Khadim India Limited (KHADIM) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q1 FY '25 Earnings Conference Call of Khadim India Limited hosted by Orient Capital. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Masoom Rateria from Orient Capital. Thank you, and over to you, ma'am.

Good afternoon, FY '25 earnings call of Khadim India Limited. To discuss our results, we have with us from the management, Mr. Rittick Roy Burman, Whole-time Director; Mr. Indrajit Chaudhuri, the CFO. They will take you through our results of the business performance, after which, we can begin the Q&A session. Before we begin the conference, I would like to mention that this conference may contain some forward-looking statements about the company which are based on the beliefs, opinions and expectations of the company as on date of this call. The actual results may differ materially. These statements are not guaranteeing the future performance of the company and involve risks and uncertainties that are difficult to predict. I will now hand over the call to the management for opening remarks. Over to you, sir.

Good evening, everyone. On behalf of Khadim India Limited, I'm pleased to welcome you all to this conference call to discuss our Q1 FY '25 results. We greatly appreciate your time and interest in our company's performance. I trust that everyone has had the chance to review the financial results and investor presentation which have been made available on the stock exchange. During the recent fiscal period, our company encountered significant challenges that impacted our financial results. Inflationary pressures have strained our cost structure, while shifting consumer spending patterns have affected the demand for our products this quarter. Additionally, the uncertainty and disruptions associated with the election cycle have weakened consumer confidence and spending, putting further pressure on our sales. Furthermore, an unexpected and severe heat rate adversely affected demand for our core footwear products, particularly in several regions across the country. Despite these challenges, we remain committed to overcoming them through strategic cost management, supply chain optimization and targeted marketing initiatives aiming at driving recovery in the upcoming quarters. We successfully maintained our margins, which stood at 47.1% for the quarter, marking an increase of 220 basis points. Looking ahead, we anticipate further improvement in our margins as key raw material prices soften. Retail sales accounted for 56.8% of our revenue in Q1 FY '25. During the quarter, we added a total of 20 stores, bringing our total store count to 878 as of Q1 FY '25. This includes 228 company-owned COO stores and 650 stores under the franchisee model. Our distribution business contributed 33.4% of revenue in Q1 FY '25. Our distribution network now includes 755 distributors as of the quarter ended June 2024. Our retail and distribution business have a presence in 27 states and 5 union territories as of FY '24. We are on track with our demerger process and have successfully obtained shareholders' approval for the same. We are awaiting some necessary approvals from the regulatory authorities, and we hope to complete this demerger process by end of this financial year. We remain confident in our long-term strategy to return to growth and deliver value to our shareholders. We believe in the strength of our brand, the loyalty of our customers and the growth potential within the footwear market. Now moving on to Q1 FY25 financial highlights. Quarterly performance. On quarterly performance, revenue from operations for Q1 FY25 was at INR 153.9 crores as against INR 158.0 crores same period last year, down by 2.6% year-on-year. Gross margin for the quarter stood at 47.1%, up by 220 basis points year-on-year as higher contribution from retail led to favorable product mix. The EBITDA for the quarter stood at INR 17.4 crores, registering a degrowth of 4.8% year-on-year. Operating EBITDA margin for the quarter stood at 11.3%, down by 30 basis points year-on-year. The net profit for the quarter stood at INR 0.7 crores, down by 60.2% (sic) [ 60.5% ] year-on-year. PAT margins for the quarter stood at 0.4%, down by 60 basis points year-on-year. With this, I end my speech and open the floor for questions and answers.

[Operator Instructions] The first question is from the line of Deepan Narayanan from Trustline Payments.

So firstly, we have seen some sharp drops in retail demand last quarter. So -- but do we see the footfall improving in Q2? And how do we see the festival season demand coming up in Q3?

What we have seen in the month of July, it was more or less the same. But in August, with this Independence Day celebration, there was a demand for footwear. And in the last week, there was footfall and the sales was also good. And since this year, the Puja is in the first week of October, so the demand will rise in the month of September and in Diwali in month of October. So we think that after this muted sales for the first quarter, we will have a good demand for the festive season.

Okay, okay. And why has the distribution margins dropped at lower levels to 0.8% from the 4.5%?

In the EBITDA level?

Yes.

But distribution sales was not -- as regard to last quarter, the sales was less compared to last quarter this year. And there was margin improvement in distribution in the gross margin, but the expenses -- and there was a lot of correction that has been done in this quarter. So that has led to the drop in the margin.

Okay. Because even last quarter, we have talked about we have taken a lot of correction in the product categories which are not margin-accretive. So are we expecting margins in distribution coming back to the older levels?

Yes. If you see the gross margin, it has moved. But there are some cost there, some schemes that we have to pass on to the distributors that we have done in the past quarter. In the second quarter, with the improvement in sales compared to the last quarter -- second quarter of last year, so I hope that EBITDA margin will be at the same point of what we have achieved.

Okay. Okay. And since this other segment contribution has more than doubled to 9.8%, so it was mainly to institutional sales. And what kind of margins were that?

They were not an institutional sales, there was some -- there were some B2B sales to DMart, but the margin is low. The margin is compared -- be around 8% to 9% in the B2B sales, but that contributes directly to our EBITDA. And also, there were some sales of the older materials, so that has increased this sales. But we are increasing our B2B sales channel. We are talking with a lot of these players where we can improve, we can have some sales through other channels also.

Okay. Okay. And the sub-brand contribution has reduced by 200 bps to 57%. So have we reached the optimal levels of sub-brands, or this is one-off quarter for us?

I think this is one-off quarter because the demand was very much muted. And in the lower segment, Khadim has sold more. And in the franchisee, we also have seen, especially in the EBOs, the mother brand has sold more. But in the festive time, I think the sub-brand contribution will be higher.

Okay. Okay. And how has been the performance of sports and athleisure segment? What kind of contribution this brought this quarter?

Sports, we have seen around 5% to 6% has been wholesale. And athleisure, we have just launched athleisure garments. We have just launched in last -- in the Independence Day week, and we are seeing -- it's a good response we are seeing.

[Operator Instructions] The next question is from the line of Akhil Parekh from B&K Securities.

Sir, clarity on sport shoes. You said 5% to 6% was the growth in the quarter, is that right?

Yes. Yes. The total contribution is around 20% of the total sales. Growth was there, especially in the women's footwear, is doing very well for us, women's footwear. And the men's footwear is also lesser growth is there. But women's and kids are having more growth in this thing, in sports shoes category. And athleisure, we have products we have just recently launched, and it's -- let's see what happens, but it should do decently.

That's 20% of the total sales, or the total retail sales?

Total retail, retail and EBO sales, franchisee and retail sales.

So is that the reason why gross margins are improving? Or is it just purely because the raw materials that was talked about?

It's a mixture of both the things.

Okay. And do we expect the kind of gross margins, what we have done now, are more sustainable in nature, both on the retail and the distribution level?

Distribution level, it is sustainable. But in the retail level, we have done analysis of the feedback on the customer. And what we have seen that, specifically in the lower price point in the mother brand, the prices that -- I mean, the customer who has gone out of the shop has shown some restriction in MRP. So maybe we have to take some correction in the MRP for the Khadim brand, but that will be done after the festive seasons. In the next spring-summer season, we will try to reduce some of the MRP in the mother brand.

Okay. And in the past, you had alluded that sustainable EBITDA margins for retail would be somewhere around 17% to 19%. And now certainly we are closer to this rate. Should -- we would have some visibility, right? What kind of EBITDA margins one should expect [indiscernible]?

This quarter, we have -- in retail, we have done an EBITDA margin of 16.37%. So we are more or less on track on that.

On track of 17% to 19%?

Once the sales improve, the margin will be far more better than what we now have.

Clear. Second on the demand front, right, in past few quarters back, we had said new retail business, we aspire to grow by 10%, 12%, which will be led by store expansion and SSG and USP. And noting that the macro situation is extremely challenging. It's not just for Khadim. On the other the brands, we are seeing some pressure on the sales. But do we have some confidence, like at least for second, half we can grow, say, at least high single digits, if not double digits for the retail business?

So we are in track for the expansion. We already opened stores. And -- but what has happened is that, in the SSG, we are degrowing of macroeconomic factors. But I think in the festive quarter, we think of a growth of the single-digit growth will be there. And we expect that after the economy has remained muted for so many months, we can see some demand during the festive season.

Okay. Sir, would it be a fair assessment to say that the current challenges, what we have, are not company specific, but more environmental-led? Would that be a correct interpretation? Or...

Company level, there are a lot of corrections that needs to be there. But one of the major challenge is the macroeconomic factor. The correction that we have taken has -- we have taken a lot of correction, especially in the distribution business. Retail business also, we are launching new products. We are doing -- where there is a gap, we are introducing products. We are taking -- we have done that customer feedback survey. We are taking some necessary correction on that also. But the demand is very challenging environment that you can see from the other players' results also. But if the macroeconomic scene change, we will have a good retail numbers.

Sure. And just two more questions. One is we had some receivables payment from the [indiscernible] government. Have we recovered value completely, or...

No, no. We have not recovered that yet. But we are in a good chance of recovering within this financial year.

In FY '25?

Yes.

And what would be the quantum for it?

It's around INR 32 crores. INR 32 crores.

Okay. And lastly, demerger process. I think it's again a bit delayed, right? Like even last quarter, we had highlighted that this should be done by September. But now in the opening remarks, you are saying that it would have -- it would be done by end of FY '25. So any specific reason?

No, no. We have received the shareholders' approval, so now it's in the final stage. But it's dependent on the court procedure NCLT. So we can have the demerger in the third quarter, maybe in the month of November or December.

[Operator Instructions] The next question is from the line of V.P. Rajesh from Banyan Capital Advisors.

My first question is just the demand side, when you're talking about the macro environment being not supportive in Q1. The question is that, what is your sense whether you are losing market share? Or all the other players are impacted by the same, and you are either holding on to your market share or you are winning over them?

So in this context, I can tell that we are holding our market share. Whatever sale we have done, we are more or less in the same region. But what we are seeing, that the footfall that used to be there in our store, that has reduced because there are a lot of challenges that we have faced in the first quarter -- that everybody has faced. And there are some correction that was needed that we have done in last year. And this year, we are already doing. We have done a survey with the customer feedback also and we have the necessary correction we are doing. So we cannot say that we are losing market share. But when there is a festival like the Independence Day, in the last week of Independence Day, we have got good sales numbers. So whenever there is footfall in the market, we are getting the sales. However, the challenge has come that the footfall has reduced. And also there are challenges come from the e-commerce players. There's a lot of stores, big stores having footwear segment. That challenge has come, but market has also evolved. So taking together, we are in the -- our market share has not improved. And -- but we are not falling in the market share, we are still in the business. We are used to sell 1 crore pairs in retail, we are now selling around 75 lakh pairs. And we will definitely achieve the 1 crore if the macroeconomic changes. We are doing our sales, and during the festive period, whatever targets we are having during the festive, we are doing it. So that show that the brand is still very vibrant in the customer. But when there is no festival, there is no -- weekend, the normal days, the footfall is down. Trying to make up that also by giving new products, offering a good price so that the volume also increases. So these three factors, we are taking into consider and hope that the things improve and our sales also increase.

That's quite helpful. And what was your average order value in Q1? And how is it trending compared to, let's say, Q4 or Q1 last year?

What, ASP?

No, average order value.

Average order value?

Order value for what, for franchisee?

No, for the retail business. What was your AOV? To just get a sense that if the customer is coming in, is he or she buying a higher-priced...

ABV, average bill value. It will be in the range of INR 900 to INR 1,000.

And how is it trending compared to Q4 versus Q1 last year?

It was same. Last year in the same range, INR 900, INR 920, it was like that. Now it was around INR 940, INR 945.

One area where we have seen a good traction is like we have this -- we have got a company-owned outlets, then we have got exclusive branded outlets, which is franchisees. And amongst the franchisees, there is another win which is called branded outlets. So these are like mainly in the Tier 4, very smaller markets. In those areas, we had -- around 5 to 6 months back, we had given some products which were competitively competitive in terms of price. So in that, when we are tracking that sales now, so it is showing a decent amount of growth. It's showing good growth. The problem with that BO style of businesses there were a lot of -- because the prices have increased a lot over the last 3, 4 years, so a lot of stores became inactive. But whichever remained active, and now that we are tracking the sales of these branded outlets, their sales have improved quite a bit. So like in the wholesaling, by offering new products both in sub-brands and the mother brands, new designs, new competitive pricing, I believe that if the market scenario remains good, I think we are -- we can grow. Growth shouldn't be a challenge then.

Right. That's very helpful. My other question was that in terms of your store count, how many of them would be store-level, EBITDA-level profitable versus maybe many at the end of Q1?

End of Q1 doesn't show a correct picture because the Q1 sales are a little on the down side. So if you compare the -- if we see the last year's EBITDA level, we have done around store-level EBITDA of 22% to 23%, and where most of the stores are EBITDA-positive. Which stores are not EBITDA-positive, we take a call of shutting the store. So last year, we have taken a call of shutting 2 stores. And out of that, 1 we have closed, and another, the rental was -- the landlord reduce the rental that we have offered, so we continued that store.

Right. So you're seeing, out of your almost 900 stores, only 2 stores were...

No, no, no. Our COCO. Out of the 240 stores that we had, two stores were EBITDA-negative. So that store, we took a call of shutting 1 store. And 1, we have -- the landlord reduced the rent. So we are continuing that store because at a lesser cost.

Okay. And what is your sense on the EBO stores or your franchisee stores, are they...

They are not profitable, they come with their problem. But we -- whatever problem they come, we try to sort it out and try to keep the store open. And if there is a problem with the EBO, it's not contributing, then we have come out with a model where we take on the stores for -- only the stock. We take the stock and give the EBO a commission because they are not able to properly run the business as are the company norms.

Okay. And so how many such EBOs were decommissioned last year?

Last year? These activities have started in this financial year. So we have already approached three franchisee who has a good location, but we're not able to do correct business. One in Faizpur; one we have done in our Kolkata; and other, we are sorting out the issue in one of the -- in the northern part of West Bengal. So this model, what we invented, is that we are taking the good location of the EBO and carrying the model on a commission basis with the EBO.

Got it. And just last question on for your Q2, given the comment you mentioned in the past. What kind of growth do you expect year-over-year there?

In the financial year, so when we budgeted this financial year, we have expected a growth of around 10% to 12% in retail. And -- but first quarter, there was no growth, it was degrowth. So maybe this year, we may land up in around 6% to 7%, good -- by doing a good festive year. And the third quarter, also believe to be a good quarter. So we are doing our expansion. Whatever expansion strategy we have done, we are on it. We are opening the stores. So I think we would be closing this financial with a growth of around 7% to 8%. .

The next question is from the line of [ Raneet ], an individual investor.

Am I audible?

Yes, sir. you are.

So basically, the first question is I'm curious about the number of inactive stores that we are right now not operating of the 800 number. So because, in the [ BHRP ], it was mentioned that around 155 out of 685 stores then were inactive. So is that the same -- does the ratio still continue today? Or how is the situation?

So out of that inactive, we have closed down lots of store in that list. Now I think the inactive stores would be how much? Just a minute. We have 136 inactive stores.

So just those inactive stores are included in the overall 800 number, right?

No. The inactive stores in BRHP also, they are not included in the overall numbers.

Okay, understood. So I'm curious about the omnichannel strategies we're employing because Metro and Bata have been focusing aggressively on creating omnichannel approach. What could be the reason? And are you also pursuing in the same axis as this? Or what is the situation with our omnichannel strategy?

In all our focus stores, we have omnichannels, and we are doing it in a good way. In the franchisees also, we are trying to sort out the issues. So there would be the cost that involves in the omnichannel. So maybe after the festive, we can run, in the top 200 stores, omnichannel models in that store also.

Understood. One more thing is regarding the retail outlet's same-store sales and same -- volume growth and sales growth. Like most of these footwear sales, there's usually the plateau of sales side. So what is usually the sales number of mature stores that the sales growth is muted? And what is the volume growth that usually happens in these stores?

Generally now, the trend is that, in the same store, we are not seeing any volume growth or sales growth. There is a degrowth of around 5% to 6% in the value. So previously, when -- before COVID, the same-store growth was in the range of 4% to 5% SSG growth. But now we are seeing SSG degrowth. So that's the reason why the sales is not improving. Once the SSG is back in track, I think the growth level will be around 8% to 9% in a financial year.

Understood. So one more. Curious about the introduction of apparel into our product range. Usually, apparel, you have higher inventory costs and like management is very difficult with day stock and everything, and footfall. And is footwear also similar? Or you think introducing into apparel would be easier because we don't -- like how is the inventory situation regarding the apparel and footwear?

Apparel is lesser problem than footwear. In footwear, the sizes are 6, 7 sizes are involved. But in apparel, we are keeping only 3 sizes. So I don't think that would be too much constraint for us. But we are taking apparel in a very small way. We are testing it out in our store, in the big store. In small store, we don't have space to have the apparel. And maybe if it pick, we'll keep on the apparel in our store. And with the cost remaining the same, if you sell a good amount, it will increase the store-level EBITDA. So mainly for improving the store-level EBITDA, we have introduced this apparel and keeping at a competitive price compared to our competitor.

So what is the margin range for this? Is it higher than the footwear segment? Or is it going to be lower?

It is lower than the footwear segment.

Understood. So what are the sales expected during this year? Like we must have budgeted some kind of sales or have some kind of inventory doing that to forecast for the year, right? What is that sales number?

We have taken it in a very small way. Around 50 lakhs of inventory, we have taken for this interaction. And we have launched it in 40 to 45 stores. So we want to check how the sales pans out in this thing, then only we will make expansion in this athleisure thing.

Okay. Got it. One more thing about footfall. So how is it usually -- like what is the footfall to conversion ratio? Like how many -- when 10 customers enter, how many completes a purchase when they enter? And how many purchase more than the average order value?

Now the conversion ratio is high because compared to last -- pre-COVID, it was around 40%, but now it's around 65% to 70%.

So what is the reason for the increase in conversion?

Reason for increase in conversion is the lower number of footfall. So now sales...

Surer buyers are coming in.

Sure buyers are coming. So the footfall, the conversion has increased.

Got it. Like -- and one more thing, like with the demand and the macroeconomic situation being a little weak, how is the unorganized sector going to play out in terms of the overall market competition? Because when we're growing the overall and when the market was growing, we thought organized is going to take up better at a higher rate than that of unorganized sector. So how -- does the situation remain? Or how is it with that -- with the competitive forces increased, like the conversion model in unorganized sector, because of the market conditions, because they have a lower-priced product? Or how is the situation?

So with the BIS introduction in footwear, we definitely see that the organized sector will improve, but it has not yet been -- BIS has not implemented in a full-fledged manner. So once it is implemented and with the China -- lower China import has gone down, I think in years to come, the impact of organized retailer will be higher compared to un-org. But in unorganized, challenge will be there. But with BIS implementation by the government, it will be better for the organized sector to do the business.

I understood that's on a long-term basis. I'm more curious about the short term, in the next coming year, let's say. So is unorganized going to play a bigger competition than it did, let's say, last 2 years ago?

Unorganized has already played -- there is a competition from unorganized sector in the distribution business. But in the retail business, the pressure of unorganized sector is a little bit lesser. But there will be -- in the short term, there will be remain. But with the stance that has been taken by the government, I think in the long run, it will reduce.

Got it. And one more thing with...

Sir, can you please join the queue for the follow-up question. Thank you. Next question is from the line of Deepan Narayanan from Trustline Payments.

Sir, you talked about these B2B kind of sales. So is this outside sales to B2B, or this unsold inventory can come back to us?

No, no, it is sold to the B2B. It's not any SOR model.

Okay. Okay. And how do you see the opportunity there? Now we have entered with demerger, so are we seeing more such opportunities? And how are we planning to scale this up?

We are trying to improve, but with a good payment comes and with more return policy, that's a challenge. But we are taking this -- that we will sell only to players who are good paymaster and with no return policy. Maybe in manufacturing defect, we will return, but not on an SOR basis. So that will be a challenge. But we are taking this challenge and only grow this business in this model only.

Okay. And margins, what we are targeting in this business is like 8% to 9% kind of margin, right? EBITDA margin?

Yes.

Okay. Okay. And also in the retail business, sir, how do you see these franchisee inquiries happening as compared to pre-pandemic levels? Are we still seeing the franchisee interest levels higher?

See, franchisee interest level, after the pre-pandemic, with the cost of franchisee going up, it is a little lesser. But we have opened -- last year also, we have opened around 70 to 75 franchisees. This year also, we have targeted for that. So we are trying scouting franchisees. There are lots of new areas that are coming up. And with our model of franchising now, some new models with the FRN model that we have introduced in the northern and western segment, so there are -- some inquiry are there. And in the eastern part, we have -- still have inquiries, but not at the level -- same level that we have seen in the pre-pandemic level.

The next question is from the line of Akhil Parekh from B&K Securities.

Just one clarification on BIS. So what are the time lines for implementation? Or is it already implemented? And this implementation, should we see a boost for domestic brands at the lower end of segment or at the higher end of segment?

Yes. So BIS is -- especially for the smaller suppliers, the government has still given an extension until the end of this year. I mean the normal year, not financial year. So after that, let's see what the government says. For the smaller suppliers whose turnover is less INR 5 crores and below, so suppliers -- many of our suppliers are in that range. And whoever is the medium-scale suppliers who have turnover about above INR 50 crores, they are already supplying us with the BIS-marked products. So the team is fully ready for -- we have actually trained our micro suppliers also. And once the government says that clear business have come around, then we'll start for that also. And what was the second question? I forgot. What is your second...

No, that was the only question. And like from an import perspective, are we get more channel imports at the lower end? Or is it more at the higher end?

Import, we'll have to -- import, we -- higher-end imports will be there.

There are lots of -- in lower end, the government don't want to do the import in the lower end.

Government doesn't want you to import something which is -- I mean, below $3 or something. And just -- I mean, the number is not fixed yet, but they don't want you to import lower-value products. So the higher-value products will -- can be imported, that's what it seems like. It can be imported, actually, from the next -- from now, you can import. So that is one good thing.

Okay. So what I understand is, basically, the lower end of footwear should benefit out of this whole exercise.

Yes.

Yes. Yes.

The next follow-up question is from the line of [ Praneet ], an individual investor.

Am I audible?

Yes, yes.

So I'm curious about increasing our brand -- number of brands. So basically, we created an -- we are sort of creating sub-brands to improve the brand resonance and to introduce new products, right? Are you going to continue doing that? Or are we going to take a break on that?

Sub-brands, we are continuing to improve our sub-brands. And...

No, we are improving the designs of the sub-brands because, as I have already told, we will reduce the margin in the Khadim brand. But in sub-brands, we'll keep the margin intact, and we'll provide new designs, good quality product in the sub-brands.

So are we going to increase the number of brands? Or are we just going to keep the number of brands constant?

Number of brands will be at the same, what we have done. Maybe in the British Walkers, we will come out with a website for the British Walkers shoes.

Okay. Got it. So how much sales do you do for British Walkers? What's the...

Around 6% to 7% of the sales comes from British Walkers.

Understood. So in terms of -- like you previously mentioned that the franchisee cost has gone up after COVID. So what is one of the main primary reasons of it going up? And after that, like why don't we just reduce the cost so that we increase -- further increase our retail presence, so more branches might take it? Or does the elasticity not remain with that...

Can we come back to the question? Your voice is cracking.

So I'm asking about you told that the franchisee cost of taking a franchisee has increased after COVID. So like what we call expense of franchisees to take a Khadim franchise. So I'm curious, why don't we pull the line back lower again so that more franchisees...

No, I'm telling the operation cost of the franchisee has increased.

Because the sales have reduced, therefore the cost has increased. Cost as a percentage has increased.

And also with the inflation coming in, the cost of rental, the salaries, other cost has increased. So whatever margin they were generating, operating margin. So now that margin has become a challenge because, on one side, the cost has increased, and other side, the value of sales has reduced.

Got it. Understood. So how many of these franchisees are unprofitable? Do you know on your level? Or how is it?

See, we don't have their P&L account. Whichever franchise is having a problem, they come to us because -- and we try to sort out their issue by doing some marketing activities. Or I have told in some franchisees, we have converted the franchisee into a [Foreign Language]. So these type of things are there, and where I think there are some closures because of non-profitability.

Understood. So you provide support as much as you can to franchisees.

Yes.

Okay. And one more last question is regarding the demerger path. So how are they going to split up the manpower in terms of top management for both demerged companies? Are you going to -- the management would wear both the hats running both the companies? Or are you going to onboard more people and reduce people in Khadim? Or how is it going to be?

No, in the -- specifically the manufacturing and the distribution people will go -- distributor salespeople will go to the demerger entity. And the management will look at both companies. So there will be no new introduction in that company for -- at the management level.

So the employee cost is going to remain thus. So maintain employee cost. So reduced for this company the Khadim which is in the retail segment? Or is it going to remain the same as a percentage?

Percentage, it will remain the same. Because -- but the thing is that the distribution employee cost is a little bit on the lower side compared to the retail. Because distribution, we don't have manpower at -- the manpower is higher in retail. So percentage-wise, cost will remain the same. But the manpower that are dedicated to the distribution will go there.

Understood. So how much more investment are we planning on doing on the distribution side? Because right now, I think our growth has remained subdued and you want to onboard more distributors. So how -- like what's the credit cycle like with distributors?

Distributors' credit cycle is around 45 days, and we are trying to squeeze as much money in the distribution business. And we are not -- I mean, going in giving more credit to the distributors in achieving the sales. Whatever sales we are achieving is with our own credit terms. And the working capital, we want to improve the working capital cycle in distribution business. And with good products and at a competitive price, we are trying to catch -- we are giving lesser distributor. Because giving more places for them to work so that undercutting of prices doesn't happen in the market level.

Understood. So we're not going to introduce further capital into the distribution business, right? Or are we going to introduce further capital?

No, we are -- generally, we are only having investment in molds. The development is an ongoing process. And in case if we require some machines, we purchased that. But no infrastructure or any improvement type of cost in distribution.

So -- but because it's a manufacturing endeavor, so what is the maintenance CapEx going to look like for the distribution business?

Around INR 4 crores to INR 5 crores.

Okay. Understood. And like one more last thing, is I think we've been rebranding our old stores, right, to improve -- like the brand face and everything. How is that endeavor going? Are we changing our stores?

No. We have planned to renovate around 20 stores. Already, we have around 7 to 8 stores already renovated. And we are in the plan -- that plan that we have done of renovating 20 stores is on.

So are we seeing any immediate uptick with the renovations? Or is this the same?

We have seen some immediate uptick in that -- after the renovation, but it's a very small time. We have to check around 4 to 5 months to see the overall impact of the renovation.

Yes. In the subsequent quarters, we'll be able to give you a more clear picture, but there is a good effect.

And one last question regarding the company-owned, company-operated stores. So are we planning on actively increasing the number of COCO stores? Or are we going to remain at the same level?

No, no, we are. In the -- and we have seen -- in the budget, we have planned for '25, opening of 25 stores. We are in that plan. We have already opened around 8 to 9 stores. So by this year-end, we'll be opening 25 new stores.

Thank you. In the interest of time, this was the last question for today's conference call. I would now hand the conference over to Ms. Masoom Rateria for closing comments. Ma'am, please go ahead.

Thank you, everyone, for joining us on the call today. I would also like to thank the management for spending time and addressing the questions today. We are Orient Capital Investor Relations to Khadim India Limited. For any queries, please feel free to reach out to us. Thank you.

Thank you, ma'am. On behalf of Khadim India Limited, that concludes this conference. Thank you all for joining us, and you may now disconnect your lines.

Thank you.

Thank you so much.