KDDL Limited (532054) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to KDDL Limited Q3 FY '20 Earnings Conference Call. This conference call may contain forward-looking statements about the company, which are based on beliefs, opinions and expectations of the company as on the date of this call. These statements are not the guarantees of future performance and involves risk and uncertainties that are difficult to predict. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Yasho Saboo, CEO, for his opening remarks. Thank you, and over to you, sir.

Thank you, and good afternoon, and welcome, everybody, for our Q3 and 9-Month FY '20 Earnings Conference Call. I am joined by Mr. Sanjeev Masown, CFO of KDDL; and SGA, our Investor Relations advisers. Mr. Raja Sekhar, CFO of Ethos, is away on a study program, but he will be joining us on phone. I hope everyone has gone through our updated investor presentation meanwhile. Let me start with the consolidated numbers. Consolidated revenue for Q3 FY '20 rose by 18.7% year-on-year to INR 203.7 crores. For the 9-month period, it grew by 8.5% to INR 515 crores. Consolidated gross profit for both Q3 and the 9-month period FY '20 was up by 9.8% to INR 79 crores and INR 215.5 crores, respectively. Consolidated EBITDA for Q3 FY '20 was up by 6.7% to INR 26 crores and for 9 months, it was up by 21.9% to INR 62 crores. Please remember that the growth in EBITDA is significantly impacted due to changes in accounting standards with the applicability of Ind AS 116 standards. These new norms has impacted the accounting for other expenses, depreciation and finance costs for the company. As a result, the consolidated adjusted EBITDA on like-to-like basis for 9 months FY '20 has de-grown by 28% to INR 36.5 crores. This is mainly on account of higher other expenses due to new store openings in our retail business. Consolidated PBT for Q3 FY '20 and 9 months FY '20 stood at INR 8.1 crores and INR 10.1 crores, respectively. I will now discuss the business-wise updates. Our manufacturing business performance was lower compared to the previous quarter. There was a decline in revenue and operating expenses were relatively higher. A change in revenue mix was also weighing down the profitability of the business for the quarter. We have seen a continuous decline in Swiss watch business globally, especially in the segment of watches priced below CHF 3,000 or USD 3,000. Swiss watch exports for the year 2019 as a whole, in value terms, grew by only 2.6% as compared to 6.2% in 2018. So there's been a marked slowdown in the growth. More important, in the segment below CHF 3,000, there has been a marked decline. The lower-priced segment consists mainly of Quartz watches, which de-grew by 6.2%, while the segment of mechanical watches, which is mainly concentrated above the CHF 3,000 price point, it grew by 4.5%. The challenges in the Hong Kong market and slowdown in the Middle East are some of the important reasons, besides the impact of the smart watch, owing to which the watches in the lower-priced segments have de-grown. The decline of Swiss watches in the lower-priced segment is a trend witnessed for many quarters and is expected to continue for a bit longer. We have been conscious of these market developments and have accordingly moved up the value chain, reducing our dependence on lower price point watches. The encouraging part for us was that the domestic market continues to witness traction and is growing. We are strengthening our position there. In the last few weeks, the coronavirus threat has been impacting this business. This will have a significant impact on the Swiss exports in the immediate future as the markets of China and the Far East are very important for Swiss watches. Also, Chinese and Far East Asian travelers buy watches when they travel abroad. Therefore, this segment is likely to be impacted in the immediate future. However, it will also provide us additional opportunities to make important inroads into other customers who want -- who will want to derisk supplies from China. We believe this is going to be a very important opportunity for us after the immediate impact of the coronavirus wears out. Our manufacturing revenue for the quarter was recorded at INR 42 crores, similar to the levels recorded in corresponding quarter of last year. And for the 9-month period, it grew by 6.6% year-on-year to INR 140 crores. EBITDA [Audio Gap] FY '20 stood at INR 6.4 crores, down by 7% year-on-year, and EBITDA for 9 months stood at INR 23.7 crores, up by 2% year-on-year. EBITDA margins came in at 15.1% for quarter 3 as compared to 16.1% in quarter 3 of previous year, while EBITDA margins for the 9-month period was 17% in the current year versus 17.7% in the same period of last year. The marginal reduction in EBITDA is due to change in the revenue mix of different business segments. Profit after tax for Q3 for the current year stood at INR 1.6 crores and for 9 months at INR 8.6 crores. The watch components business witnessed a decline of 15% in Q3 over the revenue of the previous quarter. The 9-month period, however, the watch component business registered a growth of 5% over the previous year. This segment registered revenue of INR 30 crores in Q3 and INR 100 crores for the 9-month period of the current year. Precision engineering business, the revenue in Q3 FY '20 was INR 10.6 crores, higher by 17% compared to Q3 of last year. However, it declined by 12% if compared with Q2. The decline in revenue for the quarter was mainly due to economic slowdown in the domestic market across various segments, including automotive segment and electrical and electronics. We are continuously realigning the capabilities in line with the market expectations and developments. We are confident that our initiatives for improving operational efficiencies, realigning the product mix and strengthening of the teams will help in healthy growth and sustainable profits for the company. At Estima AG, the company that we acquired in Switzerland, we are witnessing a growth -- a good response from the new customers, and we expect to capture an additional market share in the European market for the mid- and high priced segment, which would otherwise prove impossible to capture working out of India. We continue to believe that the SWISS ORIGIN regulations will help us in growing our watch component business through Estima, and our presence in Switzerland will be a major stepping stone for capturing additional market share. I will now discuss our retailing business, Ethos. The domestic watch business picked up well in the third quarter on the back of a festive season buoyancy. Our strategy of offering the widest variety of watches to the Indian consumers at the best possible price is playing out well with stable gross profit margins and a steady growth in revenue. We believe the best consumer experiences backed by a strong digital marketing approach, trust and authenticity of our retail stores, our pan India presence, will continue to help us to outperform the competition and gain market share as indeed we have done in the current year too. It is heartening to see the response of brands to associate more readily with Ethos, the case in point being our takeover of existing boutiques of Omega and Rado in Jaipur, and also opening the first and only Hublot brand exclusive boutique on joint venture basis at Mumbai. We continue to build complementary verticals for our watch retailing business, the latest being the launch of a dedicated independent website for the sale of certified pre-owned watches which is fully supported by our state-of-the-art service center. Our goal is to make Ethos the customers' first and only choice for luxury watches. Exclusive brands or house brands are an important part of our strategy, and we are happy to report that our partnerships continue to gain immense traction. We have 15 brands on an exclusive basis across varying price points that help us to offer a differentiated buying experience to the end consumer with significantly higher margin for us. Over the last few years, we have focused mainly on the price segment between INR 50,000 and INR 5,00,000 for the exclusive brands. Recently, however, we have extended this strategy to higher-priced watches. This extension allows us to add newer brands to our portfolio and to cater to the super luxury segment which is the fastest-growing price segment globally and also in India. On the new stores front, with the addition of the Rado and Omega exclusive boutiques in Jaipur, our total store count is now 55. Both the new stores are approximately 400 square feet each. Let me give you some financial highlights for Ethos. Our billings for Q3 FY '20 grew by 20.7% year-on-year to INR 179 crores, while for the 9-month period, it grew by 6.6% to INR 420 crores. Billings of exclusive brands grew faster at 48% year-on-year to almost INR 40 crores in quarter 3. For the 9-month period, the growth was nearly 51% year-on-year to nearly INR 95 crores. Same-store growth for quarter 3 of FY '20 stood at around 7%. Exclusive brands contributed 22.1% to the Q3 top line and 22.6% to the 9-month period top line. Consolidated Ethos revenue for quarter 3 posted a strong growth of 23% year-on-year to INR 160 crores, while for the 9-month period, it was up 7.9% year-on-year to about INR 369 crores. Consolidated gross profit grew by 17.2% in Q3 and 11.5% in 9-month period year-on-year. Gross profit margins for Q3 stood at 28.5% as compared to 29.9% last year same quarter on account of slight increase in discounting, which happened due to an additional but very successful sales in quarter 3. For the 9-month period, it stood at 28.5%, an increase over 27.6% during the same period last year. Reported EBITDA for Q3 rose by 25% year-on-year and for the 9-month period by 58.6% year-on-year. As also mentioned previously, the EBITDA again reflect changes in accounting standards. Adjusted for Ind AS 116, consolidated EBITDA for 9-month de-grew by 19.3% year-on-year to INR 25.2 crores due to higher other expenses on account of the new flagship store openings. In this connection, I would like to stress on this a little bit more. As most of you are already informed, during the last 6 months, we have opened some very important flagship stores, which are the cornerstones of our new strategy. This includes the Kolkata store, the large flagship store in Hyderabad, the ultra-luxury collector's store at Chanakya Mall in Delhi as well as the luxury stores in Chanakya and in Pune. So collectively, these 5 or 6 flagship stores, which opened during the period June to around October, they have added a lot to the other expenses by way of rent, salaries, manpower cost and launch expenses. However, the full impact of their revenue is not being felt. I'm happy to report that in all these stores, we are seeing a huge traction and the entry of Ethos into price segments that we were not before. We are selling more in the luxury segment, and we are establishing in each of these cities, Ethos as the #1 retailer of premium and luxury watches. The adjusted EBITDA margins for the 9-month period stood at 6.8% compared to 9.1% in the previous year. Consolidated profit after tax in Q3 came in at INR 4.7 crores, while for the 9-month, it stood at INR 1.9 crores versus INR 12.2 crores in the same period last year. Stock carrying months at the end of December 31 is about 8.2 months. This is also higher than the previous year, mainly, again, on account of the fast-paced store rollout. As you understand, the stock in the new stores shows up in the overall stocking while the sales is still only for a few months and not the full year. We are very confident that over the next year, we will see the stock in terms of number of months go down to the original projected levels as the sales from these stores starts to kick in, which it already is. At Ethos, we remain buoyant on our strategy and expect to grow faster as the economy turns around, and we expect a more solid growth for the economy as a whole. I now welcome your questions and participation.

[Operator Instructions] The first question is from the line of [ Priyanka Singh from Atidhan Securities ].

I have few -- couple of questions. So how many stores are expected to be launched in the next quarter and subsequently in the next financial year?

Okay. Why don't you ask all your questions, I'll be able to answer them?

Sure, sure. And what is your CapEx plan for the next year for manufacturing as well as for the retail business? And has the supply situation of Rolex watches improved?

So CapEx for Ethos as well as for manufacturing?

Yes.

Okay. And the third question was, sorry? Let me just note it.

What is the supply situation for Rolex watches?

Okay. Let me answer all the 3 questions. I'll start with the shortest answer, which is the third one, the supply situation for Rolex. In the quarter 3, I can tell you that the supply situation with Rolex did improve, and that is one of the reasons why we achieved the fair same-store growth despite, obviously, overall macroeconomic situation and consumer sentiment [indiscernible]. So we are hoping that the improvement in the supply situation in Rolex will continue. I must tell you, however, that worldwide, Rolex demand has gone through the roof, and you know that we can't really take anything for granted. Given the fact that the markets in China will probably remain challenged for the next couple of months on account of coronavirus, I do believe that supply of Rolex watches to India should be actually much better than previous year. So that's on the Rolex situation. For the next year, in terms of new stores, we have basically planned 3 new stores. One of them is a flagship store which is at Mumbai at the new mall coming up in BKC. That is expected to be launched in the first quarter of next year. 2 other new stores, 1 in Bangalore and 1 in Delhi. Bangalore, in the area of Whitefield, where we've not been present, that is not a flagship store, it's an Ethos store. And similarly, a new geography in Delhi, where we are not present. It's a new mall, Vegas Mall. These are the 2 stores. They will also be launched in the first quarter of next fiscal. We have not planned any other store launch other than that. There is a mono-brand boutique of Omega, which we will launch at Palladium in Mumbai, probably in quarter 3. This is going to be the first and only boutique for Omega in Mumbai, and we are really looking forward to doing this. It's going to be very, very important for us. So these are 4 stores that we have planned in the next year. However, we have also planned about 4 closures of stores. In fact, there may be 5 closures of stores, mainly smaller stores where we do not see enough traction. As you know, we are -- our strategy is to go in for larger stores instead of smaller stores, and stores which do not fit in that plan and are approaching the end of the lease, we plan to close them. So overall, the store count is not going to go up. The -- your last question was CapEx for Ethos and for manufacturing. In manufacturing, overall across all the manufacturing businesses, we are looking at a CapEx of between INR 10 crores to INR 11 crores. Much of it is for some machines and some tools, but there's also upgradation at our dial factory in Parwanoo, which is in need of upgradation of some section. Other than that, it's mainly routine CapEx. And in Ethos, we are expecting a CapEx of about INR 6 crores to INR 7 crores, most of it being in these 3 stores and a couple of renovations.

The next question is from the line of Shalini Gupta from Quantum Securities.

Sir, just wanted to check if you could talk about the SSG for Ethos during the quarter?

Yes. So SSG during the quarter, just hold-on, if I'm not mistaken, SSG stood at about 7%. Can you just hold-on a minute, please?

Yes.

Yes. So the same-store growth was actually 7.7%, which, in the previous year was actually minus 5%. So we've seen [Technical Difficulty] in the same-store growth during quarter 3. You'll remember actually that in the first 2 quarters, same-store growth was actually negative. And I'm not sure, Shalini, if you were on the earlier earnings calls, but this was significantly due to the sharp reduction in supply of some key brands such as Rolex. And as I mentioned, as an answer to the last question from Priyanka, the Rolex supply situation has improved. But not only that, I think we saw a lot of traction coming from the additional sales that -- the end of year sales that was launched in December, which was successful for us, and December was a good month. Of course, it was at the cost of slightly higher discounting, but the same-store growth did perk up. Does that answer your question, Shalini?

Yes, yes, sir. And by -- I mean, by your this thing, we should be seeing a substantial jump in Ethos EBITDA next year, given that these stores will -- the new stores will start delivering more. Is that correct?

That's absolutely right. That's absolutely right. We expect to see a sharp jump in EBITDA due to the full operation of these new stores. And as I've mentioned, we are already seeing a fabulous traction in most of these stores. I would not say all, because in 1 or 2 stores, we are looking at some challenges, and we are addressing them through a very focused marketing and digital marketing campaign. But the main stores such as Kolkata, Hyderabad, even Chennai and the Chanakya in Delhi, they are turning out a fabulous performance and traction.

So sir, if you could just give -- I'm not asking for a guidance but some kind of understanding as to how much the EBITDA margin -- I mean, on an adjusted basis, how much we should -- what kind of EBITDA margin we should see in Ethos?

So we had said -- 2 years ago, we had said that our target is that by '21, '22, when we'd outlined the plan, we should hit a EBITDA margin of 9% to 10%, right? I believe this current year is a bit of a gap in that, mainly because of the depressed consumer sentiment and coinciding with these new traction. However, we remain online to hit this 9% to 10% EBITDA margin for the year as a whole by '21, '22. And to hit this, we should -- we would probably be just somewhere between where we are today and this 9% to 10% in the next year, so that is FY '21 and hit the 9% to 10% by FY '22. That's our goal.

Okay. And sir, just one last question. On the borrowings, I mean, do you see borrowings going up? Or what is the outlook on borrowings?

We don't expect borrowings to go up significantly at all. We are -- most of our stores are now generating cash. So if at all, borrowings may go up by a few crores. I don't expect any significant increase in borrowings. What is happening is, and I'm glad to report that, I sort of didn't mention that in my speech, we are signing on some exclusive brands in some of the high-priced segments. One of the brands, which is actually a major coup is a brand called Girard-Perregaux, GP. It's one of the most well-known and most historic brands in the high-priced segment. We've signed it on exclusively and other brands like this are also in the pipeline or have been signed. So we will need a -- perhaps a bit of extra borrowing to finance the rapid growth of these. But as I mentioned, I don't believe the borrowings will be significant. And our internal generation is quite capable of taking care of the growth in the watch segment.

[Operator Instructions] The next question is from the line of Vikram Suryavanshi from PhillipCapital.

Sir, just wanted to know about Estima AG, how much -- what is the revenue in this quarter or 9-month, would it be possible? Or was it consolidated in our consol Ethos revenue? I just wanted clarity on that front. And how was the profitability for this quarter or 9-month, if you can share?

Just hold-on a minute. Vikram, the revenues and -- are included in the results. The revenue at Estima for the year was about CHF 1.5 million. It's lower than what we had -- it's significantly lower than what we had budgeted. Mainly, I think I had explained in the last time that we had to go in for a substantial renovation of the factory, and much of this revenue actually started to come up after the renovation was over.

Yes. And how was the profitability? And...

We had a loss of about CHF 1.3 million, which includes a depreciation loss which in previous periods was not being provided by Estima. In their previous years, Estima was not providing any depreciation, which apparently is allowed under Swiss law. However, now we have started to provide the full depreciation, including some backlogs of the past. And it was a loss of CHF 1.3 million.

And by when we can see a turnaround? Any plan for that?

Vikram, we have -- so I'm very hopeful that in the second half of the current fiscal, we would start to see a turnaround in terms of a profit and generally a cash breakeven in this year. We still need to make some more investments in Estima. And the reason is the following. It's actually linked to what I said in my speech. Estima was mainly focused on the mid-price segment in Switzerland, which is the price segment between $500 to $3,000 watches. As I'd mentioned, this segment is actually declining steadily, whereas the growth is happening in the segment above $3,000. Our strategy has been actually to focus on the segment above $3,000 and Estima is going to help us to focus there. But this requires a significant increase and improvement in the quality and offering of the product from Estima. Part of the investments were done last year and some investments are planned in this year, so I -- which are already actually in process. And I expect that in the second half of the current year or second half of the next fiscal, we will start to see a sharp turnaround in Estima. I can say this because we have extremely interesting leads from customers, which we have no chance to get in India. I'm talking in -- about brands in the price segment of -- and I'm not mentioning these as specific brands, only as price segments, but in the price segments of Omega, Cartier and similar brands which will never buy from India, they will never buy from Asia, and we have a very enthusiastic response from them to buy from Estima. So we are very hopeful that in -- within the next 6 months or so, we will start to see a very handsome turnaround.

Got it, yes. And second, sir, this precision engineering, how was the revenue for this quarter or 9-month? And how is the outlook, given the challenge in economy?

So in the -- I'll let Sanjeev -- he has the figures. I'll let Sanjeev answer this one, and I'll get back to you on the -- on how we see the prospects for this business.

Sure, sir.

Vikram, during the current year, the revenue has grown by almost 12%, 13%. Last year, for the 9 months, the revenue was around INR 30 crore, whereas this year, in this period, we have reported around INR 34 crores of revenue. Whereas, if you just see for the quarter, quarter-on-quarter, there is a growth. But from previous quarter, there is a decline. From quarter 2 of this year to the quarter 3, there is a decline of around 10% revenue.

And how we're seeing this export? Is there -- are there any interesting export orders and how is that outcome?

So export order position, basically, our focus is on the aerospace segment, where it takes longer time for the product approvals, but once product approvals comes, then there is some kind of lock in and it continues for a very long period. So in the -- during the current year, we have been successful in making inroads and store opening with some of the big accounts, which we are hopeful that from the coming year, the major growth of revenue from those segments may happen.

Vikram, you asked a question about future prospects. I have to be -- we've been reviewing this business very closely because, frankly, it has not grown as we had expected it to over the last 12 months. Part of it is, of course, due to the slowdown in the economy, the electrical and electronics segment as well as the auto components segment. These 2 segments, we all know, have slowed down. And as a result, the demand or interest in new products offered by us or new products required, that is slow, and also existing orders are being postponed. So that is one of the impacts, but that is not the only thing. We need to reassess which are the most profitable segments. Some of the growth that has happened over the last 3 or 4 quarters has actually been in low contribution segments, and we are addressing that very actively. We are now focusing on 3 or 4 segments that actually bring us high contribution. And of course, one of them is the aerospace segment. It has a longer lead time, but we are stepping up our efforts to actually focus very intensively on this, besides, of course, continuing with the auto components and the electrical and electricals segment. We expect that in the next fiscal, even in the first half, we will see a growth in the top line, but more importantly, there will be an improvement in the EBITDA and the profitability, overall margins. From the second half of next fiscal, I think the real growth in top line will also kick in based on some of the new leads and customers that we are getting. So it's still going to be, let's say, a steady growth. There's not going to be a very sharp growth expected in the next 3 to 6 months. But from September of this year, we should start to see a growth not only in the bottom line, but also in the top line.

And do we have any meaningful exposure to auto segment from this division?

Sorry?

Sir, do we have any meaningful exposure to auto sector from this division?

To the auto segment? Yes, we do. Yes, we do. We...

That also has...

Yes. So that has been obviously slow. So we are supplying a lot to the auto electricals, the electrical business of the automobile industry, their connectors and so on. So that has been a significant part. And obviously, it has -- there's been a marked slowdown over there. We're not seeing a very specific turnaround there. There seems to be a turnaround in the electronics and electrical segment, slow turnaround. Yes. And in the aerospace segment, again, I don't think the Make in India part is taking off soon. But there we are focusing much more on direct exports.

And last question, sir, about this watch component. Similarly, if you can give a comment in terms of quarter or 9-month revenue? And how is the outlook for hands and dial?

So on the hands and dials, as I mentioned, a lot of our hands and dial business in the past has been focused on brands in the segment below this $3,000. We have gained market share significantly in this segment, but the fact is that this segment is declining. I mentioned, we have gained market share in the Indian producers, which have grown. So Titan has grown, Timex has grown, Fossil Group has grown, and we've gained market share in that. But the profitability and margins in the supply to the Indian segment are lower than export to Switzerland. And therefore, that is one reason why even though top line has grown, some margins have declined a bit. That is because of the change in the product mix. Going forward, our strategy is to reduce our dependence on the price points below $3,000 and increase our business in the price points of watches above $3,000. This is already happening, as I'm speaking, and the inclusion of Estima is further actually enabling us to go more into this segment. We believe that both the watch component business, dials and hands, they will continue to see a growth in the top line and the profitability, which has declined slightly in the last [Technical Difficulty] will be revived. I do want to add that we are anticipating a impact of this coronavirus. In the short run, it may hurt us because a lot of brands depend on Chinese vendors for some components. They also depend on sales in China and to Chinese people. So if the sales falls or the component supply, their supply chain is disturbed, the production and sale of Swiss watches in this segment will fall, the sale and the production. And we are starting to see some impact in terms of delays of -- postponements of deliveries and so on. I believe this will last for a couple of months. We are all hopeful that in the next 6 to 8 weeks, this coronavirus spread will be halted. The long-term impact of this coronavirus scare is going to be extremely beneficial for us. Let me explain how. For the last 3, 4 years, we've been hearing about brands wanting to de-risk from China. They have too much exposure to sourcing in China, and they want to spread their risks by starting to buy in other countries. We are standing by and waiting for this opportunity to come to us. Unfortunately, it has not happened fully. It has happened a bit, but not fully because brands hesitate to change from the supply chain that is already established in China. China logistics is better. They have their purchasing offices in China. They have to travel to China more frequently because it's a larger market. India is seen as a little bit more complicated. Logistics is not that easy. Shipments out of India take a little bit more time due to customs procedures and so on. So they have not really made the full effort to derisk from China. Now with the impact of this coronavirus, I think at the top management levels, in all the brands, we are hearing of this tremor, this -- it's like almost like a Tsunami. And they're saying that we cannot be so dependent on China that both our market and our supply chain can be jeopardized at the same time. So we believe that whether it is Swiss brands, whether it is Japanese brands like Citizen, Seiko, Casio, or whether it is American fashion brands like Timex and Fossil, all of which are active in India, they will look much more actively in sourcing out of India. We believe that the positive impact of this will start to be felt already in the next fiscal year, from quarter 2 onwards from the next fiscal.

Okay. That was really helpful. Just for housekeeping, if you can just share, how was the absolute number for this quarter and 9 months from overall watch component, excluding precision engineering?

So the watch component in this -- year-to-year for the -- year-to-date, it has grown by 5%, just the watch component business. And in this quarter, it has declined by 5% compared to quarter 3 of last year. But for the year -- so in this quarter, there is a decline of 5%. For the year as a whole, there's an increase of 5%.

And what was the absolute revenue in this quarter?

The absolute revenue in watch component in this quarter was about INR 30 crores, INR 29.95 crores.

The next question is from the line of Govind Saboo from IndiaNivesh PMS.

Sir, just an update on the corporate holding structure of Ethos? Any development on that front?

In what sense, Govind? There has not been a [Audio Gap] Are you talking in terms of the demerger?

Yes, demerger, merger, there are a lot of options which are being talked about in the past.

Yes. So there's not much of a change from the previous quarter. We are -- I mean, we have looked at all the options that have been presented to us by the advisers that we had appointed for it. Obviously, the most preferred option is the direct demerger and -- or the demerger and direct listing of Ethos. That cannot be achieved with SAIF Partners remaining as a shareholder in KDDL because they will not be allowed to hold shares in Ethos being a multi-brand retail company. We are in discussion with SAIF to find a solution, either if they can shift this shareholding to a compliance body or they had once hinted that they might be interested to take an exit. We are in discussion, and we are waiting for them to come back with options. The other options which were presented, which was to list through another holding company, to separate from the manufacturing company but to create a holding company for retail and to list under that, is not seen as very beneficial because, in the end, it will not achieve what we want to. The value discovery will not happen if what you do is just list with another holding company. So it's really -- we are in discussion with SAIF Partners, and we are hopeful that in the next -- over the next quarter, we will have a clear line of action on how to go about it. We are very aware that this demerger and value discovery for shareholders is extremely important. It is also important for the business because we have goals, and we have a vision to grow this business not only in the watch business to -- as I mentioned, our goal was to grow to a number of INR 1,000 crores in top line, but actually also pursue opportunities outside the watch business. And we believe that the value discovery and the recognition of the potential of our business is extremely important and the deal is -- and the direct listing of the company is important for that.

Great, sir. Great for an update. Just a small question regarding the capital plan for Ethos. So I believe that since most of the expansion is now done with and the future expansion, as you told over the call earlier, it is limited to 3, 4 stores in the next year. So we are not -- is it fair to assume that there will be no more dilution in Ethos? Or there would be no more capital raise in Ethos?

Yes. We have no intention of diluting for starting new stores or for any of this.

The next question is from the line of [ Aarush Seth from VDV Securities ].

I have certain set of questions. So the first one is that the other expense has been rising sharply. When do you expect the store throughput to increase?

Okay. Why don't you ask all your questions, [ Aarush ] then we can answer them all?

Okay. So first one was this one. And the second 1 is, the -- I would like to know the gross debt figures for KDDL stand-alone and Ethos business as on 31st December?

Sorry, say that again, please. The gross?

Gross debt figures for KDDL stand-alone and Ethos business as on 31st December?

I'm not able to figure out. You want the gross margin, the gross profit, what...

Debt, debt. Gross -- your debt.

Gross debt, debt, okay.

Yes, debt, debt.

Okay. Gross debt, okay.

Okay. And the third one is that, how has been the traction of after-sales service segment and the secondhand watches business?

Okay. So let me start by answering the last one first, which actually is an extremely exciting story. There's been a lot of effort which has gone into the after-sales service and connected to that, the pre-owned -- certified pre-owned business. On the 1st of February, we launched an independent website for the pre-owned business. It's called Second Time Zone, and I would invite you to actually go and visit it. It's Second Time Zone powered by Ethos. We are seeing a great traction in the pre-owned watch business and this is only possible because of the support of the service center. We -- just 1 minute, let me try to give you some figures here.

Okay.