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

Ladies and gentlemen, good day, and welcome to the Q1 FY '22 Earnings Conference Call of Monte Carlo Fashions Limited, hosted by Emkay Global Financial Services. We have with us today from the management, Mr. Dinesh Gogna, Director; Mr. Sandeep Jain, Executive Director; Mr. Rishabh Oswal, Executive Director; Mr. R.K. Sharma, CFO; and Mr. Ankur Gauba, Company Secretary. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Devanshu Bansal from Emkay Global. Thank you, and over to you.

I would like to welcome the Monte Carlo management team and also thank them for giving us this opportunity. Without taking much time, I shall now hand over the call to the management team for their opening remarks. Over to you, sir.

Good morning, everyone, and thank you for joining us to this earning call of Monte Carlo Fashions to discuss the financial and operating performance for Q1 financial '22. I would like to highlight that certain statements made or discussed on the conference call today will be forward-looking statements, and a disclaimer to this effect has been included in the results presentation shared with you earlier. Result documents are available on company's website and also have been updated on the stock exchanges. A transcript of this call would also be made available on the Investors section of the company's website. Now let me share with you the financial and the operational performance for this quarter in discussion. The company reported a revenue of INR 41.7 crores during the Q1 financial '22, as against INR 11.2 crores in Q1 financial '21. We continued to witness a decent contribution from online channel sales, which is INR 4.8 crores this year as compared to INR 70 lakhs in the last financial year. EBITDA loss for this quarter was INR 8.6 crores against INR 14.3 crores Q1 financial '21. Loss at PAT level was lower at INR 10 crore as against INR 13.5 crores in Q1 financial '21. Our balance sheet continues to remain robust, and we continue to enjoy our net debt-free status. We have a cash balance of INR 197 crores, which comprises of cash and bank balances, along with current and noncurrent investments. Long-term borrowing is at INR 10.7 crores as of June '21 as compared to INR 11.7 crores of March '21, which shows our efficiency in servicing the debt. Monte Carlo Fashions continues with its endeavor to build a leading [ brand apparel ] company with a well-diversified product portfolio such as cotton, woolen, kids and home furnishing. Apart from cotton segment, we also produce different other garments. And we also produce cotton and cotton-blended T-Shirts in economy category under the brand Cloak & Decker. The ability to tap varied segments of market providers provide the company with tremendous opportunities for growth in coming years. The key strategy is wide and growing distribution network with a diversified presence across India. The company's products reach the end user through different distribution channels. At present, the company has presence through 1,265-plus MBOs, 296 EBOs and 224 national chain stores. Even during the tough time of COVID pandemic, last financial year, the company was able to open 28 new stores in different regions and, at the same time, closed few nonperforming stores also. As mentioned, we are witnessing a strong traction in online sales channels. With regard to online sales, we are looking to focus more on selling through our own portals, but also our products are available on various e-commerce websites such as Amazon, Flipkart, Myntra, Jabong and Kapsons. Our growth strategy is to focus more on cotton and cotton-blended apparels, catering to all seasons and expansion of our retail distribution network. Given the uncertainty gathered by the continually evolving COVID-19 pandemic, the company has implemented stringent cost-control measures across the organization to conserve cash to address any unwanted situations resulting from this pandemic. The company continues to enjoy a comfortable net cash position. And with adequate banking limits in place, its ability to service debt and financing obligations on time remains unaffected. Healthy credit terms with the suppliers helped the company to operate the business smoothly. Monte Carlo Fashions Limited can sustain robust growth without any significant capital expenditure and is fully geared to withstand the challenges as the situation unfolds on the back of its financials and its operational strength. We can now open the floor for a question-and-answer session. If any of you have any queries post this earnings call, you may connect us or Dickenson World, our investor relations advisers. Thank you very much.

[Operator Instructions] First question is from the line of [ Zaki Nasir ], an individual investor.

Can you hear me?

Yes, yes, we can hear you.

Congrats to you on squeezing the cost of the operations in a difficult time. Sandeep, last time, last con call, you had broadly given a guidance in terms of the top line for the current year, which you said there will be a growth over March '20, sir? So does that still stand, sir? And how does the high cotton and yarn prices affect our operations currently? This is the first part of my question.

Yes. Thank you, Mr. Zaki. See, basically, now if you see, we are giving a financial year -- the guidance for this financial year is 15% to 20% growth over last year. So that is what we have discussed in our management meeting, and we stick with this guidance also.

Last year means March '20, sir?

See, on March '20, we are hopeful of achieving or surpassing the COVID-19 -- pre-COVID sales also, that is, March '20. But I'm talking about -- the growth for this financial year over the last year should be around 15% to 20%. And as far as your question about the higher cotton prices are concerned, yes, there have been increase in the cotton prices. But fortunately, we have been able to pass all the cost increase to our garments, which have been booked also. So going forward, we do not see any effect of -- as far as raw material price increase of cotton and yarn is concerned, we have already passed on to the customers.

And sir, we have a reasonable cash balance of INR 197 crores. There are a lot of small brands, which are maybe up for sale. And Monte Carlo had indicated your willingness to go into acquisition for inorganic growth. I mean what is your thoughts on that part of it, sir, to utilize our balance in this period, sir?

You have rightly put this question to us, but the issue with -- I think most of the brands which are available right now are having a very distressed sales. And also, the brand equity with those brands is not available. So the kind of EBITDA we enjoy and the kind of brand reputation we have [indiscernible]. So those options are definitely available with us, but no option is looking very attractive at this point of time. So I cannot comment much on this.

Okay, sir. But as -- see, we're already in the second quarter. You must already be booking your winter sales. The pipeline looks strong to you, sir?

We are very confident going forward in this financial year. There are 2 reasons for that. The first reason is that, definitely, there is a strong order book, which has come to us in this financial year. That is the first reason which we are like confident of. But second reason is that there is a very less stock at the retail level, whether it is EBOs or MBOs. So that gives us another push. So I think both the [indiscernible] makes us very confident to state that we can easily grow 15% to 20% or even surpass if the situations are, like, improving as far as COVID cases are concerned. And if there is no third wave or no COVID disruptions, we are very confident of achieving the 15% to 20% growth rate, which we have commented earlier.

Next question is from the line of [ Monica Arora ] from Sharegiants Wealth Advisors.

So I wanted to ask that how are the gross margins and EBITDA margins from online channels as compared to other channels?

See, previously, we used to see that there has been a difference in the gross margins in case of online and other channels. But fortunately, after the pandemic and all these things, now the gross margin with the off-line and online channels is almost same. So that's a very good news for the company and for our investors.

Okay. And if we see the investor presentation, your MBO and distributed numbers have gone down sharply. So any particular reason for this? And how do you see this panning out in the near to medium term?

See, we need to see full year number because the first quarter number is not reflecting the actual picture of -- particularly our sales. What happens is that when the COVID cases come, distributor and MBOs didn't take the deliveries. That is why the sale is also less. But our own EBOs, they actually took the deliveries because they know that they have to sell the garments, as we have July, August also. So that's the reason the sales in MBO and distribution channel is down. But I think if we go for -- as far as overall yearly sales are concerned, we will match the last year's number and definitely we'll grow the last year's numbers also.

[Operator Instructions] Our next question is from the line of [ Ritika Ghosh ] from Sequent Investments.

Could you please elaborate on what would be our CapEx plans in the near to long term, like, around 4 to 5 years? And also, how is the company planning to expand its reach? Like are there any special plans to expand the online sales further?

Thank you, Ritika. The CapEx plan, I think the guidance, which even we gave in last to last year also, it is around INR 15 crores to INR 20 crores. And going forward, for the next 4 to 5 years, we think we'll be able to have a sufficient CapEx of INR 15 crores to INR 20 crores to fulfill whatever CapEx is required by the company. And as far as expansion is concerned, I think, definitely, I have with me Mr. Rishabh. He can also give his ideas on how we are improving our online sales and how it is shaping the other channels as well.

So as you've seen that the online sales have grown considerably in this quarter also. Going forward, we are -- to answer your question of expanding the reach, we are currently -- so we've done a turnover of INR 4.9 crores as against INR 70 lakhs through the online channel. And full year, we are targeting a turnover of around INR 50 crores from the -- so -- which was INR 37 crores last year. To expand our online channel, we are reworking on the website, and you'll see a new website up. Along with that, we are also working with our online partners like Amazon and Flipkart to develop special range for them, which does not compete with the off-line channels in terms of discounting. And we are focusing on growing our own portal sales as well as shifting our sales from sale or return towards outright sales to our online channel partners, which gives us better control over our inventory.

Next question is from the line of [ Rajesh Kumar ] from AUM Capital.

Thank you for excellent set of results. I wanted to discuss on the outlook, sir. So as the second wave was receded, so -- and your performance has also improved year-on-year drastically, so what did it take, like, how are you seeing improvement overall on a yearly perspective? And what is the outlook going forward as the COVID takes a back seat?

See, I think, as I mentioned earlier also that we have a very strong order book as compared to last year. So that is actually giving us the confidence of giving a projection of 15% to 20% for yearly growth as compared to last year. And I think we'll be going to achieve or surpass even the pre-COVID sales also. So unfortunately, the first quarter was washed out because of the COVID situation. And -- otherwise, I think this could have -- even company would have revised their guidance earlier also if the COVID was not there in the first quarter. And if we see, the Q3 and Q4 of last year, we were achieving the pre-COVID sales at that point of time also. So going forward, I think if we see that, we do not have that much of severity of the third COVID wave, which we had in COVID second wave. So as the vaccination is also picking up, and we have seen that after vaccination, the symptoms are not there and hospitalization is not that much required. So that gives us the confidence that the economy will keep on opening up. So there will be no more restrictions by the government. So I think if we see the order book as far as our order book is concerned and seeing the economic restrictions, which is also lifting up, so that gives us the confidence that we should be having a very good year ahead as compared to last financial year.

Sir, another question, if I can take up, is on your balance sheet, which is one of the most revered in the sector are like -- so using this balance sheet strength, can you think of any plans of rewarding the shareholders by way of bonus shares or dividends? Anything planned, sir, on that front?

I think the company has been very generous in giving the dividends and also to benefiting our stakeholders and shareholders. The company has gone for -- every year since the inception, they have given the dividend. And one year when the dividend was not given, company has gone for buyback, where INR 55 crores was spent. Even the promoters did not participate in that. So that shows the intention of the promoters how we would like to benefit our shareholders. And going forward also, I can strongly say that the company will always act in the benefit of its shareholders and investors. And the company is definitely -- even in this year, company has given a dividend of 150%, which is a INR 15 a share even in the pandemic year. So by that, you can assess that the company's intention to benefit its shareholders.

In buyback year also, we paid dividend...

Even in buyback year also, we gave the dividend of INR 5. So that shows that we are definitely acting in the interest of our shareholders.

[indiscernible].

Yes, sir. So intention is definitely there. So that's why I was waiting to see your comments on that, like, can we utilize that cash to reward the -- shares are definitely undervalued and have a lot of potential. So also on the front like -- another aspect to look at is the growth perspective. So will you be doing some major CapEx to increase the pace of the growth of the company, something like that, sir? Any thoughts on that?

See, basically, the garment industry is not that much CapEx-intensive. It's a labor-intensive industry. And also, we have our cotton division where we mostly outsource our goods. So we do not require much CapEx to be incurred in our company to get our production increased or the sales increased. It's only in the woolen that we do some CapEx to add some machines. Otherwise, in other areas, not much CapEx is required. So we will require a normal CapEx of INR 15 crores to INR 20 crores, and company can increase its sales without even incurring CapEx because of outsourcing model.

[Operator Instructions] Next question is from [ Shradha Sheth ] from [ Samarthya Capital ].

So my first question is on the sales front. How is the situation panning now after the COVID second wave? And also how do we see ourselves [indiscernible] and what is your...

Sorry to interrupt, Shradha, but your voice is not very clear.

Can you please repeat the question?

Am I audible?

Please repeat the question. Yes, not that much clear, but still I think there is some issue in the connection.

So my first question is on the sales front. How is the situation panning now after the COVID-19 second wave?

Okay. Thank you for asking this question. See, if I talk about July sales, definitely, there has been a pickup in the sales once the economy opened as we had restrictions in place in the months of May and June. So now I think 2 things are happening. One is that the economy is also actually growing faster as compared to the first quarter, and there have been -- we are seeing more spending and more footfalls even at our exclusive outlets also. So in July, I think, we were reaching almost our pre-COVID sales, which were there in 2019. And also, the customers are stepping out of their homes, and they are going out for vacations. They are going out for shopping. So that is helping with spending. So we are very optimistic going forward in this quarter as well.

Okay. Okay. And how do we see ourselves in 4 to 5 years' time? Like what is your assessment of an apparel industry as a whole in the near to medium term?

I think a lot more depends on the economy also and a lot more depends on how are the RBI regulations and how are the kind of things we do it in India as far as our government is concerned. But I think as far as Monte Carlo is concerned, we have set an internal target of doubling our sales of last financial year [indiscernible] 5 years.

Okay. Just one last question. What is the reason for the increase in employee and other expenses?

See, last year, there was -- factory was shut. So workers were not there. They had gone to their homes. So that is why there has been a reduction in the wages and in salary, and there have been salary cuts also. But this year, we have gone back to the 2019 levels. We have given the increments and also all the salaries, everything is [indiscernible] as usual as it was in 2019. So that is the reason that there is an increase in the personnel expenses.

Next question is a follow-up from the line of Zaki Nasir, an individual investor.

This question is for Mr. Rishabh. Sir, even on online, the way Amazon is going ahead with its own brand, Amazon Basics, so you would have to be extra agile to counter these kind of actions by the online sales. I mean -- so what is the outlook in terms of how Monte Carlo wants to position and sell online in terms of selling to its own website and a third-party vendor?

So thanks for the question. So one of the things that we at Monte Carlo believe is maintaining the price and discount parity across the off-line and online channels. So right now we are focusing more on our own website. As I said, we are reconfiguring, and we'll be relaunching our website along with the mobile app in the coming future to focus more on the online segment. Other than that, in regard to the competition from own brands of portals like Amazon is concerned, we are working closely with Amazon, and they've been -- we don't see that much of a competition from the private labels of Amazon label. And other than that, we've launched a new exclusive range for our online partners, which is not available off-line, which gives them the freedom to use discount on liberal terms as they could with the brand Monte Carlo.

I just would like to add to what Mr. Rishabh has said. See competition has always been there, whether it is from the online channels or Amazon launching its private brand, but also there was in large format stores [indiscernible] everybody has gone for their private brands. But we have a very strong brand equity. So we have a loyal customer base. So customers who find convenience in buying from online sales channel, if they're not going to off-line, they are buying from Amazon Monte Carlo products also. So I think the brand -- it is a brand which sells. It's not like that people are going to Amazon for buying some products.

See, Monte-Carlo has been growing. In the past 3, 4 years, I have been tracking quarter-to-quarter. I mean each year, there's been an improvement. Sir, do you foresee a year when Monte Carlo will post a profit in the June quarter, sir, in the next 3 years?

I think this is a very good question which you have asked and 99.9%, we were hopeful to post profit in this quarter. But unfortunately, something beyond our, I would say, operations, pandemic occurred. We have a lot of stock which is left unsold at our stores, even at our godowns. If it would have gone in April and May, [ we would have made profit ] in this quarter. So fortunately -- but going ahead, if there's no more disruptions going forward from COVID, so you would see that in the Q1 financial '23, we would be posting a profit in June quarter also. Thank you.

Next question [ Mohit Rathi ] from [ CCIBCL ].

I have 2 questions. One is, sir, we are having such a strong brand, Monte Carlo. So how are we getting the traction on other brands like Alpha, Rock It? I mean should -- is this worthwhile or should we just focus more on Monte Carlo? And second question is, one of the participants asked on the dividend, et cetera. So sir, I would request that you go for a buyback because shares are so undervalued. So please consider them.

See, I'll come to the first question. As far as Monte Carlo is concerned, it has its own brand equity. And -- but there are certain areas where Monte Carlo is not operating, the reason being is that your brand is basically -- you cannot be in all the spheres. You have to be focused only on one category. So Monte Carlo is a premium brand. In case of Cloak & Decker, it serves the economy segment, where Monte Carlo cannot participate or cannot operate in that sphere. And the Rock It brand, which we have, is totally a slither wear. So you cannot expect Monte Carlo to be a slither brand and slither brand has to be under different name so that customer can recognize and the strength of particular category with the name associated with it rather than everything under the Monte Carlo. So that is why, these brands have actually been started by us so that in coming times, when there is a growth in the category or particularly economy segment, we have something in our hands. And when there's a growth in the category of a slither, we have something in their hand. And at the same time, Monte Carlo will keep on enjoying its existing strength and keep on increasing its presence in its existing areas and existing categories. And as far as buyback is concerned, I think that is -- that decision can only be taken by the Board. So I cannot comment particularly at this point of time in this conference call. But I think the company is doing every effort and attending every conference calls and also having the investor calls time on time. That is why we have seen with all these efforts, I think the shares have moved from INR 225 to almost INR 370. It's a jump of 50% in the last 6 months. And company will keep on doing all the efforts to comment -- to discuss with their investors, with their stakeholders. And also, if there is any query, we are always ready to answer and keep on rewarding our shareholders also with the dividends and anything which the Board decides.

The next question is from the line of Sanjeev Goswami from Fractal Capital.

Can you give me the mix of your own manufacturing vis-à-vis outsourcing?

See, in case of woolen sweaters, the manufacturing is 100% in-house. In case of cotton garments, it is -- approximately 25% to 30% is in-house, and the rest everything is outsourced.

[indiscernible] approximately will be? How much is manufactured, how much is outsourced?

See, in case of cotton garments, I'm saying 25% to 30% is in-house and rest balance is outsourced.

Okay. And that will contribute how much to the revenues, the cotton one?

Pardon me?

Cotton contributes how much to the revenue?

Cotton contributes -- if I give you a breakup of financial March '21 sales, you can note it down if you have like -- if you want to -- just a minute. So 28% is contributed by the woolen category, 50% was contributed by the cotton category, 7% was contributed by the kids category, 14% was contributed by the textiles category and 2% is by accessories.

Okay. And in home textiles is primarily cotton, right?

Yes. Home textile, we have put in a separate category. It is 14% in last year. It's a winter -- it's basically a mix of cotton and woolen. We have bedsheets also. We have launched towels also. At the same time, we have blankets and quilts also.

Okay. Sir, in terms of dividend, do we have any specific dividend policy that the Board has adopted?

Dividend policy has already been adopted by the Board in the last financial year, in the last meeting. So it's already been in place.

Okay. So what is the dividend payout ratio that we have agreed upon?

See, dividend -- minimum dividend policy we have adopted is 20%, but I think company this year has given 150% of, basically, the price. Policy is also available on the website. You can have a look at it.

Next question is from the line of Saurabh Shroff from QRC Investments.

I have a couple of questions. First one, on the new brands, et cetera, I just wanted to understand how do we propose to support multiple brands? I guess Monte Carlo is a well-known brand, advertising, et cetera. How do you think about supporting and growing the other brands that we spoke about and that we started?

I think the biggest advantage we have is that when it comes from the house of Monte Carlo, definitely, there are, basically, I would say that traction going forward in the market. So in that case, like, if we talk about the Cloak & Decker, now there is a completely unorganized segment in T-Shirts and in jackets and even in sweaters also, which is being carried by the unorganized market. So those players, those multi-brand outlets and small retailers, they want the branded goods but at a lower price. So it made sense for us to go for a brand like economy brand Cloak & Decker. At the same time, it does not dilute our brand equity because there is a lot of price difference in the Cloak & Decker and Monte Carlo. At the same time, we are able to service those customers who want to buy a brand, but the branded goods are not available in that particular segment. That is how this idea of Cloak & Decker was conceived. And we are getting a very good response, and we'll be growing almost, I think, around 40% in this year in financial year in Cloak & Decker. And Cloak & Decker, I think, should be around INR 50 crores of revenues in just 5 years of launch. So it's gaining acceptance in the market. At the same time, Monte Carlo is enjoying its premium position.

Okay. Because the reason why I was asking that when we sort [indiscernible] fashion is anyway [ a very difficult ] business, right? Globally, it's one place where there are brands sort of going into bankruptcy every now and then and some brands which have been around for years. So -- and what we are seeing is that brands which have sort of lasted the test of time are increasingly becoming brands who are sort of doing one big brand, whether it is a Zara or H&M or whatever. And -- because then they are able to push all of their marketing power and muscle in that particular category. So that is why I was asking what is our thought process on that, how can we support all of that. But I take your point that at INR 50 crores, if this grows, then I guess it can have its own budget at a different time and date. And my second question, sir, was on inventory. How do you sort of assess your own inventory markdowns, write-offs? If you can just sort of share internally how you all think about -- what is a good number to carry? Obviously, there is a certain seasonality in the business and this whole sort of order book cycle. But on an average, when you take write-offs or when you sort of markdowns and let it go out, if you can just explain to us that, please?

Okay. Just to add, you talked about Zara. Zara is not actually selling under our own Zara name. So it has a premium range which comes under Massimo Dutti. It also has some casual range which comes under Pull&Bear. It also has a latest range, which comes under Stradivarius. It also has a brand for a casual premium, Bershka. So it's not that Zara is operating only under Zara name. So likewise, we have our own categories, depending upon the prices and the segments. So anyway, coming back to the next question, which is how we write down our inventories and how we get rid of -- see, what happens is that at a company level, we have approximately around 5% to 6% of the returns, which comes from the different channels. So we have factory outlets available with us. So all these returns, we sell it from our factory outlets. And whatever is left, which is not sold by the factory outlets, we sell in basically trade lots to our distributors and our smaller MBOs. So that is how we get rid of inventory at the end of the season. And normally, in the next season, like, if we are sitting in this winter season, we are carrying a 0 inventory of last winter season. So this is how you can assess that how efficiently we operate as far as controlling our inventory is concerned. So by the time we reach the next season, we just finish our last season's inventory either by selling it in our factory outlets or selling it to our distributors and our smaller MBOs at a reduced price so that we would get rid of complete inventory by the time we begin the next winter season.

Basically, at any point of time on a 12-month basis, you are saying that you don't have too much [ stale ] inventory in the system just because that fashion either is not relevant or they are classics, which anyways, you know if they didn't sell in one season, they will sell next, as in terms of [indiscernible] basics or whatever. Is that the right way to think about it?

We don't have a policy to carry forward the garments for 2 years. We just want that any garment, which we have manufactured last year as far as fashion garments are concerned, we normally sell it to our factory outlets and to our distributors and our trade partners. So we get rid of the inventory. And as far as basics are concerned, yes, if there are some garments which comes back to us which is in a basic category, which we can sell it in next year, we refinish it and we supply it again to our outlets.

Next question is from [ Mihir Desai ] from Desai Investments.

Sir, my first question would be on business front. Sir, I do understand that most of our revenues are taken from H2, that is quarter 3 and quarter 4. So as a company, are we doing any strategy or coming to some new regions where we can see that the equality of revenue or business comes in other quarters, too?

See, basically, if we see that at one point of time, we were having 100% contribution from quarter 3, then definitely -- then it is now only 52% or 53% from quarter 3 and balance comes from the rest of 3 quarters. It's reducing every quarter. So that shows that the other products are picking up. The cotton products are picking up. The textile products are picking up. The Cloak & Decker segment is growing. The Rock It is growing. So I think, going forward also, we will definitely -- I won't say that it will -- all the quarters will become equal, but definitely, the revenues from the third quarter will keep on going down and the revenue from the other quarters will keep on going up. So at one point of time, definitely, I would say that the contribution from other quarters will also grow as far as total financial -- total yearly sales are concerned.

Okay. Understood, sir. As a follow-up on this, like, can you please give me a breakup of -- if you can share the breakup of our T-Shirts and Shirts sales happened in FY '21, '20 and this quarter, just a ballpark or a percentage terms is also fine.

I can share the total sales of Shirts, if you want. So value is around INR 20 crores. And for T-Shirts, it is around INR 85 crores. If I talk about last financial year, last financial year was a -- you know that it is a pandemic-affected year. So if you want, I can give you actual sales that of March '20 also, full year, which was not affected by the COVID. And that year, we sold around -- T-Shirts around INR 115 crores and the Shirts value was INR 30 crores.

Okay. And sir, any strategy to increase these shares? Like any strategy specifically for our Shirts and T-Shirts sale?

So I would give you a data of financial '18, financial '19, financial '20. You would see that there has been a growth in case of T-Shirts and Shirts, both categories. In financial '18, we sold INR 86 crores of T-Shirts. And then in financial '19, we sold INR 109 crores. Then in financial '20, we sold INR 115 crores. So there has been a gradual growth in T-Shirts category. And then if we talk about the Shirts category, it went from INR 23 crores to INR 30 crores. So there has been growth in the Shirts category as well. But definitely, March '21 is a pandemic-affected year, so I'm not taking into account all the drops which have happened. But going forward in this financial year, we have been affected because of the first quarter COVID cases. But going forward, I think we should definitely match the figures on financial '20 as far as the numbers are concerned.

Strategy to grow is there always. Strategy to grow is from year to year. The question was, is there any strategy to grow.

Yes, sir. Sir, now on the online front, sir, if you could share the gross profit margin of our online business, gross profit and EBITDA levels if you can share.

Online?

Online, yes.

Sorry, we don't have the exact numbers with us right now, but...

If you could give us a ballpark, that is also fine.

Almost same...

So the gross margins and the EBITDA margins is almost the same on our online channel as compared to our off-line channels, but still we'll send you the exact numbers through e-mail.

Yes, sir. I'll do that. And sir, lastly, I just wanted to understand, apart from the numbers and everything, at ground level, you have been in the business from so many years, and you have seen Indian consumer growing from -- basically the behavior of Indian consumer is growing from so many years. So at ground level, sir, what is your feeling like how our consumption pattern is different or increasing? Or how it is different and how it will impact our business, sir?

I think we have been able to understand the consumers definitely well. The reason being is that there have been a trend of changing the consumer preferences. Accordingly, the brand is also taking actions. We have seen that the consumers are becoming more casual in their approach as far as their buying pattern is concerned. They're moving to casual clothes. So that is why the company is more into casual clothes like jackets, T-Shirts and all, and that is helping the company also. So that is how we read the consumer preferences from our -- feedback from our EBOs and other channels. And accordingly, company is taking actions also.

Okay. And sir, last on my part, sir, I wanted to understand about the festive season. Are you -- have you started seeing the demand coming in? Or is it still laggard because of COVID?

Yes. I answered this question in a previous time -- previous question also. Demand has started picking up in July. As the economy opened up and most of the showrooms are now open barring some of the -- our EBOs in UP, which even today they are closed like Saturday, Sunday, they are closed. But barring those, I think demand has picked up in each and every part of India. And as far as the sales are concerned, we are almost reaching the pre-COVID sales of July '19. So -- if we take a benchmark of sales. So that shows that the economy is definitely improving and recovering. And also, the people are stepping out of their houses. They are going for shopping, and they are also like spending more as compared to last financial year.

Next question is from the line of Devanshu Bansal from Emkay Global.

Sir, just wanted to understand, have prospects for organized players like Monte Carlo improved post COVID versus pre-COVID like in terms of faster shift from unorganized to organized?

See, we don't have a data for organized and unorganized. But as far as we are concerned, definitely, we have grown as compared to last quarter. In July, we see the sales are picking up, and I think the customer spend is more as compared to last quarter, and that will definitely boost our sales. But as far as data for organized and unorganized share is concerned, I'm sorry to say that those kind of data are even not available in the public domain also.

Sure. And on the ground, are you seeing any supply-side challenges with smaller unorganized or smaller organized players?

I think, yes, because of disruptions because of COVID, because of labor, there have been challenges for the small-scale industry and also for the small players. And also, there have been some liquidity challenges also because of COVID. So yes, I would say that small scale industry is more affected than the large industry.

Okay. And in the PPT, you have indicated that we share some part of discount with channel partners. Without going into the details, I just wanted to know if you can share the broad range of discounts that we share with partners.

See, basically, we have 4 channels. One is our EBOs channel, one is -- then second is SIS channel and large-format channel and online channel. As far as EBOs channels are concerned, so all the discounts are borne by the company. And as far as SIS channels are concerned, again, all the discounts and LFS channel are borne by the company. But in case of online, even again, all the discounts have been borne by the company. But we pay less commission to them when the [ USS ] sale is there, and we pay more commission when the MRP sale is on.

Okay. And lastly, we have seen an increase in our gross margins relatively in both the years versus the full year average despite higher online mix. So how should we read into this?

I would like Mr. R.K. Sharma to answer on this question.

Can you repeat the question, please?

Sir, I'm saying, our gross margins in the current quarter as well as last year's quarter are significantly higher than the full year average. So what is the reason for this?

Yes. Actually, gross margin for the current -- quarter wise is not natural. It's because of the [ hike ] due to the accumulation of the stocks. And all the margins are stuck in the accumulated stocks. So it should -- our annualized gross margin should be looked at and which is approximately 47%.

Okay. And any -- you indicated sort of that you have taken price hikes. So do we get a benefit here as well as in -- we sell inventory with a lower price and at a higher realization?

Can you please repeat the question?

Sir, I'm saying, the inventory in your books must be older, which has been recognized at a lower cost of raw materials. With increasing raw materials, we have taken price hike. So does that help in better realization for the old inventory?

No, no, no. There is no old inventory. When we book the goods, at that time, we cover the cotton yarn as far as the woolen yarns are concerned. And also, we have passed on the increase of prices to the consumers. So I don't see there's any benefit of older material, which is available with us for this financial year.

Next question is from C. S. Chaudhry from CFS Financial.

My question is linked to the previous question. On inventory, benefits or losses being carried, the management in an earlier reply has said that we write off the entire inventory. Let's say, winter has ended, we write off, sell or sell off to the distributors or partners the entire inventory. So in Q1, do you actually book a loss or a profit or whatever final realization is of that inventory? Does the Q1 have that impact? Because looking at the numbers now, I feel every year Q1 has those numbers.

First of all, it's not a write-off. We sell it at a lesser price or sometimes below the cost price anything which is left after the factory outlet sales. So it's not the write-downs, but yes, we have to bear some losses to get rid of that inventory. And yes, that inventory definitely is getting sold in Q1 also, particularly in case of some of the inventory which is not sold in [ USS ] sales. So that has some impact as far as margins are concerned [indiscernible] book in this quarter.

Yes. So let's -- my second question or rather a continuation of the first question is, if you look at the presentation that we have uploaded today to the exchanges, on Page 6, you've given Q1 FY '21, '22, the woolen segment is a minus 18% of the total revenue. So if I take the total revenue of cotton and home textile, it is around 116%, kids is 2%, 118%, minus 18% is the woolen segment. Now what is the significance of this minus 18% is roughly around INR 8 crores to INR 9 crores.

Yes, this is the returns which we get from our sales channels. So that is why because of sales returns, it has become negative.

So the inventories which we write off or we sell, if we have a loss, are we booking that in the top line or in the other expenses?

No, it's reduced from the top line also, it's reduced from the bottom line also.

So can we quantify the effect in the current year Q1, please?

Definitely. All the inventory which comes back to us, we take it as a cost. And when it is getting sold, we realize the sales. So all the channels returns, woolen material, particularly after March sale has ended. So we book the goods as a cost. So we sell it and realize the sales value.

Yes. With due respect, sir, is it possible to quantify this in -- when you produce the first quarter or in the current quarter, what would be the rough impact of all this? Because we have to understand Q1 negative figure in the light of all these adjustments, which happen every year. And since the business nature is changing to more cottons, I think that the winter going away and the disposal of the stock has a distortion on the Q1. And it's very difficult to understand in unaudited figures like this. And I think we are not able to appreciate the entire working and hence, the stock price sometimes gets distorted.

I understand your concern. You have a very valid question. Definitely, when it comes back, it has impact on the cotton sales also. We can quantify that number separately that what is the impact of the returns, which have come back to us and what is the profit of the cotton garments, which we have sold in this quarter.

Next question is from the line of [ J.K. Jain ] from J.K. Jain & Company.

Congratulations for the good set of numbers. Yes, am I audible?

Yes, yes, you're audible.

Yes, yes. Congratulations on a very good set of numbers. It's not a question. It's some sort of a suggestion because while going through the shareholders' list, I found that 74% shares are being held by promoters and 24%, 26% by retail. There is no name such as -- of any mutual fund, FI, marquee investors. Because the company -- your company is a company which has got a very good brand value, there are other shares, which you must be knowing, I don't need to put the name. But those shares are quoting at a PE of 70, 80, 90, something like that, and whereas your share -- so whether the management is thinking in any way how to give information or how to make a conference with those marquee investors? And -- because this -- now it is very important, whether it is in Asia, India, U.S.A., unless some big investors are there, the shareholders' value are not fully reflected. So that is one question. Another question is -- yes, pardon me?

Yes, please continue.

Yes. Another question is, you are going for home textile because the way the China One Plus (sic) [ Plus One ] story is beginning, either you are going very slow. What we have found that -- what is the market comprehension is that your group is very conservative, though now most of the shares are going up. But this particular share is -- I rather think it has not gone up like others here. So what is the reason? Because this has got a tremendous value, tremendous brand value and all this thing. So these are 2 major questions. Another third question is -- it is a question because how is your raw material cost winter -- in winter. How will be your woolen cost going out? And I think you must be mixing acrylic fiber also because that is a substitute. How is the acrylic fiber cost?

So there were 3 questions from your side. I'll answer one by one. First is about the marquee investors. If you see that the share price, which was there at INR 225, has moved to around INR 375. That has moved only because many marquee investors have come up. But I cannot disclose their names as they have come up in the last 3, 4 months. But because of that only, the share is actually moving up because they understood the company better than, I think, before, and that is why the share price has risen. So as far as home furnishing is concerned, I think your point was how strong we are in home furnishing or we are not, like, going ahead -- we are going very slow. Home Furnishing is one segment, which is growing faster than any other segment in the company right now. It's growing at around 30% from the last so many years. Even in the pandemic year, it actually didn't lose a single rupee. It increased its sales as compared to its previous year sales. Even in this year, we are expecting to have a growth of more than 25%. So this is one segment. Even this is contributing now more than INR 100 crores of our sales, which is growing at around 25%. So I think it's a very good growth rate going forward at a base of like INR100 crores. And we see that the product is accepted now much more than before. And we have launched a few more categories in this home furnishing. Last year, we launched bedsheets, which is picking up very well. This year, we have added towels also, which has started now. So I think going forward, we should have a good growth in home textile also.

Good. Good.

And third question was raw materials. See, raw material costs have gone up, but we don't see -- we don't feel any pinch of increased raw material prices because already, those prices have been, like, put it on to the consumers. So all the garments when we go for a trade show, we take into account all the increase in the raw material prices, and accordingly, we put the prices. So that has already been absorbed.

About the acrylic fiber, can you give some idea how much price increase was in acrylic fiber or acrylic...

See, acrylic fiber price, it went up by around 30%. It came down again by 20%. So right now, it is, I think, 5% to 7% up as compared to last year. So acrylic, at one point of time, it went up to INR 430. It again came back to INR 370. So there is a drop in the prices. And in cotton yarn also, the increase is approximately 30% as compared to last year. Overall impact on the garment is around 5% if we take the raw material component.

Another question if you will permit. I think that you are just catering to the Indian market. I think is it because of the brand -- this particular brand you cannot sell out of India? Is it any reason? Or why the management is not thinking about selling out of India?

We can only do the contract manufacturing. We cannot register our brand in many countries because of the name Monte Carlo, as it's a city name in France. So we tried registering ourselves in Dubai and other countries, but we could not do it. So we are -- right now we are focusing only on the domestic market, and I see there's a lot of potential going forward because we have -- still have more areas to cover. We are very strong in North and East, but still South and Western are 2 areas, which I think the company is strengthening its position from last few years. So still, there is a lot of growth potential as far as India is concerned.

Another question. Because there's enough chance your company sales can quadruple from this level. I think management must be aware of this that the volume of sales -- the way the brand recall is, the sale value can increase manifold. I think that must be in the management mind also.

As there are no further questions, I now hand the conference over to the management for closing comments. Over to you.

Thank you very much for your participation. And if there's any question which remains unanswered or any query, please send it to Dickenson World or to Mr. R.K. Sharma and Mr. Ankur Gauba, our CFO and Company Secretary. Thank you very much.

Thank you very much. Ladies and gentlemen, on behalf of Emkay Global Financial Services, that concludes today's conference call. Thank you all for joining us, and you may now disconnect your lines.