Relaxo Footwears Limited (530517) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Relaxo Footwears' Q4 FY '21 Earnings Conference Call hosted by Axis Capital Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Gaurav Jogani from Axis Capital. Thank you, and over to you, sir.

Good afternoon, everyone. On behalf of Axis Capital, I would like to welcome you all to Relaxo Footwears' Q4 FY '21 Earnings Conference Call. From the management, we have with us today, Mr. Ramesh Kumar Dua, Managing Director; Mr. Ritesh Dua, Executive Vice President, Finance; Mr. Gaurav Dua, Executive Vice President, Marketing; Mr. Sushil Batra, CFO; Mr. Vikas Tak, Company Secretary. We'll begin with a brief discussion from the management's end, and then we can open up the floor for the Q&A. Over to you, sir. Thank you.

So good afternoon to everyone. Ladies and gentlemen, thank you very much for attending our earnings call for the financial year 2020-'21. We've already shared our earnings press release and results' presentation. Hope you got an opportunity to go through that. I will start with Q4 FY '21 financial performance, followed by full year FY '21 financial performance. In Q4 FY '21, Relaxo booked operating revenue of INR 748 crore, which is a growth of 38% year-on-year. The strong revenue growth was partially due to low base of Q4 FY '20, as we know sales was impacted in Q4 of last year due to lockdown in the month of March last year. EBITDA during the quarter was INR 163 crore, which was a strong growth of 69% as compared to the corresponding period of previous year. Our EBITDA margin for the quarter was 21.8% vis-à-vis EBITDA margin of 17.8% in Q4 FY '20. Our profit after tax was INR 102 crore for the quarter, up by 97% year-on-year with a PAT margin of 13.7%. For FY 2021, our revenue declined marginally by 2% to INR 2,359 crore, with EBITDA margin of 21%. Our PAT of INR 292 crore in FY '21, with a margin of 12.4%, grew by 29% year-on-year, mainly due to product mix and saving in selling and administrative expenses. During FY 2021, we generated a cash of INR 513 crore from operational and spent INR 142 crore in CapEx and repayment of current and noncurrent borrowings. At the end of March '21, we have 398 exclusive brand outlets, which contribute around 7% of total revenue. Export is holding its ground and contributing around 4% of revenue. During the ongoing crisis, we are undertaking all necessary measures to ensure safety and well-being of our employees and partners. We continue to support and provide assistance to our distributors and customers. Due to lockdown in various parts of India, overall demand for footwear is subdued right now. However, we believe that demand for footwear should bounce back whenever the restrictions are lifted. The second wave of COVID-19 in India is most severe and continues to impact lives and livelihoods. We stand with all those affected and are dedicated to towards protecting and supporting our employees, partner and communities in the face of this unfolding crisis. Relaxo remains committed towards its stakeholders by creating a sustainable, profitable and growing business. The company enjoys comfortable liquidity position with 0 net debt and continuing to provide assistance to its distributors and vendors. Despite the uncertainty related to the extent and length of the [indiscernible] wave, we believe that company is well placed to emerge stronger in the post-COVID-19 world. We remain committed to give the best experience and value for money to our customers and creating long-term value for our shareholders. We can now open the floor for questions. Thank you very much.

[Operator Instructions] The first question is from the line of Nihal Jham from Edelweiss.

Sir, a couple of questions from my side, and I'm taking from our last interaction. At that point in time, obviously, you mentioned that given the trend in raw material prices, you expect that longer-term margins could sustain at around 18%, but we've obviously ended the year at a much higher number. So first, if you could comment, what is it that you expect going forward then, after which, I can come to my next question?

Mr. Batra.

Yes. MD -- no?

No, I can take it. This year, in 2021, the margin have been more because there has been saving on account of sales and promotion expenses, travel expenses and some professional expenses. So that has been the one -- and the raw material price also have been benign. And some efficiencies we worked at back end also in our plants, that was the main reason for -- you mean more than expected EBITDA level of achieving [indiscernible] you can...

So as a trend, is it that in the coming year, we expect most of these expenses would normalize, especially on the advertising part?

So we have proceeds from time to time how the things are. Presently, the way again, second wave has come up, so traveling will remain restricted. But brand building is something you can't avoid, that will have to go on. So this year, our strategy is that we have to build our brands in the long-term interest. So this year, compared to last year, our expenditure on brand building will be more. This is what I want to say.

Sorry to interrupt, sir, we're not able to hear you clearly.

I'm telling the expenditure on brand building this year will be more than it was last year because for a longer period, we cannot keep on saving on brand expenditure like advertisement and all that. So this year, as a strategy, we'll be spending more money on brand building, that is what I wanted to tell.

That's very clear, sir. One more question from my side. I just wanted to understand on the industry scenario at present. Would it be fair to say that given the disruption that has happened because of COVID, especially in a lot of our MBO channel, there has been disruption of other brands, which has helped us increase market share. Would that be a right sense of what is happening on ground at this point in time?

But the way things are, the total, I mean very chaotic, unpleasant environment that we are prevailing in. Nobody expected that COVID wave 2 will be like that. We are now -- we are in the lockdown. And when only the lockdown will start opening up, then only things will start working. [indiscernible] 3 out of our 8 plants are only operating and maybe only 10, 15 markets are open. So business is largely affected. So the way things open up, then only we'll able to really know how the things take shape. But as far as unorganized/organized is concerned, definitely, we are in a better situation than unorganized players. That advantage we might have than others. And as far as the -- our retail outlets are concerned, where our business is hardly 7%, 8%. So last year also, we suffered a lot of retail outlets were closed, but because we are selling to lot of multi-brand outlets, which are in -- I mean, through wholesalers and distributers, around 50,000, we are tending. So that is our saving grace that we are able to have in our business. That is the way the things are. That advantage, we will have this year also.

Sure. Just the last question, what would be the share of e-commerce for the entire year, sir, for us?

E-commerce, including modern trade and all these, is hardly is 10%. So I would say, 8% rather. So our stakes are very low. We are selling a not very high-value item. Last year, the e-commerce was closed for because a lot of time. So shoes and all these things, sales was less. So ultimately, because of all these things, our business was a little bit affected e-commerce, but it is not a very big stake for us in e-commerce. Our items are -- sell more on multi-brand outlets.

No, no, absolutely. I was just trying to understand that this year, given the disruption, is there is a sizable increase in our share compared to last year, especially on the e-commerce side?

No, no, no. You can't assess because ultimately our articles are priced around INR 150 to INR 125 or INR 200. These articles are unviable to be sold on this, what you call it, online. They generally sell through multi-brand outlets only.

Absolutely. Because in the second quarter when the disruption was at its peak, we had reached a 10% share. So I just wanted to like maybe there is a continuation of that once the open-up happened after, say, September or October?

So when -- online, when things open up then it is there, but we have seen a whole year how the things have panned out. This year also, we are sitting in lockdown. And ultimately, this year or last year, with the market as chaotic, what you find is that when the markets are like this, when the people are indoor, more of the slippers have sold last year. This year also is a theme that will remain like this, when people are indoor, where closed footwear will remain affected and the sale online will also remain affected.

The next question is from the line of Amnish Aggarwal from Prabhudas Lilladher.

I have a couple of questions. My first question is on the raw material [indiscernible] if you look at on a -- gross margins, both on a Y-o-Y as well as even on a Q-o-Q basis, our gross margins were actually down because in this quarter, they are 56.8; in the previous quarter, they're at 58.9. So how much is inflation in raw material currently? And because I understand that most of this petrochemical-based inputs, they had moved up even in the month of March, April and May? And secondly, how much price increase we have undertaken? And will we be able to sustain our gross margins at the current levels? So that is my question number one. First part of the margin. The second bit on the margin side is that if you look last year, we have actually cut down on our overhead significantly. But if I look at the full year, they are down by nearly 400 bps, and you are yourself indicating that the ad spend will go up. Now looking at this scenario that this year, some ad spend will come back, raw materials are high, so what sort of, you can say, outlook on margins would you like to give from here on? So this is my first question on margins.

Yes. The way things are, raw material prices, definitely, they have gone up and highly volatile. And this scenario, we have faced in our life number of times. Back then, rubber was INR 100, then it came about INR 250. These things do happen in anybody -- any business cycle, and we have gone through it. So what is our strategy? Every quarter, whatever prices are, accordingly, we [indiscernible] our decision, keeping in view market condition, price revision. So whatever is required, whatever is possible, then we pass it on to our customers. So this is what we have been doing. Raw materials, naturally they will always vary and accordingly do also, but at the same time, we have to be also watchful that what is the competitive intensity in the market. And then how -- you can't just immediately kind of knee-jerk reaction in prices and then after 3 months you may say, "Okay now prices have gone down, so we'll reduce it." So there has to be a kind of stability. Some of our best judgment we pass on the prices compared to industry and accordingly take the decision and next quarter again, we review the things. So this is what we have been doing since ages, I will call it. And this is what we tend to do in future also: keep on watching the prices, keep on quarterly reviewing the things, market conditions and accordingly passing on. And the margin is concerned that you told, naturally, this year, things are different. So we have to watch the market conditions and take a decision. The way things are, gross margin will get impacted. But on the base -- overall year basis, we have to wait and see. We can't do say now. Accordingly, [indiscernible] also does a course correction in between also. And [indiscernible] that we've already taken, that's the call we've taken, but then we keep on reviewing on all these things. Margins were very volatile, raw-material-wise, this lockdown exercise, nobody can say with guarantee how long lockdown will continue, how long COVID wave will continue. Now there's a fear of COVID third wave also. So the way things are nothing can be said with certainty. We have to see, keep on reviewing every quarter and take corrective action. That's it.

Yes. So how much price increase you would have undertaken in the past few months?

Maybe around 7% to 8% we have taken. But again, this price rise is depending upon article to article in the same category also. Some article, we have taken more than 10%, 15% also. But again, we have to see, which article can take how much price increase. Some articles -- because we are in a kind of a fashionable market. Some articles don't perform or some probably have performed too much. And then we have to see what is the competition rate for similar articles. So accordingly, article by article, we have to review. We can't generally say, "Okay, 7% all around." So we have to be very watchful on this. Article to article, we have to decide.

Okay. Sir, my second question is on the demand scenario. Because the Relaxo caters more to the value-for-money segments in footwear, and last year, rural India, small town, that were not impacted much by the first wave of COVID, but this time around, the scenario seems to be different. So what sort of an on-the-ground situation we are currently witnessing? And in your view, will it take longer for the demand to come back this time around more so in the small towns and rural India?

Well, again, as the things are, I will call it, difficult to predict. But as the thing is, the way things are in, I mean, now COVID wave second is now going down, things are improving. We think a couple of things -- a couple of months, things will then start improving and maybe back to normal. Many times, there's a pent-up demand, a kind of a thing, so immediately things start improving. I think June-July thing will start and July will be the very good month to improve. In June also, one -- but different states are taking different decisions. If the lockdown prevails, everything will remain the way they are because it is something -- a very difficult thing to predict. So we have to wait and see only. Nobody can say with certainty what is going to happen. Because everybody is confused to whomsoever we ask the question. How long things will happen? The way things are, nobody can predict. We have to wait and see.

Okay. Just one thing, how much CapEx are we planning for the current year?

Sorry to interrupt, Mr. Aggarwal. May we request that you return to the question queue? The other participants are waiting for their turn. [Operator Instructions] The next question is from the line of Akhil Parekh from Elara Capital.

My first question is on the demand for closed footwear, like first few quarters of the year, the demand was driven by open footwear. But the expectations were, like as we move closer to the festive season and winter season, the demand will pick up. So how has that been the case? And how is the demand in closed footwear for third quarter as well as fourth quarter?

Well, you are right, demand of closed footwear did improve during festive season, the quarter 3 and quarter 4, both. Before that, the demand of closed footwear was really not -- because it was all under a snare of lockdown and a lot of months we lost. People were also cautiously moving in the markets. People were more indoor. So shoes business was affected. But after this, what you call it, festival season, third quarter and fourth quarter have been quite satisfactory as far as the closed footwear is concerned.

Okay. Okay. And would it be fair to say that demand is now back to pre-COVID level for almost all the category?

This quarter 4, yes, it was, rather better. But now again, the first quarter of this year, we are sitting in lockdown. So what can be said about this time?

Sure. Sure. Just last question on the price rise, you mentioned that on an average 7% to 8% price hike. So have you [indiscernible] the entire inflation in the raw materials say in EVA and PVC because the prices of raw material have risen far more than 7%, 8% in last few quarters. So should we expect more price hikes to happen during first 2 quarters of the year?

Well, we have to again review quarter-by-quarter. This is what we decided for this quarter, keeping in view the market conditions also. Now then we have to see how much raw material -- sometimes we have in stock also some materials which we have. But at the same time, again, we have to look outward also and backward also. What is the supply chain? And outwards, what is the market emerging competition scenario? Keeping that thing in view, we'll review the things and then accordingly revise our prices, whatever, whenever required quarter-by-quarter.

The next question is from the line of Tejash Shah from Spark Capital.

Sir, sorry to stretch this point more, but the first question pertains to our margin philosophy. And I'll just give you some data before I -- before you answer the question. So in last 3 years, we have added roughly INR 400 crore of turnover, and we have added INR 200 crore of EBITDA there, INR 193 crore to be precise, which roughly means that incremental turnover is actually coming at way higher EBITDA margin. And obviously, this year is abnormal, and you said that some of the costs were not there. But in normal scenario, where would you like this business to operate at, at least for the near term? Will it be 17% range or will it be -- or that is not the part of the calculation at all, and it is an outcome based on the economic environment?

Currently, sir, it is very difficult to tell you what EBITDA margin would be because things are totally unpredictable. The way we are sitting in a lockdown and the way things are, it is difficult. Raw materials are expensive. Overhead will just mount the way things are. We are trying to control the things. But let the things settle down, then only quarter-by-quarter things will improve. Things are very unpredictable at the moment, volatile, totally. Nobody can predict at this moment what the year is going to end. We only hope that this wave settles down, things start opening up, then accordingly, we will take our decisions accordingly depending upon whether price revision is required, whether -- what expenses to be saved for this year. So we have to then take all these precautions. Definitely, if the things remains under pressure, then margins will be under pressure only.

Sir, let me rephrase the question. So let's assume hypothetically and we all hope so for that, that situation normalizes very fast. As a business, are we comfortable operating at 20%-plus margin without compromising on our competitive moat or our competitive power in the way competitive landscape that, in any case, we are operating in?

We have to always watch competition also accordingly. When the competition intensity is there, we have to keep what is reasonable with our pricing also. So that, we don't want to lose market share also, you understand? And then we have to spend money on brand building also. So all this is keeping it together. Sustaining 20% this year is going to be a real challenge. It is not possible, the way things are now, but we have to wait quarter-by-quarter and see how the things open up.

Fair answer. This answers the question. Sir, second question, you mentioned, and last time also you had mentioned export presence in international market. Sir, any more formal details on that, A? And will it be part of immediate PLI scheme that government has proposed?

Ritesh, you can take it?

Yes. Just repeat the second question, second part of your question?

So will it be anyways committed to PLI scheme that government is proposing on footwear as well?

Let me answer the first part first. Actually, we are right now at 4% of our revenue, 4% of the company revenue is doing export sales. And we are able to sustain these sales in last year also even because due to COVID, all these Gulf countries and African countries have been affected a lot. So -- but we have been able to maintain and -- we're able to achieve around 98% of the previous year. Since the government incentives, we have been already in touch with the government authorities. So whatever incentive we have been able to avail, we are gaining. This should be -- and surely, this impact of COVID is happening in this quarter as well because many countries have partial lockdowns or night curfew of complete lockdowns. So we are just having a wait-and-watch theme, how the things improve. But the good part is, we have been exporting in our own brand with our standard of quality, which is really giving -- bringing confidence in the mind of consumer there. So we are very confident we will come back soon -- come back, revive the business soon once the things settle down in COVID front.

We'll move on to the next question that is from the line of [ Nikhil Chaudhary ] from [indiscernible] Portfolio.

Sir, I have just 2 questions. Sir, can you share the mix of closed footwear when we started the year and probably versus now when we end the year?

Can you repeat, please?

Hello? Am I audible?

Can you repeat the question?

Am I audible? Yes, yes. I'll repeat. I'll repeat. Sir, can you share the mix of closed footwear in the total portfolio when we started the year and versus now when we end the year?

No, no. We can average out for the year. Our closed footwear share is around 15%, 85% is open footwear.

Okay. And it is same like when we started the year and when we are ending the year, correct?

No, no. In the start of the year, we were in lockdown. There were no share at all. April, we lost. May also, some part we lost. So what was the share? Share was definitely, first quarter, second quarter share was low. It's only after festival, third and fourth when things started opening up and people started moving around, then only the closed footwear started improving.

Sir, actually I'm coming from -- yes, yes, go ahead.

So third and fourth quarter, share of closed footwear was better, it's improved. It came to maybe better than last year. But first 2 quarters, it was affected.

Okay. Okay. And sir, when we started the year as in, what I meant is, like when we started before the lockdown what is the usual share like? Because where I'm coming from is because Campus is also coming up with a lot of closed like varieties or SKUs in the closed footwear and what our checks suggest is Campus has become aggressive. So just wanted a sense on how the competitive intensity is from Campus and how we are able to tackle it?

So that competition is a very good thing for the company. The company always remain more active. I mean it is always good to have good competition. As a result, the whole industry grows. And as far as your question earlier than last year, what was our share? It was 20% because first quarter and second quarter, the previous year were much better than what it was last year. So this year because sale of slipper was much higher and growth was much more. So the ratio of open footwear went up and closed footwear -- because today also throughout the year, schools were closed, so school shoe sale was not there. People were moving less outdoor, so sale was affected. And other article also like [ tennis ] shoe, that is again closed footwear because schools were closed, there were no sales. So that has been one of the reasons. Even although movement is less, sale of closed footwear goes down.

Got it. Got it. Sir, all in all, we have not lost any market share, right? Like...

No, no. No, no. There is no loss of shares. It is cyclical because of the market conditions that things are happening like that.

Got it. Got it. And sir, last thing, I just wanted to understand our strategy, wherein the competitor is having 9 distributors for a set of area, and we are just having 1 or 2 distributors. Because won't it strain the balance sheet of 1 or 2 distributors in keeping all the SKUs, cut sizes? Just wanted a perspective because I understand probably 1 or 2 distributors are not able to keep all the cut sizes, SKUs and supply to the MBOs, our MBOs.

You know, it is a matter of strategy. When we have too many distributors, they fight among themselves. And then they say we don't get margin. But that competition will be intensive, it will make too much among the distributors, then also they start losing interest in a brand. But when you give a low-credit area to a distributor, then only he become more motivated to do that. And we have to protect that area. So that today, suppose you are my customer, I give you certain area, you do with your all hard work develop that area and tomorrow, suppose they put another distributor, so how you will feel like? Of course, you have nurtured and developed the area. So it is your territory, your responsibility also. So if my salespeople go in a market and take orders, whom they'll give order to out of the 9? If it is 1, I will give to that person only, the personal responsible for the territory. So that is the way [indiscernible] that we are doing. Allocation of area...

Agree. Agree, sir. Fair from the point of your distributor, but just wanted a sense on how retailers are perceiving us? Because what happens is probably say, if they're getting -- I understand, I'm completely -- I'm agreeing with you like the distributor will definitely want to preserve his own interest as to he should not have the competition. But retailers will have different choices and then probably -- from the point of view of retailers, then it becomes a little hard in keeping our SKUs in all cut sizes, just getting a perspective? Like I understand distributor will benefit...

See, that I understand. When I say some distributor cannot handle all the range, then we may say, okay, you take these 2 brands, rest you give to another. But still, he will have some kind of a, I mean, control or responsibility of that category. But if there -- from a retailer point of view, you are right, if we have more choices, then he also plays between 2 distributors, too much cutting of discount. So too much -- then he expects too much of credit also from each other, that's also a very unhealthy position. As a company, we go to the retailer, we find what difficulties he is facing, then we sought out the way the things are. We don't want a distributor should overcharge. At the same time, we don't want that retailer should force him to cut too much discount and then [indiscernible] later on. And retailers also many times pass too much discount to the consumers, that also we want to see. Then the retailer doesn't done, he looks back at the distributor, distributor looks at the company. We want there has to be some responsibility of the distributor, give him area, let him develop it. Whatever difficulty our retailer face, then we are there to take care of it. This is the way we do things.

The next question is from the line of Dhaval Mehta from ASK Investment Managers.

Sir, my first question is, let's say, in FY '21, what would have been the industry decline of the footwear category? And how the competitive landscape has changed, let's say, in last one year?

Yes. I would like to -- my name is Gaurav. So if you have noticed that during last year, the formal segment, outdoor segment has declined. And the casual segment and like work-from-home segment has increased, the open footwear. So party wear, fancy wear, have declined in leather shoes, outdoor shoes, but the casual footwear, open footwear has increased.

Correct. Correct. But given, let's say, pre-pandemic, open footwear used to be around 15%, 20% of the overall industry size, right? So if the large part of the industry has declined, the overall industry would have declined sharply. Is my assessment correct?

The major -- this thing has come -- that has come in leather shoes and outdoor shoes. So that has declined tremendously, and the gains are in open footwear.

Okay, okay. And in terms of competitive landscape be it from unorganized players or organized players, how it has changed in the last one year?

Similar -- it's a similar thing. The ASP has gone down. If you see as an industry, the ASP has gone down because, again, the closed footwear, being expensive, have come down in share, and the open footwear, which are quite cheaper has gone up. Yes. So similar things with the unorganized also, as well.

Okay. Okay. So if, let's say, whatever the share of unorganized was pre-pandemic, is the share similar now? Or their overall share has come down of the overall pricing?

It's very difficult to measure. We don't have a credible agency who can back the data that this is the percentage drop or this is the percentage increase. So our guesstimate, we can say, a slight decrease we have seen.

Okay. Okay. Okay. My second question is, any call out, let's say, in terms of which brand of ours has done exceedingly well, be it Flite, Sparx or Relaxo? And in terms of geographies, which geography has seen healthy growth?

So if you see in India, Maharashtra and Kerala was -- had maximum lockouts -- lockdowns. So these 2 states, West and South was impacted more. But North one or -- North India and East India was doing pretty well. This is pre -- this is last year scenario. But currently, it's all locked down, so difficult to say.

Is the profitability same across all the geographies, sir?

Yes. More or else, it's same. More or less it is same. It's only the freight, which is a -- which will be very less.

Okay. Okay. So as most of our factories is in North, so if North does well, then I believe the freight cost will be lower. So that helps the margins.

Correct. Correct.

The next question is from the line of Bhargav Buddhadev from Kotak Mutual Fund.

Congrats for a very strong performance. Sir, my first question is that you mentioned that the closed footwear demand had been impacted in FY '21. But as we sort of enter second half of this fiscal, it seems likely that post vaccination could slowly start coming back. So in your experience, is it possible to broadly quantify what could be the extent of pent-up demand? And when I say quantify would it be 1.5x of normal demand, 2x of normal demand in your opinion, broadly at the sector level?

Sir, it is very difficult to quantify the things. We have to wait and see the -- we don't even to what extent our long-run will reduce today, what to quantify? Things are so chaotic, so unpredictable, we have to just move the way things are accordingly.

Sure, sure, sure. But do you think that there will be an element of pent-up demand for sure, right, because this particular demand cannot get lost, the closed footwear demand?

No, no. Pent-up demand will be there, but there is a lot of fear in the minds of the people. Even when the lockdown is lifted, I don't think people will really start moving very freely. So it will take some time. And then slowly things will improve. This is what we think.

Sure. Secondly, sir, how are we prepared in the event, there is a strong pent-up demand, do you -- are we carrying enough inventory to sort of meet that demand? Or can we sort of push our factories to sort of meet that demand? How are we prepared on that front?

So we have inventories also. At the same time, we have production capacity also. So we always have a cushion in our production capacity generally utilize the 70%. And [indiscernible] we can have unlimited inventory. That is also -- you have to take care. But the way things will pan out, accordingly, we will take decisions and actions.

Okay. And lastly, sir, at the company level, is it fair to say that the volume growth for the full year -- volume decline for the full year would be in the range of 8% to 9%? And across open wear and closed wear, in open wear, we would have grown, but in the closed footwear, we would have seen a significant volume decline. Is that a fair assessment?

No, no, no. Last year, actually, our volume grew, grew by around 7% because slipper sales were much more than the closed footwear. And that is low-value segment. But because demand was much more of slippers, so -- and our sale is only 2% less. So we could only make up because our slipper sales was more. So actually, volume was driven by around 7%.

Sure. Okay. So this realized increase of 7% was for the quarter and not for the full year?

Full year. We're talking about a full year, this volume.

Okay. And realized -- so for the full year, you are saying volume growth was 7% and average realization would have been down because of increase in [indiscernible]

Correct, correct.

The next question is from the line of from Girish Pai from Nirmal Bang.

Sir, I just want to understand, has there been an over consumption situation in FY '21 for open footwear, which could potentially mean softer demand in FY '22?

No. It doesn't mean today -- you would require slipper always. Last year's slipper cannot give -- of course, there is a limited life of the product. Anybody requires at least 2 slippers in a year. So that demand is going to remain. So once the things start opening up, consumption will begin. Consumption is still today also, if you're indoor, still at least you require slipper, you're not barefooted. Consumption is still there. So last year's consumption cannot affect this year consumption. This is what I want to say.

Okay, sir. Sir, had the second wave not happened, say, you were sitting in the month of February and looking out into FY '22, what is the growth you would have probably looked at? I mean what kind of numbers were you people looking at internally, assuming that second wave is not going to happen?

No, no, no. Yes, it would have been much better because after all, whole month we have lost, this May. April also, sales were affected. So there's no point in just a dreaming of those things, what could have happened. But now let us face what the reality is. Reality is COVID wave is there and things are affected. We have to see now how our June pans out and how our second quarter pan out. That is we have to see. That's important.

Okay. And lastly, sir, at some point in time, I think 3, 4 years back, you had started this distribution restructuring where you focus more on exclusive distributors. Now has the journey come to an end? Or is it -- are we still on this journey?

Sir, we are on the journey. Always, you keep on improving the things, the way of working. Today, also, we are doing the same thing and putting DMS system on those people, encouraging more and more people to become exclusively our distributors, selling our products, then looking at their areas, territories, how we can make them more responsible? How they can make them more efficient? How we can add retailers to them more kind of a universe being created. So it is ever-ending exercise. There is nothing like -- whatever -- even the best things can be made better. So we are always on it. And today also, as we'll say, these are ongoing exercise.

So sir, 650 to 700 distributors that you have, how many of them would be exclusive to you, sir?

Around 125 or maybe this -- even though we are trying to encourage them more and more to convert our exclusive, so that journey will continue.

The next question is from the line of Ankit Kedia from PhillipCapital.

Sir, I just wanted to understand the premiumization trend. How much was the premium product sold in the year, given that open footwear in the first half, we saw a lot of premium Flite and others being sold, while closed footwear was more entry-level products. So by the end of the year, how did that change happen? And from FY '20 to FY '21, has the premiumization overall increased significantly for us, which would have also aided some gross margins?

No. No, sir, last year, was a tough year. Rather, we had to introduce a lot of value-for-money articles. So as a result, our received per share every time was lower. More slippers sold. Although in slipper segment, we did add premium segments also. But ultimately, because shoe segment was not selling, and there also in shoe segments, we had to introduce value-for-money shoes also. So overall, last year, our average selling price came down, although volumes went up.

Sure. Sir, my second question is regarding the school category. How big is the school category for us? And how much is the inventory in the system for the schools? Because last year, schools didn't start and this year with the uncertainty in the schools, there could be a lot of pent-up demand from the school side. So if you could just share how does the school footwear industry work for us?

Sir, it is a very, very small share in our scheme of things. So they're hardly nothing. That's it. 1.5 -- around 1% is our share in our scheme of things, shoe business, 1.5% or so. That's all. And otherwise, these schools are not -- still closed, so they don't show consumption at all.

Right. And sir, my last question is regarding the new BIS certification guidelines for footwear manufacturers, which is compulsory from 1st of July. How will that change the unorganized sector because it will be very tough for them to get this certification. And do you see post this in the second half, a good market share gain for organized footwear compared to unorganized footwear coming?

No, no. First of all, this guideline already -- our association is in several talks with BIS and the government. And they are likely to be postponed by implementation of this thing. This will take time because it is very confusing. Even they are not clear. The way they have put -- the way notification is, even it is not clear. Whether -- they use a word -- I just give one example. They say hawai chappals, rubber hawai chappals will attract to these things, but nobody makes rubber hawai chappals. Then what is the meaning of it? Even they are not clear. When we ask them, what is rubber hawai chappal, they're not able to explain [indiscernible]. These things that they have picked up, they have picked up 20 years back what was happening. So they are now in talk with us, they -- our industry is talking to them, and they have understood the things. And accordingly, there is likelihood that these things will be postponed for quite some time -- implementation of these guidelines.

Sure. And sir, just one last thing. What was the absolute A&P spend last year? And if you could just share the absolute amount you are looking to spend in FY '22, that would be very helpful, sir.

Maybe Gaurav can answer this question -- approximate idea.

Yes, approximately [indiscernible] [ in fact, it was 8% to 7% ], which has come down to 5% to 7%.

So sir, FY '22, what are we looking at?

We are again going -- we are thinking to 8% to 9%, increase by 1% to 2%.

Ladies and gentlemen, we'll be taking the last question that is from the line of Mr. Gaurav Jogani from Axis Capital.

Sir, first question is with regards to how much of the cost that we are able to save in FY '21, how much of that can we sustain going ahead, I mean, in FY '22?

So it is 3% to 4% for the saving.

Of the overall savings...

[indiscernible] expenditure we are going to do this year.

Okay. So basically, whatever we have been able to save on last year, approximately 3% to 4% of which we can save this year. Is that understanding correct?

No, no, no. We [indiscernible] the market scenario and take decisions accordingly. We will plan something, but ultimately you have to see the market scenario and decide, whether it is a pricing, whether it is brand building, whether it is business promotion expenses, everything we have [indiscernible] dynamic environment in which we are operating. You can't just say it is writing on the wall you do it like this. If the market dynamics change, we have to change our things also. That is the way things -- not that once we plan then we -- we have to see the environment. If the environment is dynamic, then we have to be flexible accordingly. That is what we will be acting on.

Sure, sir. And sir, my next question is with regards to the replacement cycle in the footwear industry. So have you seen any changes over the past 5 to 10 years? I mean, earlier, like people used to replace it every 1 year, 2 year. And as the treatment cycle gone down, overall basis? Have you seen any trends of such?

No. We can only say earlier our footwear consumption was per capita consumption guesstimate, 1.5 pair. Now this guesstimate is 2 pairs per capita consumption. So that is what reflects consumption has gone up only because of this, many people are keeping more pairs than what they were keeping earlier. And as far as the manufacturers, he is -- those who wear slippers, their consumption anytime too, because one slipper lasts hardly 6 months -- around 6 months, so he has to buy 2 pairs. But overall consumption of footwear has gone up because there is a variety, there is a fashion. So because of fashion itself people buy [indiscernible]. So that is the way consumption has increased.

Sure. And sir, last question from my end is, what is the -- what is your CapEx guidance for the year FY '22, this coming year?

CapEx?

Yes.

Around INR 140 crore, INR 145 crore, what we have planned.

Ladies and gentlemen, that was the last question. I now hand the conference over to the management for the closing comments.

Thank you all for joining the call. This is all from our side. Looking forward to join you again. Thank you very much.

Okay. Thank you all.

Thank you.

Thank you. Ladies and gentlemen, on behalf of Axis Capital Limited, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines. Thank you.

Thank you.