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

Ladies and gentlemen, good day, and welcome to the Q4 FY '21 Earnings Conference Call of Monte Carlo Fashions Limited, hosted by Emkay Global Financial Services. We have with us today Mr. Dinesh Gogna, Director; Mr. Sandeep Jain, Executive Director; and Mr. Rishabh Oswal, Executive Director. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Devanshu Bansal, research analyst of MK Global. Thank you, and over to you, sir.

Good morning, everyone. I would like to welcome the management team of Monte Carlo Limited and thank them for this opportunity. I shall now hand over the call to the management team for the opening remarks. Over to you, sir.

Very good morning to everyone joining us today on this call. We are pleased to welcome you all to this earning call of Monte Carlo Fashions Limited to discuss the financial and the operating performance for the fourth quarter and the financial year ended 2021. I hope all of you are safe and healthy and at your homes during the second wave of COVID-19. The result presentation has been uploaded on the exchanges, and I hope everyone had an opportunity to look at it. Before taking you all through the financial highlights for the year, let me first take you through our business and upgrade operating performance during the year. Monte Carlo is a well-known brand having a basket of diversified products, which includes: woolen bottoms; kids; home furnishing. And important segment, apart from jackets, we also have T-shirts, shirts, denims, trousers, suits and different other undergarments. We also produce cotton and cotton-blended T-shirts in our economy category under the brand Cloak & Decker. The diversified strategy of the company helps in catering to various apparel demand for various seasons. Company has a presence across India through various distribution channels and recently have noticed huge demand coming from our online channels. For financial '21, our sales through online channel has increased to INR 37.2 crores and raised INR 24.1 crores in financial '20, which is now around -- constitute 6% of the total revenues. With regard to online sales, we are looking to focus more on selling through our own portals, but our products are also available under various e-commercial websites such as Amazon, Flipkart, Myntra, Jabong and Kapsons. I'm happy to hear that even during the tough times of COVID pandemic, we were able to open 28 new stores in different regions. And at the same time, we even closed a few nonperforming stores. So as on date, we have 298 stores in various states and union territories of India. We continue to enjoy a comfortable net cash position, and our medium-term liquidity needs are well covered. With adequate banking limits in place, company's ability to service debt and financial obligations on times remains unaffected. Monte Carlo has zero reliance on exports and has a presence in domestic market across India with extensive distribution network, good -- great terms with our suppliers, help us operate the business smoothly. No major CapEx is planned for the next 2 years. Therefore, the positive operational leverage is expected as the production gains scale. Now let me give you some insights on the financial performance for the year, quarter-by-quarter performance. Despite COVID-led disruptions during the financial '21, the company reported revenues of INR 622 crores as against INR 725 crores in financial '20. The gross margin stood at 46.8% in financial '21 as against 47.2% in financial '20. EBITDA for financial '21 stood at INR 115.6 crores against INR 124.4 crores in financial '20 and PAT for the year stood at INR 66.3 crores as against INR 62.7 crores in financial '20. The Q4 financial '21 revenue stood at INR 108 crores against INR 109.5 crores in Q4 financial '20. Gross margin stood at 48.1% in Q4 financial '21 as against 46% in Q4 financial '20. On the balance sheet front, we have a cash balance of INR 228 crores, which comprises of cash and bank balances, along with current and noncurrent investments. Long-term borrowing for financial '21 is INR 11.7 crores compared to INR 16.3 crores in financial '20, which shows our efficiency in servicing debt. Debt [indiscernible] 0.05 for financial '21. ROCE and cash adjusted ROCE is 17% and 21% for the year. So lastly, I would like to inform you that the Board of Directors of the company have recommended to pay a dividend of INR 15 per share, that is 150% on face value of INR 10 per share, as our endeavor is always to create value for our shareholders and stakeholders. So if any of you have any queries for this earnings call, you may connect us or Dickenson World, our Investor Relation agency, so we can now open the floor for question-and-answer session. Thank you very much.

[Operator Instructions] The first question is from the line of Deepan Shankar from Trustline PMS.

Thanks a lot for the opportunity, and good morning, everyone. Firstly, I want to understand this cotton segment summer sales got impacted last year also due to pandemic. So what is our expectation for the current year? Are we impacted worser than even last year?

Good morning, Mr. Deepan. So cotton sales, as you all know that last year, we were badly affected and there were disruptions from March 23rd until approximately end of May. But fortunately, this year, the disruptions have started in mid-April. So definitely, the sales as compared to last year are better in summers. And we'll see that the first quarter sales are also better as compared to last year's summers. But we have near-term uncertainties. Because of that, most of our stores are closed right now. And -- but we hope that the -- by June first week, we should have opening of our EBOs and MBOs and also our LFS stores. So right now, it is online sales, which is happening, but we are optimistic that we have some openings and easing of restrictions from first June onwards, and that may improve the sales as compared to last year.

So what will be our full year guidance for this year?

See, it's very early to say about the full year guidance. We would like to give our full year guidance in the next quarter's earnings conference call. But definitely, we are optimistic as compared to last year because disruptions as far as productions are concerned, it's not affected at all. Last year, we had a disruptions in our production from March till almost mid of June. So that has not happened. So our main season basically is winter, as we all know that we have our significant revenue which comes from the winter quarter. So disruptions of production has not affected. So that may improve the sales going forward, if things become normal.

Okay. Okay. Okay. Sir, particularly Q4 quarter, we have seen the kids segment has got impacted heavily. Any particular reason, 30% kind of fall in top line?

Kids segment?

Yes. Yes.

See, basically, if we compare the last year sales of kids and this year summer sales, it has actually grown by around 30%. But the problem is that it's not reflecting in this quarter as supplies have happened basically in first week of April. So that is not being counted in the summer sales. So otherwise, it has grown as compared to last year.

Okay. Okay. Okay. Sir lastly, on the capital allocation front. So we have cash of around INR 228 crores, so which is almost 43% of our market capitalization. So any major plan for buyback are giving -- return back to shareholders, which will improve even valuations and return ratios of the company?

So I think these things are being discussed in the Board also, but we don't have any information right now. I think the company has given -- the past dividend till date, till it's inception is 150%, that is INR 15 per share and which is basically to benefit our shareholders.

Yes, sir. But still we are accumulating more cash every year and cash is getting increased, and this is impacting our return ratios. And if we revert the shareholders when the valuation also will improve for Monte Carlo?

Yes, I understand your concern. Even this is a concern for us also that our cash level is actually rising. But in this particular year, our intention was to survive basically this pandemic. And definitely, the company has some plans which are on hold. So I cannot discuss anything as of now without discussing in the Board.

[Operator Instructions] The next question is from the line of [ Zaki Matal ] an individual investor.

I think I would need to congratulate the management on a resilient set of numbers for the fourth quarter and the full year, despite the pandemic. Mr. Jain, you slightly mentioned about how this time around is different from last year. Could you just elaborate on this point? And I just want to know, you are confident that the company will do slightly better than last year, provided stores open in June. So where does your confidence come from, sir? Because there's kind of a weird lockdown in different parts of the country, different rules, regulation nationwide. So I would like to have your thoughts on this, sir. And that's it, sir.

Thank you, Mr. [ Zahir ]. First of all, there are 2 reasons for having us more confident as compared to last year. Last year, when this pandemic happened, we were just sitting in dark. We were unaware of all the implications which can happen in the future. But this year, as of now, at least, I think we are more prepared to tackle this as compared to last year. And secondly, we have a destination program, which is already going on, which is definitely helping us as far as this COVID is concerned. And thirdly, the major reason, which I think was -- because not last year, but we are basically benefiting this year. Last year, all our lever had grown in March itself. So we had a major disruption which is happening from March till mid of June, so which is not there in this year. And one of the biggest reason which is making us confident is that there are very low level of stocks, winter stocks, which is lying at our retail stores and also at our multi-brand outlets. So that has helped us to get -- had more booking as compared to last year, which is still going on. So that gives us the confidence. And definitely, we'll have a very good second and third quarter. Yes, there are near-term uncertainties because of COVID, but we are hopeful that as the number of cases are going down every day. So we are seeing that from 4 lakhs, we have come down to 2.8 lakhs. And also, there have been restrictions, which is controlling the number of cases, and vaccination is also going on. So that makes us more optimistic as compared to last year that we'll have a very good second quarter and third quarter.

So you already have got a feel by the winter bookings, sir?

Yes. Already, the winter booking, which is happening around at various places, actually more as compared to last year. So that gives us the confidence that our sales will be better than the last year.

Okay. And I would also like to congratulate the management on increasing its stake to nearing 75%, sir. I think that's it. If there's something, I'll come back in that session.

The next question is from the line of Keshav Garg from CCIPLC.

Sir, first of all, I want to thank you for the very generous dividend, sir, but you would appreciate that, sir, now dividends are taxed at 43% and sir, whereas for a buyback, only 23% tax company has to pay rest, shareholders have to pay no tax. And then moreover, sir, as you know that our EBITDA is flat since 2015. Sir, so in that case, until we reduce the number of shares outstanding through a buyback sir, then how will our EPS increase? And then, sir, share price will also ultimately follow the EPS. So maybe for the future, sir, you can give preference to share buyback over dividend? Sir, that was as far as this issue was concerned. Sir, now sir, the main issue is, sir, that, sir, I have seen in your presentation that, sir, you are selling summer wear also under Monte Carlo whereas even though you have half a dozen brands so then what is the need -- because it is total contradicting. So how can you sell summer wear in your established winter wear brand?

Very strange question this has come from you. Basically, the summer wear is we are not selling from this year, we are telling from 2000. It's almost 20 years, we are selling this summer wear along with the winter wear. And that is why we have been able to open around 300 outlets across India, which shows that the brand has a strength in summer as well as winter wear. And secondly, our summer business is growing almost high double-digit from last so many years, and it is now contributing almost more than 50% of our sales. So that shows this trend for the brand in summers as well as it's helping us in Winter also to strengthen our existing sales. So secondly, your second question was on buyback. The company is not doing buyback in the future. But right now, the Board has decided it's more prudent to give a dividend at this point of time. So -- but the company is not saying that it might not go for buyback in the future. It all depends on the circumstances. It all depends on the -- at that time, the profitability, what kind of profitability we have and what kind of share prices we have at that particular point of year . So I think this year, company has decided to give a liberal dividend, which is highest til date from last, I think, 7 years since 2014, the company went public. The higher dividend which was given was 120%. So even we faced this year a lot of difficulties, a pandemic, a COVID, but then also we went ahead and had the best margins as compared to last year and also gave the dividend of INR 15 for our -- to benefit our shareholders.

So you will see that, sir, even though now volume is contributing to around 28% of our turnover, sir, but all our process is coming in the third quarter only -- I mean in the December quarter. So basically, if the main profit earner is the winter wear then, sir -- I mean, okay, we are getting sales from all our other business and it is also eroding our brand value. Sir, so I don't think there is any gain in that, just making turnover without any margins.

It's not the case. We do have a profit in fourth quarter also. But we have a very heavy [ USS ] which comes from the winter sales in the fourth quarter. So that actually reduces the profit of the summer wear sales at that point of time. And please see us as a -- on an annual basis, please don't see us at a quarterly basis. If you see the last year, we have said that at that point of time when the COVID started that our company might de-grow at 20%, 25%. But actually, if you compare us, we have de-grown only by 15%. And if you see other companies who are in apparels have actually degrown by 20% or 25%. I'm talking about the pure apparel companies, not about the briefs and vest companies. So for if you compare us to all the apparel companies, which are right now listed, we have actually performed the best as far as this year is concerned. So please see us there as the -- view as on an annual basis rather than on a quarterly basis. And we are very confident that we'll have a very good double-digit growth going forward in the next 2 financial years also.

Okay. Sir, that is great to hear. And sir, so will that also increase our EBITDA also?

See, I cannot say anything at this point of time because we are -- we are passing through a definitely a difficult period. So giving any projection is, at this point of time, might not be prudent on my side. But definitely, once we reach the second quarter, we'll be able to give more accurate guidance.

The next question is from the line of [indiscernible] from [ Serenity ].

Congratulations on doing well in an extremely challenging year. I think part of my question has been asked before, but I basically wanted to understand what's the path for the cotton business, the summer wear business to move towards profitability? Otherwise, the bulk of our profits tend to come from 1 quarter within the year. Is there a map, 3 years, 2 years out, when we can say that no more than half the profits would come from the third quarter?

See, cotton business is already profitable, and it is actually even under which is in more profitable than the woolen business. So I'm not aware that how this question is coming there, the cotton business is not profitable. But the thing is that the major sales even of cotton segment also happens in the [ wetter ] season, which happens normally in October, November, December. So we have a major sale of cotton wear, which is happening in third quarter as well. It's not that only the winter will which sells in the third quarter. It is a cotton segment also a lot which sells in the third quarter. And secondly, definitely, we have a very good sales in the second quarter as well, and which is are profitable. If you see the last few years balance sheet, the second quarter has always been profitable from last common years. It's only the fourth quarter, which is traditionally a very weak quarter for us. And where we have a major chunk of our winter sales, which go into [ USS ]. So that particular fourth quarter, we have to give a lot of discounts to -- in the end of season sales, which any reduce the profitability of the summer wear as well at that point of time. Otherwise, summer wear is always profitable since inception.

I see. But we should expect that this concentration of the profits in the second and third quarters will continue. That may not change.

I think we -- going forward, we'll have more profits in second quarter as well as even in the first quarter as well. But last year, it was affected because of COVID. Otherwise, we used to have a positive quarter for the first and second quarter as well.

Second and third quarter [ contains even the ] quarter [ sales ].

Yes.

And like a lot of the other people on the call would urge you to take some look again at capital allocation. I think the dividend is a great beginning. But given the amount that we have -- of cash that we have on the balance sheet, it may not be the best use that we are putting it to.

Yes. Thank you, You are saying the dividend -- hello?

Yes, please, go ahead.

I'm saying it is one of the best use for the company's money. In any case, as for the buyback is concerned, it does not ensure a better return to the -- any shareholders. Then you assumed it, the company cannot buy back the 50% of the shareholder -- shareholding of anyone. Since last time also, we did only -- how much percentage it was?

5%.

5%. Now some you are holding 100 shares, and even if I buy back at INR 450, your share only 5 shares will be bought back. And what will you get? And now you calculate that all 100 shares, you will get a 150% dividend from the company. The only thing is this, yes, buyback money when you get, it is tax-free. And when you get the dividend, it is taxable.

So sir, I mean honestly speaking, I'm -- I mean if you were to give a special dividend or something like that, I, as a shareholder, would be equally comfortable as a buyback.

Let me just tell you because wherever the company is concerned, company has -- company has to make shareholders very happy, that company has to grow. And in that way, that completes this main efforts would be to reducing its debt also. Now the taxability is government of India's work. Now they have -- the company was paying dividend tax. Now they have removed from the company, now the shareholders are paying, those people who do not have the having the best up to order income, regular income up to that total tax exemption, they will not pay. And the tax rate may come down to even 20%, 10% in their case. So it is basically tax liability. But otherwise, if you see in terms of money, in terms of the reward, then in that case, I think the higher dividend and distributable as the company is having a dividend policy now it is going on. It is much better for our shareholders, according to our understanding, than the buyback. It rather gives more money in the hands of shareholder, and consistent. And the money remains with the company will also utilize for a purpose of company growth. We are [indiscernible] anyway. We will definitely when the question and anything and I say is like that, the Board will consider and the moment both decides to buy back, we'll come back to you and give you the good news.

I'll just say 1 thing again. A special dividend or a buyback, both are the same for me as a shareholder. Whatever tax liabilities there should not impact our decision. And either 1 of the 2 would be absolutely fine. It's just that too much of the company is...

I'm saying is to the money reaching to in the hand of shareholders will be much higher. In the case of the company declaring a higher dividend consistently following it's an upward trend in the dividend. What I'm saying is buying back now company when is running a business company cannot afford to buy back so 50% of our shareholders. So it will involve increasing our percentage beyond the limit 6 months heavy.

I appreciate what you said. I completely agree with you on that.

Okay.

[Operator Instructions] The next question is from the line of [ Neil ] Desai from Desai Investments.

Sir, firstly, my question would be on the industry macro front. Sir, what is your view on the P&L scheme, which government is planning for garment? And how will it be benefiting our company, sir?

Most of our production is outsourced. So basically, we are not going for this, as it's only the volume side, which is being manufactured at our place. In consider is just 15% of our total production. And we are basically more of a marketing company rather than a production-based company. So most of the products are outsourced in our case.

Okay. Understood, sir. And sir, the yarn prices, which have been increasing. So will it be a pass on for us or it will impact our gross margins to some extent?

It's already passed on. Whatever yarn prices were there increased. We have increased our prices for the winter clothes approximately 5% to 6%. So we have passed on that high to the product prices.

Okay. So you don't foresee these prices to be on the upper end for coming years? Or what is your view, sir, on the yarn prices?

No, no. Yarn prices now actually have come down. It was up around 30%, 35% in the case of cotton. But now it is a downward trend. But when we do the booking, what we do is that we calculate the prices accordingly at that point of time. If the yarn price is up, we normally raise our price, and every brand has raised in this particular time because the yarn price is going up. So we have to include that hike in our prices. Otherwise, our margins will fall. So we have already taken the hike in our product prices.

Okay. Okay. Understood. And sir, on our online business, so I just wanted to ask that we have seen a significant -- or a reasonable growth in our online business mostly because of the pandemic also. So what is your view going forward, sir, on this business? Do we see this current growth numbers to continue at this line or?

With me is Mr. Rishabh, so he will answer this question.

So we've seen that we've grown the online business by around 50% for this financial year. And going forward for the next financial year, we also expect it to grow again by 40% to 50%. But more focus being on our own portal.

40% to 50%.

So yes, so we are foreseeing a growth of 40% to 50%. So we'll maintain the 6% contribution to the company's turnover going forward for the next year as well.

Okay. Okay. Understood. And so on the marketing front on our online business, so what -- how are we targeting on? Or can you share some road map on this? On the total marketing whatever?

Sure. So right now, for the last financial year, you must have seen the total advertising spend of the companies has come down considerably. The entire amount that you're seeing that are right now that the company has spent on advertisement is through online channels. So we are advertising on different social media, different online properties. And this [indiscernible]. Okay. So this has -- so this has resulted in a growth of 40% of our own website sales. And this year, with a focus on advertisement and product-based linked advertisement, our overall discount percentage in the online segment has also come down.

Sure. So a follow-up question on the same. So if you see the advertisement expenses, so do you -- so during this quarter also, we have seen a fall in this advertisement expenses and FY '21 full year also, we are seeing. So that may be because of the COVID-19 pandemic impact. So going forward, how should we look at this number?

So see, a large portion of our advertisement budget was going into advertisement through different caters throughout the country. But since there was a lockdown in the entire country. We pulled back on that budget. And we've seen that the increase in advertisement in the online segment has given us a better return on investment on that. So I think going forward also, we will be focusing more on online advertisement, and we would be targeting a 2 to 3 percentage share of advertisement on the total revenue.

Okay. So should we consider this number to be like at the level of, say, quarter 4 '21 or a little bit high on that front?

No. Quarter 4 is not basically a quarter where we can have the benchmark for advertising expenses. We are talking about the yearly basis, yearly basis. Earlier, we used to spend 3% to 4% of our revenues on advertisement. But this year, we are keeping it around 2% to 3%.

2% to 3%? Okay. Okay. Okay. Understood. And sir, lastly, on the personnel like on the employee expenses. We see in quarter for '21, it has been increased like -- it has been on an increasing trend. Is it because the utilization or levels that are coming back? Or what is the reason for that? And this number also, sir must have come down. So how should we look this number for going forward projection in '21 -- '22 and forward?

Personnel cost?

Personnel costs. Yes, sir.

It has actually come down. If you see that the strategy or almost same. It was the percentage for fourth financial year was -- just a minute...

[indiscernible]

You're talking about quarter 4 or you're talking about the full year?

No, sir. Full year would be much -- will give more color.

Yes. The full year percentage was -- how much it is?

9.59%.

9.59% it was last year, and this year it is 9.6%. So it is almost same. Even though the revenue has gone down. So the personnel expense have not increased.

Correct. Correct. Yes. Okay. Okay. And sir, last question, sorry for too many questions. Sir, last question, on the finance cost. So currently, sir, our debt levels are at very comfortable level. So is there any hope of further decreasing in our debt number or finance cost going forward?

Yes, there is definitely a possibility of finance costs going down. Because our term loan is basically right now is 11 CR which was 16 CR year last year. It was going to go down this year as well. So definitely, the finance costs will come down as compared to last year.

Okay. Okay. So that would be positive on our EPS? Okay. Sir, that's all from my side. If I have some few questions, I'll join back the queue.

The next question is from the line of Abhishek Jain from Arihant Capital.

Sir, sorry, I joined late. If it's repetitive, I'm extremely sorry. Sir, how is the inventory in the channel right now at this point of time? And second, which are the segment, whatever your understanding is there right now? So which are the segments which you believe like reason-wise, if you can throw some light, where you see the fast recovery going forward? Especially on the rural or maybe Tier 3, Tier 4? Because this time, Tier 3, Tier 4 has been deeply hurt. So what's your outlook on the team, sir?

See, first of all, as far as inventory is concerned, I have talked about earlier also that this season, we have the least inventory as far as interquarter are concerned at our outlets and also at the company level. But definitely, the summer inventory is at the peak because we had a lockdown which started almost last month. So I think going forward, if you open up in June, definitely, we'll have a liquidation of summer inventories there as well. And you rightly said about that this year, the COVID has penetrated into the entire Tier 4 and the whole area as well. And definitely, we need to see that impact, which is going to come up. But I think one thing we are very optimistic is that this time, as far as we are concerned, we didn't have any disruptions in the production. So last year, we had to face a lot of problems because of production front as well. So I think that problem is solved. So if going forward, we see this period of vaccination also goes up, and the second quarter, which is coming up in June itself, we are seeing the number of cases going down and the economy is opening up faster as we anticipate. So definitely, I think going forward, second and third quarter would be much better as compared to last financial year.

Sir, one more question, if you can add up. Sir, how -- like do you see any liquidation is there in the Q1? That's what you have said earlier? That is right?

See, it all depends if the economy opens up in June 1st week, and we have restrictions easing up. And because right now, almost 90% of our rooms are closed and all the channels are actually not operating at all, except online. See if that opens up in June first week, we'll have definitely a good chance to liquidate the stocks in the June month itself. Some of us the stock in June month itself.

Is there any -- just if you want to add, is there any further scope of lowering down some other expenses because there -- like the earlier participants also said key that other expenses have increased on the -- can we see some savings on that side also?

The other expenses actually have gone down. That's not increased. The percentage is around 16% last year and 5%. And in the absolute terms, it has gone down by around 14. So it's almost the same level as compared to last year. It will remain proportionate to the sales.

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

My question is about receivables. Now we have increased the receivables collection days by some 7 days. So is there a possibility that -- I mean are these receivables fully collectible? That is the first question. And secondly, our working capital turnover ratio has deteriorated from 2 to 1.38. So how are we planning to improve our working capital cycle?

The major reason is because the revenue is going down. So because we calculate the working capital divided by the revenue. So if the revenue is down, definitely, the working capital cycle goes up. But going forward, it will come down because the revenue is going to go up as compared to this financial year.

And sir, the receivables? Is there any opportunity that...

The number of days will definitely come down because, again, it is proportionate to revenues. If revenue goes up, the number of days will also come -- go down.

So you feel that you're confident that these are fully collective, right?

100% confident. No doubt about that.

The next question is from the line of Venkat Subramanian from Organic Capital.

There is probably no question at all that we will be in the top quartile of efficiency and profitability among apparel players. But we probably are not when it comes to growth. So how do we see ourselves? That is question one. And two, what is your assessment of apparel industry overall, let's say, over the next 4, 5 years in terms of growth rate, et cetera? And which segment do you think will grow the fastest?

Thank you very much for your question. I think if you see the last year -- there last year, we see around this 6 years, 7 years, 8 year, we've grown around 11.5%. So definitely, the growth is not that much, but there have been 2, 3 reasons for that by the growth, it's not like sounding is great. The one reason was there have been some accounting changes in last 3, 4 years. Earlier, we used to have our fabric sales included in the sales, which we reduced it, I think, in around 2016. Then there was another change in the accounting system that we used to have the -- selling the discount considered as expense, which we now actually minus from our sales. So that is also like our revenue have gone down. But otherwise, like now all the accounting end of fabric now like are over. So if we compare last year, I think most of the brands have de-grown by 20%, 25%, but we have de-grown only by around 15%. But we're very optimistic and confident about the future, and we think that the higher double-digit growth is very much possible on this base. And even on 2019 level also will definitely like to grow. But again, there are some near-term uncertainties because of the COVID. Nobody has ever anticipated that we'll have a very risky and very severe COVID wave, which has -- strike us in the month of April. So there are some near-term challenges, which I think we have been able to like tackle it. And I'm confident that if we talk about next 4 to 5 years, we are confident that Indian economy is going to grow around 9% in this financial year and again, 7% to 8% in the financial '23, financial '24 as reminded by our economic survey. So that shows that we can definitely double -- outperform the economic rate by double the rate. If Indian economy is growing at 9% to 10%, we can easily grow around 20%. So that is our prediction at from our end. So going forward, I think double-digit growth is definitely on the cards, and we are working on that -- on various categories and also on the various businesses as well.

Since there is no -- I don't think anybody will have any doubt that we probably manage the tightest ship among the apparel -- within the apparent industry or within the top quartile for sure. My question was really limited to which -- a, what is a broad outlook for apparel industry, which you say is probably growing at maybe close to double the nominal GDP growth? But which segments out of it, do you think will outgrow? And what is going to be our positioning for what can grow more than broad market?

As far as economic survey is concerned, they have clearly like said in the last report, the Indian economy -- Indian apparel industry is going to grow from 9% to 10%. So that is as per their survey. And out of that, the case is 1 segment, which we said would grow faster than the ladies and men's category. So I think similarly, in our case also, we see that the sales is growing faster as compared to men's and ladies categories. And we see the men's wear category also as far as our company is concerned, will be growing more than the apparel industry growth rate, which has been given by TechnoDex survey. And see, it depends on the consumer sentiment as well. Right now, in this financial year, definitely, the consumer sentiments are down and which is affecting the growth rate of all the, I would say, apparel companies. But going forward, once we are out of this pandemic and out of these problems, I think 15% to 20% growth is definitely on the cards.

The next question is from the line of [ Danish Mistry ] from Investor First Advisers.

First of all, congratulations for showing such good numbers during these difficult times. Sir, just a couple of questions from my end. The number 1 being that, if I were to see your channel-wise sales, if I want to just understand how do you plan to grow. So you said you opened 28 new outlets. So are these outlets all on the EBO model? Or are there MBOs? That's one question. And number 2 is that if you were to see again, while for the quarter, contribution from the franchisee-owned franchisee-operated has fallen from about 31% to 18%. Is it because of closures? Or are we kind of culling some nonperforming franchise?

See, the first question, the 28 EBOs, they are all in exclusive business outlets. There are additions in SIS, in MBOs and the latest format also that is, definitely let you know those figures also. And the second question was you were talking about the quarter 4 performance of retail?

Yes. Basically, if you will see Q4 '20, you're saying your revenue breakup channel-wise, 31% came from EBO FOFO, and that has fallen to about 18%. So that's substantial one. I think Slide # 17.

[indiscernible] [Foreign Language] Okay. You are talking about the quarter 4 performance.

Yes. Yes, Yes, sir.

Yes. Quarter 4, it has gone down as compared to last year, slightly. In case of channel-wise breakup, the MBOs and NCS have contributed 46% in this financial year, which was 42% last year, so it has increased. And EBO FOFO is showing a growth of -- sorry, it has gone down by 1%. It was 20%, which has come down to 19%. And in EBO FOFO, it was 18%. 31% last year, it has gone down to 18%. So there have been some disruptions in the summer sales, summer supplies. So again, I would say that this quarter is not reflecting the overall performance of the company. So please see us on an annual basis. Some of the sales getting shifted to another quarter like in, in this case, it is shift into April, May, June quarter. So the secret will be entirely different when we reach the quarter first.

First quarter.

I just want to understand. So we are not -- it's not that franchisees are being discounted to anything. Is this the question?

No. It's not because of that.

All right. And going forward, do we plan to go through the FOFO model or franchisee model?

No, it's franchisee model always because it's an asset-light model. So we believe in asset-light model. And FOFO model is only applicable whenever there is a higher rentals or when there are any places, which is having a higher visibility for the brand and higher brand awareness, we go for to FOFO model in that case.

Got it. And how many stores do you plan to open next year or coming years whilst I understand the disruptions and COVID all that. But Let's say next 2, 3 years, how many stores would be?

This financial year, we have planned to open 20 to 25 stores in this financial year.

Got it. And sir, just one more question from my end. The online sales, as you actually pointed out, have really done pretty well. But was this a question of offering our discounted sales to the online model? Or is it -- or is it fully priced sales that we are doing to be online model?

Yes, just a second...

[indiscernible] have gone down this...

One second. The overall disruption for online has come down considerably this year. So that shows that...

I lost you. You were a bit of -- not clear.

So I was saying that the discount percentage on the online sales has gone down considerably this year. This shows that the product was sold at the MRP and less discounts rather than 40% to 50% of discounts. Also -- so just a second.

[indiscernible]

So on an average, the discount percentage of our online sales is 17.4 percentage this year.

Because higher end upkeep.

This was higher by 300 to 400 basis points last year. And we have also started focusing on marketplace model for our online sales, which writes down our costs considerably without tagging our inventory to a particular channel, and we've also started working with players like Amazon, Flipkart, Myntra, working under outside sales, where we sell directly to the channels outright. And there's no discount sharing for the product that sold online. So that has brought up the profitability of online segment this year as compared to last year, even despite growing 50% on the top line.

Excellent. And just one 1 last question for my end. What would be the same-store sales growth that we have in our main channels? Basically, the MBO and franchisee FOFO?

This year, it has gone down because the overall sales is down. So [ SSC ] in this year is actually negative as compared to last year.

Okay. Okay. So for the full year or for the quarter?

Pardon? I'm talking about this for financial year, full financial year.

That is negative. But is it like negative 1%, 2%? Or is it like a higher mid-digit kind of negative?

It is around, I think, around 9% to 10% negative as compared to last year. But in LFS, it has gone up by 20%, the [ more on ] retail. The sales have gone up.

The sales has gone up for LFS?

For large format stores, which is more on retail.

But otherwise, for the other, it's one facing broadly about 9% degrowth in-store sales growth?

Around 10%.

The next question is from the line of Keshav Garg from CCICM.

So as you were saying that your summer sales are also quite profitable. So then when will we make profit in the June quarter, sir? Because that is the real test when there are no winter wear sales.

See, we were making a profit in June quarter. If you see our like financial figures of 14 onwards. I think it is on the last year, we faced a problem because we are totally washed out quarter and our stores were not open. So that is why we made a loss. This financial year also, there are near-term uncertainties because the shops are closed. So I can't say much about this quarter. But otherwise, first quarter is always profitable for us.

Sir, but I can see that in June 2019 quarter and June 2018 quarter, we made around INR 2 crores to INR 3 crores of operating loss. Sir, which is very minor, but sir, the question still remains that if our cotton sales are so profitable, then why in 2018 and '19, also June quarter, we made a loss?

See, there were reasons for 2018 and 2019. Our sales were less as compared to what we anticipate. But now our sales has actually grown. If we see this year from our supply, we made almost around 40% -- more some of the price branding sales as compared to last year. So that will definitely would have ensured profitability. But now we are facing a pandemic, which is actually -- put awareness on the off-track. Otherwise, we would have a first quarter profitability in this financial year as well.

So last year was extremely low base of INR 11 crores. So 40% of growth over that means nothing. I mean year before that, we made INR 60 crore in June quarter revenue. Sir, so I mean even at that level, we were not making money.

No, no, no. I'm not talking about INR 11 crores. I'm talking about the overall summer supplies of last year. It was overall summer supply of last year was around 80 CR. And this year, we supplied 120 CR. So it was jump of almost 50%. I'm not talking about the first quarter financial performance. I'm talking about the overall summer sales compared to this year -- as compared to last year. So that has grown by 50%.

Okay. Okay. Sir, and also, sir, out of the many segments that we have got into kids wear, women wear, so which of these are -- is yet to breakeven? And are we bleeding in any of these segments?

All are breaking even at primary level, all are breaking even at primary level.

Sir, but don't you think that we are trying to do too much a denim also winter wear, some of where it's such a small company, sir, that where India is a 17% of world population. So we don't have to do everything. Kids wear, women wear, denim. We just have to do one thing, and if we become market leader, sir, then our market applied be INR 10,000 crores.

See, It's not that we have started the kids wear or ladies wear are just in one go. We started with menswear. And when we bought our strength in menswear, then we ventured out in ladies wear where we have grown at a considerable pace. And then just 4, 5 years back, we started our kids wear range, which this year, I think it will be should be closing 50 CR. So it's not a small number in kids wear category, and all brands are basically utilizing their strength. If you talk about the United Colors of Benneton, they're in menswear category, women's wear category, and in kids category, you talk about Zara, you talk about H&M, you talk about Uniqlo, it's our brands, they are present in all the categories. And some of that will winter. So we're not doing anything different. We are just capitalizing on our brand strength, which can generate our sales in various categories.

Sir, your argument is much appreciated, but the fact is that Benneton, sir, the brand itself is for everything. They're doing everything since it's a big business. But our brand, Monte Carlo sir, so if you ask anybody say, if people know it only as winter wear and rest of the our brand, nobody even knows. So I mean you might be pushing those segments. And sir, the good thing is we are not doing manufacturing ourselves, so it's only the working capital that we are blocking. So the question remains that sir, have we been doing only winter then our return ratio would have been far, far superior?

Then how will we run our stores 12 months in a year, if we do only winter wear? How we will open our stores? And how will be present in all 900 stores a year? So it's not like that we have to stay in 1 category and then forget about rest of the months. See, we have to grow in all the categories. The good thing is that the company is doing higher double-digit in cotton, which is actually increasing its share every year, and it's actually [ decreasing ] dominance in 1 particular season. Otherwise, the company would stop advancing itself.

[indiscernible]

Sir, but in that case, sir, why your EBITDA is since past 6 years, sir? And if you see -- if you adjust for inflation, so actually our EBITDA is halved because this is nominal number. And 6 years back, INR 120 crore was not the same value as INR 120 crore now. So then question and sir, you also said that some changes in accounting, so like discounts you were adding in sales -- I mean you were expensing out and now you are deducting from sales and, et cetera. But then in that is that at least the EBITDA should have grown until EBITDA doesn't grow, then sir, what the point of doing sales?

Thanks for asking this question. I would like to have answered in the first instance only. See, basically, the challenge in last 5, 6 years, once the online sales have started, the [ modern ] retail has started. Give more of the multinational brands and other brands that come up in India, it was to maintain the EBITDA, not to grow the EBITDA because the discount season is actually growing every year. The discount months are actually expanded. It used to be only 1 month at 1 point of time. Now it has grown around 2.5 months in 1 particular season. So when there's a discount is applicable on all the categories, all brands have started discounts. So it is challenging to maintain the EBITDA. If you compare the EBITDA of all the apparel companies, which are right now competing with us, they are playing in single digit EBITDA. If you talk about urban brands, if you talk about Myntra brands, if you talk about other brands which are listed company, they're having single-digit EBITDA. We are still able to maintain around 16% to 17% or 18% EBITDA from last 5, 6 years, despite the competition has come from multinational companies like Uniqlo has come, Zara has come in the last 5, 6 years, many brands have come. But still, we -- it's not that the EBITDA has gone down to single-digit level. We're still able to maintain it. So why we were able to maintain it? Because I'm still focusing on the profitability as well as the growth trend. Otherwise, most of the other companies, if I talk about 10 out of 9 companies having single-digit EBITDA right now in apparels.

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

Sir, you alluded to this, but just wanted to understand in a bit more detail about our arrangements with online retailers across both the B2B channels like Myntra as well as B2C marketplace model. I guess we pay commissions plus some sharing of discounts. So can you throw some light on this?

Yes. So there are 3 different models under which we work with our online partners. The first is the outright sale, which -- where we sell our products directly to them, and there's no discount sharing from our side. The second is the SR model where our products are placed in their warehouses, and they sell it and there is 100% sharing of discounts with them. The last -- and the format which we are preferring these days is the marketplace model where the products are kept in one central warehouse, which is our company's warehouse, and the same inventory shown in all the other channels. Here also, a discount is given by the company itself. However, during [ USS ], there are a couple of periods where the channel partners adds on their own discount, which is borne by them. So at any given point of time, the discount sharing between the online channels and our EBOs or our national change stores is the same. Any additional discount is given up by the channel partners. So right now, our focus is towards the marketplace and the outright sale models.

So in the SR, you indicated 100% sharing of discounts. So if suppose the discount is INR 100, then INR 50 is borne by the market -- sorry, the online partner and INR 50 is borne by Monte Carlo?

No, no. The entire INR 100 is borne by us.

Okay. Okay. And how are the gross margins and EBITDA margins from online channel compared to other channels?

[indiscernible].

So we haven't calculated the beta and the gross margin specific for the online channel. But I can give you an idea by the net realized value that we calculate for e-channel. So net realized value is nothing but the percentage that we realized from the MRP after discount after any commissions or margins or any returns. So for online, we have a net NRV for this financial year is 48.25% of MRV. Which was 46.7% last year. So the net realized value has grown by 2% for our online channel.

This includes the commission as well?

Yes, this includes the discount, margin, commission and any handling charges which we paid to our warehouse. So just to give an idea, this year, it was 48.25%. Last year, it was 46.78%, and the year before that, it was 43.8%. So we've increased our realized value by around 500 basis points in the past 2 years.

Okay. And this, minus the cost of goods would be the EBITDA margins then?

Yes. Yes.

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

Sorry, I guess just need to clarify one point -- can you hear me?

Yes, yes, we can hear you.

Sir, there are 2 questions which is indicated or indicated or maybe normally said that Monte Carlo doesn't manufacture on anything on its own. But I think the company has a substantial percentage of manufacturing on its book, sir. So could you just clarify this point, sir?

No, no, no. I said that in woolen, we have 100% in-house production. But in case of cotton, it is just 15%, whereas the winters are outsourced. So in T-shirts, definitely, we do around 15 -- around 20%, 30%. But in case of jackets, trouser, shirts and all other categories are outsourced.

But woolen, we have 100% manufacturing?

Woolen, 100% we are manufacturing in-house.

As there are no further questions from the participants, I will now hand the conference over to the management for closing comments.

Thank you, everyone, for participating in this conference call, and if you have any questions, any query which is not answered or it's not clarified. Please talk to our Investor Relations agency, Dickenson. And you're all most welcome to mail to our CFO as well as to us. Thank you very much.

Thank you. On behalf of MK Global Financial Services, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.