Rupa & Company hosted a conference call on November 11, 2024. In the conference call, the company was represented by Mr Ramesh Agarwal  –Whole time director and Mr Sumit Khowala-CFO.

Key takeaways of the call

Industry continued to witness aggressive pricing strategy and showed resistance to price increases post stabilization of yarn prices. Other factors impacting the business were excessive rainfall in the month of August and September 2024, and other regional disruptions impacted discretionary spending resulting in part of festive demand of Q2FY2025 shifting to Q3FY2025.

Q2FY2025

Revenues for the quarter stood at Rs 297 crore down 1.6% .However volumes grew by 2% yoY.

EBITDA stood at Rs 29 crore as against Rs 32 crore in Q2FY2024.

EBITDA margin stood at 9.6% down 110 bps YoY.

Net profut for the quarter stood at  Rs 18 crore as against Rs 21 crore in Q2FY2024.

PAT margin was at 6.2% down 60 bps.

Volumes in economy segment grew by 6% YoY, mid premium declined by 2% and by 10% yoy in premium segment in Q2FY2025.

H1FY2025

Revenues for H1FY2025 was Rs 507 crore up 2% YoY.

EBITDA stood at Rs 46.5 crore  as against Rs 44 crore in H1FY2024.

EBITDA margin stood at 9.2% up 40 bps.

Net profit was Rs 29 crore as against Rs 250crore in H1FY2024.

Net profit margin was 5.7% up 70 bps.

Volumes in economy segment grew by 12% YoY, mid premium declined by 2% and by 3% yoy in premium segment in H1FY2025.

Gross margin: The company had gross margin in the range of 34-35%in Q1FY2025 which reduced to 28-29% in Q2FY2025. The company expects gross margins to improve with increase in thermal segment revenue contribution.

Debt: Net debt as on Sep 30,2024 stood at Rs 20 crore.

Working capital: Working capital stood at Rs 790 crore with working capital days of 228 days.

EBO: The company had 31  EBO’s as on September 30 2024 and plans to increase the same to 50 by end of the financial year FY2025.

CAPEX: The company has not planned for any major CAPEX. The company plans to incur maintenance CAPEX of Rs 15-20 crore in FY2025.

The company is setting up a solar power plant with a capacity of 1.8 MW which is expected to be commissioned by January 2025.

Thermal business: The thermal business in Q2FY2025 was not good. However, the company expects thermal business to be good in Q3. The company expects to recover the lost sales of thermal business in Q3.

Advertisement expenses: Advertisement expenses for H1FY2025 stood at Rs 33 crore which was 6.5% of the revenues. However, the advertisement expenditure for the financial year as whole will be around 7-7.5% of the revenue.

Subsidiaries: The company has 5 subsidiaries of which 3 are EBITDA positive and 2 are negligible EBITDA.

The company has incorporated a subsidiary in Bangladesh 4 years back however, the subsidiary is yet to commence operations.

Pragathi Scheme: the company has introduced Pragathi scheme in some parts of Uttar Pradesh, Rajasthan and Chattisgarh. The response for the same is good in Rajasthan. Pragathim scheme in Chattisgarh is stabilizing. The company plans to roll out Pragathi scheme in Haryana and Punjab going forward.

Guidance and outlook: The company has guided for revenue growth in the range of 10-12% for H2FY2025. The company had earlier expected that the yarn prices would go up  as such provided s guidance of 18-20%. However yarn prices are stable and the over all trend is not encouraging as susch has reduced the revenue growth guidance.

EBITDA  margins is expected to be in the range of 10-11% for FY2025.

The company expects modern business to grow at a healthy pace. It expects the modern trade growth to double to around 50% from the current 20-30%.

Over the next couple of years the company expects revenue to grow at a CAGR of 12-15% with positive trigerrres from modern trade, women wear, Athleisure and international business.

Management Commentary:

Commenting on the financial performance Mr. Vikash Agarwal - Whole Time Director, said  “We are pleased to present comprehensive overview of the performance of the Company this quarter and half year ended September 2024. For the half year, we have reported a stable performance - our volume grew by 5%, and the value grew by 2%. The industry continues to witness aggressive price strategies and resistance for price increase post stabilization of yarn prices. Additionally, demand usually associated with the festive season has partially shifted to Q3 this financial year. We expect improved performance in the coming quarters, with a potential boost from thermal wear sales, athleisure and modern trade business.

Revenues for the quarter stood at Rs. 297 crores, a decline of 1.6% YoY, impacted mainly due to aggressive price strategies vis-à-vis growth in volume by 2%. In terms of sales volumes for the first half of the year, athleisure segment showed a promising growth of 35%. Revenues from Modern Trade also demonstrated a robust growth of 35% in H1 FY25, contributing 7% to the overall revenues. This underscores our strong presence in major online platforms. Additionally, we have also observed a significant growth of 25% in X-factors areas in H1 FY25. This showcases our successful utilization of diverse revenues streams. Exports remained subdued, with export revenue at Rs. 14 crores, contributing 3% to total revenues.

Amidst these challenging conditions, our efforts were focused on efficient working capital management and reducing debt. As on Sept’24 our net debt stands at Rs. 20 crores. Our branding and advertisement expenses as on H1 FY25 stood at Rs. 33 crores which stood at 6.5% of our overall revenues. Our Exclusive Brand Outlet (EBO) count reached 31 stores as of H1 FY25, and we continue to expand our retail footprint to reach a broader customer base.

Looking ahead, we aspire to reach new business milestones and bring innovative products to our diverse range of customer segments. Our commitment to a customer-first approach will be key to reinforcing our leadership in the industry and advancing a sustainable business model.”