Macfos Limited (543787) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Macfos Limited H2 and FY '25 Earnings Conference Call. [Operator Instructions]. Please note that this conference is being recorded. I now hand the conference over to Ms. Bhumika Maheshwari from Hem Securities. Thank you, and over to you, ma'am.

Thank you, Steve. A very good evening, ladies and gentlemen. Thank you for joining Macfos Limited Quarter and Half Year ended 31st March 2025 Earnings Call. Joining us on the call today from the management team are Mr. Atul Dumbre, Chairman and Managing Director; Mr. Binod Prasad, Whole-Time Director and CFO; and Mr. Nilesh Kumar, Whole-Time Director of Macfos Limited. We will now commence the call with the opening thoughts from the management, post which we will open this forum for the Q&A session, where management will be glad to respond to any queries that you may have. Before we go on to the mail call, I would like to read the standard disclaimer. There may be a forward-looking statement about the company and the subsidiaries, which are based on the belief, opinion and expectations of the company's management as on the date of this call. The company does not assume any obligation to update their forward-looking statements if those beliefs, opinions, expectations or other circumstances should change. These statements are not guarantees of future performance and involves risks and uncertainties that are difficult to predict. Consequently, listeners should not place any undue reliance on such forward-looking statements. With this, I hand over the call to Mr. Atul Dumbre, Chairman and Managing Director, Macfos Limited, to take it forward. Over to you, Atul, sir.

Thank you, Bhumika. So, first of all, I would like to welcome all our dear shareowners, and thanks a lot for sparing this time for this call from your busy schedules. So, we are very pleased to share our financial results for financial year 2024-2025, which highlighted the significant progress that we have made in key areas of our business. During this year, we have achieved a revenue of almost INR 258 crores with EBITDA of almost INR 27 crores and PAT margins of around INR 18 crores. So, these results to us represent the robust growth that Robu.in has always shown. And if you convert these numbers to growth in revenue, it's 104% growth in revenue, 61% growth in our EBITDA and 65% growth in our PAT. This underscores the strength of our business model and our efficiency in operational execution. The overall year was marked by healthy demand for our product offerings, and we are optimistic that this demand will continue. As we always say, electronics is becoming a big part of life day by day as well as the alignment of government policies for manufacturing in India, especially in the segment of electronics. These are and will remain key drivers for growth for our segment. A notable progress this year has been expansion of our product catalog. So, we have added over 50,000 new SKUs or new products. So, I just want to highlight one thing here. Though this 50,000 as a number looks very big, but we all have to understand that these are primarily small and low-cost items that we have added. Nevertheless, it's an addition to our product portfolio, a strategic one. And this has significantly enhanced breadth of our product offerings. We have also enhanced our marketing efforts, both in the digital marketing as well as in the physical marketing. So, this year, we have actively participated for the first time in a lot of domestic exhibitions. So, the exhibitions in Pune, Delhi, Bangalore, Hyderabad, we have attended a few this year. So, these enhanced marketing initiatives, we believe will broaden our brand visibility and market presence. Along with that, our key business indicators like website and app traffic, total number of orders served, average order value and customer retention continue to grow and show strong and positive trends. As we look to the future, we remain guided by our strategic frameworks, which are Robu 1.0 and Robu 2.0. We believe this will continue to shape our road map for 2025 and beyond. Robu 1.0 for, I mean, most of our regular investors know this, but for people who are new here, Robu 1.0 represents our electronic distribution business, which is a core business that we have. So basically, here, we onboard a principal supplier, have a distribution agreement with them, get their products on board at a competitive price. And these products are distributed in India. That is Robu 1.0. The focus here is delivering electronic tech products at competitive prices backed by our robust customer support with minimum lead time. And in Robu 1.0, we are investing in our IT infrastructure enhancement as well as we are strengthening our supplier partnerships to optimize the procurement as well as reducing lead times. The expansion of our SKU this year reflects our ongoing efforts to build comprehensive and reliable store in electronics domain in India. Now let's talk about Robu 2.0. Robu 2.0 is basically a strategic shift or a long-term strategic shift for developing and scaling our own proprietary brands and our own proprietary products. So almost over past 2 years, we have been putting in increasing focus for Robu 2.0. And we have doubled down our efforts for research and development in 2024-2025. Robu 2.0 is an initiative which is central to our long-term vision and positions Macfos for sustainable growth over the next 5 to 10 years. In the past year alone, we have successfully launched around 186 new products, under our in-house development program for Robu 2.0. So, these products are basically from 2 main categories. One is development boards and modules, and other is Drone parts. So key additions in these new SKUs are agricultural drone frame, ready-to-fly drone kits, some telemetry modules, some TFT and HMI displays, so on and so forth. Also, we have our own brand, which is Pro Range, under which we have launched 650-odd products this year. And all these products have been well received by our customers, which reaffirm our quality and innovation as well as our belief that Robu 2.0 is going to be a strong pillar for us over the next 5 to 10 years. Again, I would like to thank you guys for your trust and support. As I always say, we always consider our investors or shareowners as one of our partners. And we believe that you guys are also a key pillar for us. And I assure you that we will always be working for bright and innovative future for Robu.in. That's it from the management side, guys. I'll be taking any questions or doubt you have and trying to answer them to the best of my abilities. Thanks again.

[Operator Instructions]. The first question is from the line of Parikshit Kabra from Pkeday Advisors.

Congratulations on a good set of numbers. My question actually is quite a fundamental and basic question because I've been struggling to intuitively understand why a large-scale enterprise customer who may be purchasing these products in bulk would come to Robu and come to Macfos for its procurement requirements rather than doing it directly. Would it be fair in my understanding that the tail end equipment that they might have, the arbitrary equipment that they might need, components that they might need is when they come to Macfos and besides that, they do direct procurement.

First of all, Parikshitji, thanks a lot for your question. And it's actually a very good question, fundamental question that you, as you already said. So, if you look at Robu's journey, I would say, in 2014, we started as totally as an online store. We didn't have any corporate customer per se. We were totally focusing on online sales or the retail sales, B2C sales, whatever you would like to call it, almost for first 4 or 5 years of our journey. And through the journey, we realized that there is a lot of industrial customers who need the support as well as our products. And then we formed a corporate sales team around 2019 and started to sell to the corporate customers. So just to give you a perspective, our corporate sales around 2019, '20 times were odd 5% of our total sales. 5 years from that movement, today, we, our corporate sales are almost 50%, half of our business. We have a strong corporate support or sales team, key account managers to support corporate customers. And I believe we have learned to make, to sell our products to, let's say, small and medium-scale corporate customers. Part of that journey, I believe that would be to gain these corporate customers coming, as you said, large-scale corporate customers in coming times for us. As on today, we are not doing a lot of large-scale customers. Again, part of your question was that why would a large-scale customer would buy from us. So basically, when you go into electronic distribution model, generally, a large-scale customer, even the small or large-scale customer have to buy from the authorized channel partners because the principal or the company who owns the product, they really don't want to get into the local distribution country-wise. The key strength is designing and developing these new products and bringing them to market to solve customer issues. Yes, whenever there are higher volumes, there are generally tri-party meetings, the one with principal who is who owns the product, the distributor who is road map first, and then the customers. And of course, there are ABCD things. But generally, in electronic distribution, even a large-scale customer would want to go with the local distributor because it is mandated by principal most of the times. And secondly, they need a number of support. If the product is not working, they need some support locally, who would support them. If they require a small quantity because their production has increased a little bit more at the last moment, or their product is not proving to the exact specifications where they want it to be. So, all those kinds of small things are taken care by local distribution or the credit terms, how would a manufacturer or a supplier, let's say, sitting in Europe will give credit terms and if those credit terms are not, if the payment is not served by that customer, how would they go about it. So, for all these practical reasons, generally, the thumb rule is they go with distribution partner.

So would it then be fair to think of Macfos as the master distributor for many of these components in India? Do we have exclusive distribution for many of these things?

We have distribution for many of these things. We are authorized distributor for over 250 brands. However, we are not exclusive distributor for most of them. We are exclusive for a few brands. However, we are not exclusive for most of the brands that we have.

Okay. So then there must be other authorized channel partners in India, just like us. Is our right to win the sheer size and breadth versus our competition?

So for any business, this is true. For any business, it always wants to win a lot of market share. However, once you are doing a significant business for any brand, you get certain advantages. Once you have a good product portfolio, so customer prefers to get a lot of products from one distributor. Secondly, once you are doing the pricing that you get and the support that you get from the brand also depends on how much volume or how much of the total revenue you are moving. So, once you are of a certain size or moving a certain business for the partner, then you almost have that edge over even with a few distributors in the country.

Perfect. Let me just ask you one last question before I get back in the queue. How would you describe our market share in this industry? And who are the key competitors in India?

So as we always say, in India, we don't see a single competitor because we are doing multiple segments, around 70,000 SKUs as on today. So, we have the most comprehensive portfolio. Internationally, we always say that there are these 3 or 4 big players who are Arrow, Digi-Key, Farnell, Mouser. So internationally, we believe that these are more of similar business models. Of course, we are stocking in India, so we have leverage in that. But yes, locally, we don't see; there are people who are doing, having a few thousand SKU in one segment, a few thousand SKU in different segment, but nobody have a comprehensive store or comprehensive portfolio like robu.in

Sure. Nobody is of the same size. But if you look at the entirety of the industry of all the equipment that you're providing, what would be the market share in India for you? Do you have a sense?

That, this question, like market share, we have also tried to calculate a lot of times. However, because the market is, you can say, fragmented or there are a lot of things, there are a lot of components in the market. So, we are not, we really don't have a number to put on here. How much is the market size and how much of that is we are doing as a business.

The next question is from the line of Balaji Vedarethinam from NAFA AMC.

Atul, Congrats on great set of numbers. Just a couple of questions. One, we have seen broad basing of your SKUs to almost 70,000 now. What I'm trying to understand is considering that you have given more business to your vendors, I was expecting that the days payable number to actually be higher than last year, meaning that you would have kind of bargained for better payable days. But I've seen that in FY '25, your payable days have actually come down. So, any thoughts on that? That was point number one. Point number two, this SKU addition I mean, of course, this was always a planned strategy, but does the 90-day trade barrier also have some kind of an impact on this particular division of yours to broad base the number of SKUs?

Balaji, I didn't get your second part of this question about SKUs. Could you please repeat that?

So if you look at the days payable, the amount of time that you would take to pay to your vendors, that has actually dropped compared to last year. So, I was actually expecting that the days payable number would actually go higher considering that you have given more business and you are broadbasing your SKUs.

Yes. And second question was?

Second question was how much of the current geopolitical situation, the trade barriers that has played a part in trying to broad your SKUs in the last quarter of this financial year?

Okay. So, I'll answer the second part first, that how much of a geopolitical situation has played a role in broadening our number of SKUs. So, I don't think it has played any part, I mean, active part. Yes, of course, there is a geopolitical situation. I mean something, every time something is going on around, which is going to impact a lot of businesses in India, Robu is no exception. However, the broadening of SKU, we really haven't thought much that way. Our thinking process is simple. We [ Impact] [ Technical Difficulty ] at a certain target for revenue, short term and long term that we want to do. And for doing that revenue or growing the business, we always see which categories we want to target, not the SKU, number of SKUs to be added, but the categories. We see what is the best that we can do with our existing categories. And then if we need to or want to add any extra category in our portfolio. And then once we zero down on a particular category, then we see what kind of products we should target for the category to have a certain revenue in coming 1, 2, 5 years, so the decision is totally based on that. So, there are some categories where the product is selling single SKU selling at INR 1 lakh a piece, maybe INR 60,000 a piece. So there maybe we just add 2 or 5 products. And even if we sell INR 20, INR 30 a month, the revenue will [ increase ] [ Technical Difficulty ] by INR 20 lakhs, INR 30 lakhs, let's say, roughly. For some categories, if a product is selling only at, let's say, INR 400, INR 500, then we'll multiply it by a number of products that we can sell. And accordingly, we'll see if we need to add 10 SKUs for that category or maybe 1,000 SKUs. So, it is totally based on the type of category and type of product and the pricing. So that is how we think. So generally, we do not have this geopolitical situation considered while doing this SKU, new products or new SKUs to be added in. And that's why in my management prospective, I said that I want to highlight that though the number looks good, these are primarily small and low-cost products. It was just a strategic decision. Secondly, you mentioned about payable days; [ Technical Difficulty ]

So, for March '24 was around INR 8 crores. And in March '25, it's around in March '24, it was total INR 8 crores and in March '25, it's INR 10 crores. So, it has gone up by INR 2 crores and all are less than, you can say, 6 months.

So, I was actually looking at it from a number of days. I mean it's actually come down to 18 days from 30-odd days. So that was my broad question, but that's fine.

I'll tell you. So generally, we always want to have the credit from our suppliers, which is whatever based on 30 days, 45 days, 60 days, whatever. In our case, more often than not, we are importing these products internationally. And it is, how to say, hard to get that credit terms going with Principal because they are international, though we try our best. So, when our business goes on increasing, you are, like the amount of these days should increase. Like, if I'm doing INR 10 lakh with 30 days credit, generally, I'm doing, let's say, INR 60 lakh worth of credit next year because my business is growing and I need higher credit terms. But number of days generally are the same. They are not increasing or decreasing. I think it is more situational. I mean this is as on 31st March. So, to answer your question, the days are not changing that much, but it is more situational that whether we have brought it on 1st of March or 10th of March, one big shipment coming here and there or a lot of shipment coming 10, 20 days here and there will make that difference. Have I answered your question?

I have one question on Robu 2.0. Of course, you have mentioned the successful launch of 186 SKUs. And of course, it's understandable that it's too early to talk about revenue numbers, et cetera. But would you have any ballpark SKU target? Like, for example, you have 70,000 SKUs, out of which 196 SKUs are Robu 2.0, which is at this point in time, a rounding of error 0.25%. So, would you have like an SKU target in mind saying that, okay, over the next 2 years, 10% of my total SKUs must be Robu 2.0 or some such number like that?

Yes. So, Balaji, we don't have an SKU number target, as I said. So, all our targets for the general thinking process is revenue based. So, we have rough targets in our mind that, okay, we want to do the revenue in longer term with Robu 2.0, for which categories are the best category to target? And then we want to target a certain product in a certain category. So, it depends like if for INR 1 lakh selling price product is doing well in Robu 2.0, I'll be more than happy to just make 4, 5 more SKUs and generate a good revenue out of it. And if, let's say, INR 5,000 selling price worth of product is doing good in Robu 2.0. And again, there is a market scope for making 50 of those SKUs because there is a market demand, then we'll be making more of those. So, our thought process is more revenue driven rather than number of SKUs driven even in Robu 2.0. So right now, our key metrics for Robu 2.0 is making the products, launching them in the market and get the first response from the market that whether the products are selling, is the quality up to the mark, are the functionalities of the product up to the mark, what are other customer expectations and then what slowly and gradually will move to what revenue those category and products are driving and then double down on the categories that are doing well for us or products that are doing well for us. So that is the thinking process. Currently, we have, I think in last year was the first year where we have launched a number of products aggressively. And we are happy with the initial response. Products are selling and people are happy with the quality that is the first. So, we'll continue working towards growing this.

Great. Congrats and wish you all the best

The next question is from the line of Swaraj Mehta from Perpetual Capital Advisors. Please go ahead.

Hello? Thank you for the opportunity and congratulations on a great set of numbers. I just wanted to understand that gross margins have declined significantly this year. And so, could you elaborate on the key factors that are driving this drop? And do you see this as a structural shift? Or is it temporary? And how do you anticipate gross margins evolving in the coming quarters?

Okay. So, I would talk more, so gross margin for us is a mix of our corporate business as well as our retail business. And as a company as a team, we always like to focus more on our net margins or PAT levels because we have our expenses under our control. And as long as that is happening, we are very sure what PAT margins we are making. Since the gross margin is a mix of N number of factors. This year, specifically, we have, as we have told in our H1 commentary, we have a lot of big orders or I'll say a few big orders coming in H1, which we don't foresee in future as on today. And for, if you see our gross margins in H1, they were around 17%. So, they have dropped because of those big orders. If you see in H2, we have again maintained our regular 23%, 24% gross margins level, which generally we are happy with. And I think in the long run, we don't see any, I mean, as of today, we don't see any significant change in the gross margin. So, whatever we have maintained in H2, we are confident that we'll continue on the same path. It was one exception in H1 because of the big orders that we have done.

Okay. And other expenses, what are, if you could give the breakup of what are the key components that are driving this rise? One you mentioned marketing and other specific costs that have risen or any onetime cost in other expenses?

No. I mean nothing comes to my mind that there is any other expenses that we have risen. As I said, I keep the gross margins in the H1 were low because we have these big orders coming. So of course, once you have higher volume orders, you have to do them only at a certain margin. But I mean, after that, there is nothing that comes to mind for increase in expenses, which is abnormal, I mean, other than our regular expenses other than what the regular percentage that we target for.

I'm sorry, I could not get the last part. Can you repeat what you said?

Yes. There is no abnormally increase in other expenses other than what the regular percentage that we target for our big 1 to 3 expenses.

Okay. Thank you.

The next question is from the line of Kiran from Table Tree Capital. Please go ahead.

Hi. Thank you so much for taking my question. A couple of questions. First question being we have achieved about INR 250 crores of revenue. If I ignore the onetime or 2-time big orders in H1, could you tell me minus that INR 25 crores minus whatever, INR 60 crores, INR 80 crores INR 90 crores whatever...

It would be around INR 190 crores.

INR 190. Okay. So that was, Great. So INR 190 crores. So INR 190 crores is the revenue. So of this INR 190 crores, can we, can you tell us for B2C and B2B, how has the average order values increased year-over-year? I'm not looking for exact numbers, right, because you don't give a split. But I'm just trying to see if average order value is increasing, number of orders per customer is increasing because you are adding a lot more customers, both on the B2C and B2B perspective. So, is it the number of orders that's increasing? Or is it the average order value that's increasing year-on-year?

Yes. So, if you look at the presentation, particularly for this year, our average order value has increased, I mean, it is, I mean as we are not giving the split numbers, so I'm just giving you the total, all businesses number. So, the average order value is around INR 4,600 which was around INR 4,000 last year, okay? And before a year ago, like before a year to that, it was INR 4,900. So as a business, we always like to or want to increase our average order value. However, as how to say, the focus of doing business or the top of the head thing that we have, we never look at it that way, whether I just want to increase my average order value from INR 4,600 to, let's say, INR 5,000 crores and then what are the things that I want to do for that. No, that is not how we principally think. The principal thinking is always from the top line of the business. Okay, we have done, let's say, INR 230, whatever revenue we have done this year. And then we want to increase it to a certain number. For that, we'll split the categories, and we'll see which category is doing what business and then which category has the potential to increase and then what are the things to be done, so on and so forth. So, in a category, let's say, we have added the small components. So, the orders of the small component, average order value of these small components will be obviously small. right? However, I really don't go into that as a metric. My metric is always my top line and profitability. And then for that, if I have to increase the average order value or increase the number of orders, because anyway, revenue will be the multiplication of those 2. I really don't keep either of these as a focus. I generally keep the category and growth of the individual category as a focus. So yes, it has increased in the last year. However, the management or the thinking process is like this, the focus will always be on increasing the top line with a certain margin. Have I answered your question...

Yes, no, perfect. That was absolutely superb. The second is of the, I mean, this is more of a financial question. Your inventory suddenly increased to INR 55 crores, INR 56 crores from INR 24 crores. Is that a result of building up this INR 73,000, I mean, these are all low-cost. So, I'm just trying to see whether you are anticipating a lot of growth in the first half of the year, and therefore, the inventory has built up so high? Or is it a function of something else?

So the inventory is a function of multiple things, one of which you rightly pointed out that our number of products that we have to keep in stock if the products increase. So yes, that number of SKUs increase certainly has a role to play in inventory increase. However, let's say, the top of, let's say, INR 5 crores to INR 10 crores inventory is also a role of, or rather, the function of timing. So just to explain to you the situation, sometimes if we know that our stocks are on their highest peak. So that time, our inventory will be 10% to 20% higher. But it is just maybe momentary.  Let's say, if you calculate in the middle of March, it will be higher. And if you go to the middle of April, it will go down a bit because if you look at our revenue, we are also consuming a lot of inventory. And then maybe some 3, 4 big parcels are delayed. They have not arrived on time. So, I think these 2 combined are showing that price in the inventory. However, our regular numbers for inventory rotation days and inventory aging, that is, how old our inventory is, those numbers are in line. So, I assure you there is nothing to be concerned about the inventory. It's a mix of 2 things. Yes, we have an increased number of SKUs, and that contributes to the inventory increase. Secondly, it's just situational that 10%, 20% of that thing.

The next question is from the line of Abhijit Mitra from Aionios Alpha Investment.

Yes. So, in the absence of these one-time orders, the large orders, I think you mentioned the sales number also. So, just to maintain this year's number, it means 39%, 40% growth. So, I'm just curious what kind of growth projections or thoughts you have in FY'26 over '25.

Yes. So, Abhijit Ji, generally, we do not give any forecast in the number per se. However, what we have said is, I'll say right. But if you look the way we work right now is because we view that these are onetime orders that may or may not repeat; so from day 1, we have internal targets and everything that we always exclude those onetime orders from the revenue that we are doing as well as our growth target that we are taking. And we will keep on doing the same because that is the practical way of doing things.  If we just add those one-time orders and then think on top of that, how much we want to grow and everything, it becomes really unachievable. So, what we have been saying is something that we are confident that we'll do, that we will continue on the growth path that we have been doing historically. You have to exclude the one-time big orders when we say this, because that is the most practical thing to do.

Understood. Understood. And then there will be some improvement of margins because these are margin-dilutive orders. So, you expect net profit margin to reach around 8.5%, 9% again, as this normal course of business resumes?

Margin is like, there are 2 things. One is the big orders coming in or not coming in. And then also, it is dependent on the product mix that we are selling in a particular year or a particular quarter, whatever. However, I would also not like to comment on the percentage of margin we are targeting. So, whatever we are doing historically, I think this time, it's around PAT level if you see around 7%. But yes, we are always trying to improve it or at least maintain that.

Okay. Got it. And lastly, I think you mentioned that the inventory addition has been mostly in terms of small ticket items, it's small items, so these small and low-cost items. So, this AOV will reflect accordingly in the first half or first 9 months. I mean, will the AOV sort of come off because of this kind of, is there a shift in sort of product mix that you are trying to suggest when you say that this addition is mainly because of small and low-cost items?

So let me just, I mean, correct me if I'm wrong. So, what you're asking is average order value, will it increase because of this low-cost items?

It will decrease. Yes, yes.

There are, it's hard to predict because what may happen is our regular customers will also buy the low-cost item in their regular orders. So that value should increase because they're already buying 10 products from me, let's say, average order value at this point, INR 4,600. Even if I add INR 500 worth of these products, so my average order value should go up.  Again, I'll have some customers who are only buying these new products. So maybe the order they are placing is only INR 1,000 or INR 2,000, which is, let's say, for the time being, an INR 1,500 average order value for the customer who is only buying this new product. So, it is really hard to predict what will prevail when you calculate the total average order value because we already have a big customer base, which is buying these existing products with INR 4,600 average order value. So, both are possibilities. We will come to know when it happens.  Yes. However, we are confident that if any of this happens, ultimately, we are going to generate higher revenue. I mean that is what the whole point is of adding the accrual. And that is how we think that's okay, whether our old customer buys INR 500 worth or whether a new customer comes and buys INR 500 worth of this product doesn't really matter as long as I'm gaining that INR 500 in revenue. And that is how we think that the category and the revenue, and then multiply it by the number of whatever orders or total category-wise revenue, and add this up, and then see if it is viable to add that catagoru.

Understood. And your inventory days, you don't feel is going to go up permanently, right? I mean it's sort of come off again next year, you feel this year, this sudden jump of inventory days that is going to normalize sort of again next year, you sort of permanent high in terms of days that you see from here on?

So, primarily because we have added these products, we expect our inventory days to go slightly up. However, you have to understand this is a different category of products. And these products have higher margins. So, they allow us to have higher inventory days because these slightly higher margins take care of the inventory days. So actually, we don't consider inventory base as a stand-alone metric. But we knew that when we are adding this 50,000 whatever SKU we have added 50,000, very closely to each of the products, cannot pay attention to each of the products. We have to buy them in bulk. So, there will be more inefficiencies in inventory. However, the margins on these products are such that even those little bit inefficiencies in inventories even a little bit generation of dead stocks are taken care in the margins. So, we are okay with that. So, it's kind of a trade-off that we are doing. Now how much it will add to our inventory days and everything, that we are not sure at this moment. However, whenever we calculate our inventory rotation, it is always category-wise. So, we will have a clear picture internally that, okay, for these particular products, how we are doing and what are the margins and if it is good or not. For others, it should continue the same we have historical data. So accordingly, we'll tweak and move and readjust align our path.

The next question is from the line of Rohit, an individual investor.

It's always a pleasure to listen to you speak, and understand the business model. My first question, so what we have seen is the growth has been rapid and the return on capital and net worth has come down. And over time, if the growth of our business is faster than the, or is higher than the returns that we generate on the capital that we are investing, what that means is we would need further dilution along the way. So, I think we diluted 1.5, 2 years back. Do you see, for us to maintain our growth rate, us requiring to dilute sometime next year or the year after that? And the follow-on question is, 3 of you together own equal amount of stake. So, what is the cumulative promoter stake below which you are not comfortable going? Or do you think along those lines at all?

Thank you, Rohit Ji. Thanks a lot for your questions. So, as you mentioned, growth has been rapid and according to that, the dynamics of the business are changing. So, we are also very fluid on this. We have been doing since only over a decade, I guess. Every year, we are growing and then we face some new challenges, we find some new solutions. So, things are really clear in hindsight. However, looking in the future, picture is always a little bit fuzzy. We know the direction. However, we always keep on course correcting as we go in future, whatever is the best for the business to the best of our abilities. Now as of today, we really don't have any plans for dilution. Of course, even if we had, it would be really stupid to say it loud on this call. But yes, to be very frank, we don't have it as of today. And whether we'll have it in recent future or not, that's only the business requirement or the dynamics will decide. Secondly, 3 of us currently own equal stake, which is around roughly 69%. So yes, we also have never discussed this that how much is the minimum and below which we are comfortable or not comfortable. We just diluted whenever we felt that there was a business requirement and then we are here at 69 so yes, there is no such number or per se never was the discussion to be very frank, that below what we will not be so comfortable or whatever.

That was helpful. And so, we have started taking debt, right? I mean we are today at the end of the year, at least it's taking a point in time depending on when we liquidate the inventory, but the debt is at the highest level that we've had so far, obviously, because the business is growing. So, do we have an internal metric on what is the maximum debt at any point of time that we'll take in terms of its ratio to equity or any such number that we look at? Beyond this, we won't take any debt?

For the debt you are saying?

The loans, yes, debt on the balance sheet.

Yes, for the debt Yes. So, we really don't have any highest number of debts. So, our thinking is very simple, as I always say, we want to grow this much, to grow this much with this much margin. To do that, what categories demands what, whether we have money to do that, to buy inventory or whatever investment we want to do. If we don't have money, then what are the options, debt options we have. So, if we say take whatever INR 5 crores as a debt, extra debt than what we have, what are the returns that we have to give on that? And is the category that we want to expand will provide us more than what investment in debt and returns it will have. If it is a yes, we'll go ahead. If it is a not, then I think we shouldn't do that. So, this is the top-down process. So, if the category requires certain amount, and we are confident that we can earn more than what is going as an interest of the debt, then why not. And we only take debt when we are sure of that return. I think that is the thinking behind that. And to be very frank, I think you guys, the investors are really good at these financials and numbers crunching everything. We, on the other hand, are more of driving that approach of top line and growth and categories, more of a business person or technical approach. Personally, if I go look into these ratios and this and that, it becomes really too much to look at. And as a management, we just try to keep it simple. [Foreign Language] [ If we don't have that kind of margin, why go after it ] I think that helps us the way we have been doing with this, and it works well for us so far. So yes, that's about that.

So, 2 questions, what is the publicity spend that you did this year? Do you have an idea of what the number there? And the second question I have is, in the sense of [ fee ], have you moved from B2C to B2B in 2019? I guess the next part of the journey would be to probably supply the bulk requirement of the customer as and when required. So where are we on that journey? I think right now, we provide for the R&D departments and the bulk requirements are provided by some of these big traders or big distributors. So, do you see us in reaching that level in some categories?

I'll answer your first question first. The marketing spend, generally, our target is to maintain it below 2.5% of the overall revenue that is -- sorry, the online revenue, that is the internal number. I'm not sure exactly how much we are doing that or doing as of now. But yes, it is under that, which is below that. I'm not sure exactly how much we are doing that or doing as of now. But yes, it is under that, which is below that. I think mainly the question arise because we did participate in domestic exhibitions this year, multiple of those. However, we are always like whatever marketing activity do, we always have the limit for that expense. So, anything we do, you have to maintain it below that. And I think this year, we have got this budget for that because we have grown revenue well, and that has allowed us to have that extra percentage in budget, which we can use on these domestic exhibitions. Secondly, you asked about growing from B2C to B2B, and where do we foresee that going up. So yes, we have grown from B2C to B2B. And as on today, we are doing a lot of not only the R&D orders, but also small productions; small- to medium-scale companies' production orders. We are doing some, I would say, production or big orders for some of the big companies. And obviously, we would love to go there and increase that. However, I mean, how long, how far, we are really not, we are not really doubling down on that as a target per se because there are different dynamics that comes into play for those orders. And even small- and medium-scale companies base is growing very rapidly in India. And that customer base, we are already fulfilling their requirement. They're happy with the service and the products and the prices that we gave. So of course, we'll try to go into those high-volume productions. But when and how or how much that happens is currently that I really can't foresee.

The next question is from the line of Shubham, an individual investor.

So I had the same question on the line of like when you will be moving from R&D to the bulk orders. So, I think that has been answered because I have been a customer too for your products and most of your sales are in the category of development both that is Arduino, Raspberry Pi and second is probably 3D printers. So those are like onetime or like low volume orders, which are not probably repeated after R&D cycle is completed. So like will you be getting into bulk orders like Mouser DGP, if you have to compare yourself with them?

Yes. As I already said, Subham, that is always on the table that we want to have these big customers who want to grow these orders. However, I'll just like to slightly add on to this. So, the way you mentioned Arduino and Raspberry Pi, there are some customers who buy, let's say, 1,000 Raspberry Pi or 1,000 pieces Arduino per month from us. So, the dynamics of markets are also changing. A lot of customers, even they, do they have 500,000 pieces worth of product requirement, they don't want to go into the cycle of developing their own boards and everything. So, they are using these boards also as their, I'll say, small- and medium-scale volume production. Only when they move something like 5,000, 10,000 pieces a month, then they are moving to developing, designing their own boards to save some cost and moving in that direction. So yes, we would like to be serving those customers as well. And strategically, I cannot tell you on this call exactly what we are doing. But yes, be assured, strategically, we are doing things internally, which will position us well to serve these orders, to serve these customers to support these customers. So yes.

Yes. Got it. And just a small question, like how big is the opportunity for Atal Innovation Mission for you guys? Is there anything that is well supplied, L1, L2, L3, any kits?

So we have been supplying the Atal Innovation Kits to the different customers. And these are, since these are standard kits, I think we have already listed them as a single product, the whole kit as a single product on our website. So yes, we have been supplying those kits directly to some end consumer as well as through some of the project guys who have been buying these kits and then doing the execution on their own.

The next question is a follow-up question. It's from the line of Parikshit Kabra from Pkeday Advisors.

Actually, people have spoken about margins in this call previously, and you have maintained that you guys are targeting the current margins at the steady state -- at the current levels, you want to maintain that. But there is a pattern, there's a trend to your margins for the last few years. You peaked, and I'm talking about EBITDA margins, you peaked at about 16% in FY '22. And since then, like clockwork is reducing by a couple of percentage points each year. Could you elaborate on why that is happening and why we think that will stop happening from next year onwards?

Okay. Right now, I don't have the numbers in front of me or exact data. However, if I talk about our PAT margins as on today, we are always, like even in the current margins, we are always trying to maintain; in future, we want to maintain those margins. And this is not a secret. I mean it's very obvious that when we are going for the bigger margins, bigger market or more of industrial customers, we would have to sacrifice some margin or the margin goes on reducing. Of course, everybody knows since like, as this is not the secret, this is, the second thing is also not the secret that, okay, it will go down only up to a certain level because after that, the margins should stabilize, let's say, give or take 0.5% or 1% here and there, because beyond that, then the business also becomes not lucrative to do on those margins. So, on one side, we are always trying B2B customers or the high-volume customers or the higher market size. On the second side, this also reduces margins slightly and then we believe that it will stabilize at some level. Now we are always trying to maintain our margins or do a little tricks here, little tricks there to increase, add on the margins, 0.5% there, 1% there. If you have, I mean, if you have listened to me closely in the call, whenever I'm talking about those high, low value 50,000 SKUs, you always hear me saying that the margins are good on those products. So, it is also one of the effort to target a category where we have higher margins so that we can gain something which we are, gain margin somewhere where we are losing 0.5%, 1% somewhere else. So, these kinds of things are always going on, and let's see how it goes.

The next question is from Keyur from Nivashay.

Congratulations on good numbers. Just two questions from our side. One, on website we have mentioned one is government association, organizations, and corporations; so, are there any order on repetitive nature from their side?

I heard your question till the point where you said there are a lot of government client mentioned on our website.

I'll repeat. So, my question is in our B2B segment, we have many organizations from the government side and many national level institutions, which are our client. So, are this order from that side is in repetitive nature?

Yes. So, we have essentially two types of businesses. One is our online business and other is corporate sales. So generally, our corporate sales orders are repetitive in nature. It depends on customer requirements. So even if it is a company like, let's say, Tata, Mahindra or Bajaj, and if they just want to set up a test lab or the R&D lab in their company, they're ordering a few components, a few multimeters or devices from us, it will be onetime purchase. But even if they are making some device, which is like 400, 500 pieces a month or every 400, 500 pieces every quarter, it will be repetitive in nature. So B2B orders are generally repetitive in terms of if they are production-based orders. If they are lab-based or R&D-based orders, small prototyping, then we have seen that they are repetitive from the type of customer, but different products.

And the second question is you mentioned that we have increased the SKU on Robu 2.0. So, we are entering the production of our own products, do we see any or foresee any vendor issue because we are attaining the same products that maybe they are also doing. So, do you face any vendor leaving our site in last nine months?

We do not, we have not, first of all; so okay, I'll answer the question straight first. We have not seen any vendor leaving the site because generally, these vendors like the market are open, like in one category, we have 8, 10 vendors maybe doing the similar kind of products. Everyone has his own strength and everyone has his own; some are like premium quality products, some are like very cheap, some are in the middle somewhere. They provide value to different kind of customers. So, our vendors or the agreements are not restrictive on these kinds of products generally. Secondly, as a part of our strategic part of Robu 2.0, we are never trying to replace a product on our website. That will be too much effort for too little of a gain. So, we always see the categories that we believe will do good in the future. And secondly, we want to fill the market gaps. I always give example of SmartElex Modules, where we see that there are some principles in China manufacturing the modules who are very cheap, but the quality is not that good or rather very bad quality. And there are some Principal Europeans who are making those modules in development goods who are really pricy. The quality is good; the price is really high. So, we found a gap where we felt that, okay, we can make the modules in India and we can provide a one-year warranty. The quality should be good. But the price we can keep right in the middle, where there is a customer base who would like to procure these products and will be happy with the performance because they want to use them in industry use cases at a reasonable price. They don't really want to pay the European premium. And we have been developing this product, and we have been finding some good customer base in this gap that we have found. So thinking is more like that, find the gap and try to place the product in that gap rather than just replacing a product because ultimately, what will we gain then? If I'm just replacing my old revenue by my own product, the delta of revenue will be nothing or not significant.

Okay. And I think in the future also, we will have to follow the same strategy, right?

Yes. We want to follow the same strategy in the future because that's the most logical thing to do.

Ladies and gentlemen, that was the last question for today's conference call. I would now like to hand the conference over to Ms. Bhumika Maheshwari for the closing comments.

Thank you, Steve. On behalf of Hem Securities Limited, I thank Macfos' team for giving time we spent on this call and responding to all the queries in a detailed way. I would also like to thank all the participants for joining this call. Now I would like to hand it over to Steve for closing remarks.

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