KDDL Limited ($532054)

Ladies and gentlemen, good day, and welcome to KDDL Limited Q4 FY '26 Earnings Conference Call. [Operator Instructions] 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 performance, and involve risks 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. Yashovardhan Saboo, Chairman and Managing Director of KDDL Limited. Thank you, and over to you, sir.

Thank you. Good afternoon, everyone. Sorry to keep you waiting a bit. Thanks again for joining us on the KDDL Limited Q4 and FY '26 Earnings Conference Call. I hope you've had the opportunity to review our financial results and investor presentation recently posted on the company's website and stock exchanges. I'm joined today by our CFO and Executive Director, Mr. Sanjeev Masown; and SGA, our Investor Relations Adviser. I'm especially pleased that today Mr. Pranav Saboo, Managing Director and CEO of Ethos, is also with us. Last year, after the end of FY '25, which has seen a major correction over the previous year, we had promised you of a recovery in FY '26. I'm very glad that despite the challenging business environment, we have done even better than expected with very good results, which I'm sure you have noted. It is in our nature in our DNA to be cautious in our promises, but aggressive enough performance. We've always been happy to deliver better-than-expected results. As is known to all of us, the global economic environment during FY '26 remained uncertain and volatile, and this is continuing even now. The global work industry also operated in a challenging environment during the year, weak consumer demand in key luxury markets, particularly China and certain parts of Europe, continue to weigh on industry growth, while global brands remained cautious inventory planning and procurement decisions amid uncertain macroeconomic conditions. Despite these near term challenges, and I say they're near term because I'm very hopeful that things will change, we remain very confident about the outlook of our businesses. Global customers are increasingly prioritizing supply chain diversification, reliability, consistent quality standards and long-term strategic partnerships. This creates meaningful opportunities for companies like us with strong manufacturing capabilities, execution track record and trusted customer relationships. At the same time, the domestic market environment in India continues to remain encouraging. Rising premiumization, increasing localization opportunities, strengthening manufacturing ecosystem and healthy consumer demand are supporting growth across multiple segments. About the watch components business, which is dials, hands and bracelets. Despite the difficulty in the international watch scenario, our watch component business, dials and hands, forged a recovery during the second half of FY '26 after a quiet first half. Even though Swiss watches continue to face headwinds in several markets, we expect H1 FY '27, that is this year, to remain relatively stable for the export-oriented business, with growth being more visible during the second half of the year. We expect the domestic business to continue to remain robust, supported by healthy demand trends and increasing localization opportunities within India, which will show up in our growth numbers. Our continuing growth in a subdued market speaks volumes for the strength of our performance and our capabilities. Over the last few quarters, we have intensified our customer diversification efforts beyond Switzerland. These customers operate at different price points compared to traditional Swiss luxury brands and represent a very good medium- to long-term potential for us. We believe the benefits from these efforts will become increasingly visible over the coming years. The bracelet division continues to deliver strong performance, driven by its export business, with deliveries being executed in line with the planned volumes. Bracelets are not covered under the [ swissness ] criteria for Swiss watches, and this provides an advantage to manufacturing of our bracelets in India in the long run. Based on current visibility, we expect the bracelets business to continue delivering good revenue growth in this financial year and the next financial year, though margins may be moderated in the near term due to lower price points of newer customers, which are fueling growth. Now to Eigen, the Precision Engineering division. FY '26 has been an extremely successful year for the Precision Engineering business. Revenue grew by more than 35% year-on-year to around INR 200 crores, supported by strong momentum across export markets and increasing customer confidence. We remain highly optimistic about the medium and long-term prospects of this business. Export markets will continue to remain the primary focus area for high growth potential. Our strategy remains to deepen relationships with existing customers, adding new customers and expanding our capabilities selectively. We are undertaking further expansion in this division, with backward integration and process enhancement together with some capacity additions. About the Packaging division, Ornapac, here also, we witnessed encouraging progress during FY '26, with revenue growth growing by over 35% year-on-year. The growth in this business is primarily focused on the domestic needs of international brands, although we expect business to grow in all the segments that we are in. Supplies to customers, international brands who are sourcing our packaging for the domestic market and the Indian market have already commenced, and the initial response has been very encouraging. While the business currently is showing a loss at its ramp-up stage, we expect the division to become profitable during the second half of the current financial year. A few words about Ethos. As you know, it has declared its results a week ago, and they have been in the public domain. So I'm sure those of you who are interested will have gone through the numbers there. As I mentioned, we have Mr. Pranav Saboo, Managing Director and CEO, on this call, and I'm sure he would be pleased to take any questions that you may have with regard to Ethos. I would like to add my comments that Ethos have done extremely well in FY '26, once again after a [indiscernible]. And I'm sure this year, with strong growth in number of stores, sales profit and visibility. Finally, about Silvercity brands. As you know, this is a company in Switzerland that owns and operates the Favre-Leuba brand. I'm sure many of you have already seen the amazing market success of Favre-Leuba watches internationally, and the amazing stories of satisfied customers, including some top sellers who have chosen Favre-Leuba watches for their use and their collections. During the end of the year -- sorry, at the end of the year, Favre-Leuba was already present in over 20 countries, with more than 80 points of sales. Sales is much better than expected in the last fiscal, and most stores are actually short of stock, while we are ramping up production, but this takes time and effort to maintain the quality and the amazing watch pieces that are produced. We expect to more than double the sales in FY '27 and greatly expand our global footprint with exciting new product launches. All of this has been possible, only due to the outstanding and unique vision of the brand guardian, including [indiscernible] and including Patrik Hoffmann, the CEO and Chairman of Silvercity brands. Our medium- and long-term vision for the brand remains very ambitious, and we hope that you will continue to enjoy the success stories and numbers from this brand in the quarters and years to come. From an overall capital allocation perspective, we have planned CapEx of approximately INR 50 crores across businesses during FY '27. This includes both maintenance CapEx and growth-oriented investments aimed at strengthening capabilities, improving efficiencies and supporting long-term expansion opportunities across our businesses. With this, I would now like to request Mr. Sanjeev Masown to take you through the financial performance of the company.

Thank you, Mr. Saboo. Good afternoon, everyone. Now let me take you through the company's financial performance. Initially, I'll be sharing the standalone financial performance. Total income for quarter 4 FY '26 stood at INR 145.3 crores, and it grew by almost 42% Y-o-Y over the last year's period. And for the full year, the revenue was INR 506 crores, and which grew by almost 31.9%. When I say INR 506 crores, it includes only the operational profit and not the nonoperational income, which is there. EBITDA for the quarter 4 was at INR 36.4 crores, and it grew by 87.6% Y-o-Y. While for the full year FY '26, the EBITDA was INR 116.9 crores, representing a growth of 32.2% Y-o-Y. EBITDA margin for quarter 4 was our highest at 25.1%, and for the full year, EBITDA is 23.1%. PAT for quarter 4 stood at INR 19.8 crores, with a PAT margin of 13.6%. And for the full year FY '26, PAT stood at INR 76.6 crores with a margin of 15.1%. During the year, the company invested approximately INR 34 crores for the CapEx in the various divisions. And now coming to the consolidated financial performance. Total income for the quarter 4 FY '26 was at almost INR 585 crores, and it grew by almost 35.6% Y-o-Y. And for the full year FY '26, the revenue was INR 2,207.8 crores, and it grew by almost 30.3%. EBITDA for the quarter stood at INR 95 crores, growing by 25.2% Y-o-Y. While for the full year, EBITDA was at INR 363 crores, representing 18.3% growth over the previous year. EBITDA margins for quarter 4 at a consolidated level was 16.3%. And for the full year, almost at a similar level of 16.4%. PAT for quarter 4 was at INR [ 34.5 ] crores with a PAT margin of 5.9%. And for the full year, PAT was at INR 135.2 crores with a margin of 6.1%. Now when we exclude Ethos in the consolidated financial results, the watch component business in the manufacturing reported revenue of almost INR 240 crores as compared to INR 200 crores in the previous year. So registering a growth of almost 20% Y-o-Y. In the Precision Engineering business, the revenue during the year is INR 200 crores compared to the previous year revenue of INR 147 crores, reflecting a growth of 35% plus Y-o-Y. Ornapac, where the base is much lower, the last year revenue was around INR 17 crores and during the current year, we reported INR 23 crores, representing a growth of almost 37%. And with this, now, I open the floor for the questions and answers. You are free to ask the questions which you feel are relevant. Thank you.

[Operator Instructions] The first question is from the line of [ Ritesh Sheda ] from Lucky Investments.

Sir, the bracelet is a part of the watch component in that INR 240 crore or should we -- or should have a number separately?

No, the bracelet is separate. No, not part of it.

Okay. So can you give the bracelet's revenue?

Around INR 40 crores.

Okay. The other question is on the 2 capacities that you've put, one is for packaging and the other for bracelet, what kind of peak revenue is possible from those capacities?

Sorry, what do you mean by peak revenue? Ritesh, why don't you ask all your questions at one go so we can tackle them all?

So my second question is on the peak utilization of these 2 capacities or 2 businesses, bracelets and packaging, what can be the revenue on peak utilization? My other question is if you could share the outlook -- on the growth in precision components, what kind of visibility or backlog or growth that you see in precision, is the other question, sir.

Okay. So it's a little bit hard for us to sort of define what is the peak utilization because both capabilities and capacity in our kind of businesses, they expand incrementally. When a capability expands, our -- actually our capacity, in terms of value, also expands. So let us say I had one machine today, it gives me a new capability to make a slightly higher value bracelet or a different type of bracelet which also adds to the value. So it's hard to say that -- and add to that the fact that we are continuing to do the CapEx required for our better capability and quality and capacity enhancement as that would do, both in packaging as well as in bracelet. So it's hard to speak about what can be the turnover at peak utilization. I think what is important is to speak about what we expect the turnover or revenue to be from these businesses in the current year. And this brings me also to your second point as to how do we see the outlook for the Precision Engineering business. For both the businesses...

Sir, you may want to give then the outlook for all 3: the precision, packaging and bracelet.

So for bracelet and for Precision Engineering, we believe medium term to long term, we find it hard to predict as to what's going to happen in 1 quarter or 2 quarters, but in the medium and long term, both these businesses have -- we believe they will grow at about 25% CAGR. The watch component business will probably grow a little bit less than that. But again, a lot depends on how the macroeconomic environment changes. It could well grow faster as well.

Just clarifying, 25% is for precision, packaging and bracelet, all right?

Yes.

Okay. Any color on the margins based on the product mix or any changes on the gross margin when one segment vis-a-vis the other...

It's very hard to say that. In today's environment, it's extremely hard to say that, Pritesh, as you will know. We are facing very challenging environments in markets with our customers and so on. If we need to compromise margin a bit for strategically gaining market share and gaining new markets, we have always sort of -- we've always used that tool in our strategy kit. We try to protect margins, but we also protect the growth of our business. So it's hard to predict which way it's going to go. You have seen the margins have remained stable. What we can say is that we do not expect any great change in the margin picture over this year.

So last 2, what's the size of Favre-Leuba brand now? And these CapExes that you put every year, usually at what asset turn these CapExes are put? And these are my last 2.

I'm not sure if we would like to share those numbers with you right now. Those are confidential numbers, which we would -- but as I said, Favre-Leuba is doing excellently well. The results have been better than expected. We are selling more quantity than we expected. Stores are -- have less than the stock they need, and we are doing everything possible to ramp up the supplies. It takes a little bit time to ramp up with this quality and the kind of components that we use. But yes, you will see a very strong growth. We will see a very strong growth in numbers as well as the footprint of the brand globally.

An asset turn of the CapEx is -- annual CapEx that you do, let's say, this year, you said INR 50 crores.

That's not a number that we can share, unfortunately.

Mr. [ Kunal ] your line has been unmuted. Please go ahead with the question.

Congratulations on a great set of numbers. I have 3 questions. One, the first one is how much has been the volume -- growth versus volume growth in this quarter versus -- and also in the full year for the standalone division.

So which -- sorry, for which company are you talking about? Which business are you talking about?

The standalone business, which includes the watch component and ID.

Okay.

Yes. The second question is the CapEx, INR 50 crores, is for box components, ID and Favre-Leuba, everything included? Or it's just for the stand-alone business that is watch component and ID and all of that. And the third question is, in the bracelet division, which currently is about 40 crore, how do we plan to grow at [ 25% ]. Currently, we have been doing steel bracelet. Are you going to diversify from steel to other materials also? Or is it going to be only steel bracelet? These are my 3 questions. And one more, on the EBITDA margin as well, if you can throw some light on that.

So Kunal, first of all, volume in the manufacturing business is something that we actually don't really combine and take it up because these businesses make a very diverse range of products. Hands are produced in millions, boxes are produced in thousands, [ bags ] are produced in lakhs...

Sir, I'm not asking the unit of a thing in terms of percentage, how much has been...

So again, I'm saying that because the volumes are so disparate, we don't -- it doesn't make sense for us to combine them because today, we are making small quantity of very expensive products and it means more to larger quantities. So quantity is not something that we count really. Maybe individual businesses at an operational level they may be doing, but on a financial level, we don't really sum up the volumes. So I'm not sure I can answer that question meaningfully at any time. As far as the CapEx is concerned, the INR 50 crores that I mentioned is in the stand-alone business. In our businesses, it includes bracelet, it includes watch components, it includes the precision engineering as well as packaging. So it's across that. It does not include investments made by subsidiary companies such as investment in banks, Favre-Leuba and so on. And bracelets, our -- look, 80% of the metal bracelets in the world are steel, right? So while we are not ruling out going into other metals, but right now, there is a huge scope in development of steel bracelets, and there's a global need for that. So as that -- and we are experiencing that need. So that's why we believe that a 20% to 25% growth in the bracelet division is quite evenly possible.

Okay. And sir, any new customers outside Switzerland? Can you give some flavor on which geographies are we targeting?

So look, outside -- first of all, I want to say that Switzerland is still by far, the largest in terms of value. So it's like -- I don't want to give the impression that other countries are out there taking major market shares. But there are other countries where watch making is developing. And some of these countries, watchmaking was already there in the past, and it is seeing a revival. Germany has always been a strong sort of traditions of watchmaking, so it is deriving in Germany, deriving in France. What is a little known is that watchmaking in the world actually originated in U.K. And U.K. is seeing a strong revival in watch making. The U.S., which has some very well-known brands in the past, is seeing a revival. And of course, for us, we have not been present in the Japanese market. Everyone knows Japan's strength in watches. So we are seeing that also as a potential future market.

Okay. And sir, in Eigen, we have not...

Maybe you can -- can you come back again?

Sure, sir. Okay, I'll come back.

[Operator Instructions] The next question is from the line of [ Ganesh Gupta ] from [ SM ] Family Office.

Am I audible?

Yes.

Yes. Great to speak with you. My first question would be to Mr. Pranav. As post IPO commentary in the conference call, we said about 10x revenue in the next 10 years. And I would like to hear on brief about that. And second question would be, how do you think about ongoing ultra high [indiscernible].

Sorry, your voice is echoing.

Yes. Now, it's fine?

Yes.

Yes, I'm asking about onboarding ultra high luxury brands like Patek and [ EP ], given their preference for mono brand retail.

Any other question? Any other questions, Ganesh?

No, sir, those were the 2 questions.

Pranav, would you like to answer them?

As I had mentioned that we are at the time that we listed the company, we had mentioned our goal of growing 10x in 10 years. And I think that we are ahead of that vision that requires us to give a 26% CAGR, 25.9% or 26% CAGR. I think we've been delivering that through times that are through the good and the bad times, and I don't think that our vision has changed. I'm committed to delivering that vision. And I feel very confident that our teams have the resources, the partnerships and the energy to be able to deliver that vision on time. We have crossed 100 boutiques this year. And I do believe that if things go well, we should be doubling our network of boutiques in the next 3 years, and we are well within our -- we are executing as per our vision of the 10x in 10 years, given at the time of listing of the company. Talking about ultra high-end brands. We are -- our vision is to serve the Indian customers through whatever means or whatever routes or formats that serve the customer and the brand the best. Our job is to be able to create stakeholder value for everybody. If a brand feels most comfortable in a mono brand -- in a monobrand environment, which is an environment that is exclusive to them, then we will deliver on that as well. In our network, we have a lot of brands that have monobrand boutiques, and we performed very well with them. At the same time, we want to be -- we want to ensure that our business is not built on only upon supply-constrained brand. And we want to make sure that in our vision, supply doesn't become a constraining factor for our growth. However, we have respect for all these brands that want to come in, and we believe that we will be able to represent many of them to the best of our ability and really be able to set benchmarks around the world.

Sir, many congratulations on the century of boutiques you hit with Ethos. And I want to know anything about the connection with [ Adamar ] and Patek particularly growing...

Thank you, Ganesh. Maybe you can come back later?

I will not be able to answer in particular brand-wise connection.

The next question is from the line of [ Yash Sonthalia ] from Edelweiss [indiscernible].

Congrats on a good set of numbers. So my question...

Yash, there is an echo in your call.

Yes. Is it clear now?

Yes.

So my questions are regarding KDDL majorly. So first all, can you help me with a stand-alone revenue and EBITDA for Q4 and full year adjusted for currency, currency movements and impact of currency? Second, I want to understand like are ambition or our goal of 25% CAGR in Eigen, can you give us some color about the -- how we are aiming to do that by adding more customers or getting more wallet share of the customer or something else? Third, a follow-up on the dials business, like in the PPT, you have given a growth number. And also, like we are saying if the headwinds on the industry from China and some other markets revised, we can have a better growth. So this 11%, 12% growth was we try to -- I want to understand, is it including debt headwinds or if those headwinds goes away, where can this growth can go? And last on Favre-Leuba, like you said, we are expecting to double our sales. So can you give us some quantitative numbers like the new watches, which we sold on new plus old, and we are -- how much we are envisaging for next year in volume terms, if you can help me for that.

So I'm going to let our CFO answer about currency. I'm not sure if that's a number that we can easily share. But Eigen, actually, the answer is very simple. All of the things you mentioned, all of them, deepening -- and I mentioned this in my short address as well, deepening existing customer relationships, new customers and new products and capabilities. So the growth has come from these steps, and it will continue to come from this step. I want to point out that actually, our market share in the business of precision stamping is extremely small. So there's a huge headroom for growth. And so I believe all the 3 avenues will be used for the growth. As far as dials is concerned, we -- it's not only that. I mean, I always talk about dials and the watch components in general. And yes, if the environment in the global market for expensive watches for our export the brand that we exposed to, if that improves, then we expect that the growth can go higher than 11% or 12%. As far as Favre-Leuba is concerned, I'm not sure if we can share exact numbers, but as I told you, we have sold more than what we were projecting, and we expect to double the sales in the next -- in this quarter -- sorry, in this financial year. Currency? You said the currency corrected overall?

What is actually the [ third ] question regarding the currency? I have not understood. What do you mean?

So I wanted to understand, adjusted for any gains or losses for currency, what is our revenue growth and EBITDA margin?

We do not calculate adjusted with the currency, especially at a consol level, broadly, it gets even netted out because in KDDL, where the exports are there, we stand to gain. And it tell us where main imports are there, there is a ForEx loss. So as the [indiscernible] there is -- just continue?

Yes, sorry. So my question was more on stand-alone, like we have seen a huge jump in EBITDA margin. And my understanding is some part of it is because of currency and -- right now...

That has nothing to do only with this -- exclusively with this quarter. So over the year, as set the currency movements have been there. And with the exporting mainly to Switzerland and the Swiss franc being a strong currency, we do stand to gain. But I think going forward also, it is expected to remain at vital levels or the strong level. And it's difficult to quantify that over INR 1 or Swiss franc leading to how much of my EBITDA margin.

The next question is from the line of Ajay Suria from Niveshaay.

Sir, my questions are primarily on the Precision Engineering level. Sir, we were to come up with the new CapEx in Bangalore, so wanted to ask it has that commission or will the commission in Q1? And also the new CapEx, which we are talking about, if we can give the breakup line, is that to be more on the Precision Engineering business or on the Phase 2 of breakdown which we were to maybe lower some time after the success of [indiscernible]. Also, sir, second question is on the bracelet division, you mentioned that current revenue for this year is, I guess, if I heard it right, around INR 40 crores. So maybe if you can help us understand the utilization level for bracelet division at this moment? And how are we expecting that organization to ramp up going forward? And on the customer when for the bracelet division, I guess it was just one customer who was driving this segment. So as we are winning any new customers or any progress on that, that will be a big help sir. Sir, follow-up question is on -- again...

Sorry, there are a lot of participants waiting. So maybe you can limit your questions to 2, please, and come back later.

Sir, just last one if I can squeeze in. Sir, just on the Precision Engineering, I mean, majority of the revenue has been driven by a global OEM for which we were [indiscernible] products. So wanted to understand like is that like we are putting up this CapEx bagged by the orders maybe or confirm visibility from the OEMs or we have one new customer also on that. So maybe on that, if you can just add something.

So let me answer your questions on the bracelets. We are adding new customers, capacity utilization on the capacity that was existing was about 75% to 80% this year. As I told you, we are continuously adding capacity, and it doesn't happen with one big jump. We are incrementally adding capability and capacity, all of which leads to our revenue growth. So this will go up this year, and it will go up not only due to that, but also due to the addition of new customers. As far as Eigen is concerned, it's -- I will let Sanjeev answer that. And you had one question on CapEx, which also Sanjeev, I think Sanjeev is going on.

I think you asked a few questions regarding the CapEx, yes. Let me tell you, as far as the item CapEx is concerned, which we started last year, that is still under progress. Hopefully, in the next 3 to 4 months, it's backward integration of some of the processes which we are planning to do through this CapEx will be commissioned, and we will start utilizing the facility. Going forward, for the next year, when we have shared the -- that approximately INR 50 crores is planned to be invested in the CapEx, it is spread over all the businesses. But the major part will be for the Precision Engineering and the bracelet. And as we progress and based on the need and the development in the market, the investments will be done. You also asked about something about the [ bus bath ] and exports to the customer. So for us, I think you need to understand, Eigen asset is not a product selling company. [ Horizon ], it does not matter whether it's a [ bus far ] or some other component for some other applications, we continue to remain a capability selling company, and we will continue focusing into that. So there are avenues -- there are opportunities into the different products and to the different segments. And that has been our strategy, and that will continue to remain our strategy for the going forward approach. So it does not matter whether we are supplying [ busbar ] tomorrow, the customer changes and something else comes up. We will keep selling our capability.

The next question is from the line of Devanshu Bansal from Emkay Global.

Congratulations on -- Right, sir. Sir, congratulations on very strong performance across both KDDL stand-alone and Ethos as well. And Ethos, specifically because you have -- the team has achieved the key milestone of funded stores, plus the format has been sort of delivering a significant growth of outperformance versus the other consumer names. Just 3 questions from my end, sir. Do we have anything significant demand elasticity to inflation as we are entering into that phase going into FY '27. So based on your historical experience, do we have any evidence of maybe some growth impact due to hiring question? Second, on margins, I wanted to check, from a P&L perspective, last year, our store expansion was quite aggressive. So that impact of new store additions is already in the P&L now. So can we assume that the worst is behind us from a margin perspective, and incrementally from here on, we should see margins improving? And thirdly, quite a commendable performance on working capital front. There is a sizable optimization that has happened in FY '26. So I wanted to check if you could highlight a few key initiatives as well as whether we can expect a continued improvement on this front going ahead of them? So yes, these are my questions.

I'll let Pranav answer the questions on Ethos. As far as demand elasticity is concerned, no, I think we have -- you mentioned -- you are talking about price elasticity. Is demand is -- if inflation goes up, will demand suffer? We made [ 2 ] other products, right? So they are made specifically for customer-specific needs. So it's not really going to be impacted if there is inflation and there is -- if some of this has to be passed on to the customer, it doesn't usually impact. But in the end, it also depends on how much is the overall general inflation, right? If there's overall inflation and uncertainty and demand globally in the, let's say, growth globally dips, then everyone starts to make corrections in their stocking, in their inventory and their purchases. So that is a different thing is where the global demand drops. We don't see that impacting us right now. Even last year was uncertain and quite heavily impacted here. We all know that. But we have seen the growth that has happened. And we believe that if things moderate from here on and stabilize, we will be pretty much on track. So there is not that much of an issue if there is a little higher inflation on our demand. That's what I wanted to say. From -- for the Ethos questions on margin and working capital, Pranav, will you take them, please?

Thanks for the questions. I think our focus, as you know, right now, will remain upon increasing our network because we believe that the opportunity in India is massive. And I believe that no one else is better equipped to take on this opportunity and deliver customer excellence as we are. Our focus right now is in accelerate -- a further acceleration on store openings. Yes, this has been -- this has been the most accelerated development this year. So our costs getting baked in, yes. However, setting directionally, for us to be able to double the network in the next 3 years is my is my goal. Maybe it will take 4 years. My goal is to double the network in the next 3 years. I do believe from a margin perspective, a little bit depends upon currency fluctuation. I think that if currencies stabilize, we are in a good position. And I think it's hard to say whether it's bottomed out or it's going to be better, et cetera. Our focus is to keep it -- to keep making sure that it becomes better. If -- I know that if the Swiss franc or when the rupee stabilizes, the full price will be passed on and I don't see any impact on volumes type of luxury prices or price of luxury products is priced on. It's just that we take -- we do it every 6 months. And in luxury, we want to make sure that, that price, once it's, let's say, a certain currency has reached a certain stage, we do it after we feel that fundamentally, it's there to stay. We don't want to be correcting our prices. So therefore, there's a time gap in It. once it stabilizes, I do believe margins will become better. Is there costs that are increasing in making sure our foundational cost -- foundational layers are better? Yes, today, we want deeper relationships with our brands. For example, we have dedicated brand managers, et cetera. Those are the costs that have come in already. A little bit may come in. As I had mentioned earlier in my interactions as well, we're going through this 3-year investment cycle, after which, it will start to pay off very, very well. This year, we are -- April was a fantastic month, in fact, one of our best months in terms of growth. And we are continuing to focus on growth over everything else at this point of time. In terms of working capital, we are making massive investments into our merchandising team, into our processes and into our -- into strengthening our relationships much more with our brands so that they understand deeply what sells, what doesn't sell in India and to be able to create a product specifically for this market. We've gone from nearly 247 days of inventory to 221 days at cost, right? It is something that we're going to be focusing on. I had announced that we are doing and AI lab, it's -- AI lab is an internal thing, to be able to help all our departments make better decisions, right? In terms of space, in terms of capability, and our biggest focus area will be on furthering better. So we do expect that in mature stores, working capital will be looked at much more efficiently and will be looked at, at a much more granular level with the team sizes increasing and their KPIs being linked to it.

[Operator Instructions] The next question is from the line of [ Kanjal Mukija ] from [ Growth Spear ] Ventures LLP.

Yes, I'm audible?

Yes.

I have a couple of questions. So firstly, on the bracelet side, maybe 2, 2.5 years back, I got an opportunity to visit the plant. So around then, we are talking about that the current capacity of bracelets will be close to 70,000, 75,000 units per year and will incrementally increase it to a much larger number, given the fact that a lot of the Chinese players -- I mean, the smaller players are also doing some 300,000 units capacity. So like, can you just share some road map on the -- like how this capacity will increase here? The second question on Eigen basically. Just wanted to understand, like now that we are further expanding the capacity here, if you could just provide the capacity before the addition and what would be the total capacity post the expansion? And secondly, like you mentioned that we're also thinking of backward integrating here. So does that mean that you think of entering into forging costing, that kind of a setup? And one question on this, I wanted to understand, currently, in Eigen, what kind of metals are we dealing with? It's primarily steel or like some other metals also we're dealing with because of the other industries like aerospace and global consumer electronic industry and all. So these are my 2 questions, sir.

So second question. First, I'll just have a go at it. Sanjeev, you can supplement it. Again, it's hard to specify or calculate in terms of capacity. I know you want to plug in a number in your model over there. But if you remember seeing the Eigen factory or the bracelet factory when you saw both of them, there are very many different products that are made. And how many products we can make really depends on what is the mix of orders that we get. We can get orders, 3 orders for 1 million pieces or we can get 20 orders for much smaller numbers. So we don't know. So it's -- we don't really calculate quantity in terms of what is the changes of production or units of production. We tend to see it in terms of value. And as we have said that we expect value to grow at about 25% CAGR. As far as the bracelet is concerned, you are right, 75,000 was the approximate kind of capacity. As I told you, we are at about 80%. It is true that China has larger plants. Many of the larger plants actually make a much lower quality. So that has to be taken into consideration. This is a fact across businesses in every industry, the Chinese factories are larger than Indian factories, and it's not easy for Indian factories to match the scale of China. I'm not saying anything new. That's unfortunately a reality of manufacturing in India. However, our plan is to compete with China, not always on price, but on quality and producing and delivering the best value. Our goal is not really to race with China on producing cheap parts, but to race with the best in the world on producing higher quality and delivering high value. So the expansion in bracelet, I've already spoken about it earlier, so I'm not going to say that again okay? So I hope that answers your questions.

On the expansion front, if not, in terms of what is the output -- actually, this is just a follow-up, like my question was not answered completely.

So as I told you, we tend to look at -- it's important that we understand that we look at our in terms of value. What is the value of production that we have given. Value [indiscernible] grow by about 25%.

Sir, not the sales part. If you could just provide like how much the production area has increased or the facility has increased and a little bit on the backward integration, but what exactly what are we thinking of the willing backward integration?

The backward integration is it operating process, which we were getting it done outside. Now for further ensuring the quality and the consistency as well as the ramp-up of the volumes which are happening, we want to bring this process in-house. That's a backward integration already. And you asked about the earlier these revenues with which Saboo has already answered. And the capacity in terms of prices of the -- because very difficult, we make parts, which are [ 2 ] better and we make part, which is INR 200. Going forward, the only thing which has to be seen is the [indiscernible] growth possible.

Sir, in terms of size, if you could quantify -- in terms of size, how big is the...

We cannot -- we cannot quantify. And you are welcome to -- whenever we are visiting next time, we organize a factory visit, you are welcome to come there, and we can show you why it is difficult to quantify. It doesn't mean anything. If we were to say 5 million components, it doesn't mean anything.

The next question is from the line of [ Sujal Jhanwar ] from [ Opportune ] Wealth Advisors Private Limited.

Sir, am I audible?

Yes, Sujal, you are.

Sir, first question is on part of [ sideline ] bracelet division, that if you are expanding and increasing the capacity, are we like on the better part of division? Increasing the capacity or doing the backward integration? And my second question is in the part of side like the Precision Engineering that in the part of how much CapEx you are doing for the Precision Engineering and this is for also backward integration, am I right?

So these are your 2 questions?

Yes.

Just a moment. Increase in the [indiscernible] and the backward integration. So I think you have not understood properly. The backward integration is being done in the Precision Engineering business, not in the baseline. So that is the rating process for the Precision Engineering business. As far as the bracelet business is concerned, there, we are planning the some capacity increase in line with the market requirements. But what more is your specific question regarding the business?

So for bracelet, your increase -- doing expansion in the bracelet division. So how much increment capacity are you building for the bracelet?

Again, you tend to look at it in terms of quantities. We tend to look at it in terms of value and capabilities. But if I were to say that, I think we are going to expand from the current or from the original level of about 75,000 over the next 12 months to about 110,000 to 120,000.

Okay, sir. And sir, one last question on the part of overall revenue, part on the stand-alone KDDL. Is it more of volume growth or realization increment happen in -- on the top line? That is my last question.

The same question with the different shares of the volume and we do for us, we are worried and always concerned about the value growth. Whether it comes through a mix of the segment growth, whether it comes through the volume or whether it comes to the other realization, so neither we monitor or we feel that's important.

The next question is from the line of Prateek from [ Bandhan ] ANC.

Am I audible?

Yes.

Sorry. Sir, all my questions are related to Ethos. The first question is performance of new stores, which we have opened in the last year, which is around 25. How are they performing in terms of payback experience. That is question number one. The second is a ASP on FY '25 versus FY '26 is kind of flat. So how should we think about that? And lastly, on CHF [indiscernible], obviously, the CHF is now 122 versus -- it was 106 when you had the analyst year. So how much have you covered for? And what's the journey there?

Pranav, would you answer those questions, please?

I didn't understand the last question.

How much of the CHF exposure do we cover?

No, no. I think -- that was not the question, the pricing. So essentially, look, versus rupee, CHF was 106, now it's like 122. And obviously, we pass this increase in prices gradually. So how much have we passed on and how much is left to be passed on, which is hitting our gross margin?

Understood. Understood. I got it. It's different for different brands, but I'll answer it. So the first question was on how's the experience on new stores. It is as per expected line. It is exactly what we thought it would be. We are monitoring this -- as you go into Tier 2 cities, it takes a little bit longer, but then costs are also lower. So we are -- it is as per expectation. And year 1 of an accelerated expansion gives us the confidence to continue our acceleration. And as I announced that we will be opening many more stores this year in the next 3 years, we are signing on aggressively locations because we are confident on how well we are doing with these bookings. Is it sometimes a mixed bag? Yes. But is it ever horribly wrong? No. Until now, we have not a single decision are we regretting. Some may take a little bit longer than the other. So a store like [indiscernible] may be -- may reach its year 1 goal or its annual running rate of year 1. In 6 months, someone -- a city like [ Kanpur ] has already exceeded it in the first month. So it's a good mix. None of them do we regret. The second question was on -- I forgot the second question.

ASP.

The ASP is going to -- we are not focusing on ASP increase. That is not our focus. As we go into Tier 2 and Tier 3 cities, it is natural that volumes will increase faster because the kind of stocking we do over there is different. We were, in the first 3 years, after the listing, we had taken more luxury positions. Our luxury expansion will be more calibrated because of the fact that we feel we are -- the ultra-luxury, because of the fact that we feel we are well exposed over there, well -- or well entrenched over there. It's not that we've covered it. But the growth is on the ultra, ultra luxury where we're talking 50 lakhs 1 crore, et cetera. The growth on the price they are where the brands are more in the 1.5 to 3.5 4 lakh rupee price point, that will be an aggressive rollout over there. And it's into Tier 2 where it matches better. Tier 2 customers, will they also order a INR 1 crore [indiscernible] or INR 1 crore watch once in a while? Yes, but we don't need to stop that over there. That can come in from our main network and we fill in from there. We will also be launching a format. We believe that the threat from wearables is over, and that allows us a lot of expansion back in a price point between 25,000 and 2 lakhs. And that will be a new format that we are working on. It's very exciting, and it will further give us growth into the future. And as for your...

As part of you doubling of -- sorry, this new format is a part of your doubling guidance which you [indiscernible]?

It may not a very significant part, but it will be. Definitely, we are going to be launching this year a new format over there, which is going to be very exciting, very different from what we have. But we had earlier believed that 10 years back or 7, 8 years ago when Apple Watch had launched, we had decided to go slow in that sector. We believe that threat is over and that there is a lot of expansion possibilities over there as well for us. Brands want to work with us over there. They are welcoming us over there. We've tied up contracts already. So there's a lot happening over there. This is to specify on your question on ASP. I think for us, revenue growth and margin is important. Again, not so much the average selling price per watch. That is -- that's going to be an amalgamation. All verticals are essentially growing. Some may grow faster than the other, and therefore, you might see dipping over here or there. But you'll see very strong volume growth coming in as well. Your last question on Swiss franc. I think averagely, we are -- there is a room for improvement of 7%, 8% easily over there right now. We are definitely 7%, 8% below what we need to be right now in general. Now it takes time to pass it on for 2 reasons. One, it is not one brand that is deciding. It is 50 brands that is deciding. Everybody looks at the industry. There's comparative. It is comparative in nature, typically happens once in 6 months. And secondly, nobody wants to be raising prices and dropping prices because that erodes customer confidence. And at no point of time do I want to erode customer confidence because there's a volatility in currency, whether it is 1, 2 or 3 years, we'd rather win over customer confidence. That's the difference that I would see. But yes, 7%, 8% even if the Swiss brand doesn't move anymore.

Sir, when you say expected lines, would 12-month exit from the start of a store mean the breakeven? And the exit might [indiscernible] 12 months...

Can we move to other speaker because there are a lot of...

But yes -- yes, but we make a move on from that. Yes.

The next question comes from the line of Naman from [ Sangley ] Family Office.

Most of the questions are answered. Very good set of numbers. I just wanted to understand that any components, which of these sectors are witnessing the fastest growth of the EV aerospace, defense, auto components? Could you give us some light on that part, which -- or any visibility in these segments that we are getting for the next year?

Okay. You have a second question, Naman?

No. [indiscernible] but that is not answered, right? So we had already activated that part, correct?

Yes, yes. Would you like to answer that? Okay. I think -- so actually, the way we look at it and the way we are experiencing it, all these sectors that you name, they're actually very robust. So we have to decide where we are going to put most of our focus on. Obviously, EV, the energy storage, these are sectors where we've got momentum. We have relationships. There's a lot of scope to expand that. So that is growing. On electronics, again, there is a lot of momentum. Our market share in some of these is very small. So as we actually get into the segment and we understand the needs of customers and we marry and we sort of tally our capabilities with that, it's like you are standing at the beach and looking at an ocean ahead of opportunities. Now which direction you want to let, the ocean is large everywhere because compared to our size, the ocean is very large, right? So we have to decide which areas we want to focus on. And as I think we've spoken earlier also. Our focus, because of the momentum that we are getting, is in the EV, the energy storage and the electronic components. We have customers in other segments as well. And if opportunities come up, we will, of course, examine them. But the strongest growth we see are in the sectors I mentioned.

The next question is from the line of [ Shreyanj ] from Swan Investments.

Yes. Sir, 2 questions. One is on the Ethos. So when we're targeting 2x revenue stores in 3 years, all these stores are going to be coco? Or do you sort of look at the franchisee way of expanding stores? Because you spoke about getting into Tier 2 and below, right? And my second question is when I look at the stand-alone P&L, sir. Last 5 years, our revenues would have doubled. But if I just look at the other OpEx bit, that has grown higher than your revenue CAGRs, right? So I'm just trying to understand, your majority of your portion is exports, revenues is exports. So you're earning in maybe dollars or CHF, but you're spending in INR. So shouldn't there be some kind of operating leverage that sort of plays out? And when I look at your -- the breakup of other OpEx, it's largely consumables and job work expenses. So just trying to understand, is this volume-specific pay that you give to your contractual labor number of volumes that they do? Or it's a fixed salary? Or how does that work? Because I was expecting some kind of leverage in that line item.

So I mean, obviously, leverage is a part of the business. You said, right, we earn in dollars, and we spend in rupees, but don't forget that the inflation in India, including wage and manpower cost inflation, is far higher than abroad, right? In Switzerland, I'm not sure if you're aware, but in Switzerland, the annual increment that a person gets usually is between 0.5% to 2%. In India, 10% to 11% is pretty much the norm. So it's not -- yes, there is operating leverage in that way. But it's -- we should not overplay it, right? You can't really rely on that because costs in India escalate much faster, which is one reason why the Indian rupee keeps depreciating. I mean that's basic economics, which I'm sure you are familiar with. As far as your -- the arrangements on labor and contract, there are a mix of arrangements. Sometimes, it is dependent on volume. Sometimes it is a combination of volume and time. And in some skills, this can only be time. It cannot be volume. So it's really a combination of many things. And overall leverage comes from the way you approach the business. We don't see the -- breaking it down into segments like that.

I would like to add into that. Was -- look only in to the one side of that we earn in the dollars or in the foreign currency. But we do have a lot of import and a lot of expenditure for the market and the business promotion in the foreign currency. So to that extent, we have exposures into that. And number two, in the last 5 years, the growth of the different business segments are varied. As component growth has been lower than the other businesses where the margins are different. So this is a mix of all those things. Difficult to point out that only because we are in the currency and then accordingly, margins should improve. But overall, if you plot the last 4, 5 years, the margins have been at a stable or it has been growing. Yes, there is always a possibility of growing, but more than what we have grown.

I'm going to -- sorry, due to time constraints, we're going to take one more question. It's already 1 hour.

Sir, my Ethos answer is yet pending, the first question.

Sorry, you had said which one? Yes, I can answer that -- we have not done anything other than coco. We are not ruling out anything in the future, but at the moment, we are really focusing on company-owned, company operating stores.

Also, I said between 3 and -- 3 years, yes, between 3, I just want to make sure that we underline that.

Ladies and gentlemen, in the interest of time, that was the last question. I would now like to hand the conference over to Mr. Yashovardhan Saboo for closing comments.

I just announced we'll take one more question, if you don't mind.

The next question will come from the line of Jain from Lucky Investments.

On the margin again. But just sequential and Y-o-Y increase in margin this quarter. How should we understand the sustainability of this?

I can answer that. It's hard to sort of get one quarter performance. And I don't judge anything by that. It's -- you have to look at years and you have to look at a slightly longer term. As I mentioned in my -- we expect revenues grow 20% to 25% [indiscernible]. We expect margin [indiscernible] to remain within a closed bank. Again, it depends how the product changes in some segments where margins are higher but revenue grade is higher and the margins -- sorry, margins are lower and revenue growth is higher and [indiscernible]. So it's hard to really take a thing based on one quarter. I wouldn't sort of [indiscernible] based on a quarter.

So just a follow-up on that. In that case, if you could help us understand what drove margins in this quarter?

Sorry?

What drove margin this quarter.

There is some echo problem. I do not understand. We are hearing our voices and your voice is echoing again.

Is this any better?

Sounds better now. Yes, looks better.

6% increase in margins, if you could break it down in terms of operating leverage, better product mix, currency benefits so that we can sort of make...

It's difficult to answer. There are different business segments, export domestic mix changing and the growth of the opportunities in the different segments. But more or less, the -- we have already shared the indications of the revenue growth. The EBITDA margins and the overall margins will be in the same bank. It's not going to change dramatically either upward or downward.

Ladies and gentlemen, in the interest of time, that was the last question. I would now like to hand the conference over to Mr. Yashovardhan Saboo for closing comments.

Thank you, everyone. I hope we've been able to answer your questions to your satisfaction. If you need any further clarifications or want to know more, please contact SGA, our Investor Relations adviser. Thank you once again for being part of this call. And thanks, Sanjeev. Thanks, Pranav. Bye. Goodbye.

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