Rupa & Company Limited (533552) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Rupa & Company Limited Q1 FY '27 Earnings Conference Call hosted by MUFG Intime. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. [ Pragnya Singh ] from MUFG Intime. Thank you, and over to you, ma'am.

Thank you. Good afternoon, everyone. I welcome you all to the earnings conference call to discuss Q1 FY '27 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, 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. The detailed 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 afternoon, ladies and gentlemen. On behalf of Rupa & Company Limited, I extend a very warm welcome to all the participants joining us today for Q1 FY '27 results conference call. We appreciate your continued engagement with the company. The financial results and investor presentation has been uploaded on the stock exchanges for your review. Before I begin, I would like to take a moment to express our deepest condolences on the unfortunate demise of Mr. Ashok Bhandari, Non-Executive Independent Director of the company, who passed away on August 3, 2026. Mr. Bhandari has been associated with the company since August 2018 and served as Chairman of the Audit Committee and the Nomination and Remuneration Committee. He was a veteran finance professional and was widely respected for his knowledge, wisdom and integrity. His passing is a great loss to Rupa family, and we extend our heartfelt condolences to the family and loved ones. May his soul rest in eternal peace. Coming to the business, we started financial year '27 on a positive note with revenue growing by 10%, witnessing steady momentum across the portfolio. Healthy volume traction remained a key driver of growth during the quarter. While the Value segment was a key contributor to the growth during the quarter, based on our historical revenue trend, we believe the momentum to broaden across other segments as we progress through the year, translating into a broader and more balanced growth profile. Exports contributed 4% to overall revenue during the quarter, while Modern Trade, including e-commerce, contributed 5% to the revenues. Both these channels continue to gain traction and provide meaningful opportunities to further scale our market presence and expand our reach. EBITDA stood at INR 15.7 crores with an EBITDA margin of 7.8%, supported by stable operating performance. The company maintained a net cash surplus of INR 7 crores as at June 2026, reflecting its continued focus on liquidity discipline and financial flexibility. On the raw material side, yarn prices are currently on an upward trajectory, creating a favorable pricing environment for the company. While competitive intensity remains elevated, we continue to adopt a calibrated pricing approach with the objective of progressively translating the favorable pricing environment into improved realizations and margins. With healthy volume momentum, expanding channels, disciplined cost management and an improving pricing environment, we remain optimistic about the outlook with revenue expected to grow by 10% to 12% in the coming quarters and EBITDA margin expected to remain in the range of 9% to 10%. With this, I would like to hand over to our CFO, Mr. Sumit Khowala, to take you through the financial highlights of the company. Thank you.

Thank you, sir, and good afternoon to everyone. Thank you for joining us on quarter 1 FY '27 earnings call. I will now take you through the key financial highlights of the period. For quarter 1 FY '27, revenue from operations stood at INR 202.4 crores as compared to INR 183.9 crores in quarter 1 FY '26, registering a growth of 10.1% year-on-year basis. Gross margin remained stable during the quarter, stood at 37.4% versus 37.7% corresponding quarter last year. EBITDA for the quarter stood at INR 15.7 crores as compared to INR 12.2 crores in the same period last year, registering a growth of 29.1% year-on-year basis. EBITDA margin for the quarter stood at 7.8%, improving by 120 basis points year-on-year. Net profit after tax for the quarter stood at INR 8.3 crores as against INR 5.5 crores in quarter 1 FY '26, registering a growth of 50.2% year-on-year basis. PAT margin for the quarter stood at 4.1%, improving by 110 basis points year-on-year basis. As on June 30, 2026, the company has maintained a net cash surplus position of INR 7 crores, reflecting our continued focus on liquidity discipline and financial flexibility. We remain committed towards improving profitability through better product mix, efficient channel management, focused investment in high-growth categories and disciplined cost optimization initiatives. With this, I conclude my remarks and open the floor for the question-and-answer session. Thank you.

[Operator Instructions] We have the first question from the line of [ Pahal Sharma ] from DD Capital.

My question is that during the last quarter, you had guided for 10% to 12% revenue growth and also 9% to 10% of EBITDA margin. So my question is that what are the key reasons for the shortfall in EBITDA margins versus your guidance?

During quarter 1, the advertisement and marketing spend comes to around 10.5% of the total revenue. And going forward, the same would be rationalized to 6% to 7%. So this would help in achieving the desired level of EBITDA.

The next question comes from the line of [ Suhani Singh ] from Ross Capital.

I just have one question. You had taken a price hike in April. However, the impact of this price hike does not appear to be reflected in the realizations. So if you could explain the reasons for this? And when do you expect the full impact of the price hike to be reflected?

That's true, we have taken a price hike, but later because of intense competition, where competition has passed on extra scheme and all in the market. So by compulsion, we will have almost all the brands have to do the same. But we are hopeful by -- in August, and we'll be implementing the new rate now. The rate is yet to be implemented. That was implemented, but again, passed on with some extra schemes and all.

The next question comes from the line of [ Yash Mehta ] from SKP Capital. Mr. Mehta can you hear me?

Am I audible?

Yes, please go ahead.

I've just got one question. So how is the order book for the Thermal segment shaping up for FY '27? And like what is the current visibility for the segment in terms of order inflows and growth?

For Thermal, we have a sound and healthy order book, and we expect that this year, Thermal will contribute better compared to last year. So the expectations are high. And probably lastly, it largely depends on the -- how winter gets through this year. So we are hopeful that things will be better from last year.

So order commitment and all is good. But unless the winter starts, it's really difficult to assure anything about the numbers. But so far, the impression is good and numbers should be better from last year.

The next question comes from the line of [ Shreya Singh from SMSD ] Securities.

Am I audible?

Yes, please go ahead.

I just had 1 of your questions. Like yarn prices are currently on an uptrend. So are you considering any further price hikes to offset the increase in yarn costs?

Yes, it's true the yarn prices are high. And in August, we will be implementing the last rate. And yes, we have to take a further rate hike. But again, a lot will depend upon the competitive scenario, how other competitors...

So that will be basically the strategy to manage the impact, right?

Yes.

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

Am I audible?

Yes.

Yes. So sir, I had 2, 3 separate questions. First is around the brand development cost, which you mentioned at INR 21 crores, 10.5% of Q1 FY '27 top line. So can you just elaborate a little bit more on where this INR 21 crores was spent?

Yes, it's basically 35% to 40% on the ATL and rest is on the BTL.

Okay. And...

On the endorsement [indiscernible] also, a bit of that has gone into that also.

Endorsement fee. Okay. And sir, often the PPT reflects that the current brand ambassadors for Rupa Frontline, Rupa Jon, Softline and Macroman are Ranveer Singh, Ranbir Kapoor, Wamiqa Gabbi and Yash. Is that correct?

Yes, absolutely.

So the INR 21 crores which you spent and on average, 5% to 6% of the overall top line per year, what portion of that would go to the brand endorsement fee for these stars?

10% to 12%.

Okay. Got it. And sir, second, I had a few questions on the strategic initiatives, which you mentioned like over the last few quarters. So I can see that Modern Trade is currently at 5% of overall sales, right? I just want to understand like -- so it's effectively INR 10 crores for this quarter, right? Just want to understand like what are the key initiatives we are taking there? And by how much, like, let's say, by FY '27, at what absolute number do we see Modern Trade going roughly? Like a rough number would be helpful here.

On Modern Trade, we see huge potential. So we have been able to appoint senior heads for the E-commerce business, and we are building the right infrastructure for that. So either it is your warehouse, your inventory management, your dispatches and all, so your IT. So everything is getting in place, and we are quite hopeful, we are looking at double-digit -- more than double-digit growth in E-commerce.

Sorry, how much?

At least a growth of 20%, 25%.

Getting that from...

There is a significant growth in LFS. And probably in a quarter or 2, once things are absolutely on track, we look forward to a handsome growth there.

Got it, sir. And sir, in terms of the Women segment, like Women segment currently, I think it was around 8% in Q1 and has been in that range only for -- on an overall annual basis, 8% to 10%. So how do we see that going? And what are the key initiatives we are taking on that front?

So one major is the main brand in our Women's segment is Softline. So where we have done a big change. We have changed the brand -- the font of the brand. It's going under a major change. And we are again building up a very relevant portfolio in terms of product range with like a lot of new fabrics and all and building up a strong team for that. So we are quite hopeful that things should fall on track. We understand Women for us has not done so well what should have been. But the way things are happening, we are hopeful things should be better from here in coming quarters.

Got it, sir. So you mentioned that you're building up a strong team. Can you elaborate a bit on that front?