Rupa & Company Limited ($533552)

Ladies and gentlemen, good day, and welcome to the Rupa & Company Limited Q4 and FY '26 Earnings Conference Call hosted by MUFG in time. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Omkar Bagwe from MUFG. Thank you, and over to you, sir.

Thank you. Good evening, everyone. I welcome you all to the earnings conference call to discuss Q4 and FY '26 results of Rupa & Company Limited. To discuss our results, we have with us from the management, Mr. Vikash Agarwal, the Whole-Time Director; and Mr. Sumit Khowala, the Chief Financial Officer. They will take you through the results, and then we will proceed to Q&A session. Before we proceed to the call, a small disclaimer, this conference may contain certain forward-looking statements about the company, which are based on the beliefs, opinions and expectations as on date of this call. the actual results may differ materially. These statements are not guarantee of future performance and involve risks and uncertainties that are difficult to predict. A retail safe harbor statement is also given on the Page 2 of the company's investor presentation. Now I would like to hand the call over to Mr. Vikash Agarwal. Thank you, and over to you, sir.

Thank you. Good evening, ladies and gentlemen. On behalf of Rupa & Company Limited, I extend a very warm welcome to all the participants. Joining us today for our Q4 and the financial year '26 Results Conference Call. We appreciate your continued engagement and finance results and investor presentations are uploaded in the stock exchange for review. Our company delivered a steady performance during the quarter amid the competitive business environment and the evolving consumer demand trends across key categories. Revenue growth during the quarter was driven by healthy volume expansion across segments, while pricing conditions across the industry continue to remain competitive. Revenue for Q4 financial year '26 stood at INR 441.5 crores, registering a growth of 6.3% year-on-year. The company recorded a strong volume growth of 9% during the quarter, reflecting improved market traction, focusing execution and strengthening consumer demand across our credit portfolio. Our continued emphasis on scale expansion, stronger challenge engagement and product mix improvement supported overall business performance. [ Their Fuse ] segment continues to replace encouraging momentum during the quarter, reaffirming strong consumer acceptance and the growing developments of our diversified portfolio. We also continue to focus on strengthening our position across mid-prime and premium categories through focused product initiatives and calibrated channel expansion. Exports contributed 3% to overall revenue during FY '26, while [ bottle ], including e-commerce, contributed 5% to revenues during the year. reflecting our major and strategic trade expansion efforts in a competitive market environment. EBITDA for the quarter stood at INR 55 crores, with EBITDA margin at 12.5% while the operating environment continued to witness elevated competitive intensity, we remain focused on disciplined cost management, operational efficiency and prudent inventory controlled measures to support profitability in long-term business stability. Operating cash flow for financial year '26 stood at INR 45 crores demonstrating our continued focus on putting cash management and working capital efficiency. As of March 31, 2026, our cash surplus further improved to INR 33 crores reflecting the strength of our balance sheet and healthy liquidity position. During the quarter, we continued to strengthen our sales and distribution network by making focused investment in our sales and improving our on-ground market execution. We are hopeful these initiatives will help us expand our presence across markets, increase the reach of our products and improve the efficiency and productivity of our distribution tenants. In addition, the company is increasingly emphasizing on all improving, secondary channels changed by increasing product movement from the shooters to retailers. We are also maintaining optimum in multilevels across the channel to ensure better stock availability. We believe these initiatives, coupled with our continued focus on building a stronger sales infrastructure will support future growth, enhance operational efficiencies and drive sustainable profitability over the medium to long term. Our commitment towards delivering sustainable long-term value towards stakeholders remain strong. In line with this commitment, the Board has proposed to subject proposed subject to shareholders' approval a dividend of INR 3 per equity share for financial year '26. We project revenue growth of 10% to 12% in financial year '27, largely led by volumes and expect our EBITDA margin to be in the range of 9% to 10%. [ Baastad ] brands extensive distribution to was a strong market positioning. We remain confident of navigating the evolving market environment while continuing to create sustainable long-term value for our stakeholders. With this, I would also like to hand over CFO, Mr. Sumit Khowala to take you through the financial highlights of the quarter and the full year. Thank you.

Thank you, sir, and good evening to everyone. Thank you for joining us on the quarter 4 and FY '26 earnings call. I will now take you through the key financial highlights for the period. For quarter 4 FY '26, revenue from operations stood at INR 441.5 crores as compared to INR 415.5 crores in quarter 4 FY '25, registering a growth of 6.3% year-on-year basis. EBITDA for the quarter stood at INR 55 crores as compared to INR 45.9 crores in the same period last year, registering a growth of 19.8% year-on-year basis. EBITDA margin for the quarter stood at 12.5%, improved by 150 basis points year-on-year. Net profit after tax for the quarter stood at INR 36.1 crores as against INR 30.6 crores in quarter 4 FY '25, registering a growth of 18.1% year-on-year basis. PAT margin for the quarter stood at 8.2%, improving by 80 basis points year-on-year basis. Now moving to the full year performance. Revenue from operations for FY '26 stood at INR 1,259.1 crores as compared to INR 1,239 crores in FY '25, registering a growth of 1.6% year-on-year. EBITDA for FY '26 INR 115.3 crores as compared to INR 130.4 crores in FY '25, we see a [indiscernible] of 11.6% year-on-year. EBITDA margin for FY '26 stood at 9.2% as we [ tenfold ] 10.5% in FY '25. Net profit after tax stood at INR 72.5 crores and against INR 83.3 crores in FY '25. [ Extra ] of 12.9% year-on-year. PAT margin for FY '26 stood at 5.8% as compared to 6.7% in FY '25. As of March 31, 2026, the company remained net cash secular position of INR 33 crores, reflecting our robust lability profile and strong balance sheet position. we remain committed towards improving profitability to better product mix, official selling management, focused investment in high-growth category and disciplined cost optimization initiative. With this, I conclude my remarks and open the floor for question-and-answer session. Thank you.

[Operator Instructions] Our first question comes from the line of [ Preeti Agarwal ] from SK Associates.

I wanted to know what is your CapEx plan for FY '27?

During FY '27, the company was senior capacity by developing manufacturing from warehousing facilities. And there will be a total outlay of INR 60 crores, which will be spent in 2 years' time. And this CapEx will be developed at [ Westbank user part, Ulta ].

Understood. And what is your advertisement expense for the quarter? And can you please throw some light on the next year guidance?

The advertisement spend for the quarter is around 4%. And the next year guidance would be the advertisement with the expenses would be in the range of 6% to 7% for FY '27.

Our next question is from the line of [ Yash Mehta ] with SKB Capital.

Okay. So I wanted to ask, like, is there an impact of USA run or amid Middle East disruptions?

There is no potential impact on the business, but business is facing some challenges, such as increase in price of crude would lead to the rise in the prices of raw material. Secondly, there is a global disruption in shipping routes, so logistics and freight costs are higher and there is a foreign exchange volatility, which in of challenges faced by the company amid this year on.

Our next question comes from the line of [ Rudy Vora ] with SAS Capital.

Hello. Am I audible?

You are audible, ma'am.

Yes. So my question is that industry is facing intense price competition. So have you taken any price hike in the last quarter? And any plans for price hike in the coming quarters?

We have taken a price hike of around 4% to 5% in April and we might take another price right to maybe 2%, 3% in June, July, depending on the market condition.

The next question is from the line of [ Sajal Trivedi ] with MSC Capital.

I wanted to ask, you have given the guidance of revenue growth of 10% to 12%. So what will be the split in terms of volume and value?

Volume should be and maybe 4%, 5%, largely will be value -- a mix of both [indiscernible], 5% each,

So what is the main reason for increase in EBITDA in quarter 4 FY 2026?

The main reason for increase in EBITDA in quarter 4 is because of increasing gross margin. And this is mainly because of change in product mix [ Atairos ] well in quarter 4 FY '26.

The next question comes from the line of [ Nidhi Sharma ] with AP Capital.

I wanted to ask that can you give us the split of inventory into raw materials, finished goods and work in progress?

The [ fate ] of inventory, the raw material is around 13%. The [ nabi ] around 54% and working progress is around 33%.

The next question comes from the line of Shubhankar Gupta with Equity Capital.

I think 2 tests in mind. First is that in the PPT also, you mentioned that we have strengthened our sales and distribution capabilities with focused investment in sales team and field execution, right?

Just wanted to understand if you could throw some light on how we have strengthened our sales and distribution capabilities. So in terms of sales, which we are trying from last couple of years, but we are quite confident now in terms of the capacity in terms of the current we have funded. So one is the same all in there. along with the distribution in our strategy head and I had also, which will be focusing on goad a separate debt for e-commerce along with for [indiscernible] , which have already been appointed and are already working in the company from last within a month time. So the team is in place now. And we are sure in coming months, we see in type of sale.

Sir, all of this has happened in the last 1 quarter in the last.

Yes.

Okay. Got it. And sir, just 1 -- I think on teasing questions. So when you are standing at good cash in the books, which is a good thing, right? What was the need to increase short-term debt?

There is the arbitrage, I mean what we do basically is that we invest in a fixed deposit at a higher rate than our borrowing rate. So net debt you will find there is no finance cost.

Okay. Okay. And so with regards to sales growth for FY '27 what is our expectation? And what will be the key levers which will lead to that growth?

So as we said, we are targeting growth of 10% to 12% and key levers is like, of course, we need to grow across GT, across modern trade and all, and we have team in place, a strong team in place, and we'll be focusing more on secondary and into primary mix of and as well as we are focusing on export as well. So mix of all these sectors should help us to achieve the top.

But sir, any -- so this is like across the book, right, but let's say, any specific space in which we are going to be focusing more.

You need to have a strong book at everywhere. So it's not like we'll be focusing just on we need [indiscernible] on modern trade on exports everywhere. So in terms of focusing, we need a strong team, and we have the team in place. And we are letting a lot of GT, a lot of areas in e-commerce as well. So although channel should continue to grow.

Okay, sir. And in terms of the INR 70 crores, which we spent on brand and development costs for FY '26, could you help throw some more light on the details of how the INR 70 crores is actually spent?

So we share the breakout, but we are gradually focusing more on digital and online media and oil but the outdoor 50% of the total expenditure and digital, we are -- detail is around 4%. And [ paisan ] 10% to 12%, and in media is also 12%.

Sorry. So it's basically to digital forward, television [ 10, 12 and 10 media ], right? So total is around [ 50. So 20 million is still try ]. Details right now will share up.

But the idea is going forward is increasing more on the digital platform.

And sir, within budgeted any specific platform or medium?

Across all [ Alteon ] Market.

[Operator Instructions] Our next question is from the line of [ Darshan Shah ] with M&S.

Yes, on a decent type of numbers. So my first question was a drove a sharp rebound in gross margin in Q4 despite the competition and the geopolitical tensions that we know is going around.

Yes.

So sir, my question is what drove the sharp rebound in gross margins in Q4 were examining gross margin, the reason for that?

Main continues well in this quarter 4, there is a volume growth of 20% in quarter 4 and value 25% correctly here. So this is the main trigger point for improvement in gross margin. and then chasing overall revenue which is compensated with the operational cost.

Got it, sir. And sir, do you think that these gross margins of about 28% will sustain going forward or will revert more towards the 26%, 27% range.

Yes, with this initial price hike and acceptability in the market, we hope that we will sustain this gross margin.

Okay. Got it, sir. enter next question was what are the specific figures, either [ Kotian ] pricing, competition, discipline, demand recovery what will drive this pricing normalization over the next 1 to 2 quarters?

So it will all depend on the competition in the market admits difficult to say -- but yes, as long as the demand is there, there's a shortage of an and all. So every day the new day, we have to see how it goes forward.

Okay, sir. And sir, specifically on the discounting front, are we doing some dynamic discounting or any such thing right now? Are we just enjoying the higher prices right now and then depending on how the civil demand in the future, if we look at how to play it a discount?

Discoveries to the market is totally direct market. So it totally depends on how market as means we have to -- we have to give discounts in line with the market. you have taken a price hike and the prices are the trains for looks strong. It all depends upon the [ yanging ] [indiscernible] forward.

Our next question comes from the line of [ Rajeev Jain ] with Arcane Investment.

First couple of questions. So starting with while volume growth has accelerated to 9% in Q4. Revenue growth is still modest. How much of pricing pressures still persist when we look at over Q3 levels?

I think in Q3, there was also a volume there was an intense pricing competition. The same we are facing quarter 2 also. So it means amid this intense pricing competition, we have to maintain the price in line with the market.

Understood, sir. Understood. And furthermore, has the 12% rate is coding intensity reduced meaningfully in Q4 or still it's elevated?

It's around 12%.

It's around 12%. Understood. And sir, in Q4, margins have rebounded strongly to almost 12.5%. How much of this is sustainable? Was the seasonal well? What do you think.

With this initial price hike, we hope that the gross margin would be at the same level in quarter.

Understood. Understood. And is the private pressure now structurally behind? Or could discount remain elevated going forward as well?

We can maintain the same level of this.

[Operator Instructions] Our next question comes from the line of [ Vinay Kumar ], an individual investor.

My question is regarding a bit long term. I'm going through the last 5 to 10-year data, we have seen the CAGR sales growth of near 2% and the profitability is also around 2% to 3%. So what kind -- in this -- what kind of a 3- to 5-year road but you are seeing the sales trajectory and the profitability? And the second part question is also the. Since we do 5% to 7%, 6% to 7% expenses on advertisement, in brand building, yet the OPM margins are like a normal business, 9%, 10%, 12%. So why are the industry as an industry, you're not able to capture the brand value end of margins, actually, where is the brand value actually. My question is the second part is more important, yes.

So it's a very competitive industry is very competitive from the last couple of years. So you are very [ gene ] are also working on saying. But as we find compare tidal, we are focusing more on second deal now, focusing more on retail for that, we have built up a strong retail team will be focusing on secondary and on developing the retail network. So we target a growth of 10% to 12% for the next couple of years. And with that, every year in profitability, should help us increase the profitability by 50 basis points year-on-year.

We have no further questions, ladies and gentlemen. I would now like to hand the conference over to Mr. Omkar Bagwe closing comments. Over to you, sir.

Thank you, everyone, for joining us on the call today. I would also like to thank the management for sparing the time and answering all the queries. We are [ a new time ], Investor Relations Advisors to Rupa & Company Limited. Thank you, and over to you, sir.

Thank you.

Thank you.

Thank you. On behalf of Rupa & Company Limited, that concludes this conference. Thank you all for joining us. You may now disconnect your lines.