Stove Kraft Limited (STOVEKRAFT) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Stove Kraft Limited Q4 FY '25 Earnings Conference Call. [Operator Instructions]. Please note that this conference is being recorded. I now hand the conference over to Mr. Parth Patel from MUFG Intime. Thank you, and over to you, sir.

Thank you, and good afternoon. On behalf of MUFG Intime, I welcome you all to Stove Kraft Limited Q4 and FY '25 Earnings Conference Call. Today on the call, we have Mr. Rajendra Gandhi, Managing Director; and Mr. Ramakrishna Pendyala, Chief Financial Officer. Before we begin the call, I would like to give a short disclaimer. This call may contain some of the forward-looking statements, which are completely based upon our belief, opinion, expectations as of today. The statements are not a guarantee of our future performance and involve unforeseeable risks and uncertainties. And with this, I would like to hand over the call to Gandhi, sir. Over to you, sir.

Thank you. Thank you, Parth. A very good afternoon, ladies and gentlemen, and thank you very much for attending our Q4 FY '25 earnings call. A detailed presentation and the press release of our quarterly performance has been uploaded on our website, and I hope everybody had an opportunity to go through them. We closed FY '25 on a strong note, delivering revenues of INR 1,449.8 crores, marking a year-on-year growth of 6.3% over FY '24. This performance was underpinned by our strategic focus on improving profitability. Through disciplined execution and cost optimization, we achieved gross margins of 38.1% for the full-year. Our EBITDA margin also saw a healthy improvement, expanding to 10.4% in FY '25 compared to 8.7% in the previous fiscal. It is worth noting that FY '25 was not without its challenges. The year was characterized by elevated inflation, cautious consumer sentiments and muted discretionary spending. These headwinds were particularly evident in Q4, where demand trends fell short of our expectations. That said, every business undergoes cyclical phases, and we believe the tide is gradually turning with CPI inflation further improving to 3.3% in March '25. The forecast of a healthy monsoon, improving rural sentiments, RBI's liquidity support and potential rate cuts, tax relief are on the horizon. The macroeconomic setup is becoming increasingly conducive for a recovery in demand. Encouragingly, we are already beginning to witness early signs of revival in rural markets, and we remain optimistic that urban consumption will follow suit in the coming quarters. FY '25 was a defining year for us, marking -- marked by several strategic initiatives that have laid a strong foundation and blueprint for FY '26. One of the most notable milestones was our partnership with IKEA to develop and supply a range of cookware products for their global network of stores, a testament to our manufacturing excellence and global aspirations. We also continued our retail expansion at a robust pace, transitioning from the COCO to the COFO model to scale efficiency and enhance reach. Further strengthening our back-end capabilities, we commissioned a state-of-the-art cast iron foundry with an initial annualized capacity of 2.2 million pieces, scalable up to 4.4 million pieces per annum, positioning us well for future volume growth. We also made our foray into new product segments such as grooming and launched several technologically advanced products across categories, reinforcing our commitment to innovation, diversification and consumer centricity. To address the demands of the export markets, we are also working on developing outdoor cooking products, the likes of the grills, which we believe will be the future opportunity for us in the exports. Highlighting our progress made in Pigeon EBOs in FY '25, we made a strategic transition from a company-owned company-operated model to a company-owned franchisee-operated model. This shift was aimed at accelerating our retail footprint across multiple cities and states in a capital-efficient manner. As of FY '24, our Pigeon exclusive brand outlets network comprised 171 stores across 50 cities in 8 states. By March 31, 2025, this number has now grown to 262 stores covering 91 cities and across 20 states, reflecting a robust net addition of 91 stores during the year and 32 stores during the March quarter. This expansion reinforces our commitment to making Pigeon a truly pan-India brand that is synonymous with quality and affordability. These exclusive brand outlets not only allow customers to engage directly with our full product portfolio, but also play a pivotal role in strengthening brand salience and improving overall margins. Looking ahead, we remain focused on expanding our presence across the strategic and diversified locations, further enhancing accessibility and deepening consumer connect across the country. This quarter, we continue to build on our innovation agenda with the launch of several new products designed to enhance everyday convenience and energy efficiency. In the personal care segment, we introduced our next-generation BLDC Hair Dryer with a 5-in-1 styling capability along with the precision men's trimmer, marking our entry into the grooming category. In home essentials, we are excited about the launch of our BLDC Ceiling Fan, which features advanced dual motion technology for uniform and efficient energy cooling. To cater to portable needs, we also introduced rechargeable mini fans and a high-performance pedestal fan under the Pigeon brand. These launches not only reflect our focus on smart functional product design, but also reinforce our commitment to entering into high potential adjacent categories with differentiated offerings. Channel mix in Q4 was 40% from general trade, 32% from e-commerce, 11% from modern trade, 2% from corporate sales, 8% from our own retail. We are also excited to share that our products are now available across major cities through the quick commerce platforms like Swiggy, Instamart, Zepto and Big Basket. Now I will discuss the Q4 FY '25 financial performance. The consolidated revenue stood at INR 313 crores for the quarter versus INR 325.2 crores in the previous quarter last year, hence registering a degrowth of minus 3.8% year-on-year basis. Gross profit for the quarter stood at INR 120.8 crores versus INR 120.7 crores in Q4 FY '24, registering a growth of 0.1% year-on-year. Gross margins for the current quarter stood at 38.6%, improving by 150 basis points as compared to Q4 FY '24. EBITDA for Q4 FY '25 stood at INR 29.5 crores versus INR 24.8 crores in Q4 FY '24, showing a growth of 18.8% year-on-year. The EBITDA margin for the current quarter stood at 9.4% versus 7.6% in Q4 FY '24, improving by 180 basis points year-on-year. Profit before tax for Q4 FY '24 stood at INR 1.5 crores versus INR 2.7 crores in Q4 FY '24. The PAT margin for the current quarter stood at 0.5%. This is post the notional impact of accounting additional depreciation and interest against rent payments accounting to INR 3.4 crores. Now I will discuss the FY '25 financial performance. The consolidated revenue stood at INR 1,449.8 crores for FY '25 versus INR 1,364.3 crores in FY '24, hence registering a growth of 6.3% year-on-year. Gross profit for FY '25 stood at INR 552.5 crores versus INR 504 crores last year same time, same period, registering a growth of 9.6% year-on-year. Gross margin -- gross profit margin stood at 38.1%, an increase of 120 basis points year-on-year. EBITDA for FY '25 stood at INR 150.7 crores versus INR 118.8 crores in FY '24, showing a growth of 26.8% year-on-year. EBITDA margin for FY '25 stood at 10.4% versus 8.7% in FY '24, improving by 170 basis points. Profit after tax for FY '25 stood at INR 38.5 crores versus INR 34.1 crores in FY '24, showing a growth of 12.8% year-on-year. PAT margin for the period improved from 2.7% with substantial efforts underway to improve the same even further. Now I would request the moderator to open the floor for question-and-answers. Thank you.

[Operator Instructions]. The first question is from the line of Praneeth from Samatva Invesments.

I was wondering, I was curious about the volume degrowth in terms of all the product categories. There was a significant volume degrowth in terms of non-stick cookware and cookers and even smaller appliances despite growing in value. Could you tell the strategy or what is happening in the market at this point of time? And how does the company view this going forward? How does it expect to change going forward? Because volume growth was one of the key...

We have been growing on all the categories by volume, except for the non-stick cookware. Our pressure cooker category for the year, where the volume growth was 1.4%. For small domestic appliances, it was 6%. For cooktops, it was 6.7%. For industrial...

Sorry to interrupt. I was talking about this quarter specifically, what has happened during this quarter that there is substantial...

The quarter was -- I mean, a subdued quarter. It was not as per our plan. There was softness in the demand. And particularly, of course, there was a lower revenue in the GT, but there was also impacted by 3 other factors. Our institutional business also that comprises of the microfinance business were impacted fully. And we have now moved from pure non-stick cookware to ceramic cookware for our export. So there is a transition that is going on. While our order books are very strong, we have a robust demand. But because of this new coating system that we have implemented for the cookware, we are seeing a little -- we are ramping up our capability to manufacture them. But for the non-stick cookware for the year and for the quarter, we are seeing a movement of consumption from the both domestic and for export markets, the demand moving from the current PTFE-coated cookware to the new ceramic-coated cookware or the cast iron category.

But that is understandable. Last time also, you mentioned that because of transition as a product, the revenues have reduced and volumes are reduced. But I'm curious about small appliances specifically because GT most -- I assume that small appliances most of it goes through e-commerce and retail. How much contribution to small appliances comes from GT? And like what has happened with the small appliance volumes?

No, it is not specific to the small appliances category. Overall, for this quarter versus the Q-o-Q quarter, we had Y-o-Y quarter, we had a revenue drop in all the categories. So there was softness in demand from the GT. And I also mentioned about the other channels, that is the institutional channel, including the microfinance channel. Of course, some of the appliances category also we sell through all these channels. So it is across the whole revenue, there has been a drop over the previous quarter, Y-o-Y quarter.

Understood. And one more question regarding the retail footprint we are planning. So we have been aggressively expanding and that's going well for us as per of revenue -- overall revenues. So going forward, how do we see the FOFO model expanding? Because we introduced a new model recently. And how do we see that going forward? And in terms of depreciation also, how do we plan on forecasting the growth? Because we do plan on expanding continuously over the years, right? So to what extent are we planning on expanding the stores? And how does that going to correlate into the overall line item of depreciation and finance cost? Because that is showing a significant impact on the overall P&L statement. So how does the company plan on doing something regarding this?

So there is an additional impact in our accounting because of this depreciation and amortization cost that is reflecting below the EBITDA line item. For the current year, I will tell you exactly what is the difference is about INR 3.5 crores, right? So the initial years are -- the way the accounting works for the initial years, it is higher. The actual -- the rent that we pay is accounted in this. And the differential between what we actually incur as rent and what is accounted for the whole year is about INR 9.17 crores and about INR 3.5 crores for the quarter. So going forward, your question on what is the strategy and plan for the stores. We will continue to expand these stores at a rate. This year, we hope to add another 90 to 100 stores. So every quarter, we will endeavor to open around 25 stores.

Understood. But is there a focus on which type of store do you want to expand? I understand you want to maintain the COCO stores at 170. So -- but are you intentionally pushing for FOFO or COFO? Like how are you planning on looking at those segments?

We have capped our COCO to 171. All incremental stores are COFO stores or there are some FOFO stores, but there is no increase that we will do on the COFO stores.

No. But do you have a preference in franchisee? Do you want it as a company-owned franchisee-operated model? Or do you have a preference for franchisee-owned franchisee-operated model? So going forward, like how we plan...

We are open to both. We would prefer a company-owned franchisee model, but there are also some franchisees who own their own retail space and/or want to own the -- I mean, have the stores under them. So we have -- currently of the 262 stores, 10 stores are under FOFO model. The rest are -- apart from the 171, the incremental are all on COFO model.

So -- but the company does not have any preference regarding what type of store they want to continue to expand, right?

No, we are okay. We don't want to increase any COCO store. Even if we open a new COCO store, we will first want to replenish it with the COFO store so that the net number of COCO remains at 171.

Okay. I understood. How do we see the demand right now increasing, improving in terms of volume and value growth? Because during one of your interviews in the last quarter, you mentioned you're going to expect double digit. But now after the end of the quarter, you mentioned that you plan, it is worse than expected. So how do we expect going forward, in terms of...

The last quarter has not panned out as per plan. Otherwise, we were still expecting to grow at double digit. We believe that, of course, but for the last quarter, we believe that the demand is coming back. But more -- the more of that growth, we are also foreseeing huge good demand and a good strong order book on our export. So bigger growth in the current year, we see a bigger growth coming from our exports opportunity. We are also having the capability to execute this. In the non-stick cookware, I did mention that we are moving from the PTFE to the ceramic-coating. So initial -- the learning curve is there, but this will all stabilize, and we have a strong order book on exports.

But do we see any issue in terms of exports because of the tariff-related concern that's been happening because we do have exposure to the U.S. market, right? So what percentage of exports go there? And in terms of the FT or anything, what is your view on that in terms of growing our exports? Is there going to be any short-term trouble or something like that?

No, the tariff is actually a positive for a country like India. Irrespective of that, there is a strategy by many of these retailers that they would want to look at an alternate or additional source other than China. But with the current tariff situation, actually, it had almost got a full stop for them to import from China. They're all scrambling for alternate markets, sourcing from alternate markets. But then this is a short-term thing, I think. But in the long term, I think many of the retailers that we are working with and with whom we are engaging with new customers are all very keen to establish alternate supply chain markets out of China, and we stand to gain in that.

So have you been seeing any request from your existing people?

I'm sorry to interrupt, sir. I just request you to join the queue for the follow-up question, please. The next question is from the line of Pritesh Chheda from Lucky Investments.

Sir, just one observation and it's a continuation of what the other participant was asking. So you've gone through about INR 450 crores to INR 500 crores of CapEx in the last 4 years post your IPO. So in your IPO, you brought down your debt, raised capital, brought down your debt. And now in the last 4, 5 years, we put about INR 450 crores. And there's a corresponding INR 400 crore addition in top line or INR 500 crores addition in top line. Can you just share the way forward? Because you've been spending at about INR 80 crores, INR 100 crores per annum. Where all does this lead to? Where all you have spent in the last 5 years, totaling about INR 450 crores, INR 500 crores? And where does it lead you to over the next 2, 3 years? That's one question. Second, in the double-digit growth this year or next year, there was some positivity from your communications sent to the exchange of IKEA and Walmart in terms of supplies. What is the progress there?

So first of all, on the capital infusion, sir. Mr. Chheda, on the capital infusion, majority of our investments have gone into the manufacturing facilities. Of course, we have also invested in the stores on the retail side… Yes. That is what has led to -- if I'll explain to you how it has transformed into business, on an incremental revenue, we have grown from the pre-IPO time to the current time at about 2x of revenue. On the increased revenue -- a little more than 2x. On the increased revenue base, our contribution from manufactured products has gone up from 70% to 95%. So actually, the incremental revenue from manufactured products has gone 3-fold from what it was pre-IPO. And on the relationship with IKEA, of course, we have set up a separate factory for them. We have built that, and we are building the capability to supply. It is a long-term plan, and it also takes a little longer term. The initial revenues will start seeing only end of the third quarter, and it will start from the fourth quarter. All this development is on the way for IKEA. On Walmart, we are seeing growth from -- in our existing category. There is a transition from some of our non-stick products to the -- of course, this is also non-stick, but it's a ceramic-coating and it's a little different technology that we apply to make these products. Apart from these products, we have just commissioned our cast iron foundry. We have fully commissioned it. We have started producing domestic products, but we have also got export orders for this. And those are long-term orders. And once we start executing these orders, the overall order is almost to the full what we want to export. With our capacity, we would want to do 50% domestic and 50% export. So there is enough and strong order book with the investment that we have done for our non-stick cookware. Apart from this, we have set up some lines where we want to produce chimney -- we are getting into manufacturing of chimneys and where we are already producing OTG. And in the same line, for the initial period, we are building -- developing our capability to make outdoor products like grill. This is more focused coming from the opportunity and demand from our customers for the export markets. So this also will start working. Overall, I'll tell you today, even for the domestic market, we are now fully capitalized to produce all this within our facilities and that capital investment cycle has more or less come to an end. And to give you again, when we started off without this investment, our production was about INR 400 crores. This can get to INR 2,500 crores.

So this whole capital that you have invested and the asset or the manufacturing that we have created can support a INR 2,500 crores revenue?

You're right. INR 2,500 crores of production revenue. So we will continue to still have some revenue out of the -- outside of the production.

Okay. So in any case, you are 90% now on your own production, right?

Yes, sir, 95%.

95%. So -- okay. Now you said now in these comments, you mentioned about OTG and some outdoor equipment and all, so what? So the CapEx still continues, basically?

Is already done. The line is already fully set. We have made the molds. Everything is so then it goes through that initial trial phase, testing phase, then go-to-market. That is the phase. We are already in the chimney business, but this was driven by what we are importing and selling. But when we make, definitely, we have a huge advantage. I can say, even as early as next month, we will be starting to sell chimneys from our own plant. The factory is fully there. The capability for manufacturing OTG, chimney or these outdoor products is the same. In the same plant, we are making different products. The outdoor thing will -- it is a development phase now. We will start manufacturing then maybe by Q4. That will be more for export markets.

Okay. And lastly, what will be your CapEx now, next year and year after?

I think going forward, apart from our retail store expansion and tooling, we don't intend -- we don't see a plan of investing more than INR 25 crores annually.

Any case for retail, you mentioned that it is going to be FOFO, right? Incremental is FOFO. So it's not going to be a CapEx?

There is no cash flow outgo for retail. But still the stores are owned by us.

Which means? I didn't understand.

We take a deposit of about INR 17 lakhs from the franchisee, but the lease rental is on our books. We take the lease on our books. We pay the lease deposit to the land owner. But there is no cash -- additional cash outflow from the company because the deposit actually, it funds all this, the inventory, the fit-outs.

Okay. So the only CapEx is INR 25 crores and you lease -- which you are saying.

And some tooling. Yes, there could be some tools, fixtures.

Can you quantify the total outlay? It will be very useful for us.

It will take all this will not exceed INR 40 crores because this is accounting. Some things are more of accounting. When I say the lease, the furniture fixtures and the deposits that we make is all capital outlay from the company, but it is not cash outflow. So that -- including this, all this will not exceed INR 40 crores.

Okay. And just one confirmation. So in your double-digit top line growth, which you mentioned earlier, that had IKEA supply and Walmart supply part of it, right?

Yes. So IKEA and the Walmart supply is ongoing, and we are growing on that. The IKEA business will only start in the end of the last quarter, early fourth quarter, I mean, end of third quarter and early fourth quarter.

The next question is from the line of Shreyans Ashok Jain from Svan Investments.

Sir, my first question is coming back to the previous participant's question, sir. So I'm just looking at FY '21, we were at INR 860-odd crores of top line, and we've done about INR 1,450 crores this year. Obviously, there has been some improvement on the gross margins. But when you come to the PBT side, sir, there is -- actually it is flat over the last 4 years. We're just trying to understand, so from INR 81 crores, we have gone to INR 50 crores. So incremental INR 600 crores of revenue has actually not given us a commensurate benefit in terms of profit. So we understand we are doing COCO and all of that. We're just trying to understand, sir, when does all these initiatives that you've taken, increase in CapEx, backward integration, in-house manufacturing, when does that actually start to come in and increase our profits? Because when I try to reconcile all of this, the savings in gross profit has actually gone into other expenses and opening of COCO stores. But 4 years of efforts not flowing down to profits is something which is worrying us as investors. And secondly, sir, when you say -- when you take rent from the franchisee and it is shown as the deposit. But when I look at your balance sheet, there is no increase in current assets or other assets. So where exactly is this deposit sitting in? And when I look at the cash flow statement, there is INR 25 crores of lease payments. So we're unable to reconcile this thing, sir.

Let me break it up from the beginning. See, of course, that INR 861 crores revenue, that was an exceptional year, I want to say. We had very low expenses then because that was the COVID year. But our gross margins were at about 35%. We had closer to 15% EBITDA in that year because of low costs. We had no marketing costs, no travel cost and a severe freeze on various costs. That was a different year. But otherwise, every year, but when 1 year, we went down on our gross margins from 35% to 32.5%, we have continuously worked on improving our gross margins, which is also reflecting in our EBITDA. Definitely, because of our incremental investments in the various -- capital investments in various manufacturing apart from the retail, which is a long-term plan we had -- this was as per plan that we wanted to invest for 3 years that is closer to INR450 crores -- a little upwards of INR 400 crores. That has gone into make us what we are today. We are a strong manufacturing capability today. And also today, if you have to be relevant to this business in this country, you have to either be sourcing domestically or be making it yourself. And the most efficient form today without the supply chain being very strong, it is the best to be manufacturing it yourself. We have built both -- though we have invested, we also built the capability. And our gross margins improvement is also reflecting in our EBITDA improvement. So if you see our last year, we have improved, while we were targeting to get to 11%, our last quarter did not pan out the way we envisaged to. So that has led to be a little short of 11%. Going forward, the outcome of these investments, we have already hit that point where from here, we are going upwards. Any increment beyond the normal expenditure that we would have for growth, any increment on our gross margin will definitely impact our EBITDA positively. And the fixed cost below the EBITDA now, whatever you see about INR 115 crores will all flow to PBT. So if we increase our gross margin contribution from that INR 550 crores, say to -- say, INR 650 crores, if at all. And that INR 100 crores, definitely, after accounting for the general cost then everything will flow to EBITDA and all of that will flow to PBT. The number between the EBITDA and impact will only improve now because with the additional cash flows, we will -- our cost of borrowing -- actual borrowing will further come down. Of course, it will be offset by a little increase in the number of stores. And this is for the first 5 years because there is a negative impact on our accounting on the actual rental cost for the initial period. For the next 5 years, actually, it will be a positive. Example is for this year, we -- on the accounting, we have incurred additional INR 9 crores over and above the rental cost, which goes in the form of depreciation and interest below EBITDA. And after the -- because these are the initial years, after the fifth year, this becomes positive, you may actually be paying a little higher rent, but your accounting will be a little lower than that. So this is upfronted the way that accounting happens on this is like that. I will only want to guide you through that, that we are at that cusp of that our PBT and PAT margins and absolute number improving from here year-on-year.

I would like to add to your question on the franchisee deposits received. It is there in the other financial liabilities, both current and non-current, is about INR 17 crores.

I hope that answers.

Yes. And sir, second is when now we are at 262-odd stores of retail and incremental if retail starts picking up. And obviously, your gross margins will be higher than other channels, right? So what are the kind of benefits that should flow through in terms of gross profits and gross margins, sir?

So today, we are at about -- for the quarter, we are at about 8% and gradually, we'll move to between 8% and 10%. So there is definitely a gross margin -- I mean, better gross margins in our retail business. But at the EBITDA level, I will tell you it is at the company's EBITDA. It will get to -- it will definitely improve the EBITDA once we are able to get to the mature stage, which we believe that currently, we are at about INR 3.6 lakhs of monthly revenue, net revenue. And we are -- as soon as we get to INR 5 lakhs, this will be much more positive than the company's EBITDA. The final business will have to be looked at -- in the -- at EBITDA for retail, not at gross margin. Gross margins will be very higher. But then the cost to manage these stores will also be equivalent to there. That is either we are giving our franchisees commission or we are paying rent and people cost for the stores. So at EBITDA, I will assure you that in the -- we are seeing that side that newer stores are negative to our EBITDA now in the terms of -- in percentage. But as these stores get mature, it will be positive to the company's EBITDA. When I say, what is positive, negative, supposing the company is cruising at 11%, 12% EBITDA in a full mature stage, we will be upwards of 12% on EBITDA on these stores.

[Operator Instructions]. The next question is from the line of Anand Mundra from Soar Wealth.

Sir, what is your long-term guidance on gross margin? You have seen remarkable improvement from 32%, 33% to 38%. Is it -- your competitors are at 40% to 43%. Is it possible that we can reach 40% to 43% in the next 3, 4 years, sir?

We are very confident of having the best gross margins in the industry because we control costs. Our costs are controlled because of our highly backward integrated facilities in manufacturing. We are gradually moving to that. I don't want to commit to you the time frame when we can, but we will definitely beat our peer group on gross margins.

Okay. Sir, my second question with respect to export opportunity. How do you see this business growing? And what is the current contribution? And how do you see in FY '25, '26 and '27, how big it can become, sir?

You will see high spike in our growth rate quarter-on-quarter this year. We believe this year itself, you will see very high growth rate. It will be upsur to give you a number, but it will be a very high growth rate upwards of 50% in the current year itself. But we are also building several things for the future. Our new ceramic coated cookware, existing non-stick cookware, that outdoor category that we want to do and the cast iron cookware, apart from the plants that we are setting up in the IKEA plant that you are aware that we are building, we are having a bakeware line coming up. All this will start contributing. And from the last year, we were at about 12% contribution to our overall revenue. In the next 3 years, we'll be sure it will cross 25%.

Okay. And sir, whatever the tariff imposed on India, will it be passed through the customer? Or how it will play out, sir?

For us, we -- all our pricing is FOB. We deliver to the customers' designated port that is if we are sending it to Kattupalli or [ Tiruchirappalli ], whichever port that they want. There -- our responsibility ends. Our revenue is recognized when we deliver there. Beyond the sea freight or custom duty that is applicable is on the customer's account and nothing -- it does not impact us in any way, positively or negatively.

Noted, sir. Sir, one last thing, sir, on balance sheet. Our inventory in absolute amount has significantly gone up. You have mentioned some non...

There are 2 reasons. One is we could not complete our export orders. I was telling that we had challenges in execution. We have moved from non-stick to ceramic-coated cookware. So we had fully capitalized on the inventory because we were to deliver in that quarter. That is now happening. Apart from this, there was a little slowdown in our domestic business. We were actually short by about almost 10% of our revenue. Particularly for our domestic business, there are several components that we import. Almost 50% of our inputs are imported. There is a month where there is a challenge that we import from China. February is a month when Chinese all -- I mean they are closed for almost a month. We plan to buy all these inputs for the whole quarter, and we are a little stranded with that inventory. You will start seeing improvement in the absolute inventory starting from this quarter itself, but we are also cognizant of this that the inventory levels are a little higher. You will see substantial improvement on our inventory, but absolute number and inventory days also.

The next question is from the line of Gaurav Jogani from JM Financial.

Sir, I wanted to understand once the IKEA business starts to hit your overall P&L, what kind of an impact could we see on the gross margin front? Would it be a bit dilutive from the current levels?

So the gross margin levels will be lower to our domestic brand business. All the export business on the gross margins are lower to our brand business. But at EBITDA, they're at par or better.

Sure. So any number that you would like to guide us what kind of an impact this could have on...

Very specific. No. In fact, overall as -- I can only assure you that we are working on our gross margins. We wish to improve our gross margin at least by 1% and we also want to improve our EBITDA margins at least by 1% in the current year.

That is FY '26, right?

Yes, current year.

Yes. So, I think the IKEA business will start hitting from Q4, as you mentioned, right? So because the impact will be seen on the gross for the next year. So if you can help us out, like despite this IKEA number, still you would expect to maintain gross...?

Despite the growth on our export business, which we believe will get to 25%, you will see growth on our gross margins in percentage, overall gross margins. So we are also working on our domestic gross margins. This is a net of -- this is a mix of both the margins. There will be an incremental contribution of revenue from exports, which, of course, in terms of percentage, dilutes our gross margin, but we are also working on improving our gross margins from the domestic business. There is enough opportunity. There is a scope. We are very, very aggressively priced in the market. Our consumers will have no pain with giving us a little more increased by price itself. But more of that will come in by efficiency that we are building in. We have backward integrated several facilities. All that efficiency will keep in and then that also will contribute to gross margin. We are moving towards industry best margin, but it will happen a little gradually. We have moved from 32.5% to closer to annualized 38.1%. But we are confident that even from here, we can get to industry-best gross margins.

Sure. And sir, as you have mentioned in one of the previous comments that you have also started to see pickup in the domestic business as well. And given that we have closed the 4% decline in Q4. So what is your guidance for FY '26 in terms of overall growth rate? And also...

We will grow by double digits, sir. For this year -- the higher growth will come from our export business, but we also -- we feel that the -- I can only infer that the quarter gone by was not a great quarter. It was soft on that. There were some 2, 3 reasons. It is not limited to one. I did mention that we could not execute some export orders. We had a softness in our GT channel and 2 channels are having challenges, that is the MFI and the institutional channel, which will all get regularized and they are not very significant. But because this all happened in the last 1 quarter and the last quarter itself is a smaller quarter for us. The first and the last quarter are smaller quarters, and that's why you're seeing that very significant.

No. So I was asking at an aggregate level. I mean, it is including export and domestic, both its double digit, right? That is what I was trying to ask.

Yes, both. It is -- the growth is not only coming from exports. Exports, of course, today is about 12% of our revenue about INR 760 crores last year. We are very confident of growing upwards of 50%. The growth may be larger than that. And the remaining growth will come from our domestic business. We have introduced several products. Our channels are all doing well. Our retail is also growing. Our retail, both in terms of number of stores growing and sales per store is also growing. Apart from this, we are seeing good traction already in our e-commerce channels. We wish that our GT channel also starts contributing.

Sure. And sir, the last question from my end is the EBITDA that you have reported for the full-year. I mean, how much would be the actual rent if you take out and what will be actual EBITDA margin if we adjust for the rent because of the Ind AS?

I will -- Ramji, can you please?

The actual rent for the full-year is INR 24 crores and whereas depreciation, interest together, it's about INR 33 crores. So the impact -- additional impact in the P&L is INR 9 crores.

Okay. So the PBT level, I think we lower than less stated by INR 9 crores, right? That would be the right understanding?

INR 9 crores additional, yes.

Correct.

A little more than INR 9 crores.

The next question is from the line of Nikhat from Dolat Capital.

Sir, can you provide any region-wise flavor, how is the growth in the South versus non-South? That is my first question.

So of course, for all the rest of the channels, we continue to be there. We are continuing to grow a little higher in terms of percentage for the regions other than South. But for our retail, we are expanding apart from South in the rest of the country, particularly North and West. So the growth rate is a little higher. But we continue to be at almost at 50-50 now for the South and the rest of the South. The overall business has actually grown at the same -- almost at the same rate at the company's growth rate.

Okay. And sir, any price increases we've taken during the quarter for any of the [indiscernible]?

We continue to improve on our margins. It's a function of both efficiency improvement and some cost price increase pass on, and we continue to do this every quarter.

Okay. And sir, in FY '25, our growth was 6%. So any number you can give on the overall kitchen appliance growth rate during the year?

I can only say that each of the categories that we are in, we are acquiring market share, and it will be difficult to give what the organized retailers -- organized brands are doing currently versus unorganized brands. But each of the categories, we are seeing market share growth. So maybe when you tablet it with the other players, you'll be able to know that we -- probably you will find us doing better than our peers.

The next question is from the line of Yash Bajaj from Lucky Investment Managers.

Sir, I think you were responding to the previous participant on gross margin, where you mentioned that financial year '20 or '21, you were at 60%, 65% in-house manufacturing, which today is 95%. And in FY '20, your gross margin was anywhere between 31%, 32%, which is now 38%. So my question, sir, is that what levers are there for the gross margin improvement after taking into consideration that we are 95% manufacturing -- doing it in-house in terms of manufacturing? That's my first question.

Both price increase and efficiency. Definitely, as new -- when we start manufacturing new products and backward integrate them, there is a curve that we -- the learning curve that we go through. Definitely, there is a lot of scope on efficiency improvement, which will bring down our costs further. And definitely, there is a huge scope because we are very, very aggressively priced to competition. The brands are getting stronger. Our distribution is getting stronger. So definitely, we can pass on some more additional price increase to the channels and the market. So the opportunity of growth rest on both sides, efficiency improvement and price increase.

Okay, sir. And just a follow-up on this, sir. When you mentioned efficiency, it is in terms of a learning curve of the new products or even also the existing products? And if that is the case, then where are we in that journey?

So if I say, if a plant is built for producing 100,000 pieces and we are producing 90,000 piece and if we produce 100,000 piece, the cost -- the absolute cost remains the same. The cost per piece will definitely come down. And there is also a process where we automize these plants. So cost of people come down, productivity goes up. So even for existing products is a continuous activity that I think for any manufacturing process, efficiency improvement is a continuous process. There is no maturity for this.

Okay. Got it. And my second question is, sir, can you just mention the distribution mix, GT, e-comm, our own stores?

For the year?

Yes, sir.

We are at about 20 -- no this is a pressure cookware category. We are talking GT -- just 1 minute, sir. I think these are all -- will you allow me some time to get back to you on this, sir. Yes, I can give you the contribution. Our GT has contributed at 34.4%. E-com is at 34.1%. Modern trade is 11.5%. Our institutional sales, corporate sales is at 3.5%. Retail for the whole year is at 5.7% and the export is at 11%.

Export is at 11%. Okay. So out of all these channels, the one which is on a muted level is the GT channel only, right, sir?

GT, actually, it was 37.9% is now 34.4%. Our e-comm has grown from 30.8% to 34.1%. The muted channel is modern retail is at 11.5%. We had a drop in our corporate sales, the MFI sales from 5.4% to 3.5%. We had an improvement in our retail from 3% to 5.7%. Exports for the year was from 11.4% to 10.9% as contribution.

The next question is from the line of Praneeth from Samatva Invesments.

So I was wondering in terms of gross margin. In previous con calls, you mentioned that the margins are same across most of the channels and most of the products. And you mentioned that you have a better margin in terms of retail footprint. And is there any difference across different channels like that in terms of products or product categories? Could you give me a more broad picture in terms of EBITDA and gross margin? And how will it be for as an investor for me to look going forward, how -- which one to track?

So of course, the retail gross margins at the gross margin levels are higher. It is in the range of about 52%. And our domestic gross margins are definitely higher closer to the 40% -- a little upwards of 40%, and for export, gross margins are in the range of 30%, 29% to 30%. But overall, at EBITDA, I can say today, of course, because of that initial stage of our retail, our EBITDA for the retail is below the company's EBITDA level. And both for exports and domestic business at EBITDA, more or less, they are the same. And whether for product and channel, more or less, we work at the same margins. There could be a very small difference, but there is no significant difference in margin between products and channels.

Got it. And going forward, all the new products are also expected to be in the same similar margin range, right, in terms of gross margin?

We would prefer to maintain the margin -- retain at least the margin that we work on based on the channel. There is exports, of course, are at a lower margin, but at EBITDA, we would want to maintain the same margin. And for domestic, all the channels, whether it is e-comm, modern trade, general trade or our corporate sales, margin will be the same. Of course, the retail will continue to have a little higher margin.

The next question is from the line of Anand Mundra from Soar Wealth.

How much revenue was lost because of slowdown in microfinance channel?

Overall for the year for us, it is about -- I can say, it is a drop of about 2% for the overall business. So about -- that corporate sales channel from 5.5% has come down to 3.5%.

Okay. And this is largely happened in last quarter or throughout the year, it would have happened, sir?

Not majorly, of course, it is impacted more in the last quarter, but it's not only the last quarter because the impact is almost, say, INR 30 crores, 5.4% to 3.5%, 1.9% of INR 1,450 crores, approximately INR 27 crores, INR 28 crores. It's not only the last quarter, but I think particularly in the last quarter, everything happened. I mean we had a drop in GT, in exports and in the corporate sales -- I mean, institution sales.

Okay. And sir, second question, how much lease rental is charged to P&L much more than the actual payment for the financial year?

I think we've answered this. For the whole year, the approximate difference between the rental and the lease accounting is about INR 9.5 crores. For the last quarter, it was INR 3.4 crores. For the last quarter alone, the difference between the actual rent paid and the accounting lease rental is INR 3.4 crores for the last quarter. For the whole year, it is INR 9.5 crores.

Any reasons why it is much higher in last quarter, sir, because more stores were opened in the last quarter?

Yes, sir. And initial period, it is higher because last quarter, we opened 32 stores. How many?

32.

Of the 90 stores, right? Of the 90 stores, 1/3 of the stores were opened in the last quarter.

Okay. And sir, when you are giving guidance for gross margin for FY '26, that assumes that export revenue will go up because that will be margin dilutive?

Yes. Considering that -- so I also want to guide you through something. Our last quarter was at 39%. And we would want to improve from the current level of 38.1%, right? So we would definitely want for the whole year to improve by at least 1%. If you will only say the quarter, we are already at 39%.

Okay. Understood. So sir, there are chances we may even report higher than 39% because you already reached 39% in last quarter?

Sir, we wish to. But I think what will -- what we are confident of is with all those actions that we are taking, considering there has been substantial growth in exports, we will still be able to improve our gross margins by 1%.

Ladies and gentlemen, in the interest of time, this will be our last question. I now hand the conference over to Mr. Rajendra Gandhi, Managing Director, for closing comments. Over to you, sir.

First of all, thanks all of you for the patience and for listening. I hope I have addressed all your questions. But if you have any further inquiries, please feel free to reach out to us directly or contact our Investor Relationship partner, MUFG Intime India Private Limited. Thank you.

Thank you. On behalf of Stove Kraft Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.