Monte Carlo Fashions Limited (MONTECARLO) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to 4Q FY '20 Results Conference Call of Monte Carlo Fashions hosted by Emkay Global Financial Services. We have with us today Mr. Dinesh Gogna, Director; and Mr. Sandeep Jain, Executive Director. [Operator Instructions] Please note that this conference is being recorded. I would now like to hand the conference over to Mr. Devanshu Bansal from Emkay Global. Thank you, and over to you, sir.

Yes. So good afternoon, everyone. I would like to welcome the management team of Monte Carlo Fashions and thank them for giving us this opportunity. I would now hand over the call to the management team for the opening remarks. Over to you, gentlemen.

Dear friend, I want to make one correction to begin with. Mr. Rishabh Oswal has also joined us. He's Executive Director of the company. He is also with us along with CFO and other people. Mr. Sandeep Jain will address the meeting.

Good afternoon, everyone. It's a great pleasure to welcome you all on this earnings conference call to discuss our Q4 and financial '20 financial performance. Thank you for sparing your valuable time and joining us here today. In the unprecedented and continuously evolving situation arising out of COVID-19 outbreak, we hope all our stakeholders, customers and suppliers are taking enough care to ensure the safety of oneself, family and in general, ensuring the spread of the virus is curtailed. Before I briefly share the financial performance for Q4 and financial '20, the developments during the year, I would like to update you on all the business continuity post opening up of the lockdown since 21st of April 2020. With the government directives, regarding the nationwide lockdown, Monte Carlo also had temporarily closed its manufacturing facilities, corporate office and retail stores from 23rd March 2020, onwards. In line with the government safety and the security norms for COVID-19, the company's offices, factories and retail stores are now operational and are currently operating around at 70% of capacity utilization. The company continue to work with its business partners across all channels, that is company-owned, franchise-owned, national chain stores, large-format stores and multi-brand outlets. We have taken various measures to take care of the livelihood of workers and their safety and security. The company has emphasized on providing medical facilities to workers inside the factory premises, sanitization and the fumigation in the whole factory. We have ensured that employees of our clearing and forwarding agents and the distributor frontline field force are observing necessary safety precautions. Monte Carlo continues to enjoy a comfortable net cash position, and its medium-term liquidity needs are well covered. With adequate banking limits in place, its ability to serve debt and financial obligations on time remain unaffected. While the safety and well-being of our employees are our priority, we have given utmost importance to incident management and stakeholder communications. Our departments are in constant touch to take inputs and to ensure the business continuity. The company's product development team in May 2020 launched a new range of products in health care segment, which is face mask, 3-ply mask, KN95 masks and N95 masks and personal protective equipment, considering its shortage and massive demand from the medical workers and the general public. Moving on to the financial performance. The total revenues for the financial '20 stood at INR 726 crore compared to INR 656 crore, recording a growth of 11% year-on-year. During financial '20 quarter 4, the company reported total revenues of INR 110 crores, that is 14% increase over the financial '19 Q4 revenues of INR 96 crore. The company reported gross margin of 47.2% and EBITDA margin of 17.1% in financial '20. For the full financial year '20, the profit after tax stood at INR 63 crore as against INR 60 crore in financial '19, a growth of 5% year-on-year. The total online sales have gradually increased to INR 25.5 crore from INR 20 crore achieved in the previous financial year. Our own cotton portal sales have grown to INR 5 crore from INR 4 crore in the previous financial year. The cotton segments contributed almost 59% in the total revenues and 22% contribution came from the woolen segment. T-shirts, shirts, cotton jackets forms a significant share in cotton categories. Home textiles and kids segment continue to grow at a healthy rate. Monte Carlo has 0 reliance on exports and has a presence in domestic market across India, with an extensive distribution network. The good credit terms with our suppliers help us operate the business smoothly. The company has always been focused on digital transformation journey to enhance customer engagement and emphasize to drive sales through its own portal sites. The COVID-19 pandemic, followed by the nationwide lockdown, has impacted the company's operation. The last 10 days of March and the first fortnight of April 2020 witnessed significant disruptions in the operations of the company. Considering that situation is unprecedented and is changing dynamically, we are planning production based on the estimate of demand. The company is trying to ramp up the capacity further as early as possible. We continue to evaluate the impact of pandemic as the situation evolves. We are not in a position to gauge with certainty the future impact on our operations, but we expect that there shall be adverse impact in financial year '21 in the first half due to the economic slowdown and lower demand. However, our strong presence in winter wear market, along with well-diversified product portfolio across range, will help us to minimize the impact of COVID-19 for the full financial year 2021. The company has implemented stringent cost control measures across the organization to conserve cash to address any evolving situation resulting from the pandemic. The company can sustain robust growth without any significant CapEx and is fully geared to withstand the challenges as the situation unfolds on the back of its financial and operational strengths. Now we can open the floor for a question-and-answer session. Thank you very much.

[Operator Instructions] First question is from the line of Vivek Ganguly from Nine Rivers Capital.

I just wanted a small clarification on your balance sheet. There are these 2 new items there. One is about a INR 75 crore right-of-use assets and the other is a lease liability of INR 70-odd crores. So where do these come from and -- you can just explain that, that will be helpful.

INR 75 lakh.

INR 75 lakh is a write-off, which is -- we consider the bad debt, which the company is not going to receive from its -- one of the retailers. And as far as INR 70 crore lease liability is concerned, it is basically the Ind AS impact on the lease rent which we give to the malls and other high street shops. So that is basically only an Ind AS impact, which is considered as a live -- assets in case of the rents which we pay on the lease.

So I was directing to the INR 75.9 crore right-of-use assets.

No. INR 75 lakhs. Just a minute, Mr. R. K. Sharma, our CFO will clarify here.

So you're talking about right-of-use?

Yes.

Yes, this is as per the 116 -- Ind AS 116 implementation. We have to capitalize all the rental properties, and this is the assets, which is INR 75 crore. And equivalent amount has been set aside for the liability also. So this is the Ind AS 116 requirement, which all the companies are required to maintain.

Financial impact is nothing.

Next question is from the line of Deepan Shankar from Trustline Portfolio Management Service.

First, I wanted to understand the current quarter, the South region has degrown by 28%. So any specific reason for that? Or full year, it has degrown by 28%.

See, basically, what happened was, after 15th March, retailers didn't take any deliveries. And that happened for South also because most of the South deliveries basically go in the last week of March. They don't take before that. And after the lockdown, we are stuck with more than INR 32 crore of inventory, which is lying in our godown, which was to be dispatched to various parts of India. Out of that, around INR 3 crore to INR 4 crore was South also. So if we include that figure in the South, it would have even crossed the last year's figure by around 5%.

Okay. Okay. And last year, full year, cotton growth seems to be slowed down to 6% level. So any specific reason? Full year numbers, sir?

Sir, the reason is same. We have stuck with around INR 30 crore of material, which was ready to be dispatched from 20th of March to 31st of March, which could not go. If we add that figure, it would have grown to around 12% to 13% in case of cotton categories also. So the reason is only the lockdown. Because of that, the dispatches have not been made.

Okay, okay, okay. So also, if I see the last 3 years numbers, so our EBO FOFO has been not been growing. So the FOFO and MBO has been growing in double digits but FOFO is still growing at 8% as for last 3 years. So any specific comment on that segment?

See, if you talk about the revenues of -- you're talking about the EBOs and MBOs separately?

EBO, particularly that franchise-owned, franchise-operated EBOs.

Yes. Franchise-owned and franchise-operated EBO, just a minute, I'll give you the detail of the growth of last year and last to last year also. First, I'll talk about this financial year. I'll just give you the details. See, the overall growth in the exclusive business outlet was from INR 270 crore to INR 290 crore. It could have been INR 305 crore, but again the reason is same. So growth was around 10% if we consider the goods, which were to be dispatched but could not dispatch. And if we take out the company-owned outlets, the growth is again coming to around 8%. So the growth is there, but the -- I think already I have mentioned the reasons because of the lockdown effect, the dispatch could not be made in the last week of March.

Okay, okay, okay. So even if I'm looking at the last 3 years' period, FOFO growth has been lower than COCO and MBO, so that's what specifically I wanted to understand. So are we working more on FOFO? So what is exactly happening over in that segment?

No, I need to check the figures. So last to last year also, it's not available with me right now, but I have asked my finance department. I think they will collect it in another 15 to 20 minutes. I'll come back to you with the growth figures of FOFO in the last 3 years.

Okay, okay, okay. So -- and finally, how is your expectation this year on winter season and some orders started to -- how is that picking up?

See, basically, now there are basically 2 kind of problems. One is that we could not have our trade show in Delhi, which was scheduled on 24th of March, and we have to like shelve it when the lowdown happened. So in that case, we invited our EBOs online, LFS and other channels, but the MBO booking could not happen. And MBO booking is basically -- now we are doing it in various parts of the country by sending our samples at over there. But still, it is taking time because of some restrictions on the travel, some restrictions on some containment areas. So that bookings still have not come to us, but we have estimated that our production levels will be around 70% as compared to last year. So whatever winter wear we have produced because we have not got the sum of orders with us, it's just the estimation. So with estimation only, we have started our production, and we planned everything. Around 70% of last year's what we have achieved in winter category.

[Operator Instructions] Next question is from the line of Keshav Garg from Counter Cyclical Investment.

Sir, I want to understand that in last 5 years, sir, our operating profit is flat at around INR 124 crore, whereas sir, our receivables have doubled from INR 120 crore to INR 250 crore. Sir, so what's the reason for this? And sir, when will we break out of this range?

I think you've asked a very good question. See, the reason for increasing the receivable was that the model is completely changing from last 5 years to this year. Mostly, we were doing with mostly MBOs at that point of time. So MBOs received the goods and made the payment immediately. But as the business has progressed, so the other channels like SIS and large-format retail and the online sales channels and more of the EBO, which are doing consignment sales have added, so then all these have been added. So definitely, they only give the payments when they actually sell the products. So that is why the receivability is showing it is more as compared to last 5 years. And as far as profits are concerned, if you see that what is happening in last 5 years is that after the advent of online channels and all -- and the discount, which is going up every year, that is definitely hurting not only the Monte Carlo but everyone in the industry. So as the discount is going up, still we are able to maintain at least a profitability in case of, I would say that in our -- all the channels, but definitely, the impact of -- discounting impact of returns is also there in the balance sheet from -- if we talk about 2015 and 2020.

Okay, sir. And sir, when will we break out of this INR 125 crore operating profit range?

So this is a question, definitely, I cannot answer in this particular year because there are so many challenges and very difficult economic environment. So our first priority in this financial year is to cut down all the unnecessary expenditure, all the bad expenses and just to survive ourselves and do better than others. So that is what actually our focus on this financial year is because we are still not aware about how this situation will improve in the coming few quarters. Because every day, we are listening and we are reading that the corona cases are increasing every passing day. So clarity is not there as far as this particular financial year is concerned.

Sir, so our woolen is around, say, less than 25% of our total sales. Sir, so what I want to understand, sir, Monte Carlo brand is only for woolen, or sir, cotton and et cetera, also nonwoolen, nonwinter wear also, we are selling under Monte Carlo brand?

Sir, Monte Carlo brand is for the company's product. So whatever we sell in our EBOs, in MBOs, in SIS and in LFS, all the categories comes under Monte Carlo. Besides that, we have one economy brand, which is called Cloak & Decker, which only serves to economy segment, and we also have one more brand, Rocket, which is our sportswear, sports apparel brand, which is a very different category altogether. But 90% to 95% of the sales is being contributed by the Monte Carlo brand itself.

Sir, but don't you think, sir, Monte Carlo, everybody knows the Monte Carlo as a winter wear brand, and sir, it has got enormous brand equity in that segment. Sir, so now if we start selling even nonwinter wear under Monte Carlo, sir the brand will get diluted. Sir because -- so let's say that Gillette -- sir, now if Gillette starts selling soaps and et cetera, under Gillette brand, sir, so the brand will get diluted because it stands for only shaving. Sir -- so similarly, sir, don't you think that we should just at least -- sir, we can sell nonwinter wear under some other brand, but sir -- I mean, sir, what do you think about this?

See, basically, Monte Carlo is brand for the lifestyle apparels. So when we talk about lifestyle apparels, it covers winter wear as well as summer wear. And I'll give you a very fine example of how the other categories have grown. See, at one point of time, the 100% revenue was contributed by Monte Carlo brand only in the sweaters category, if I talk about 2002, 2003. Now you see that in last 16 to 17 years, the contribution from woolen categories has been restricted to -- or came down to around 23%. So the nonwinter categories and the nonsweater categories basically contributed to the 80% of the -- almost 80% of the revenues of Monte Carlo. That shows the strength of the Monte Carlo that how the brand image, which was created by Monte Carlo in the woolen sweater, was passed onto cotton T-shirts, cotton jackets and other categories, which kept on growing, and they've grown at a such an extent, now they contribute more than 7,500 of sales for Monte Carlo. So...

Yes, sir, so if that's the case, sir, then why do we make loss in March and June quarter? Sir, if -- I mean if nonwinter wear also, if we are able to sell, then we should be making profit in all quarters.

See, the reason is that there is EOSS, end-of-season sales, which normally happens -- normally in summer, it happens in June, July, August. And in winter, it happens in Jan, February. So that is the time because we contribute almost 60% to 62% of the sales in third quarter by winter wear categories and that goes on discount in this January and February period. So the volume is so huge, so you have to see Monte Carlo as a yearly revenues brand. We cannot compare our quarter with other brands' quarter because their business model is different. So you need to see how we have grown in one financial year and how our profits are and how our EBITDA is. So that is the best way to see Monte Carlo as a brand.

[Operator Instructions] Next question is from the line of [ Mihir Desai ] from [ Desai Investments ].

So just wanted -- so I was just looking at the presentation, sir. And what I noted is that in Q4, our online sales have grown. So do we see as a structural change in the industry? Or -- and we thus see this line of segment expanding going forward? Or just wanted to take a view of your, sir.

See, I think if we talk about the fourth quarter and also in this quarter, the online sales are actually growing more than any other channels. The reason being is that the people are -- still fear to go out in the public, go out in the market, go out in the malls. So when they know the brand, when they've used the product earlier, so they better sit at their home and ordering the product, so that it can be delivered at their home. So that is why -- that is how they feel very safe without going out and buying the things, which they need the most. So definitely, answer is, yes, the online sales will definitely outgrow other channels in this financial year as well. Because most of the people, who are like, if I talk about the old age people, so they are preferring not to venture out from their homes because there is so much fear outside. So they prefer to sit at home and order the product, which can be delivered safely at their addresses -- at their home addresses. So that's why the online sale is growing and it will grow this year as well.

Correct. Correct, sir. Sir, actually, even we were also trying to grow and focus on the online. So this way, we are growing in a good pace, sir. So that's a commendable which I noticed, sir. Sir, other than that -- sir, one question on the finance cost. Sir, finance cost has been increased. So basically, this is only due to COVID impact or is it due to -- sir, so just wanted an insight from you, sir?

No, there are 2, 3 reasons for that. One is the Ind AS impact. Ind AS impact has actually increased our finance cost. And second reason is we did a buyback also last year, last financial year, so that was a cost of INR 55 crore, which also went from our working capital. That increased my working capital limits to an extent and which increased my finance cost also. And thirdly that inventory and the sales have also increased as compared to last year. So that is the usage of more working capital as compared to last year. So these 3 reasons basically contribute an increase in the finance cost.

Okay. Okay. And sir, just wanted an outlook on cotton sir. So currently, I do understand that the demand revival is the key point. But sir, apart from that, the -- going -- or the lower fuel cost and -- sir, will that help us to further enhance or at least be at a stable gross margin, what we achieved in Q4 '20, sir?

See, if we talk about only the fuel cost, I don't think it's going to affect much to us because we don't use much of the fuels. We depend on the electricity. And that, of course, is being regulated by the state electricity boards. But definitely, when the fuel cost is lower, it helps the economy, which in turn helps the -- improve the customer sentiments. And that is why definitely, it helps to improve the GDP also when the fuel cost is lower.

Next question is from the line of Hemant Sreeman (sic) [ Sreeraman Hemant ] from Bearing Advisors.

Just have a few questions on the longer-term trends in the business that you are seeing. You made a very interesting point on buyer behavior, specifically more online purchases. How do you see the post-COVID world? Do you see more purchases to permanently move online?

I don't think so. There are a set of customers who would like to go to the shops, feel the fabric and buy -- see in front of the mirror and see how it looks to them and then they change it. So there are customers who prefer to sit at home who also feel little safer as they are more prone to diseases and so they don't venture out. So I think there will be increase in the online sales because some of the people will change their mind to go to the shops. But I don't think that it will hurt the physical channel sales. And the reason being is that if we compare our EBO sales in the June, particularly this financial year, we are already doing around 70% of the sales, which we are doing at a pre-COVID level. So that shows that even the fear is there in the mind of the people, still people are coming out at these stores and buying the products. And I think this year will also go away as we -- as the time passes because naturally, when you start stepping out of the home, the first day, you are very fearful. But once the 1 month is passed, 2 months are passed, you become habitual to it, and you know that you have to live with the disease, you have to adjust yourself. You need to have some protective equipment, so that it doesn't hamper your work. So I think by -- as the time will pass, definitely the fear will be less as compared to now. And definitely, the physical sales will start rising as it has risen from last 15, 20 days as compared to May. And the online sales definitely will improve more as compared to last year because of the reasons I've told earlier.

Got it. Today, it's at 3% to 4% of sales, let's say, 5 years from today, what would be your guesstimate of how much online share would be as a percentage of your revenue?

We see 8% to 9% of the sales coming from this channel in the next 3 years.

Interesting. Got it. The second question is on the customer profile. The primary outreach channel for your business is multi-brand outlets. I'm wondering if you could share some insights on the customer demographic. And when I say customer, I mean the ultimate buyer. And do you track that closely?

No. I didn't understand your question. Can you please repeat it?

No. So I'll give you a personal example. So I'm a buyer, and I'm the ultimate consumer of your product. Now I might be buying your product through a multi-brand outlet or an exclusive brand outlet. I'm just wondering if as a company, you track the customer profile itself closely in terms of who is the customer. What is the kind of demographic? And why do they come to you versus say, going to other outlets?

See, that is being flagged at our exclusive outlets, where we have a privileged customer program and where we have information as well as a demography also that from where the customers are coming, but it's not possible in case of MBOs. Because MBOs, we don't have any our software installed over there. So it's their software, and they actually deal with the customers. So customer comes to them and they show them different products and customer buys it. But we don't come to know except what we have sent to them and what they have sold. So we can get the data from them that this much of Monte Carlo have been sold in different categories. But the customer profile is not shared by MBOs to us. But in large format, yes, we do come to know.

Got it. And I'm assuming even through your online channel, you would have slightly more insight.

Yes. Online channel, we do know everything about the customers.

Next question is from the line of Gautam Gupta from Nine Rivers Capital.

Unfortunately, COVID happened, otherwise, I think Q4 this year has been really good for us. I think all the accounting changes we made have also started showing. So that was one positive sign that we saw. Just had a few questions on the management and on the accounting side. So if I could maybe start with the quick accounting questions. In fact, there's only one question on accounting side. The employee cost has been up by about 17% year-on-year. I just want to understand, is there -- has there been more hiring at the manufacturing side? Or what has kind of driven this cost?

I think that is again -- it would have been around 15% if INR 30 crores have been added to the sales, which was not done in the last week of March. So the percentage would have come down and revenues should have gone up. So I think the sales have also increased. If you see the sales is increased by 11%. And if the dispatches would have happened in the last week of March, so it would have been almost similar as compared to last year.

The absolute raise from about INR 59 crore to INR 69 crore is more wage-hike driven or more headcount expansion-driven, if I can ask that?

No, it's basically the large format stores, which have been added. So we have employed extra people over there, which was lesser in last financial year. This year they have gone up.

Yes. That makes sense. Understood. Fair enough. So that is clear now. Sir, now in terms of the inventory levels that you would have because of the COVID impact, when we talk to brands such as yourself, normally, we see 2 strategies. Some brands say that we will hold on to the inventory, maybe we will launch it in the next season. And some brands, say, we may go for discounting and liquidate it. I was just wondering, our thinking on this front. What route do we plan to take?

See, there are 2 things in that. One is the inventory, which is completely in set-wise, shade-wise and size-wise. And second is assorted inventory. So assorted inventory we'll definitely be selling in this financial year also, this financial year only because already, it has been dispatched to various SIS, MBOs, EBOs and LFS also and some of the inventory is lying with us. And still we have around 2 months of summer, which is left with us. So that definitely, I think that we'll be liquidating those inventory. But some of the inventory, which is set-wise, we'll be taking in the -- there are some festivals like in south, there's Pongal and all, in Calcutta, in West Bengal, Orissa and in Bihar, there is a puja. So we are keeping that merchandise definitely for those regions. And then if you talk about the shirts and trousers, that we would be using in the August, September and October period in the Diwali period in Northern and Eastern India.

Okay. So in terms -- I know it may be a little too early to say, but in terms of discounting, do we expect a higher discounting level in FY '21 to get customers back to the stores?

See, I can certainly say for the summer because when we started it, the morale of the customers and the economy was very, very low. So we could not sell it on MRP. We have to start with the discount and still discount is -- they are in all the channels. And it will only increase going forward. So in summers, definitely, we'll be facing more discount pressures as compared to last financial year summer. But winter, I'm not sure about that. The reason being is that in winter -- I would like to give you some -- throw some light on the winter part. See, first of all, winter is -- in Ludhiana, there are many hosieries, which do not have the workers right now. So the production level of those hosieries, which used to be 100 pieces, if I take an example, it has come down to 40 or 45 pieces. So the problem in the inventory is that because of known availability of workers, which have gone to their native places because of the wrong policy of the government. So the production could not happen for many of the hosieries who are here in Ludhiana. But fortunately, for us, we are running around 80% of our capacity right now. And we are producing around 70% of what we produced, 75% of what we produced last year. So in that case, the availability of winter wear would be less at the retail stores all across India, there will definitely be more demand, brand like Monte Carlo, who have a strength in winters. In that case, if more products goes on the fresh sales, there might be a chance that we have lesser EOSS because of low stocks, because of no previous stocks lying in the store and because of no -- not many brands are able to produce the winter goods on time. So that gives us a chance to sell our merchandise most in fresh than as compared to last year and then lesser in discounts as compared to last year. That is our presumption right now, seeing the conditions of the hosiery industry in Ludhiana.

Okay. That is very nice perspective for us. Sir, 2 more questions, if I may ask. One was do we -- where do we see OpEx cost optimization opportunities, advertising side or any of the other areas that you -- wish you could give us some color on how much we can really reduce our OpEx cost by -- for the first half given that it will be a slow first half for us?

See, we have taken various steps in the company to reduce the expense size. First of all, I would like to talk about -- we have taken the salary cuts across the company, which will save us around approximately INR 3 crore in this financial year. Then -- just a minute, I have a revised figure. Okay, the full financial year impact will be INR 8 crore as compared to last financial year. And we would be saving at least INR 15 crore in advertising cost in this financial year as compared to last year. Then we are negotiating with all the rentals with all the mall developers and all other shops where we are having, we'll be saving around INR 3 crore to INR 4 crore in that case also. So we are working on the expense side as well how to cut down the expenses when we know that the sale is going to go down because the production is less. So I think if we manage whatever we have discussed in our expense side, and 99%, I am sure that this will be taken place. So that will definitely help us in maintaining the margins.

Okay, sir. Sir, last question. We mentioned about the PPEs, the masks and PPEs that we are making. I want to get a sense of how material this can be in terms of sales? How much of the sales shortfall could be made up from this? Or is it more of a CSR thing right now?

No, it's not of CSR. It's definitely a -- it will be a profitable venture for Monte Carlo. And basically, we have gone for 2 product clients right now. One is the 3-ply mask, which is very common and very popular, which sells around -- in the market around INR 10. Secondly, we have gone for N95 and KN95. And this is a specialized mask, which is a 5-layer mask. So machines, we have already imported, the productions have already started. So we assume that in this financial year, we should do a turnover of around INR 12 crore to INR 15 crore out of this masks line.

Okay. And this will be to retail or more to institutions, health care?

There are 2 models for this. We will be selling in our own retail channel also. And secondly, we have appointed some distributors who are having the medical line. So it will be selling through the chemists also. And thirdly, we'll be selling to the institutions, which is the government tenders and also some hospitals.

Next question is from the line of Aditya from B&K Securities.

Sir, I have 2 questions. One is what is the current year CapEx plan? And the other question is, how has the business been so far in the first quarter of financial year '21?

Okay. The first question is the CapEx is approximately INR 10 crore to INR 12 crore in this financial year. Last year, it was INR 24 crore. So we have cut the CapEx to half for this financial year. And second is, after COVID, there was definitely a slowdown in the economy, and we witnessed that at our retail outlets also. But right now, if I talk about on this date, from last 15 days, the business has picked up. And in EBOs, if I talk about barring Delhi, which is most affected corona state in India, the business has touched almost 80% of the last year's sales in June. But in Delhi, because people are not able to come out of their houses because of so many containment zones, so many sealed streets. So Delhi, we are witnessing only 20% to 25% of sales as compared to last year, which is last financial year June sales.

Next question is from the line of [ Zaki Nazar ], individual investor.

Hello?

Sir, we are listening.

I think Monte Carlo has turned out a decent performance for the last year, taking into account the last 10, 15 days' loss of production. And although the pandemic has been a human tragedy, I think as you mentioned that our -- winter season, things should get back to normal. Sir, keeping that in mind, you said that your production line is working at 70% capacity, so do we assume that Monte Carlo will do at least like 75% to 80% of the top line it did last year? That is my question number one. Question number two is, sir, see, this year, you had a reduced dividend in terms of -- even though the profits were slightly higher than March '19. So do you think -- would this be an exception because of the nature of this year? And you'll get back your dividend policy to previous levels once things improve? That's all, sir.

See, first of all, I come to the dividend part. So I think you would appreciate that it's a kind of situation, India and all the companies in India are facing, the future is very, very uncertain. So every country -- every company would like to conserve cash for any problems which can come in the future as well. Still, the company has thought that it should reward its shareholders, even though everyone is talking about conserving cash, cutting down the expenditure, but the -- still company has gone ahead and gave the dividend of 50% which I think, as far as the kind of situation we are in, it's a very good dividend. And the company has continued the dividend policy, which it has been doing from last 6, 7 years since inception. And the 1 year, which the company did not give dividend, was a buyback year. Here, we did a buyback of INR 55 crore, even where the promoters have not participated. So everything -- so we are very concerned about the shareholders' wealth also. So that is why we have gone ahead. Even in the difficult times, we know that this year would be very, very difficult, we have gone ahead with and giving the 50% dividend. And can you tell me the second question, please?

Sir, in terms of your -- you said your production facilities are running at 70% to 75% capacity now. So is it fair to assume that you will do at least 75% of -- yes, sir.

Yes, I got. I got. See basically, what happened was our winter season production normally starts in the month of February -- January, February. We completely lost 2 months of production from 21st March to 21st May. So that production, we cannot produce. And secondly, the worker availability is still a challenge. If we talk about in the month of February, still the workers have not reached Ludhiana. Even we are trying hard to get those workers back. See that would be the reason. Even though the demand from some of the EBOs are very higher as compared to last year, but we will not be able to produce more than 70% to 75% of the orders which we delivered last year. So production is basically more constrained than anything else.

So should -- can it be assumed that you'll do at least 70% of turnover of last year, sir? Like in the last year, we did INR 725 crore, so INR 650 crore would be -- INR 625 crore to INR 650 crore would be safe to assume?

See, it's very difficult to comment at this point of time, but I think you can assume it as I've given you the figure of the production quantity of winter was -- if 100, we're are producing 70. So you can work out those figures very easily. But it is not prudent from my side to give any figures right now about next financial year.

Okay, sir. But once things -- see, suppose things come back to normal before the winter, which things should be. Do you think our third and fourth quarter should be equivalent to last year, if you are able to ramp up the production also?

[Foreign Language] See, basically, the winter goods are...

[Foreign Language]

[Foreign Language] The winter goods are very difficult to produce. In case of winter garments, the time required is around 6 months. So if -- even if it becomes normal, it requires from one end to another end, at least 90 to 120 days to get -- to reach to the end of product. So the cycle is very large. But again, as we have estimated that we should be able to sell this much of quantity, and we should be able to produce around 70% to 75% of last year's winter goods, which we did last year. So we can even safely assume that the company should achieve that kind of turnover in this financial year.

Okay. And sir, your imports from China, you were importing some blankets and some -- I mean some of the home textile kind of products. What is your view on that? And have you changed your country of products? I mean because definitely there is some kind of resistance for Chinese goods. So what is your view on that, sir?

See, it's very difficult to change instantly and to place orders to any other country. Because right now, there are no studies being made, which are the good producers and who can give us the same price which we are getting from China. So the biggest challenge is the price. There are many countries which produce blankets, but the price is not competitive at all. So we are only buying from China right now. But yes, the import have been reduced to 60% of the levels as compared to 100% of the levels last year. Again, I would say in this that -- but there are a chance if the situation improves, we can further import in the case of August and September, it is possible in case of blankets, but it is not possible in case of sweaters and jackets. But right now, we are targeting 60% of the blanket sales, which we did last year because of -- seeing the current conditions in the country.

And sir, there was a broad -- I mean I was just reading somewhere that the only clothing, a consumer who wants to buy because of the lockdown and whatever the psychological impact is a T-shirt or a track pant, or of course, a sweater would be a integral part of them. So I think Monte Carlo is well placed to -- in the textile segment in India. What is your feel right now, sir? I mean in terms of you would be interacting with your EBOs and your retailers. What is your outlook, sir? I mean how -- what is your feel of the market right now?

So I think when the lockdown opened, the only thing which we were selling at our retail stores were T-shirts and lowers only. So we are well placed to service the demand. And also, we don't have a stock left with us, particularly for lowers, there was so much demand in the lockdown particularly because people were only wearing lower at that point of time. And they don't have a large, I would say that, the quantities of lowers with them. So when the lockdown ended, the first thing they bought is the T-shirts, the lowers, those kind of casual category, which they wear at the home. So definitely, yes, the lower demand and T-shirt demand has gone up as compared to last year. The shirts and denim trousers demands have actually come down in the month of May and the first 15, 20 days of June. So that is, well, I think, the effect of corona.

Okay. Sir -- and last, sir, any plan of getting into innerwear, sir?

No, not right now.

Next question is from the line of Apurva Mehta from A M Investments.

Sir, can you just let us know that due to this COVID, do you have any new defaults in debtors or what you are seeing that the collection during this COVID, do you find any stress in that thing?

No, fortunately, in our business, we -- at this present moment, we don't have any default, which is rising out of these COVID cases. But yes, there are some delayed payments for which we have given some extension for 2 to 3 months, but we don't see any defaults right now, particularly for Monte Carlo brand.

That's good to hear. And can you give us a breakup of what is the breakup between fresh and the end-of-season sale kind of to what is current last year, what we did was fresh and end-of-season breakup. Can we have some ballpark figures on that?

We can only talk about the EBOs because we don't get the figures from the MBOs. So it's not relevant for the -- our brand. But EBO, it is around 40% to 45% in the fresh.

Okay. Okay. And sir, what currently are the billing prices, which are there currently? Can you [Technical Difficulty]

Pardon?

Apurva Mehta, are you there?

Yes, yes, yes. One second. Is there any raw material costs and we have -- how it has been? And can you give a ballpark figure that post last year and this? And does it impact our costing or...

The price of cotton and woolen both have come down, but already, the production has been planned for this financial year. So we won't have much effect as far as this season is concerned. But it will definitely have more effect in the next season.

Next question is from the line of Bhaskar Chaudhry from Entrust Partners.

I just wanted, if you could just explain the difference in the profitability profile and the working capital profile of your online and your off-line business?

You're talking about the working capital?

Working capital profile and the profitability profile, the margin profile as well.

See there's a difference of -- in online and MBOs, SIS and EBOs, the difference of margin is 3% to 4%. Online is lower and the MBOs, SIS and EBOs are higher. But in LFS, it's again 3% to 4% lower.

Okay. Got it.

Yes. And the working capital involvement in online is not that much because it contributes only 4% of the sales.

Sir, but for that 4%, I mean, relative to the percentages, what is your inventory level? Or what are your debtors, et cetera? Could you just...

Basically, we sell on a marketplace model. So in marketplace model, we have to keep the inventory with them. So it's same like in LFS or it's same like in EBOs also. So the model is not different from EBOs and SIS -- sorry, LFS.

So on a return of capital basis, how would the businesses be different then?

See, return on capital MBOs are the best because we don't have any sale returns from that channel. Then comes the SIS, then comes the EBO and then comes the LFS and online.

[Operator Instructions] Next question is from the line of Riddhima Chandak from Roha Asset Managers.

Sir, I'm from Riddhima Chandak from Roha Asset Managers. Sir, my question is regarding that as 59% of our portfolio is from cotton segment, so is -- we see any down-trading happening over there or any bill size increase or decrease? So can you tell us?

See when we talk about the cotton segment, it's not only the summer segment, it's basically around 70% is the winter segment. When we talk about sweatshirts, when we talk about jackets, it comes under the cotton category. And when we talk about the tracksuits in winters. So basically, the cotton category comprises of around 70% of the winter category and 30% of summer categories. So summer category, when we talk about, it's the T-shirts and shirts and trousers, and shirts and trousers, denims also comes in the winter season also. So we see 59% contribution by the cotton category, out of that, mostly it will come in the third quarter. So I think that in third quarter, we won't be much affected in the cotton categories as compared to other brands.

Okay. Okay. So is there any down-trading happening currently? As you said that T-shirt and lowers are -- there is huge demand as of now as people are currently working from home. So is there any down-trading happening as compared to our previous levels, pre-COVID levels?

Down-trading means?

Means, people are buying cheaper products than the premium product. Say INR 500 [Foreign Language] they are buying INR 400 or INR 350 like this. Is there...

I think in one way, it is -- you are correct because when the economy is down, the purchasing power also comes down. There has been cut in the salaries. There have been increase in the unemployment. There have been downtrend in economy. So people would prefer to buy a lower-price product as compared to higher-priced product. So I would say, yes, in some of the cases, where these kind of situations happens, the first thing which comes to the mind is saving the money, which everybody does. But again, there are certain customer profiles, I would say, the upper premium, which are not that much affected where in our economy as the lower, middle-class is affected. So their state is still here, which doesn't mind spending money for the good value product.

Okay. And currently, what is our average realization per se as of now? And how much is their volume growth, we achieved during the quarter or in the last financial year FY '20?

Volume growth, I would like to share with you for the total -- woolen categories, it was minus 5% as compared -- sorry, just a minute. Volume was -- it was 13 lakh pieces in last financial year, March '19, and this year it is 12 lakh pieces. So it's almost 6% to 7% down. And in case of cotton categories, it was 47.6 lakh last year. This year, it's 49.71 lakh. So growth of around 6% in categories. But this growth could have been around 10% if we would have got the last month -- last week of March also.

Overall is 5.65%.

Yes. So overall, is around 5.65% -- 5.2% for full financial year.

Okay. Okay. And as we said that 70 -- we are already reached at the 70% production level. So in the cotton category, as you said that 49.71 lakhs you achieved last year in FY '20. So how could we -- how we assume in this financial year that it could be reduced by 10% or say, 15%? Any thoughts on that?

See, when I said 70%, it was only for the winter categories. That constitute the summer category as well. So we completely lost the sales of April and May. So very difficult to project right now for summer categories. But for winter categories, the production plan for this financial year is 70% as compared to last year. And the summer for next financial year, would be more completely, I would say that more than last year's summer because by the time we reached in March, April and May, next financial year, everything will be all right. So the only -- the bad time, I think the Monte Carlo will face is till June and July only. And I think after that because we have upcoming winter season, then upcoming summer season, I would say that it would be better as compared to last summer. Because by the time, the economy would be definitely reaching around 2019 level. So there would be more demand as compared to last year.

Got it. And so in -- our inventory is almost INR 216 crores level. So how much -- and this is woolen and cotton in terms of value?

So I need to have to see the breakup for that. Right now -- I don't have right now with me. The total inventory shows is INR 216 crore. But I think the winter portion in this is approximately around INR 80 crore to INR 90 crore, which we have freshly produced for the next financial year and balance is summer category.

Okay. Okay. Okay. And one last question. Sir, as our CapEx plan is almost INR 10 crore to INR 12 crore in this year, so in this, we imported machines from the respective country for the mask manufacturing, so how much we invested there in the INR 10 crore to INR 12 crore?

Approximately INR 3.5 crore has been invested in the mask-making machines.

Okay. So that investment had done in previous financial year or...

This financial year.

[Operator Instructions] As there are no further questions, I will now hand the conference over to the management for closing comments.

Once again, thank you very much for all the participants who have participated in the conference call of Monte Carlo. And I also like -- if there is any query, which is unanswered, or if there is any query which comes in your mind, you can also mail us to Mr. R. K. Sharma and to Mr. Dinesh Gogna. And you can also call them for any queries. Once again, thank you very much. Stay safe.

Thank you very much. On behalf of Emkay Global Financial Services, that concludes this conference. Thank you for joining us. You may now disconnect your lines.