revenue from operations and another is other income. So the growth in revenue, okay, has been on, I'm talking consol numbers, growth in revenues from operating has been from INR 1,376 crores to INR 1,713 crores, all right? The other income, obviously, has grown from INR 9.49 crores to INR 23.28 crores. If you lock up almost INR 10 crores of that, okay, then your other income becomes INR 9.49 crores here, and it is 10-point something, INR 10.28 crores, almost, yes. What has fallen in the other income from operations, if you care to look at, is the export incentive, income from export incentive, last year, there was income on export incentive of INR 16.53 crores. This year, this is INR 7.5 lakhs -- sorry, INR 7.5 crores, I beg your pardon, INR 16.53 crores to INR 7.5 crores. Why has it fallen in spite of increase in our turnover of enterprise business in exports. The reason being that there is a change in the incentive calculation structure. It is now ad valorem and earlier it was calculated on a per piece basis. So I -- if I export something, I used have to get the per piece export incentive. So in ad valorem, we know the rates are lower and therefore, the calculation of incentive has gone down for us. So have I answered your question?

Yes, sir. And what led to a significant drop in the revenues for EB?

So EB is very opportunistic business. If we don't make ROCE of 20%, then we will not do that business because capital is limited and we want to put that capital on high-margin business. In the month of -- on [ JFM ], overall traction on the EB business was lower and we could not make the ROCE, so we did not go for that business. That's the only case. And overall, because that business is between 1.5% to 2% gross margin, we only do it when it's an opportunistic business.

Okay. And sir, my last question is that it seems that pTron, pTron seems like a high volume and low margin brand.

Correct.

So I mean what impact will there be on our revenue and margins?

So committed margin with pTron, we have already double digit, it's between 10% and 12%. It's an online-only brand. They want to get into the channel. And they are Indian company. So the supply chain overall is much shorter. So we think in pTron, our ROCE will be close to 32%, 33%. So it's a good business to be in, if we can do higher volumes. So we feel in pTron, for the first year, if we can do INR 30 crores and the next year INR 100 crores, it is a good business to the be in.

Absolutely. Absolutely. And we just started with pTron. It takes time to settle down. But this is our aspiration.

Ladies and gentlemen, we will take this as a last question. I now hand the conference over to Mr. Ketan Patel, Chairman and Managing Director of Creative Newtech Limited for closing comments.

Thank you, everyone, once again for your participation in our quarter 4 and FY '24 earnings call. In case of any further queries, you may get in touch with the Adfactors PR or feel free to get in touch with us. We look forward to interacting with you in the next quarter. Thank you so much.

Thank you very much. Thank you.

Thank you, on behalf of Creative Newtech Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.