Kaya Limited (KAYS) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Kaya Q1 FY '26 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Sachin Bobade from Dolat Capital. Thank you, and over to you, sir.

Thank you, Vishaka. On behalf of Dolat Capital, I welcome you all to the Q1 FY '26 Earnings Conference of Kaya Limited. Hope you all and your family members are staying safe and healthy. From the management side, we have with us Mr. Rajiv Suri, Global Chief Executive Officer; and Mr. Arihant Dhariwal, Chief Financial Officer. Now I hand the floor to the management for their opening remarks, and then we would have question-and-answer session. Over to you, sir.

Thank you. Good evening. I would like to welcome you to the conference call on company's behalf. The investor presentation has been uploaded on the stock exchanges and contains the financials, key metrics and business updates. I hope you have had a chance to go through it. Let me begin the conference call with the highlights of quarter 1 performance. Our clinic business registered a 7% collection growth over quarter 1 FY '25. Clinic product business witnessed an 11% growth versus quarter 1 FY '25, mainly driven by categories like Bath & Body, Nutraceuticals and Sun Care. Services business registered collection growth of 6% over quarter 1 FY '25, mainly driven by categories like Acne & Scars, Hair care, and Anti-aging, Hair free and Brightening and Pigmentation. Hair care and Brightening and Pigmentation also maintained a healthy growth of 20% and 13% respectively. Our NPS scores continue to trend higher in quarter 1 FY '26 at 90, reflecting Kaya's great customer experience. A quick update on other initiatives. On expansion, Kaya launched 2 new clinics in quarter 1, Yelahanka in Bangalore and Starling Mall in Noida. Yelahanka clinic was inaugurated by Kannada film star Sapthami Gowda, a leading celebrity in South. It is the 12th clinic in Bangalore, enjoying a 5-star Google rating. Starling Mall Clinic was inaugurated by Shalini Passi, an A-list celebrity based in Delhi. The clinic is also enjoying a 5-star Google rating. On our brand refresh program to uplift customer experience and outcome we invested in 31 new dermatology machines in Anti-aging, Brightening and Pigmentation, Acne, Hair care, Body and Laser Hair Reduction in quarter 1 FY '26. Innovation remains core to our business and performed strongly, new product development contributes to 5% of the clinic collections. New service development contributed to 6% of Kaya India clinic collections, use of marketing automation, including WhatsApp bot and Web bot helped improve customer experience. The chatbots enable a seamless customer journey for appointments and clinic information. With regards to our Kaya Smiles Loyalty Program, Kaya Smiles contributed more than 90% of Kaya clinics collections in quarter 1 FY '26. We focus on experiential marketing for our Kaya Smiles platinum and Kaya Smiles gold elite based by giving free services, which helped us grow collections. On the financial performance, revenue from operations at a stand-alone level is INR 52.8 crores for quarter 1 FY '26, a growth of 1% over the corresponding quarter 1 FY '25. Stand-alone loss after tax and other comprehensive income for quarter 1 FY '26 was negative INR 14.2 crores as compared to after-tax profit of INR 6.4 crores over corresponding quarter Q1 FY '25, which included a onetime gain of INR 15.8 crores for reversal of impairment on investment and sale of intellectual property. The detailed financial information update is already with you in the uploaded investor presentation, and you may refer to that for additional information on the performance. I now open the session for questions and my colleagues and I will be glad to answer it.

[Operator Instructions] The first question is from the line of Rehan Saiyyed from Trinetra Asset Managers.

I have 2 questions mainly on the P&L side. First is given that net employee benefit has risen to over [indiscernible].

Sorry, Rehan, your voice is not clear.

Okay. So first question is on the employee benefit side. So your employee benefit has risen to over 16 to 24 lakh this quarter. Can you help us -- are there some additional drivers of this increase is just leading to clinic expansion, wage inflation or higher productivity incentives?

Sorry, your voice is cracking.

Do I mention my question again, Sir?

Yes. And I understood that you're asking some increase on the employee benefit cost in the P&L.

Yes. [indiscernible] expansion due to inflation or higher productivity [indiscernible].

Yes, I will answer your question on that. What is the second question?

My second question is, sir, on the standalone assuming the consumable cost is still higher at [ 88 lakhs ]. Are there any ongoing initiatives to increase procured efficiency or optimize inventory without affecting service quality? Just put some light on that.

Yes, I understood both of the question. Yes. So I'll answer your first question. So with respect to increase in employee benefit expenses, there are 2 or 3 factors by which the cost has increased. One is there is a factor of increment as compared to last year. And also, yes, a bit of productivity has increased and there was some contest, which was been run along with the new clinics, which have been part of the employee benefit cost. That's the reason why the employee benefit cost has increased as compared to last year. With respect to consumables, our market mix has changed a bit. Our body contouring, our acne scars, anti-aging categories have grown a bit as compared to last year, where the consumers are a bit higher, and that is the reason of increasing consumable cost.

Okay. Okay, sir. And sir, last if you can allow one more question on the estimate markets [indiscernible].

Sorry to interrupt you, Rehan sir. I will request you to come back in the queue for the follow-up question. The next question is from the line of Madhur Rathi from Counter Cyclical Investments.

I'm trying to understand, in our last quarter, you mentioned that our clinic level EBITDA is 26%, 27%, but most of that goes away into corporate cost and marketing cost. Sir, I'm trying to understand what is our utilization level currently? And sir, a steady-state utilization, how much of this 26%, 27% should flow to our operating margins?

Utilization of what?

Of our clinic, sir like based on if it's like -- so is there a particular [indiscernible]?

Yes. So there is potential to increase the utilization without adding any extra cost. And that is what we are working on to improve the profitability of the business and we are investing in marketing for customer acquisition. So the infrastructure is there and the people are there and the utilization gap of the clinics remains more so during the weekdays and less so during the weekends when they are quite busy and therefore to improve profitability, we are working to improve the customer count and once we do that, it will come at no extra cost and flow directly to the bottom line.

Sir, can you give me a number about how much would be our utilization level currently?

We don't disclose that information in public domain. Should you like to have a person to person call, we can have that later on because it also varies significantly from clinic to clinic.

Okay, sir. Got it. Sir, next question was, sir, in our investor presentation, you have mentioned that the investment should grow at 13% over the next 5 years. And similarly, in your annual report, you have shown that it has grown by 13%, 14%, but we haven't been able to grow. Sir if I consider Kaya over the next 5 years, can we expect at least to grow at a rate that is faster than this industry level of 13%, 14%?

The management will be doing its best in order to improve the percentage of growth from what our current growth is 7%, 8% in quarter 1 and we are taking several initiatives. Like I mentioned, we are making extra investment in marketing and contribution. So we can try to get the growth from existing clinics without increasing costs further, so it flows to the bottom line. We are also as you may have heard started our expansion program. We believe that, that also will help us increase the top line without increasing the head office costs, and we can leverage the extra cost which should also help the profitability. So we believe that a combination of better utilization of our infrastructure and new clinics should help us improve the percentage of growth.

Got it. Sir, how are we measuring our...