KDDL Limited (532054) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the KDDL Limited Q4 and FY '20 Earnings Conference Call. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on the date of this call. These statements are not the guarantees of future performances and involve risk and uncertainties that are difficult to predict. [Operator Instructions] Please note, this conference is being recorded. I now hand the conference over to Mr. Yasho Saboo, Chairman and Managing Director, KDDL Limited, for his opening remarks. Thank you, and over to you, sir.

Thank you. Good morning, and welcome to everyone for our Q4 and FY '20 Earnings Conference Call. I hope all of you are safe and in good health. I'm joined by Mr. Sanjeev Masown, CFO of KDDL; and Mr. Raja Sekhar, CFO of Ethos Limited; and SGA, our Investor Relations advisers. I hope everyone has had a chance to go through our updated investor presentation uploaded on our website and these changes. I'll start with the financial performance consolidated basis for Q4 and FY '20. Revenue for Q4 FY '20 was down by 8.7% year-on-year to INR 137 crores, primarily due to 0 business operation towards end of March on account of the COVID-19 lockdown. For the year FY '20, it grew by 4.4% year-on-year to INR 652 crores as compared to INR 625 crores in the previous year. Consolidated gross profit for Q4 stood at INR 59 crores, down 12.8% year-on-year, while FY '20, it grew by 4% year-on-year to INR 275 crores. Consolidated EBITDA for Q4 was up by 2.2% to INR 12.7 crore, and for FY '20, it was up by 17.2% to INR 76 crores. The growth in EBITDA has been largely on account of the changes in accounting standards with the applicability of Ind AS 116 standards. The new Ind AS 116 norms has impacted the accounting for other expenses, depreciation and finance costs for the company. Therefore, consolidated adjusted EBITDA on like-to-like basis for FY '20 has degrown by 35.2% to INR 42 crores as compared to about INR 65 crores in the last year. Consolidated PBT for FY '20 stood at INR 5.1 crores, while in Q4 there was a loss at PBT level of INR 5 crores. Consolidated loss after tax for Q4 stood at INR 5.1 crores, while for the full financial year FY '20 the loss stood at INR 2 crores. I will now come to the business-wise updates and the impact of COVID-19 on the business. Our manufacturing business revenue for the quarter was INR 40.7 crores, down 9% year-on-year, while for the full financial year the revenue grew by 2.6% year-on-year to INR 180.6 crores. EBITDA for Q4 '20 stood at INR 5.7 crores as compared to INR 8.6 crores in the previous year same quarter. EBITDA for the financial year stood at INR 29.4 crores compared to INR 31.8 crores in FY '19. EBITDA margins for Q4 stood at 13.9% as compared to 19.1% in the previous year same quarter, while EBITDA margin for FY '20 stood at 16.3% versus 18.1% in FY '19. Profit after tax for Q4 was INR 0.5 crores and for the full year, it stood at INR 9.1 crores. Revenue from watch component business stood at INR 28.6 crores in the quarter 4, down 16% year-on-year, while for the full year, the revenue from watch components business was INR 129 crores, similar to the level reported in the previous year. Precision engineering business revenue for the quarter was INR 9.7 crores, an improvement of 10% year-on-year, and revenue for the full financial year grew by 11% and recorded INR 43 crores in FY '20. The revenue from watch components was almost stagnant compared to previous year. The exports declined by 4%, mainly due to slowdown in the Swiss market, while domestic revenue of watch components improved by 4%. In the precision engineering business, the company registered a growth of 11% over the previous year compared to a growth of 14% in the previous year. The revenue growth for domestic market was 17% while exports improved only marginally by about 1%. Unfortunately, in Q4 of the financial year, the revenues of the engineering business was suddenly impacted due to the lockdown announced by the Government of India in March 2020. We had a sales loss of nearly INR 10 crores in the quarter, which affected the overall margins of the company. The business global economic scenario due to the impact of COVID-19 pandemic will lead to declining revenues for quite some time, and we expect gradual recoveries after that. The first half of the financial year 2021 will witness a significant impact of slowdown. In the second half, growth [indiscernible] will be better. The prevailing scenario will also create new opportunities for the company as some of the weak players will surely exit the market. The initiatives under Atmanirbhar Bharat need to be watched very carefully, and we are taking necessary steps to promote further growth and development of the company, taking advantage of the situation arising out of the Atmanirbhar Bharat initiative. In 2021, our major focus is on reducing cost and overhead, in line with the expected decline in revenue. We will also strengthen our digital presence and communication to showcase our new products and features to our existing and new customers. We will continue to focus on manufacturing excellence with the goal of world-class delivery compliance, quality and especially on fast turnaround time. For the current year, the revenue from the watch component business is expected to decline by about 15% as major markets and countries are under lockdown due to the pandemic. The focus of all economies is on minimizing the impact and providing necessary stimulus for market recovery. This year, the precision engineering business of the company is expected to be around the same level as previous year. But we do expect to get entry into customers in new segments and markets, which -- due to which we foresee faster growth in the existing and new segments in the years to come. I'd like to add a few words about our Swiss subsidiary, Estima AG. 2019 was the first year of operations post-acquisition. During this year, the company invested in the watch and manufacturing facility and upgrading it with acquiring new machines and equipment. We also renovated the building and infrastructure to present a world-class setup to potential customers. Key markets in the company was changed in line with the business requirements. The company also added the facility to supply watch styles in addition to watch hand, thus expanding the potential of Estima. During FY '20, the company reported revenue of CHF 1.8 million and a net loss for the period was CHF 1.4 million. This acquisition fits into the strategy of KDDL to expand its footprint in Swiss manufacturing. And we are in a good position to turn around the factory by replicating the strength and capabilities of Indian operations and also extending our strong existing customer relationships. The SWISS ORIGIN regulations will be the catalyst for the revival and growth of this business unit. I now discuss aspects of the business relating to our watch retailing subsidiary, Ethos. Here are the highlights of Ethos on a consolidated financial performance. Our billings for Q4 dropped by 12% year-on-year to INR 104.5 crores, while for the year FY '20, it grew by 2.3% to INR 524.5 crores. Billings of exclusive brands grew faster at 9% year-on-year to INR 22 crores in quarter 4, and for the financial year, it grew by 40.7% year-on-year to INR 117 crores. The exclusive brands contributed 21.2% to the top line in quarter 4 and 22.3% for the whole year. Same-store growth for Q4 stood at minus 22%, obviously due to the impact of the lockdown, and for the year it was minus 7%. Consolidated revenue for Q4 stood at INR 91 crores, down 11.6% year-on-year, while for the year, it grew by 3.4% to INR 460 crores. Consolidated gross profit for the quarter stood at INR 24.7 crores, down 29%, while for the full year it stood at INR 130 crores, a similar level when compared to the full year FY '19. Gross profit margin for Q4 stood at 27.1% as compared to 33.8% for Q4 FY '19. For the full year, it stood at 28.3% versus 29% last year. Reported EBITDA for Q4 and for the financial year grew by 62% and 59%, respectively. This growth, as also mentioned previously, are due to changes in accounting standards. Adjusting for the Ind AS 116 and other items, consolidated EBITDA for FY '20 degrew by 25.1% year-on-year to INR 27 crores, due to higher expenses primarily from rental charges. Adjusted EBITDA margins for FY '20 stood at 5.9% as compared to 8.2% in FY '19. Consolidated loss for Q4 stood at INR 4.4 crores and for FY '20 -- for the full financial year, it stood at a loss of INR 2.5 crores. Stock carrying [indiscernible] at the end of March 31, 2020 was of 7.9 months, which is just slightly higher than the previous year. This being on account of the higher inventory in the newer flagship stores that operated for only part of the year. Ethos was severely impacted due to the lockdown imposed by the government to prevent the spread of COVID-19. All the stores were shut down during the second half of March, which adversely impacted the business. Most of the retail stores are in malls which were asked to shut down a week before the official shutdown. As of today, about 26 of our total 50 stores are operational. Stores are being opened only for a limited time with limited staff to ensure strict social distancing and other measures for security. We are witnessing a gradual improvement in visitor footfall week-on-week and hope to be back to pre-COVID levels by quarter 4 of this year. The optimism is based on a similar experience in demand shock witnessed by us due to series of decisions taken by the government in the past such as the requirement of PAN card, TCS requirements and the prohibition of large cash transactions. We always witnessed the strong bounce back in sales post these demand shocks. While the severity of COVID-19 is obviously much higher than other shocks, we do expect the business to recover eventually. We have used the lockdown period productively to divide the new strategy at Ethos after extensively studying the market condition, store locations, assessment of our cost structure and also the direction of business aspects in our line of business. Let me highlight this point-by-point. First, the cost-optimization strategy. As we all know rental costs form a major portion of our total expenses at Ethos. We have been in continuous negotiations with mall owners for rent reduction to optimize rental cost. With respect to other overhead costs, we have deferred CapEx and other expenses, all that can be delayed in the medium term to prudently conserve cash. We are also looking at other overhead expenses, including manpower costs, to reduce them and get better efficiency. Second, on store optimization strategy. We have done an in-depth performance assessment of all our [indiscernible]. We will be closing down the stores which are unlikely to contribute meaningfully to overall profitability in the future. We have already closed 5 stores in the last 3 months. With this, the total store count is 50 as of today, down from 55 at the start of the year. Our focus will continue to be on improving the profitability of the stores rather than expansion in this year. Third point is on digital strategy. Our e-commerce website, ethoswatches.com, continues to have a large number of visits even during the lockdown period. And surprisingly, we witnessed very good bookings for our premium watch segments for which deliveries were started after the lockdown eased. This is a sign of a market shift in development as customers start accepting the idea of buying even luxury products through e-commerce platform. This enables the luxury watch market to expand to customers who did not have access to luxury retail stores and also gives Ethos, with its strong digital presence, a great advantage over the competition. We have the most advanced digital communication and e-commerce capabilities in the country for any luxury project -- product. With the change in customer behavior, we will be best positioned to leverage these capabilities and increase market share substantially. These 3 strategies, cost optimization, store optimization and digital communication, will help Ethos to become fit, lean and ready for future growth. One other important point that I would like to highlight is the fact that most important Swiss brands will prefer to focus maximizing their resources and attention on their top markets, including U.S.A., China and Europe, and they will want to reduce resource deployment in smaller markets such as India. The company is well positioned to capitalize on this opportunity by offering these brands faster growth without the brands having to deploy their own resources in marketing and personnel. Thus, Ethos will be in a strong position to negotiate attractive deals for distribution and exclusive retail arrangements. The company has proven marketing resources and sales capability and a proven track record of managing several Swiss brands exclusively in India. We continue to build layers of complementary verticals for our watch retailing business. After-sales service offering backed by strong technician and watch expertise as well as the steadily increasing pre-owned watch business points to this fact, and our goal remains to make Ethos the customers' first choice for luxury watches in India. Exclusive brands and house brands are an important part of our strategy, and we are happy to report that our partnership continues to gain traction. We have about 38 bands on exclusive basis across all price points, which help us to offer a differentiated product to customers and a great buying experience. I now welcome your questions and participation.

[Operator Instructions] We have our first question from the line of Rishikesh Chatterjee, investor. Mr. Chatterjee, your line is unmuted, you may please go ahead and ask your question. We have next question from the line of Vikram Suryavanshi from PhillipCapital.

Sir, just we understand that there is impact of economic slowdown on almost all of the segments, but particularly in precision engineering, which are the segments where we can see recovery could be much faster for the demand and so which are the segments where we are disappointed from the demand side of precision engineering? And are we seeing some kind of inquiry probably the components which were imported from China or something where the customers may start developing domestic sourcing and inquiries from such kind of order?

Vikram, so I just -- I personally believe it's still a little too early to take a judgment as to where we are disappointed and where we are not. We have to recognize that pretty much up to June most factories were closed. And if whether it's our customers or the customers of our customers in the precision engineering business, there has been a delay in the forecast for the business for the year, right? So if people don't know exactly what is going to be -- what sales are going to happen, it's difficult to get any forecasts. So I think the right time to answer this question is probably going to be after a month or 2 because it's only now that most of our customers at least they are open, they are starting to forecast, and we are starting to get some forecast on what kind of orders will come, will be revised, what will continue to be delayed. I don't think there will be much of preferences that 1 segment is going to boom while other segments are going to be delayed. I think it's going to be pretty much similar across all segments, but we will come to know this only in the next 2 months or so. As far as the -- your second question which is relating to response from businesses to buy more from India, we already see some positive signs on this in terms of RFQs, both from Indian customers as well as for export customers. We feel this is related to the fact that there is some kind of a sentiment to reduce buying from China. It is still at RFQ level, but we believe there is a definite trend. And over the next couple of months, I think this will develop into a real momentum.

Okay. And sir, currently, some stores are open for you. So how is the mix of online and toward the thing if you take just the mix between these 2 currently? And now we'll move into almost festive season in second half. So what is the indication from mall owners or basically in terms of can you start opening these malls before this festive season or not seen like in first decision is really uncertain?

Vikram, so you'll recognize that actually nobody can really predict with much accuracy. See until May end everybody was pretty sure that in June our malls will open. When the third lockdown was announced in May that was already a disappointment and which are why is this happening. Then June came, some malls opened, some malls didn't open up to -- as you know, today, Bombay, nothing opened; Pune, nothing is opened; Nagpur, nothing is opened; Chennai, nothing is opened; Gurgaon, nothing is opened. Guwahati opened and closed down again. Telangana, there is a problem there. We are hearing that in Hyderabad, there may be a second lockdown. So as of now, today, it is very difficult to expect anybody, any mall owner to give any firm date. They give a firm there and then it goes -- suddenly the state takes another decision, and we don't blame anybody because everybody is taking decisions in the best interest of public at large and so on. So for example, in July, we were pretty sure that in July all malls will be opened. But as we stand today, almost 50% remain closed, right? Our airport stores which are the large -- which were successful for us [indiscernible] to close the airport store at Bangalore duty-free because the lease came to an end and it's very uncertain how duty-free stores are going to behave. Similarly, our domestic store at Bombay airport, we decided to short close the lease because airport shopping is going to remain difficult. It's going to remain weak, and the costs are very high with 24-hour operation. So we are -- I need to take decisions as we go along. Is it likely to improve? I think it will improve. There is not only a pent-up demand, people want to shop. So I think there will be an improvement but it's difficult to predict. Your question was also about online versus physical shopping. I think we have seen a change in consumer behavior which is along expected lines. Safety becomes of primary importance. So browsing and product discovery, product exploration is happening more and more on the net. Just like you and I are now shopping for our daily necessities also on the net using e-commerce more, even so for same way for luxury products, we see an increase in visits. We see an increase in dual time on our website. So a lot of product discovery will shift online. It is already happening. And stores, of course, will remain important for eventually the customer experience for look and feel. And therefore, we will have growth in sales, but I think there will be a shift that more product discovery on the net and probably leading to more sales through the net as well. So this partially also -- I just want to point this, what this also means is that our strategy can shift towards more emphasis on digital communication, more offering on customer experience on the net, probably fewer stores, great store experience, delivering the same sales from fewer stores and more digital presence.

Okay. And sir, last question is like, basically, obviously, are we having some concern on supply side or because of supply chain disturbance because if you say demand comes back in third or fourth quarter, is there any chance that some of the models may not be available because of the supply shortage or supply chain disturbance? And is that a concern? Or how is that you're handling?

See, as of now, there is -- there are some supply-side constraints because many of the factories producing watches, like many other products, they went into shutdown. There is also logistics. So shipments from overseas, flights coming in, customs clearance, there are some difficulties there. However, I think these are pretty temporary. Over the next couple of weeks, these will be sorted out. So I don't expect that these are going to last until the second half of the year. I think from September, October onwards, we should start to see much smoother operation.

[Operator Instructions] We have next question from the line of [ Patrick Samuel from Gravity Securities ].

My questions are really focused on Ethos. Sir, just wanted to understand what is the SSG for Ethos in Q4 and also in FY '20?

Okay. Are there other questions you have, Patrick, if you can ask all of them then we'll answer all of them together.

Yes. Sure. So the other questions are that, do we plan to close more stores further going ahead in this financial year? And if yes, then what is the number that we have in mind? And lastly, the rental cost of our stores, what is the current cost for that? And what is the amount that we are paying on it currently?

Okay. SSG -- so let me answer your SSG question first. SSG for the year as a whole was minus 22% -- sorry, for the year was minus 7% and for the quarter was minus 22%. Regarding stores, as I mentioned, we've already closed 5 stores. There likely to be a few other closures. We are not really sure because we are also -- this also depends on a few things which will emerge. Number one, what are the new rental arrangements. Some -- from some malls and locations, we have got, I would say, reasonable relief. From others, we are still negotiating, and the position is that if we don't get reasonable relief, the stores will not be viable and we may prefer to close them, especially in cities where we've already got other stores, right? So the goal is really that if in a city we've got, let's say, 5 stores, for an example, and one of them we are not able to make viable anymore, then we are seeing how we can achieve the same sales with 4 stores, of course, supported by the Internet. So it's difficult to say exactly how many stores might be closed during the course of the year. I believe there will be a few, not too many. But if I were to hazard a guess, maybe another 3 to 4 stores may be facing closure during the year. But this will depend how things progress over the next 2 months or so. And the third question was about rentals. So overall, rental is about 6.9% of our sales.

Okay. 6.9% of your sales. So that is what we are paying currently is what I presume?

That's the average for last year. The average is a mix of several things because, for example, at airport stores, the revenue share is much, much more. And there are other stores like luxury stores, either the revenue share is much lower or there is no revenue share, it's only a fixed rate. The 6.9% is an average figure that I've given you.

[Operator Instructions] We have next question from the line of [ Jeetu Panjabi from EM Capital Advisors ].

Yashoji, I just wanted to understand 2 questions. One is in the journey of normalization -- let's talk about the retail business to begin with. I understand the key points you said, including digital and the cost side and whatever. So I'd assume that inventory that you'd be holding right now would be very low in the context of what your historical inventory is or are you still holding the same levels of inventory?

Well, so Jeetu, I want to understand where exactly your question is going or what is your objective?

So -- okay. Okay. Let me give you the...

When we close the year, we have a certain inventory, right? When we close the year we have a certain inventory. We have not purchased anything in the last 3 months, obviously. So nothing coming in. So to the extent of sales in the last 3 months, which have been meager, our inventory has gone down. But that -- yes, that is true, inventory has gone down. In terms of number of months, sales have been low as well, right?

Yes. So you can't help it. So my -- the -- okay, so the other linked question is, how did you see the road map for normalization over the next -- let's assume by Jan, we should be 80%, 90% of normal, I don't know, I'm just showing the number up on a per store sale basis or whatever say numbers you'd be back to sort of normal. So what's the road map to normalization? Do you see rent waivers being very significant in this journey? Do you see much greater digital sales as a percentage of total sales in this journey of normalization? And do you see anything that you'd doing completely different in this path for normalization?

So Jeetu, let me answer this question. In the road to normalization, you may not see much change, but in the -- and I believe normalization will go into quarter 4 of this year. When we started off [indiscernible] June, July, such things will become okay and from quarter 2, we can expect a recovery. We all know that is not happening. I think quarter 4, today, there is news that vaccine may come out by December. I think all indications are quarter 4 [Foreign Language]. Next year will become okay. So let me tell you -- so our thought is we need to last through this year and we need to use the next 9 months of this year to plan a fabulous bounce back in FY '21, '22. And I think the shape of what '21 and '22 will look like would be very different from what the past has looked like, and this will be the year of that transition. Then I'll start with rentals. Yes, we will get rental relief from the malls, whether it will be significant or not depends on one perspective. From our point of view, nothing will be significant enough. But the mall owners, they have strength also, they have commitments as well. So we will reach some kind of a middle ground where what they can give and what we can live with. Most of the malls, I would say, have taken a reasonable position on this and we are helping each other. Some of them, we have already concluded some negotiations and some we are still in the path. So you will see that there will be a reasonable relief in rent. Whether rent will fall equal to -- will stay the same as a percentage of the sales, I don't know, depending on how sales will be at the end of the year. But what does it mean for next year? I believe that overall, our goal being to keep the same trajectory of sales growth with fewer stores. What this means is that rental cost as a percentage of sales will show a decline in '21, '22 as compared to the past. I can say this with confidence. Then digital sales. The fact that with fewer stores, we will show the same sales also points that there will be much more sales happening through the digital framework. Whether it will be pure e-commerce or Internet sales, Internet-led sales, which will happen at a store, we cannot say at the moment. But we are planning and investing in what we are calling the white glove service, which means a sale is negotiated and discussed on the net and then the watches, luxury watches are delivered at the doorstep of the customer through a white-glove service completely secure, health secure in all ways, that is something which will start in the next 3 months. So I think it will have an impact. We will have the same sales from fewer stores and a larger percentage coming through the digital or digital-aided platform. And the third part which will be the differentiated offering. So strengthening our exclusive brands. Of course, we will continue to offer the best-selling, best-known brands, but there will also be a differentiated offering of exclusive brands. There's a lot of digital communication which is happening in terms of webinars with watch collectors, representatives of foreign brands. We are not able to do physical events today, but we are doing digital events for watch collectors who are interested in particular brands with the representatives. And this is showing an immense traction. So I believe even the way we communicate and interact is going to change a lot in the future. All of these are things which are planned in this transition period and will have a significant impact in '21, '22 -- from '21, '22 onwards.

Okay. Okay. Can we do the -- have the same path to normalization on the manufacturing side?

So manufacturing actually will be a little different. We expect a faster normalization on the export market and slightly slower on the domestic market. I believe on the export market, most of our foreign clients, Swiss brands are looking at a 30% to 40% reduction in production during this year. So obviously, their purchases will be down similarly. But they are now -- as they have opened, again, they are now planning for next year. That means calendar '21. This year, most -- they've already sort of washed out this year and said that, look, there's going to be a 30% fall. We can't really do much about it, but let's plan for '21 onwards. And the planning for '21 has already started. So we expect that for quarter 3 -- from quarter 3 of this year, we will start to get the orders for that recovery of next year. So I believe the recovery in manufacturing segment will happen a little bit faster, especially for the export side. Domestic market, Titan is our biggest customer, Timex is our customer, that will depend on how fast the domestic market itself revise. Assuming that the market itself will revive in quarter 3, and I think the production will start revising in quarter 3, so we may start to get normalcy from quarter 4 onwards on the domestic side.

And tell me something, the final question is anything that you're thinking completely lateral for the business relative to what you did to kind of say that this is a brand-new thinking that's come out in the COVID and we'll do this completely differently or something completely new?

Vikram (sic) [ Jeetu ] that's what is there. Obviously, when we are going through a crisis of this magnitude, all kinds of important thinking does take place. We've had the time for that. And we know that the world will change after this, and how can we anticipate that, it's a little early to share because we are having to divide our time between 2 things. We are either thinking long term which means where our company and where our businesses are going to be 3 and 5 years from now and on the other extreme, we are thinking of what is going to happen 3 to 6 months from now, right? So we're having to divide this thing. I must say that right now a lot of the thinking has been on 3 to 6 months because also things are changing frequently. Every 2 weeks, the situation is changing. But there has been systematic thought going into where our businesses are going to be 3 to 5 years from now. What is going to be the impact of Atmanirbhar? What is going to be the impact -- how exchange rate is going to impact our business? What businesses are likely to grow in India? How manufacturing is likely to grow in India? How can we do more for our customers in other parts of the world? Is there going to be a move to derisk manufacturing from China to other countries? How can we take advantage of that? How can we use our knowledge of specific processes to get into products or services that may be completely different, but use the same know-how and skill and experience that we have? So I think a lot of our thinking is going on. And once we are stabilizing and we know that this year is secure, I think there will be a lot of thinking happening on the other side as well.

Okay. Understood. Understood. And sir, 1 quick question. How -- what is the status of that pre-owned business that you have started? Has that started at all? And is that seeing some...

That is going. That is going on. Please see there is -- in fact, there is now a dedicated website for that. It's called Second Time Zone, www.secondtimezone. Please go to that. It is there, and we have -- it is growing steadily. Last 3 months because we rely on buying watches and selling watches. So because stores are not open and there is lockdown, you can't even buy watches. There are a lot of people wishing to sell watches. But if we don't buy, we can't sell further. So now with the opening up, this business is going to grow. But look at that website, it's actually doing well.

Okay. And you're having your -- I mean, as the revenues there must be pretty -- the margins there must be much higher, right, I'd assume? So you're seeing good traction over there?

Well, the margins typically may not be higher because we're buying and selling. If you offer a very cheap price, the seller is not going to sell a second-hand watch. And if you charge a very high price, he's not going to buy one. So it's not the market. But the fact is that our turn can be faster. The demand is great. So we can buy a watch and we can sell a watch without actually investing in the capital.

Yes. And what -- I mean, I don't know whether there's a number to this, but what percentage of revenues or sales will be from here, from this part of the -- what number of watches would be pre-owned versus new?

That's still very, very small. It's still very nascent. But what I can tell you is that in other countries where pre-owned business has been there prevailing for some time, typically in some businesses, 15% to 20% of the business could come from pre-owned watches.

Okay. So it could be as large, if you were to take the...

In future, there is a lot of potential for that, true.

[Operator Instructions] We have next question from the line of Saurabh Ginodia from SMIFS.

Sir, my first question is with respect to rentals. In whatever stores we have been able to manage for rental renegotiation, in those stores what kind of rental relief have we got? And secondly, have we been able to convert any of this fixed rental into revenue share?

Saurabh, we have got rental relief. In some cases, it has been a waiver for the period of the lockdown. In some cases, it has been a reduction by 50% or 75% for the period of the lockdown. And in several malls where we have concluded, there is also a relief for some months after the lockdown is over. So that is the range of reliefs that we have got in the malls that we have concluded negotiations. And as I mentioned in some malls, the negotiations are still going on. In some malls where we have concluded, for this period there has been a term that it is semi-based on revenue share, which means that if revenue goes above a certain percentage of previous year, then the relief becomes less. So for example, we said that, let us say, in the month of September, if the revenue is at least 80% of last year's revenue, then the rental will be 90% of the normal rental. Otherwise, it will be 60% of the normal rentals. So there are -- some of the relief is connected to the actual recovery in sales. If the recovery in sales is there, then we will pay full rent or nearly full rent. But if sale recovery is not there, then we will not pay the same rent. So there is a relief based on recovery and what revenue we generate. In most of the cases, that is true.

Okay. Sir, my next question will be with respect to -- I just wanted to get some understanding from your side with respect to, are we doing anything differently to provide contactless experience to the customers at the store?

When you say contactless, the product is a contact-based experience. So as such you cannot really completely make it contact-free. But of course, all the security is being provided. So whether it is in terms of visors, masks, gloves, sanitization, sanitization of the product, all of that is being provided. So there is a very, very safe transaction protocol which is practiced in all our stores that are open now.

[Operator Instructions] We have next question from the line of [ Ankit Agarwal from ARC Capital. ]

The first question is, sir, what is the company's total gross debt as of now?

Ankit, can you -- if you have other questions, can you also ask them so we can answer all of them?

Yes, sure. So first is the total gross debt and the cost of debt as of now. Then what are the fixed expenses that we have to incur per month?

Are you talking about KDDL manufacturing or are you talking about Ethos or consolidated?

Consolidated, yes.

The consolidated debt is about INR 180 crores.

Okay. And the cost of debt, sir?

You mean the weighted average interest rate?

Yes, yes, the finance cost, right.

I think, it will be around 10 -- between 10% to 10.5%.

Okay. And sir, so what is this cost is fixed cost that we're incurring per month?

Let me tell you this separately for KDDL and Ethos because the businesses are completely different, and it doesn't really -- I can't really monitor it. So for Ethos, the retail business, without counting any temporary waivers in rent and so on, it's about INR 10.5 crores per month. And for KDDL, it is about...