Mallcom (India) Limited (539400) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Mallcom Limited (India) Q1 FY '25 post results earnings conference call hosted by Batlivala & Karani Securities India Private Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Akhil Parekh from Batlivala & Karani Securities India Private Limited. Thank you, and over to you, sir.

Thanks, Shlok. Good morning, everyone. On behalf of B&K Securities, I welcome you all to Mallcom (India) 1Q FY '25 conference call. From the management team, we have Mr. Ajay Mall, Promoter and Managing Director; and Mr. Shyam Sundar Agarwal, Chief Financial Officer. Without taking much time, I'll hand over the call to Mr. Ajay Mall. Sir, over to you for your opening remarks, post which we'll open the floor for Q&A session. [Technical Difficulty]

Ladies and gentlemen, we will wait for a moment as the line for the management seems to have disconnected. I'll reconnect to the call. The management is on the line.

Yes. We are there. This is Ajay Mall.

Yes. Sir, over to you for your opening remarks, post which we'll open the floor for Q&A session.

Okay. So good morning, this is Ajay Mall. Thank you. It's a pleasure to welcome you all to our earnings conference call for the first quarter of the financial year '24-'25. Let me first start off by thanking our hosts B&K Securities for hosting today's earnings call. I will begin with some business highlights for the first quarter of the financial year '25, after which our CFO, Mr. Shyam Agarwal, will provide a detailed briefing on the financials. On CapEx front, our first phase of garment facility at Chandipur, Ghatakpukur in West Bengal is now operational with full installed capacity. And we plan to add further capacity during the current financial year. The company has commenced Phase 2 expansion at Chandipur, Ghatakpukur, which is setting up of a new unit for designing and manufacturing of industrial safety shoes. The unit will have a built-up floor area of 50,000 square feet and involves a CapEx of INR 20 crores, with completion expected within the year ending financial year '25. For this project, we have received a conditional financial grant of INR 7 crores, INR 7.17 crores to be precise, from DPIIT, that is Ministry of Commerce and Industry. Additionally, the Sanand-II project in Gujarat setup for manufacturing Protec workwear is also progressing as per schedule, with production likely to commence there by September '24. The company has already invested INR 52 crores in this project and will invest further INR 30 crores before the unit becomes fully operational. In total, a capital expenditure of INR 52 crores has been made and additional INR 50 crores will be made over the period. That will be the entire CapEx in Sanand-II, which will be funded through internal accruals. To meet the growing demand of our products in both export and domestic markets, we are increasing manufacturing capacities and investing significantly in marketing and branding efforts. We remain confident of achieving our annual targets based on market conditions and efforts being made by our company. Now I would like to request Mr. Shyam Agarwal, our CFO, to brief you on the financial performance of the company. Over to you, Shyam.

Thank you, sir, and good morning, everyone. Let me brief you on the consolidated financial performance for the first quarter of the financial year 2025. On a consolidated basis, operating revenue stood at approximately INR 102 crores compared to around INR 95 crores during the previous year, reflecting a growth of nearly 8% year-on-year. EBITDA is around INR 14 crores, reflecting a growth of 1.4% year-on-year, with EBITDA margins at 13.96%. The net profit was reported to be close to INR 9 crores, which was flat year-on-year with profit after tax margin at 8.30%. The decline in EBITDA margin for the quarter on year-on-year basis from 14.92% to 13.96% was mainly due to higher operating costs, which were largely offset by the savings in cost of goods sold. Thank you. With this, we can now open the floor for the question-and-answer session.

[Operator Instructions] The first question is from the line of Rushabh Shah from BugleRock PMS.

Yes. So what is the life cycle of our products? And how frequently do we need to replace them across all categories?

Okay. So depending on the category, the product life cycles are different. For example, when we talk about, let's say, cotton gloves, it is replaceable almost every day, depending on again which industry they are being used. And when we talk about leather gloves, in that category of gloves, for example, then they can be anything between 5 days to 1 month, depending again on what kind of usage they are being put to use. And when we talk about, let's say, safety shoes. So it could be anything between 6 months to 1 year, or even a little longer also in many cases, which again depends on what kind of product or what kind of category or industry they are being used. When we talk about garments, it could be anything between 6 months to 1 year, depending again on what kind of use. When we talk about some kind of very, I mean, let's say, disposable suits, it is used only once. One they use and then they throw it. That's how we categorize the product life cycles.

Okay. So my next question is, how many distributors we have in India?

So altogether, we have got around 80-odd distributors. And they are in India, and some of them are also in neighborhood countries.

So are you planning to add more in domestic markets?

Yes, we are in that mode. Yes.

Okay. Because the follow-up question is, since Europe is an important market for us, but would we be ready to see a change of our focus and make India an important market over the years? See, India has seen investments in infrastructure and many other things. So just wanted a perspective on it.

Yes, definitely, India is a very important market for us. And Europe is -- or America, I would say, the whole of, let's say, private label, which we are calling it internationally, where we are selling product under big brands, who are buying from us, so that would also remain as our, I mean, quite an important market, because we definitely would like to grow in the Indian market where we are -- I mean, this whole story about the PPE concept is rather new. The market situation is still a long way for us to go in Indian market, but the focus will remain in both the markets, because we are operating in both the markets. So ideally today, maybe we have around 60-40, and that could remain like that or maybe slightly betterment in the Indian market over the period, depending on how the market takes shape.

Okay. And sir, my next question is except for the certification, what differentiates Mallcom from the other unorganized players, except the certification part of it?

The certification itself is a big demarcation of Mallcom products versus most of the products which are available in the market. See, every safety product in India -- of course, not a huge kind of compliant products are available. But then in the Western world, all the safety gears must be on a particular class or certification. For example, it could be category 1, 2, 3, depending on what kind of uses they are being used or what kind of efficacy it should have. Based on that, these products are categorized. In India, of course, now Government of India is trying to make some kind of ISO standards or, I mean, equivalent to EU standard, which is getting prevalent now, but a long way to go. After a long time, we could see some shoe certifications or shoe BSI certifications are being made. But in case of gloves or garments, it's still a long way to go for Indian market. But definitely, this is a big differentiation which Mallcom has is, the certification itself makes the product much superior. Because once you are qualifying for that kind of certificate, it requires you to have a particular kind of performance level, which it must attend. The moment it is attending that [Technical Difficulty].

Ladies and gentlemen, the line for the Chairperson seem to have disconnected. Please hold while we reconnect. Ladies and gentlemen, the management is reconnected. We request the management to go ahead with the...

Yes. So, sorry about this line getting disturbed or disconnected again and again. No problem. So as I was explaining, this makes a difference between the local products which are available in the Indian scenario versus Mallcom product which is certified. So apart from the certification, which entails the product to be much superior in efficacy and in performance, which is the one. And secondly, we have a designing aspect which is much more superior and better because of our exposure to the Western world and the Western environment where we have been learning lot of new ideas about to place and market our product and also to design element on that, which also makes us much, much ahead of the competition and the product category where we are. Classical example could be shoes, for example. This is something which is more driven by efficacy than by the design, but then design is also very, very important, because finally, the users are very, very, I mean, interested in looking at the design kind of thing rather than just a black shoe, which is just very old and very ugly looking shoe, yes, that way. So these are the basic points on which Mallcom is far ahead of most of the product category available in the market.

The next question is from the line of Priyank Agarwal from Equirus Wealth Private Limited.

Sir, my question is with regards to the top line, like in terms of products, if you see safety shoe, garments, leather gloves, and nitrile gloves, all in terms of Q-on-Q have shown a decline. So are our products -- like what is the seasonality of the products? I wanted to know that. And my second question is with respect to the external demand environment. How do you see the demand environment in countries like Europe, South America, North America, where we have a major revenue share?

Shyam, you will take this question, or you want me to answer?

Yes, I can answer this. So on part of revenue mix, basically, we had for the quarter, safety shoes, we did around 43%, and garment is 29%. Gloves, we did around 24%, and other product categories like helmet and face mask, we had 4%. So see, this revenue mix is almost -- it remains in the equal proportions. So in around 30% to 33% for safety shoes, garments, and gloves category. So for the quarter, we see that safety shoes is on the little bit higher side and garment is almost there 29%. Gloves is a little bit on the lower side. So for the full year, we see that we should be catching up and the overall proportion should remain same. So we had around top line INR 100 crores, so the turnover should be increasing, and the product mix should also be catching up. So ideally, it should be in the equal range, and we look forward to that. And regarding the second -- what is your second question?

My second question was related to the demand environment in countries like Europe, South America, North America. How do we see that? And for the full year, how is your guidance in terms of the mix as well in terms of Asia, Europe, South America?

A.K., you can answer that.

See, the demand pattern has been a little bit slow in Europe and also in America. In America, we are now seeing the growth is again coming back, whereas Europe is still slightly lagging behind. In South America, we have a traditional market. In some of the countries, of course, we have a demand which has been almost, let's say, steady, which is not really declining for us, but at the same time, not really improving to a large extent, I would say, because they are also a very cautious buyer because of the Americas being [ brother ] to them, they are watching the whole thing very carefully. So in general, the demand in the Western world is growing, but in a very slow pace because America is the only one where we can see a little bit of growth, whereas the Europe is still a little bit slow. But I would say that with the growth in the [Technical Difficulty].

Ladies and gentlemen, the line for the management seems to have disconnected. Please hold while we reconnect. The management is reconnected. Please go ahead with the question-and-answer.

So as I was mentioning that the market is slightly getting into the better zone, which all this while was a little laggard. So going forward, we see that things will improve, and we are making a lot of product mix changes, which also will get us in power growth journey in the western world. Yes.

Yes. Sir, my next question is with regards to the pricing strategy. Like in the domestic market and in the global market, how do we compete in terms of with our peers? And like how are we placed? Like are we discounting our products? Or like what is the pricing strategy we follow?

Can you please repeat it, because it was a little too blurred in your voice. Can you repeat your question, please?

Sir, I'm asking about the pricing strategy we followed in terms of the domestic market and in terms of the global market? And how are we competing against our competitors?

See, the domestic market, if it's our branded product, we have a different type strategy. And for the international market, it is highly competitive, so we have to follow a different strategy. In domestic market, prices are slightly better, I would say. But don't forget that when we have a slightly better, we have to also invest a lot of money on the branding part of it, which is also there. But of course, we are creating for the future for the brand. Whereas in the international market, it is not in our brand, it is mostly on the private label. So the strategy has to be a little different. That's how we are categorizing.

And sir, one last question is that, sir, how is the private label sales mix like as of this quarter and like how do we see it forward?

See, now we have -- I mean, our idea is to push more on the, I mean, branded products than on private label. But then going forward, in my opinion, we can have almost a good mix of 50-50 kind of thing, where we will have both the markets with us. And of course, the volume itself will grow, so both the angles will have the maximum benefit. We don't want to have completely reliance on, I mean, our own branded products, because the market which we have created in our private label sales also is good enough and that also brings revenue and that also keeps us updated on the international market scenario.

The next question is from the line of Shikhar Mundra from Vivog Commercial Limited.

What are our present capacity utilizations currently?

Yes, it depends upon different product categories. So talking of garments, we are almost now picking up and reaching the capacity, installed capacity, so almost I would say around 90% we are utilizing the capacity, installed capacity. In case of safety shoes also, it is similar. But installed capacity, and need based, we can always increase the capacity. So if there is a volume and demand, then there are alternate options like going for fabrication or increasing the shifts also. So that is possible. So talking of only installed capacity, which is on an 8-hourly basis, safety shoes and garments, where we are almost utilizing our capacity. And in case of leather gloves and nitrile gloves, yes, it is a little bit on the lower side, so maybe around 70% we are utilizing as of now.

Okay. And what will be our peak capacities after these 2 expansions, the West Bengal expansion and the Gujarat expansion? What will be the peak revenue potential after these expansions?

So see, like this Gujarat expansion is basically completely greenfield project. And on the full capacity utilization, we expect around INR 100 crore top line growth from there. And in case of the Bengal expansion, which we have done, as of now, it is more of a replacement of garment making facilities from old unit to new unit. But during the year also, we plan that additional capacity to be built up there. So maybe -- how much we expect, you can just mention.

Got it. Got it. And what kind of revenue growth are we looking for the whole year?

So it should be in the range of 15% to 20%. So we have this stated target of reaching INR 1,000 crores turnover by FY '28. So we need to have around 20% turnover year-on-year. So this is what we'll target depending upon the market definitely.

Got it. Because the first quarter was a little slow on growth, so will we be able to...

So normally, it remains -- yes, so that is the pattern, but we have growth year-on-year, you see 8% growth is there, and we'll be catching up there.

Okay. Got it. And what is the current mix between domestic and exports, like India versus exports?

Yes, for the quarter, it is almost -- domestic is around 42% and export is 58%. So yes.

And we have a target of reaching INR 1,000 crores for FY '28, so will the mix look similar or will our domestic mix be much higher?

Yes. This is what our MD has just said that we expect growth in both the segments, but at best, the Indian market is going faster, so we should have it in the range of 50-50.

Okay. Got it. And one last question about our market share. I mean, what is like our market share in India currently? And how is the industry? Like how much of it is organized players, how much of it is unorganized players? How is the industry structure?

So market size is around INR 15,000 crores, out of which we expect that 50-50, around 50% is organized, 50% is unorganized. So within organized, our market share would be around 3% to 4%. So there are around 15, 20 big players having a similar market share. And the rest is small players. Yes, so organized market is around INR 7,500 crores, and similar is unorganized market. That is just estimate.

And how is the shift happening? Like what was this unorganized market like 5 years back? Like how is the trend looking?

So, it is improving. So whatever you see, for the last few years, we have growth in the range of 15% to 20% in the market. So this market is growing faster than other markets. So this is happening because of the quality product demand as well as market shifting -- increase in product awareness, product availability also, and due to that market shifting from unorganized to organized, and that's why the turnover increasing also.

[Operator Instructions] The next question is from the line of Tushar Vasuja from Yogya Capital.

My first question is, can you talk a bit about your Protec workwear expansion in Sanand? Like what the product would be? Why are you foraying into it? What sort of market size is there? And how much of its market size would you be able to capture?

So this product, Protec is our protective gear. So we will have the plan to put the PU-dip gloves, the nitrile gloves, also the helmets, and also the eye glasses. This is the product category just now we have planned to put up there in Sanand. Now the market size, okay, we have different product category in a different -- first of all, these products at the moment in PU as well as nitrile. From the local manufacturing, none is doing it. There are a couple of them, 2, 3 of them, they're all doing for export like us. We also have the export unit for these products, for example, NBR. But then for local market, none of the factories or the units in India are doing it. So we'll be one who will be doing it, Indian production for Indian market. Now at the moment, these all products are being imported. I mean, when we talk about all these products, that is PU or the nitrile gloves, they are imported and being sold in the Indian market. Quality what is imported are largely coming from China, which is not a good efficacy kind of product. They are all, I would say, seconds or reject quality which is coming and which is not a very good situation for the Indian users. So that's where we would like to play a role by providing the right kind of safety hand gloves, which we will do it out of that factory. So now, so far as the helmets are concerned, this production, we have some production capability in Calcutta, which also is going to be moved there because of the larger volume, which we are anticipating to come out of it, and that will be there in Sanand. And then in due course of time, we'll also integrate with the eye glasses or eyewear, which will also be having a good potential for us in the market, because at the moment, these are also made in India, I think, 1 or 2 players only, which is not in a big way, which we'll be really doing in a big way. So these are the product categories we will be doing there in Sanand-II. The market size for this, as I say that this is -- when we talk of head, it is 1/3 of the total PPE market. And for gloves also, it's 1/3 of the total PPE market in India. So you can extrapolate the figure of let's say around INR 7,000 crores or INR 8,000 crores, which is 1/3 will be head. But then in head, there are many products. To pinpoint on absolutely one product will be very difficult for us, but this is how we are categorizing. So the market size still remains quite big. And there our intervention by production of these items will still be very beneficial, as you can extrapolate. Yes. I hope I have been able to answer your question.

Yes, sir. Sir, was there a delay for commercialization of Sanand-II in any capacity?

Actually, not really a delay, because we are, I would say, slightly behind the schedule by maybe 15 or 20 days. So by mid of September, we should start first phase of the production, which will be PU gloves. And then in another 1 month's time, we'll also have the NBR gloves starting. So this will be well within -- because we were targeting to start within September, so it will be maybe a 30 days delay or something like that, which is one by one we'll start the machines, yes.

Okay, sir. And sir, who are your domestic competitors in terms of regulated, like those who have certifications? Who are your competitors over there?

So there are -- arranging everything in a product basket like what we are doing, it's not really a large -- or many of them. Nearest competition who is having, let's say, a little bigger basket of offering, a little bit lower than us, of course, but then they are like Karam, for example, or Udyogi, right? But then they are not producing everything. They are just doing some [ polyesters ] or helmets, but then others they are all outsourcing, whereas we are doing a lot of products ourselves. So these are the organized players. Then rest, many of them are there, but only confined to one product category.

Okay, sir. And sir, another question. You mentioned utilization rate for this quarter. Garments is around 90%, safety shoes around 90%, and gloves around 70%. If we compare this to the previous quarter, it has actually improved, but quarter-on-quarter, our revenue has actually decreased. So like I'm not able to understand that. Can you please talk a bit about it?

Yes, we have growth in turnover. So it is around 8% growth is there. So utilizing level, yes, a little bit on the higher side. So we have higher turnover also.

No, sir, that's what I'm trying to say. In this quarter, you actually had a degrowth quarter-on-quarter.

I think you are comparing with the quarter of previous quarter. I think we are always comparing with the quarter on the year before, right? So the first quarter of '24 to the first quarter of '25, we have the growth. When you compare with the last quarter of '24 with the first quarter of '25, of course, there is not a growth, because there is some seasonality effect on the whole sales revenue stream, if you look at it.

Okay. Fair enough, sir. And sir, last question. You mentioned about the pricing difference in exports and domestic. So is there a difference in margins also? Can you please explain that?

Yes. There is slight difference in the margins, and not only margins, but also there is a difference in the payment terms and conditions and a lot of other kind of regulations. So there are many risks also when you are exporting. Whereas in case of the local market, that risk is also mitigated. So there are various kind of commercial elements which we have to understand before we analyze both these revenue streams. So to answer very candidly on your point, yes, we have a little better margin in the branded product what we do.

The next question is from the line of Anik Mitra from Finnomics.

Sir, my first question is, are your products attracting any PLI benefits?

We do have many products which have PLI benefits, but we are not in that category. We are not putting that much of money on plant and machinery to claim that PLI.

Okay. Sir, what kind of investment -- or what is the criteria to get that PLI benefit?

It is INR 100 crore. So we are as of now in textile category. We are not investing INR 100 crores. So we are not eligible.

Okay. I got it. Sir, is there any impact of current container shortage and Red Sea crisis on your margin or in the export demand?

Very, very relevant question, I must say. Yes. So there is a container crisis, there is a big turmoil because of the Red Sea, and also because of the situation today that container shortage has happened, because not too much inward cargo coming in, things like that, which is quite obvious. But most of our sales revenues are on FOB basis. So it's a trouble which is more for the buyer. But yes, their trouble is also our trouble, and we also face this heat sometimes, because the customer may cancel the order or may try to bounce back on us. So we try to do as best as we can do. It is a little bit hurting our margins also in many cases, because when we want to help the customer, even though it is an FOB or CIF and we are not getting the container, for example, if a shipment has to be done in Calcutta, we move it to Mumbai or somewhere, so that we can get the container and can get the connection. So that eats away little bit on the logistic cost from our pocket. I hope I was able to answer your question.

Yes, absolutely. Sir, I have one additional question related to this, like if you can quantify in terms of basis points, what was the impact in Q1 FY '25?

I'm sorry, I don't have the data. Shyam, if he has, I don't know.

No, no, that we need to -- see, basically, it is not comparable. See, what we do, sometime we are selling on CIF basis, sometime we are selling on FOB basis, and the figures will never be comparable. So you can say that, yes, there is some cost pressure there, but not quantifiable as of now.

Absolutely. Fair enough. Ajay, sir, I have one more question related to the competitive landscape in the international market. Sir, what is the competitive landscape in the international market now?

See, on a broader perspective, I would say it's rather looking very good. If you talk about competitiveness landscape so far as India is concerned, it looks so bright because of a lot of geopolitical issues. America, for example, is very much behind to make China Plus One policy, which is making India as one of the preferred next vendor. Then in Australia, for example, already this has happened, and we have the FTA, which has been signed. Similarly, with the Middle East also the FTA with India has been signed in Dubai. Similarly, European Union is also now looking at FTA, even England is also looking at FTA. So these all landscapes are going to be very, very, I mean, beneficial for the Indian competitiveness. So going forward, with these all assembled points, I would say that, yes, we have a very interesting spot where we are in so far as the Indian products exports scenario internationally is concerned.

Sir, China Plus One is an old story. In last couple of years, like what kind of benefit you are deriving from the U.S. market because of this China Plus One strategy?

See, the China Plus One strategy is only 2 years old story, right, or rather 3, let's say, maximum, right? The results are still to be tested, right? We are all talking. See, you will understand that when we talk about any large, let's say, company to look for India as an alternate supplier, now it's not so simple as it looks like, because when we talk about the capacity, so in our domain of PPE, which is, let's say, almost 70% catered by China and where only 7% or 8% catered by India, so we are 1/10 of their size, right? So anybody, for that matter, coming to India and asking for some kind of volume, I don't think we are really ready to handle that. So this is something very, very fundamental to understand the market dynamics, that even the Americans or the larger corporates who would like to buy and source from India, they have to figure out the larger capacity. And that's where we exactly as Mallcom are trying to build up. We are building up capacity, so that we can attract the large customers, who can really bank upon us and can buy from us. So this is how I will put it.

So sir, at this point in time, capacity is the biggest constraint for this transition from China to India?

Yes, yes, yes, yes. This is what we have identified. This is what we are trying to achieve.

I got it. Sir, any timeline like you can achieve that level?

See, we are in the journey, we are in the process, right? Sanand-II, for example, is a large capacity we are building up. Even in Ghatakpukur here in West Bengal, we're putting up a large factory just to build up that capability, so that we can cater to these larger customers in a big way.

Yes, sir. I visited your Ghatakpukur capacity as well.

Thank you.

The next question is from the line of Abdul Qadir, who is an individual investor.

Sir, my question is regarding the certification part. Sir, just wanted to know like what is government doing to make this certification mandatory for players like us? Because I feel like this would be the differentiation between the organized and the unorganized players. So just wanted to understand little more about the certification part for our products.

See, about the certification, there are two angles, right? The Government of India, for example, is giving BIS certification, for example, some of the products, right? This is one part of it. But that itself is not propelling the whole scenario of market, right? So the market, for example, today, if you buy any product, right, for example, any consumer product like a pressure cooker, for example, let's say, you will have the pressure cooker, which is ISI Standard. There are many pressure cookers which are not ISI Standard, right? Now in the market, the customer has to be aware of what he has to buy, right? And the customer is buying based upon his pocket, based upon his own idea and judgment, and based upon the salesman's push about what are the products that salesman would like to sell, right? So based on these all scenarios, he would buy. Similarly, in these product categories of ours, where the ISI or the BIS standards are there, when manufacturers are doing it as per their suitability or their, I mean, own calculation of what kind of product category they would like to do, what kind of product, whether certified or uncertified, but then it's the market which will decide and market will decide the buying of the safety products will be based on the government policy and regulation and enforcement, which Government of India has to propel now and which it is doing for OSH, which is coming in place. Worker safety has to become a very, very important thing for the statute for the government, for the people, for the industry. For everybody who is doing the work on the workplace, they must be protected. The moment that kind of rule becomes more and more, I mean, enforced, the demand for the legitimate and certified products will automatically be going up, because that is what is required by everybody to be used. So I would put it this way. I hope I'm clear.

Right, sir. I got your point. So sir, like are we seeing those things being done from the government side? As you said, like the government has to make more strides for this, so are they doing it?

No, no, of course, Government of India has of late been trying to propagate on the worker safety. OSH code has been put in place. See, why today, even since 1947, they have put factories, where the industrial safety is also an important subject. But the enforcement or the laws are not so stringent, number one. Number two, there are not so much rules to have incorporated for the industries to use certified and efficated products, so that worker safety is paramount. That has not been done. So once government starts enforcing these rules by making stringent provisions, automatically, people will start doing it.

The next question is from the line of Uday Kumar Shah, who is an individual investor.

[Audio Gap] regarding some property development partnership which we had. And when the cash flow will start and how much? And second is expectation of FTA that can help us for Europe countries, particularly for United Kingdom?

The property development, our old factory, which was on outskirt of Calcutta, which as we had already intimated that we'll be moving to Ghatakpukur, which we have moved. The land is already offered to a joint venture partner who would be developing it. The paperwork and everything is going on. The clearance from the government is pending. So the moment clearance of the government and everything is done, then, of course, the project will start. And of course, we will be participating in the benefit of the same. That will be there. So the timeline is, we wanted this to happen as quickly as possible, but the government works take a little longer time. But we anticipate, within this year, we should have a very clear picture of the deadline of this would be there, because once we have the clearance from the government, we'll be in a position to monetize this whole thing. So at least we will know what exactly is the timeline, by when we will finish the project and we'll be able to cash out our part of it, that we'll be able to do by March '25, I would say. And about your next point of FTA with England. Yes, we are looking forward. In fact, it's a very traditional market of Western Europe, which has largely been buying such kind of products out of China. Indian buying for English market for these kind of products has not been so big in volume. Once this FTA is in place, we will have a, let's say, advantage of almost by 10% of the duty, which will be eliminated. Of course, we have a better chance to market in England.

The next question is from the line of Rushabh Shah from BugleRock PMS.

Yes. What would be the trigger point of our company in the coming years? What would change the nature of Mallcom?

I don't understand your point.

What trigger we expect for the coming years?

Yes, yes.

Trigger?

Yes.

Trigger, as in what? I mean, on the...

On the growth side.

Okay. Growth side, yes. See, the growth story which we were trying to propel was 15%-plus kind of a growth we must see year-on-year. That is what we are trying to achieve, and we are still propelling towards that. We are taking care of all the factors globally because of the internal market being 60% of our total revenue coming from there. But also, last year, for example, was slightly -- deteriorated our story, but then that's improving going forward. And looking to the various opportunities coming out of America, South America, Australia also, which is also looking quite good, I would say. So we have that kind of perception in place, and we look forward that we will be able to achieve that.

The next question is from the line of Shikhar Mundra from Vivog Commercial Limited.

So I get it, the Indian market is growing fast. But in order to achieve our target of INR 1,000 crores by FY '28, our export market also has to grow by 15%, 18% CAGR. And I believe the export markets are a bit saturated. So what is our strategy? Are we entering new geographies or how are we improving our global market share? Like what is our strategy?

Yes. I mean, global market share has to be also with that kind of ratio, as you rightly mentioned. Yes, we are definitely expanding our customer base in America, in Australia, in MENA region that's Middle East region also, in Africa. We are also trying to make inroads there. So these are the new geographies where we are trying to put forward our feet. Apart from our present customer bases Western world where we have, we are also trying to create a bigger product basket by offering, for example, one customer buying A product, we are also trying to push in for the B product because we have a long-term customer relationship, and that also helps us in offering the different product basket which we have. So that also can bring us a little more revenue. So that's how we are trying to build it up.

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

I just have 2 bookkeeping questions. One, I see that your gross margins have increased by 300 bps year-on-year. So what is the reason for that? And secondly, the other expenses have also grown by [ 35% ] year-on-year. So what are the reasons for that?

Yes, through investor presentation, we have already mentioned that gross margin has improved because of lower cost of goods sold. So yes, on the raw material side, we had some savings. So there we had some better margins. Yes, and what was your second question?

The other expenses have also increased. So any one-off...

Yes, other expenses, as our MD also mentioned that we are investing into -- we had some higher cost on freight side as well as we had some marketing and branding expenses also we are incurring. So there, also we had. And for the first quarter, we have lower turnover, so higher overheads, yes.

And I also wanted to understand the seasonality related to the business. So if you could just tell us how it works. Like quarter-on-quarter, how does the seasonality move? If there's any particular quarter where you see more revenue? And what is the reason for that?

Yes, I can take it. So now seasonal criteria is applicable globally. Even in India also, we have some seasonality. Ironically, seasonal effects are a little on the river side so far in India and the rest of the world is concerned. Just to give you an example, in the last quarter, that is from January to March. Now this quarter is supposed to be a very good quarter so far as the export turnovers are concerned or the export market is concerned. Most of the time, the seasonality starts when we talk about first, second, third and fourth quarter. The first 1 and 2 quarters are low so far as the Western world is concerned, because they are having the summer time. They are not in a mood to make a lot of inventory in their warehouse. They don't buy too much. And the third and fourth quarter goes up because, I mean, before they come back from the holidays in August, September, they would like to have the stock, so that they can sell and things like that and then continues till March. So this is how the whole propelling happens so far as the international market is concerned. So far as the local market is concerned, you'll find the fourth quarter is always very low, because the budgetary expenditures for the big factories and the big companies goes a little down. They don't want to spend more money during the last quarter, because they are ending their year-end. They don't have the budget, so they don't do it. So that's how it is a little bit lower. So this is how the seasonality affects the business. I hope I have been able to answer.

Yes, sir, that was helpful. The next question that I have is with respect to your current debt levels. If you could throw some light on that? And what we understand is your borrowings are primarily for meeting your working capital requirements. So I believe the incremental INR 50 crores, INR 60 crores of CapEx that we are talking of, that will be funded through internal accruals, and we don't plan to take any external borrowings for the same, right?

Yes, that is right. So as of now, there is no long-term borrowing, and we don't plan to borrow anything. So we have planned our investment CapEx in line with expected cash accruals. And regarding working capital borrowing, yes, as of now, it is similar to last year level, a little bit on the higher side, but not much. So maybe still we are enjoying almost maybe 80% of our sanction limit for working capital and we do have some liquid investments also against the same. So that is the overall debt position as on date.

As there are no further questions from the participants, I now hand the conference over to the management of Mallcom (India) Limited for closing remarks.

Yes, so thank you all for participating in this earnings conference call. I hope we were able to answer your questions satisfactorily and, at the same time, offer insight into our business. If you have any further questions or would like to know more about the company, please reach out to our Investor Relations Managers at Valorem Advisors. Thank you. Stay safe and stay healthy.

Thank you very much, sir. On behalf of Batlivala & Karani Securities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.

Thank you.