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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Ladies and gentlemen, good day, and welcome to the SP Apparels' Limited Earnings Conference Call hosted by Batlivala & Karani Securities India Private Limited. [Operator Instructions] Please note that this conference is being recorded.
I would now hand the conference over to Mr. [ Roshan Nair ] from Batlivala & Karani Securities India Private Limited. Thank you, and over to you, sir.
Thank you, Peter. Good evening, everyone. On behalf of B&K Securities, I would like to welcome you all for 4Q FY '22 Post Results Conference Call of SP Apparels Limited. Today, we have with us the senior management of the company, including Mr. P. Sundararajan, Chairman and Managing Director; Mrs. S. Latha, Executive Director; Mr. S. Chenduran, Director; Mrs. P. V. Jeeva, our Chief Executive Officer; and Mr. V. Balaji, Chief Finance Officer.
I would now like to hand over the call to the management for initial comments. Thank you, and over to you, sir.
Thank you. Good afternoon, everyone, and a very warm greetings to all of you present on this call to discuss our Q4 financial year '22 performance. I hope and wish that all of you and your loved ones are healthy and safe. As all are aware that the company has completed the retail [indiscernible] through a slump sale arrangement during 31st of December 2021. After the sale of S.P. Retail ventures, it's continuing its operations under the subsidiary company and Managing Director of SP Retail Ventures, Mr. Chenduran, will update you on the latest different developments of the company.
As informed in the last call, we are planning to raise private equity of -- and our strategic investments in our new Retail Ventures to grow the business and the [ excel ] in its industry. Now with regards to the current sector industry, I understand from any that getting calls from various investors, shareholders that some ambiguities about this industry, what we've see in media and what they hear is that I just want to update you on this. Okay. Generally, the scenario in textile industry is cotton prices going up due to which the yarn price and in turn, the Garment price are going up. That is for sure. I mean the cotton price has grown by more than double never in the history before. And that has also affected the increase in the yarn prices. This is a general scenario there is no doubt it.
And also the coal and the electricity all the raw materials and the electricity also the prices are also going up. This is definitely there. And also sometimes, the [indiscernible] is nothing, I will say, well, something like that, but this has also been under control. So generally, from the -- outsider point of view, there is a concern about the textile industry. But that's not the case with most of the big players, and especially in SP Apparels because we'd like to highlight 3 points, which are mitigating this kind of a situation.
One is our USP is that we are strong in baby's products as always. And that's our key strength, still remains key strength, and there is a very high entry barrier for this one. This is one thing which always support us because of our capability. And the second point is we are backwardly as well as forwardly integrated. So this is the biggest advantage for us especially in the current scenario because if the cotton price goes up, yes, there will be an impact in our garment costing, but the overall managing in such a way that we don't lose the orders. Now we will take the orders at the negative margin or something, because one way or another, we will be able to make some money. That is one thing.
And also the availability of cotton and availability of yarn is not an issue because our capacity of yarn is fully balanced with our sewing capacity. So that has never been a problem. And also during this crisis and the cotton quality is not as expected by everyone, but we are able to do a proper mixing and we know what cotton we need to buy our product. So there again, we don't have this quality issues also. So this is something -- some of the advantages what we have used over at the integrated facility.
And the third one is our manufacturing garment facility that, as I always been telling that, it's a [indiscernible] model of manufacturing sector, which means we have the little [ 3 ] hostel factory, mix of hostel and local factories. Again, there again in the hostel factories migrant circular own state [ Tamil girl are there ]. And we also have different factories that there is abundance over what was available or we can recruit and train. So we have got a different mix of what an availability and we're engaging them.
So which means that the -- if at all there is a problem in 1 or 2 factories in terms of available shortage of people, but the remaining factories will take care of everything. So this is something which has been continuously mitigating the risk of ours. And these are the 3 things, which I would say. And then -- okay. And this is as far as the textile industry is concerned. So with SP Apparels, yes, as I mentioned, you may not have to be having any concern about the business as something I'll update you on this thing.
So with this, I would like to give you an update on the dividend path. Yes, there has been a policy for dividend and the Board has suggested to wait until next Board meeting to decide upon the dividend and the quantum of dividend. So I request everyone to wait until the next quarter result and had Board meeting.
Now I would like to discuss on the segment-wise our performances. Garment division, the financial performance is our Garment division revenue for this quarter stood at INR 228 crores as against INR 153 crores for Q4 FY '21, which is at a growth of 38% year-on-year. Total revenue for the whole year stood at INR 743 crores as against [ INR 534 crores ] for the year ended 31st of March of '21, at a growth of 38%. Adjusted EBITDA of the Garment division stood at 20.1% for the current quarter versus adjusted EBITDA of 17.8% year-on-year. Adjusted EBITDA of Garment division for the year stood at INR 155 crores as against adjusted EBITDA of INR [ 108 ] crores of FY '21.
With regards to our current order it stands at INR 337 crores [indiscernible]. Our current order book stands at INR 327 crores.
And with regard to the new customer additions, yes, as we mentioned before, we have shortlisted -- we are looking for 2 customers to add. Both of them, as I mentioned last time, they have global presence and they have stores all over, and we'll be working directly with the brand. So the business will start hopefully in the next 6 months' time. By then, we will also have adequate capacities to accommodate for their orders.
And capacity utilization is around 72%. Before going to capacity utilization, I would also like to highlight that regarding 3 trade agreements, FTA with the U.K., Europe and Canada, it is going very strong and steady. And most probably by October, I think there will be a conclusion of FTA between the U.K. and India. This will be a very great advantage and we will be at par with any other duty-free countries like Bangladesh and Sri Lanka, et cetera, then we will have same level play. This is also one of the reasons why our existing customers as well as new customers are looking to place business with India. And where, again, for the [ day ] they would prefer only SP Apparels Limited.
Then regarding factory utilization, this is around 72% currently and is expected to increase by another 10% to 15% going forward. So which means we expect around 82% to 85% in the next few quarters. The new customers are looking for bigger factories. And hence, we are planning to add one more factory in the down south in this year.
And with regards to spinning, as explained to you all, our expansion of 3 trains, that is 3,600 spindles is completed currently and have started yielding production. Further, as inspected in last call, to mitigate the risk of availability of policy on and consistency in supply, we have tied up with a mill on the conversion basis so that the supply is under -- without any volatility. The financial year, our spinning plant has demonstrated well, both in terms of margins and production, which has contributed significantly to the market.
With regard to the cost on prices for spinning, this is until now the cotton prices are steadily increasing and various our associations and talking to central government and the state government to intervene and say that it is -- some actions are being taken. Until then, the prices continue to increase. We hope that in the next 2 months' time, there will be definitely an arrest in the further increase and probably the price will start coming down after 2 months' time. This is with regard to the spinning.
And go back to the Garment thing, I want to inform because one of the shareholders questioned about the quantity. So what -- for the year completed, financial year '22, we have done [ 3 crore ] pieces. Other than that.
[indiscernible]
So the number of pieces, what we have produced not yet shipped is 5 crores pieces for the year '21/'22. And the order book is 3 crores of pieces on hand that is INR 327 crores in value and 3 crore pieces in volume terms. And going back to processing division, in spite of the coal availability and the raise in the input cost, our processing division continues to perform well and with good utilization levels and contributing to the margin effectively.
Our SP Apparels UK division has seen a lot of disruptions in supply chain majorly due to the third wave in the U.K. and Europe. Nonavailability of adequate containers has also interrupted the supply sales and disturbed the revenue for the current year -- for the current quarter. Revenue for the quarter stood at GBP 2.1 million as against GBP 2.2 million year-on-year last year. Current liquidity, our liquidity position is strong and we have serviced all the debts up to date.
With regards to the Retail division, I would request Mr. Chenduran, the Managing Director of SP Retail Ventures, to brief you on the performance of the Retail division and its updates. Thank you. Over to Chenduran.
Thank you, Chairman. So I'm Chenduran, Managing Director of SP Retail Ventures, which is the [ 100% ] subsidiary of SP Apparels, wholly [indiscernible]. So as you know, the -- we hold the license for the brand Crocodile, which was part of a division -- Retail division of SP Apparels, currently [indiscernible] listed as SP Retail Ventures. On the numbers, I'm sure CFO will be able to explain in terms of the value of the slump sale.
So in terms of Retail last year, last 2, 3 years has been very difficult where in terms of COVID and lockdowns a lot of discontinuity in terms of the supply chain as well as with the closure of a lot of stores. But this financial year onwards, it has picked up, it is very positive now. So to give a brief update on the Retail front, apart from Crocodile, SP Retail Ventures also has the license of a brand called Head, which is one of the premium tennis brands. The brand is very well in top 3 in terms of tennis and the [ skiing ], and we have the license for the brand for the sportswear as well as the footwear of Head in India.
Apart from Head with -- and with Head we signed a 15-year royalty agreement, which exists in between, mutual exists. And apart from that, SPRV also hold the license for U.K.-based kids wear brand, a premium kids wear brand, which is based in the U.K. called Angel & Rocket. Again, it is a licensing agreement for now, but we intend to acquire the brand in the future. This is a premium kids wear brand, which is completely designed in the U.K. for the global market. It has a huge presence online in the U.K., Europe and the Middle East in off-line stores.
And in India, we are present currently in around 70 large-format stores like Shopper Stop, Lifestyle, Central, Iconic [indiscernible]. Apart from that, in all the online platforms like Myntra, AJIO, FirstCry, even Nykaa in India alone. There is a stand-alone store exclusive brand outlet planned in Bangalore. And apart from that, we are also planning to increase the footprint in terms of large format stores as well as EBOs. That's it in terms of the update from the Retail side. Over to CFO, Mr. Balaji.
Good afternoon, everybody. Thank you, Chairman and Director for the brief update. Regarding the financials, I would just like to update you on the consolidated financials for the quarter. Adjusted revenues stood at INR 258 crores as against INR 193 crores year-on-year. Adjusted EBITDA stood at INR 45.75 crores as against INR 25.16 crores year-on-year. PBT stood at INR 36.58 crores as against INR 15.19 crores year-on-year. PAT stood at INR 25.25 crores as against INR 10.56 crores year-on-year. EPS for the quarter stood at INR 9.83 versus INR 4.11 year-on-year, which is a 240% increase.
On a stand-alone financials for the quarter, adjusted revenue stood at INR 219.92 crores versus INR 163 crores year-on-year, which is an increase of 35 percentage. Adjusted EBITDA stood at 20.1 percentage. PBT stood at INR 36 crores as against INR 15.98 crores year-on-year. And PAT stood at [ INR 23.26 ] crores as against INR 98 crores year-on-year -- sorry INR 9.8 crores year-on-year. EPS for the quarter stood at INR 9.83 versus INR 3.82 year-on-year, which is a 257% increase.
Consolidated financials for the full year. Total revenue stood at INR 867 crores versus INR 653 crores year-on-year, which is an increase of -- a growth of 33 percentage. Adjusted EBITDA stood at INR 153 crores as against INR 107 crores year-on-year, which is an increase of 43 percentage. PBT stood at INR 114 crores as against INR 59 crores year-on-year, which is an increase of 94 percentage. PAT stood at INR 84.6 crores versus INR 43 crores year-on-year, which is a growth of 96 percentage. EPS for the whole year stood at 32.96 as against 16.8 year-on-year, which is 196 percentage increase -- sorry, 96 percentage increase.
Stand-alone financials for the whole business. Total revenue stood at INR 742 crores versus INR 536 crores, which is an increase of 38 percentage. Adjusted EBITDA stood at 20.9 percentage. PBT for the year stood at INR 113 crores versus INR 53 crores year-on-year. PAT stood at INR 83.2 crores versus [ INR 38.68 ] crores year-on-year. EPS for the -- on a stand-alone basis stood at INR 32.38 versus INR 15.06 year-on-year. Please be informed as our credit rating has been upgraded currently to AA negative stable. For the long-term and short-term, we have been upgraded to A1+ stable. With regard to the debt in the books on a stand-alone basis, we have a gross debt of INR 173 crores and a net debt of INR 117 crores.
In terms of a consolidated basis, we have a gross debt of INR 197 crores and a net debt of INR 141 crores. On the working capital front, our inventory on a stand-alone basis stood at INR 332 crores and -- sorry, on a consolidated, it stood at INR 332 crores and on a stand-alone basis, it stood at INR 295 crores. On receivables, consolidated basis, our receivables were at INR 108 crores, on a stand-alone were at INR [ 162 ] crores. On payable front, on a consolidated basis, it is INR 118 crores. On a stand-alone basis, payables are at INR 88 crores.
Increase in the inventory level is mainly due to increase in the cotton prices and other costs of material. The increased cost of escalation has increased the carrying cost in the inventory, and without increasing the working capital, and this is -- this shows that the strength of the company and its liquidity. All the other information's are available in the presentation and we can get into the question-and-answer session.
[Operator Instructions] Our first question is from the line of Nirav Savai with Abacus Investments.
So my question is regarding this SPUK subsidiary now. We have been doing this business for a long time. So how do we see the future growth trajectory and what are the kind of working capital requirements we have for this business?
So SPUK, we have started working with SPUK since 2016 onwards. And it's 6 years now, and we cannot consider FY '20 and '21 because of the disturbed COVID issues, we cannot consider that. But there, it's purely a trading model where we are looking at a revenue of close to 9 million next quarter, 9 million to 10 million. And it's purely back to back in terms of [ POS ]. So working capital should be hardly 45 days there.
Okay. But over a period of next 2, 3 years, do we see this growing 2x or even bigger than that? .
Yes. Working capital?
No. I'm saying in the overall terms of size if we see the revenue pie.
As I've been explaining before also. Unfortunately, 3 years has affected, '20, '21, even '22, is because of the supply chain issues and they reopen the stores and the business picked up and the stock and everything. So it had after effect for another 1 year. So now it's getting back on track. The business model is -- it is purely based on the reputation of the company SP Apparels, which is very well known to the U.K. and Ireland market. So as I always mentioned, the -- some of the brands which they work in a different model, which makes they want everything on land that delivery in the sense. They want the suppliers to do the designing, the sourcing, compliance, quality and they [indiscernible] their resources. So this kind of service is something which most of the companies -- the retailers are doing. And for that, our company is the best to act for this kind of full service as full service went up. So there is a lot of chances that already -- we have 3 customers. So probably with these 3 customers, we can easily double the business in the next 1 or 2 years. I mean, I'd say 2 to 3 years' time. So it's a good opportunity for the business model, which is not taking any of our -- the India business. It is an additional extra business.
Okay. And sir, what could be our hedging policy? We have seen a lot of volatility in pound. So would there be any impact in the first quarter?
On this -- due to the yarn price -- I mean the cotton price?
No, I'm saying in the pound -- I mean, would there be any impact of currency because of extreme volatility in pound in the first quarter? And what is the hedging policy? I mean, is there something which we [indiscernible]...
We have very clear product policy. I think let's CFO explain.
We have a very clear ForEx policy where we cover 80% of our orders, within 6, 7 days from the date of receipt of the order, so that we cover the volatility in terms of any currency fluctuation. And when we do costing with the customer, we work on the current prices and work accordingly. So there cannot be a huge volatility because of the currencies at least next couple of quarters.
Right, right, right. And sir, the way the cotton prices have gone up, in our category also, would there be a big impact because this is infant wear category where -- which I understand is lesser commoditized and the adult wear and also what can be the potential impact or how difficult it is to take price hikes in this segment?
We have given a guidance in terms of percentage anywhere between 18% to 20%, and I think we would like to stick between 18% to 20% in terms of guidance. If at all, there is any pressure because of the [ common prices ] fluctuations. It could have a pressure to an extent of 100 -- not beyond 100% -- 100 bps on the margin. So only 100 bps could be a risk here.
Right. Right. Right. And sir, is there any expansion plan going ahead as far as the sewing machines are concerned for the next couple of years?
If you recollect in the Chairman speech, now we have a couple of customers where they are looking at new facilities or facilities with the bigger capacity. So already the existing capacities are tied up with the existing customers. So we are looking at one factory [ done so ] which to come up with a bigger capacity that may happen towards the end of the financial model. .
Okay. So end of FY '23, we might see this new facility coming on stream?
Yes.
And sir, how many machines would be -- we would be adding in that? Anything if you can give some numbers.
We cannot predict it now, but the capacity should be at least 2,000, 2,500 machines at full utilization levels because we would like to go in phases there.
Okay. And sir, what would be the CapEx behind this new facility, which we are planning?
It could be anywhere between INR 50 crores to INR 60 crores in terms of the whole project including machines.
It's not 2000 machines, it's about 1,000 machines.
Our next question is from the line of Mr. Resham Jain with DSP Investment Managers.
So I have a couple of questions. First of all, congratulation on good set of number. So first is on Garment business. Our earlier guidance of around INR 1,000 crores in the Garment Export business, does that guidance still holds true for FY '23?
Yes, I think we have not taken back any guidance. We are working towards INR 1,000 crores of revenue for the Garment next year, FY '23.
Right. Great. And what you mentioned in your initial remarks, is it correct that despite several headwinds which we see in the industry, the margin could be at least in the near-term, we have the visibility of 18% to 20% with 100 basis point differential in your core business. Is that a fair understanding?
Yes. Just now I said that could be -- we have been guiding for 18% to 20%. But because of the unusual cotton price, there could be a pressure in the margin to an extent of the percentage.
Right. Understood, sir. Great. And my last question is on SP Retail, the new subsidiary which you created. Just to understand how are you approaching this business. Because last 5 years, if you look at this business, and one can argue that '21, '22 are affected years because of pandemic and all. But on a base of INR 50-odd crores, this business have hardly grown in the past. INR 50 crores and moved to INR 82 crores in FY '19 on a very small base. So clearly, there has been -- the scalability has been an issue in this business.
And now we are -- we had this Crocodile brand, but we are now adding another 2 brands here. So how are we planning to deploy capital in this business, given the not-so-great track record in the past. If Mr. Chenduran can help in terms of how the capital employed will be in this business and what kind of risk measures. Because on the profitability side also over the last 5 years, if you look at the cumulative EBITDA, it's actually negative. So just the thought process on scalability of this business and also the risk management.
So this is Chenduran. Thanks, Resham. So in terms of the past 5 years, there have been a lot of ups and downs in terms of the inventory management. There have been certain errors and mistakes where the stores opened or we closed some channels. And if you just ignore the last 2 years because of COVID, the earlier 3 years, there were a lot of corrections that we had to do internally, which we knowingly did. But at that point of time, even before COVID, the plan was to achieve a INR 100 crores top line in Crocodile alone. And unfortunately, we have the situation where we couldn't do anything. But we still achieved a significant top line in spite of losing 4 months.
So effectively, last financial year, we lost 5 months if we don't take into account the weekend lockdowns, which are again peak for Retail. We lost a couple of months with the transmission. We've upgraded the SAP in terms of -- from the migration from this entity to the other entity. There was a lot of hindrances. But as of today, as it stands, even from April onwards, we've been on track to achieve the number that we proposed to achieve. So in terms of scalability, it has always been possible, but internally, there had been earlier issues earlier, but that is precisely what we worked on.
And last 2 years, in terms of inventory also, we've considerably reduced to an extent of INR 10 crores, the inventory has come down, which is not by liquidation. We effectively use the inventory to achieve the numbers and we reduced the buying. So going forward on the capital terms as well, with the existing inventory by improving more in the core business, core products that we will be managing the capital -- working capital and the inventory. So if we do only fashion then we have to keep changing every season, but the contribution from wholesale distribution, which is going to be higher, is going to help us in terms of effective utilization of the inventory and the capital. And in terms of the new brands also, where we've not taken any additional overheads in terms of teams or marketing or any such things. So -- but they've already started giving us revenue. So that is going to help in terms of the overall overheads for the Retail as an entity.
Okay. So in 4, 5 years' plan, if you can share how scalable this business can become?
I don't know.
If there will be losses which we may see in the initial periods, or it will be a breakeven kind of business at least for the first 2 years.
It will definitely be a breakeven this financial year. It has already started that way. And to be very honest, if there is no unprecedented issues with COVID or lockdowns again, every month is going to be definitely EBITDA positive. And going forward, if -- I don't know, if I can give a guidance on a 5-year plan on a number, but we'll definitely be growing 50% to 60% every year.
Okay.
We have a good [indiscernible] with the new brands also. So it looks very progressive from now onwards.
Our next question is from the line of Forum Makim with Equitree Capital.
Congratulations on a great set of numbers. I just had a couple of questions. Sir, could you share the realization per piece number for the quarter? .
It should be close to INR 125, INR 126 per piece.
Okay. And how was that last quarter?
Last quarter, it was around INR 104 -- INR 114, sorry, last quarter.
So it's gone up by almost 10%?
Yes.
Okay. Sir, what is the reason for the improvement in gross margins Q-on-Q and what would be the impact in Q1 on a margin since you are sitting on a high-cost inventory?
See, all the inventory which the company is holding or is carrying under work in progress is purely towards the orders in hand. In case my order book, it's [ INR 327 ] crores, I need to have at least [ INR 180 ] crores of inventory under WIP, where I've already taken the cotton, yarn and the completed the guide process. So the process in terms of work in progress is purely towards my orders in hand.
And in terms of my raw material, because we are backward integrated, our inventory at both as cotton and yarn in our spinning divisions and dyeing plant is also considered as raw material. And the carrying cost at the current cost should definitely be at the higher side. On the margin front for the current quarter, there is a betterment in terms of the margin. It's purely because of the spinning division contributing on the margin because we were carrying cotton at average prices, better average prices previously, which is giving us better margins for the current quarter. Going forward, our holding, we have come down to 45 days of holding. So the margins could have some hit at the spinning division level.
So sir, would that be a temporary phenomenon or it could last for the whole financial year?
I'm not sure. The cotton prices only got and say how it's going to work.
Right, sir. Sir, in your cash flow statement, there's a INR 6 crore impact due to some ForEx loss. Could you just explain what that is?
That is not ForEx loss, that is gain, mark-to-market gain of INR 6 crores.
So we have booked that gain.
Yes. And in our presentation, you could see that the margins are getting adjusted towards that.
Right. And sir, have we started operating the second shift?
Actually, in one of our factories in a small level like one line, we have started. Slowly we'll be increasing one by one. And we are trying to add the second shift in one more factory also that will happen next month.
Okay. So by next month, it should be operational.
Yes, yes.
We have already started operating one line? And slowly, we are increasing one by one?
In one factory, we have started running the second shift for one line and it's on a trial basis. And same rate what increase -- next month, we will be starting one more line in another factory. So probably in the next 3, 4 months' time, the number of lines in those factories will be increased.
Right. Right. And sir, we spoke about adding two new customers. So what could be our revenue potential from those customers?
I think they are big brands. Their volumes are unlimited and they are focusing us for the babies and kids. So it's all -- like in the first year, we will be just starting on a trial basis. So the real business starts from next year, '23/'24. By then, our new factory will be also ready for the new customers. So from, say, April year '23, the business will take up for those two customers.
Our next question is from the line of Rishab Munda with ICA.
Just wanted to understand this cotton prices have been increasing. So in all likelihood the margins in Q1 of FY '23 will be impacted if the company is not able to fully pass on the price mix to customers.
Yes. See, it's like this. We always factor in the cotton prices in anticipation, which means we add another certain percentage of increase in anticipation and do the costing. And we are able to get some -- [indiscernible] media prices. So this is how we are managing it now. Because even the customers know that all over the world, this is the situation. So it's not only the price of SP, it's the price for everybody.
So they are cooperating. And the one good thing is that the customers, the retailers have started putting up their prices also. So which is a good news for us because unless they increase their selling prices, how can they pass on some prices to it? So that has started happening now. So I think the whole industry has started accepting the current situation until the situation restores. So that's the current scenario.
Okay. Sir, you mean to say you have taken price hikes in the current quarter?
Sorry, you have to come back on your question.
Sir, you mean to say that you have taken price hikes in the current quarter?
Yes, yes. So whatever orders we have taken previously is going to be shipped for the current quarter, and we expect these prices, I mean, beyond covered at that prices during the... [Technical Difficulty]
Sorry, sir, you were telling something that goods are -- about this goods are shipped.
That the goods are being shipped in Q1. We have factored in a certain increase of yarn prices. But the fact was rightly that the yarn price has gone up more than what we factored in. In this quarter, quarter 1, there will be an impact to some extent, say, about 1%.
Okay, okay. But sir, let's say hypothetically, like if the cotton prices remain high for another 2 quarters, so from Q2, so we will be able to pass on this to our customers?
Yes, we are trying as much as possible, and the customers also understand the situation. And that's why I said that they are supposed to increase their retail prices. So there is a room for passing on some prices to [indiscernible]. So I think we should be able to manage the same 18% to 20%, with the -- there'll be an impact of about 1%, as CFO mentioned as overall year.
Okay. Sir, one more, sir. In terms of this, are we seeing any impact of inflation in this Europe market on the demand side let's say -- over 2, 3 quarters?
In terms of the demand, there is no -- as Chairman was indicating that the FTA is coming, the China factor like the container, the ships, are not able to leave the ports from China because of the COVID lockdown. So many factors and demand is definitely far, far, far better comparing last year. So there is no big impact from the demand side.
Our next question is from the line of Aman with Carnelian.
Yes. Sir, as I can see, like during this quarter, we have basically exported around 1.5 crores garment pieces. So do we expect that for the next year we would be doing 6 crores pieces, at least, like what we did during the peak of FY '19?
Current year, we have done 50 million pieces, and we are expecting it to increase by 10% to 15% next year, as you heard Mr. Sundar talking about the future and the number of pieces. So we are looking at definitely increasing by 15% to 20% -- sorry, 10% to 15% in terms of the volume.
Okay, noted. Sir, my second question was on the labor side. So we had previously guided that we are basically adding around 300 labor per month, out of which we are basically planning to retain around 200. So how has that been going on? Like are we facing any issues? Or is that on track right now?
Yes. Labor front as we committed, there was an inflow for 200 to 300 people until last month. Due to some policy cases in Orissa part, there was a less inflow expected this month and next month. So again from next to June onwards, so definitely July onwards, we'll be getting inflow of 300 as we committed. So regards of capacity commitment, as we committed, we'll be able to achieve the mission of what we have already committed.
Our next question is from the line of Samir Palod with Ohm Fund Advisors LLP.
Congratulations on a very good set of numbers. Just some clarification, sir, I'm already new to the company. So as far as the 2 sort of subsidiaries are concerned, you mentioned that the Indian Retail business has been hived off into a subsidiaries, and there you will look to basically raise the private equity or strategic capital. So there won't be any capital employed from the parent company into that business. Is that understanding correct?
So for the new Retail Ventures, which has been held off, there we have transferred on a[ slump ] sale consideration of INR 53.5 crores, which will sometime be converted into equity at some point of time. And then in private equity, it's joining us, then that will help them grow their business.
And I understand, but there won't be -- so apart from this INR 53 crores, which will get converted to equity at some point in time, there's no -- there's no plan to additionally invest more money into the subsidiary, it will come from external sources either private equity or strategic. Is that correct?
Correct, correct. And as of today, we feel that whatever we invested into is enough. And we would like to partner with somebody like the private equity or a strategic investor to take the business to the next height.
Sure. Sir, what does SPUK actually do?
SPUK is purely a trading company where whatever orders which we are not able to take because of the quantity of the order size, SPUK takes the order and gets it outsourced somewhere else and gets it shipped to the customer. It's purely leverage on the [indiscernible].
In fact, as I mentioned before, there are certain small retailers who would not like to do the sourcing on quality directly because of the cost of budget involved. So they would like to have some local importer full service vendors who can do the designing, sourcing, compliances and the shipping everything, quality. So this -- in order to serve those small retailers -- I mean, not small really, it's medium size as well as those who want [ full service ]. So our U.K. office will approach them and they will do the design perfect for them and get the order booking, and they can source it from anywhere in the world. They can source from Bangladesh, source from India, source from anywhere -- Sri Lanka.
So it's not far from SP Apparels as the parent at all.
Sorry?
SP Apparels, the parent, there's no sourcing from SP Apparel in India.
It will source from SP Apparels, yes. They will source directly from other factories not us. .
Okay. Sir, second question is, sir, I do not know if I've heard you correctly, sir, but there is about a INR 350-odd crore order book for about 3 crore pieces. Is that number right?
Yes. So close to 3 million pieces -- 30 million pieces.
Sorry, come again?
Well, close to 30 million pieces, he said.
For that INR 350 crores, even there are dramatic drop in the per piece value.
So it's only a rough number. In terms of quantity, I think I can share it when we are able to communicate through mail. I will communicate through mail on the correct number pieces.
Actually, the value is right at [ INR 327 crores ]. So the average price now is INR 135. So you can calculate the pieces.
But last year, the [ 5 crore ] pieces for about -- for INR 750 crores of sales in your [indiscernible].
INR 750 crores of revenue is, along with all the other operational income, exchange gain, the duty drawback and all put together. So the number, what I'm talking is purely on the export front.
Okay. But in the last quarter, you mentioned that your [ INR 160, INR 170 ] a piece in one of the earlier questions. So I'm just trying to figure out your [indiscernible] realization. I'm just trying to get a good sense, whether it is moving up, it remained stagnant.
Last year, FY '22, the Garment sales is INR 578 crores and exports alone.
All put together [ INR 740 ].
Correct. Plus they ship [ 5 crores ] so it is INR 160.
So the -- actually, the sales -- we are talking about is only export sales, but you are comparing with the all other income also. So that is the difference. If we compare it exactly with the -- only the sales part, the growth rate is about 20%.
So in the growth rate of per piece realization?
1 second, let me understand. Okay. See, last year, the cost from the -- I mean the sale value of the export is -- per piece is INR 116 for 5 crore pieces.
You said INR 116.
Yes. 517 divided by [indiscernible].
So where does -- how do you -- I mean INR 517 crores and your total sales Garment division was [ INR 742 crores ] right.
[ INR 517 ] crores Correct?
[indiscernible].
The sales of Garment thing is INR 517 crores, leaving spinning and [ dyeing ] revenue apart, only export division, Garment export. And divided by INR 5 crores is INR 115.
Sir, I'm not able to understand. I'm looking at your Slide 10 out of your -- on your presentation, which talks about Garment exports of INR 742 crores.
Export has bought backward -- it is backward integrated, and so we have realization.
It can be. But what is your per piece realization from your buyer? He is not looking at -- he is basically buying a garment from you, right, fully finished.
What is your doubt, please?
Sir, I'm trying to get what would your buyers be on a per-piece basis, and I'm trying to figure out whether that per piece realization due to a product mix or raw material cost escalation or better margins, how it is increasing, let's say, between '21, '22 and in the coming years.
I think you should, let's stop this entire here. You can talk to us separately, we will explain to you.
You contact us and I talk to you separately and explain you how things are arising. I think you are looking at this for the first time, so I'll explain you separately.
Sir, and my last question, if you can permit, just about a slightly longer-term period we are hearing that the Indian garment exporters are seeing very, very good demand from U.K. as well as U.S. There's also some discussion around treaty with the U.K. and given a lot of your export and your customers are in the U.K., what sort of volume growth do you think this business can generate, not just necessarily FY '23 but over a 2-, 3-year period? What -- how are you seeing this business develop, your Garment export business specifically?
So we have already given guidance in terms of the growth next 2, 3 years. So FY '23, we are looking at revenue growth somewhere around 20% increase. And going forward, it should be anywhere being 10 percentage to 15 percentage because of the complexity of the product. So we are looking at 10% to 15% revenue growth from FY '24 onwards.
Okay. And -- but despite.
This is the operator. Mr. Samir, if you have more questions, please join the queue afresh. [Operator Instructions] Our next question is from the line of Abhilasha Satale with Monarch Network.
Sir, you have mentioned that in FY '23, the average revenue what you would be clocking will be around INR 1,000 crores for the Garment division. And further volume growth you are guiding around 10% to 12% increase, with 70% utilization and that going up to around 80% to 82%. So the rest of the growth, another 20% growth will come from the realization product mix. How is it distributed?
Ma'am, if you recollect the last time our con call which we have explained that there isn't a significant increase in the cost. So there is some escalation in the cost given by the customers, which could be anywhere in 10 percentage to 12 percentage. And there will be an increase in the volume growth also. So as the previous person asked, there could be anywhere between 10 percentage to 15 percentage in terms of the volume growth. And because of the prices getting escalated, 10 percentage to 12 percentage growth could be there because of the price. So both put together that is why we said that it could be anywhere between 20 percentage to 25 percentage.
And I can add on to this, please bear in mind with there is a continuous improvement in our efficiency that will also take about another 5% minimum of increase in the output, which will automatically improve the growth. Realization, another one is increase in efficiency. The third one is increase in the price.
Okay. And what is likely to be our peak capacity utilization, is it like that 80%, 82% would be the peak utilization and then the addition of the 1,000, 1,500 machines will give us further volume growth in FY '24?
Our peak utilization can be anywhere between 85 percentage to 90 percentage.
Okay. Okay. So when we are seeing the demand is so buoyant and the -- India, there is a lot of inquiry, order book is increasing. Then why we are guiding so conservatively, and we also have a capacity?
So if you recollect the challenge piece is first, we said that our USPs on to children's product, where the entry barriers orders are on the higher side. Since we are in the niche segment, the skilled labor force is the -- is a challenge which we are managing. And we have -- we've already aligned with couple of skill development agencies to increase our capacity utilization, which as we were -- spoke about a couple of questions before, about increasing the capacity going forward.
So as we always says the getting the business is not as challenged as getting the capacity increased because it's a labor-intensive units, where we need to skill these, I mean, mostly women are employed. So that is something -- that is the challenge in this industry. So we are doing our best to -- our growth plans based on the capacity, always. The more the machine running, we can get the business, we can grow our business. So that's a model.
Okay. Sure. So 10 percentage to 15 percentage more like a sustainable volume growth over a longer period of time.
Our next question is from the line of Niraj Mansingka with White Pine Investment Management.
I think the question is on the capacity. How many machines do you have right now installed in your current locations?
All our locations, we have 5000 [indiscernible] of machines and our utilization, and our utilization level is up 72 percentage.
Right. So this -- when you say utilization, we do not use the second shift, it's just a single shift being utilized. And of that, 72% machines are being used. Is it the right way to look that?
Correct. Correct. You understand it right.
And when you -- and how many employees are there at the end of the year -- last year?
Last year, we have close to around 12,000 employees onboard.
Okay. But if I see the numbers, on a December quarter call, you had said 12,500. And the number of March, you're talking about 12,000. So has there been a fall in the employees in the company?
No, actually, like the people -- because of COVID, so many people didn't turn up. And this January, we -- the cleanup in terms of settlements having taken to people who have not returned back for a longer-term. So the members are now looking at 12,000.
Okay. But -- and so -- but our company has been struggling to get -- the number of employees addition. So how do you see this addition? I understand you have been contacting the agencies to get to employees. How do you see that employee increasing over the period of next 6 months or a year from now?
So don't get into a number of employees. For us, every machine has to be supported by 2.25 employees. So if I'm in 100 machines in one factory, then I should effectively have 225 people working in that factory, because you have the hiring work to be done. You have the help of cutting work to be done, you have to do the buttoning work. So you have to have the complete process in-house. So for us, for every machine, you should have 2.25 people working. And moreover, we are backward integrated. We have our value in facility with employees. We have our spinning people we can employ, which is all contributing to the number of 12,000.
But the reason I'm asking is only one. I'm just coming to the same thing that you have -- do you see your utilization going to 85% with 12,000 employees?
No. See, utilization is only because of the presence of the operator on the sewing machines. So utilization only, say, for example, if in 100 sewing-machine factory and I have 200 employees on role, and I have only 10 sewing operators coming, then only 10 machines can run. So utilization level and number of employees onboard doesn't matter.
Okay. So then -- coming to the same question, if it is not matching then, what is stopping you from getting 85% utilization? Despite you having orders in hand, you are not reaching to that level?
They need to operate it. So if I have to run one machine at first, I need one operator, and helpers, another 1.2. So if I don't have an operator, then I cannot use the helpers also.
So the same question -- the same question again. That are there shortage of operators? And how do you see the number of operators increasing over the next 1 year?
Yes, that's what we told you. We have to do an aggressive sourcing, manpower sourcing. We have to train them, and that's a major thing. That's a challenge.
Okay. Okay.
I mean your question is how can we grow, if we don't have the operators, correct?
Exactly, exactly. I'm struggling to understand that.
I never said, I do not have an operator, no. I said that I'm going to recruit. That's our continuous process.
So the question is, what is the visibility that you'll be able to hire because I know you have been contracting the skill people, skill agencies. So how much confidence do you have that you can hire employees so that your utilization can go up much beyond 85%?
That is -- that's an ongoing thing, gradually only we can do it because it's a lot of it ifs and buts for this. So I think it's a continuous process. I cannot give you a clear visibility.
Ladies and gentlemen, due to time constraint, this was the last question for today. And now I would like to hand the conference back over to the management for closing remarks.
Are we waiting for -- hello?
Sir, if you want to give some closing remarks, you can proceed.
Yes, please. Yes, so I think I have been able to -- we have been able to answer to most of the questions. If anything is still not clarified and still if you have any queries, please do not hesitate to call any one of us or e-mail us, we'll be able to explain in detail. Otherwise, thanks for your support. Thanks for the time you spent. Thanks for showing interest in investing in our organization. Please rest assured, as I always say that, this company is definitely in growth mode, and we are looking for great numbers in the next 5 years' time. Thank you.
Thank you. On behalf of Batlivala & Karani Securities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.