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Ladies and gentlemen, good day, and welcome to the Dollar Industries Limited Q2 and H1 FY '22 Earnings Conference Call hosted by PhillipCapital PCG Desk. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Dhiral Shah of PhillipCapital India Private Limited. Thank you, and over to you, Mr. Shah.
Good afternoon all. On behalf of PhillipCapital PCG Desk, we are glad and thankful to the management of Dollar Industry Limited for giving us the opportunity to host this call. Today, from the management side, we have Mr. Vinod Kumar Gupta, Managing Director; Mr. Ankit Gupta, President, Marketing; Mr. Gaurav Gupta, Vice President, Strategy; and Mr. Ajay Kumar Patodia, Chief Financial Officer of the company.First of all, I would like to congratulate Dollar management for delivering an excellent performance in this challenging time. And now without further ado, I would like to hand over the call to Mr. Vinod Kumar Gupta for his opening remarks and followed by a Q&A session. Thank you, and over to you, Vinod, sir.
Good evening, ladies and gentlemen. On behalf of the entire management team at Dollar, I welcome everyone to the second quarter and half yearly FY '22 post results conference call. After [indiscernible] Q1 which impacted a lot of states and citizens due to the COVID second wave, Q2 has come with great relief led by state-wise reopenings. Unlike last year, this year manufacturing companies were allowed to keep running their operations. However, manpower was not easily available through Q1, which impacted our overall sales as well progress of some of our projects. Coming to the positives. This quarter, as you all -- we have seen by numbers by now has turned out to be the mix of a quarter for us in terms of revenue. Our company declared it's best ever quarterly revenue of INR 391 crores in this quarter and EBITDA and net profit of INR 62 crores and INR 41.2 crores, respectively. As Q2 has displayed the bump up performance for all fronts, our thirst for growth is clearly visible in this quarter and we are looking to further improve on this in the coming 2 quarters to meet our targeted growth rates. On the working capital front, our overall working days have reduced from 270 days in September '20 to 178 days in March '21. This has now further improved to 161 days in September '21. On a year-on-year basis, the improvement was still on receivable which were down from 153 days to 109 days, while inventory has reduced from 131 days to 116 days. Our return on equity improved from 15.64% to 21.60%, while our return on capital employed improved from 43% to 33% -- 30% at the end of September '21. Debt equity ratio continues to stay in control at 0.26x interest coverage has improved to 32.6x. Our Project Lakshya also had more than 1.5 lakh outlets, while more than 40,000 outlets have been enrolled under this project. We have made significant progress in this quarter, having increased the number of distributors under this project by nearly 50% versus Q1 FY '22. As now, we have now got 91 distributors under Project Lakshya, and this is where we take revenue contribution from Lakshya distributors to 6% of the first half revenues. Our sales teams are back working hard to grow the business as well as to maximize the effects of Project Lakshya. I'm happy to share with you that we have just innovated our first EBO on 26th of October this year at Ayodhya in Uttar Pradesh. This is the first of 8 to 10 EBOs planned by us in this financial year. The EBO shall work on the FOFO model, and our focus will be initially to set up these EBOs in Uttar Pradesh and Rajasthan and moving to other states gradually. Another positive development during the quarter, as we said, we are now entering to channel financing arrangement with a large private sector bank which will help reduce our receivable as we will look to bring in all our distributors under channel financing. We continue to march ahead focusing on our 3 key pillars, namely, brand architecture, restructuring the distribution and investing in digitalization. I shall now hand over the call to Mr. Ajay Patodia, our CFO, to discuss about the financial performance of the company during the quarter. Thank you.
Thank you, Vinod, sir. Good evening, everyone. Welcome to quarter 2 earning call of Dollar Industries Limited for financial year '22. Now quickly updating on the financial performance. The company's total revenue for first half of September '21, we stood at INR 596.5 crores and INR 391 crores in this quarter as compared to INR 417.56 crores in last 6 months up to September '20 and quarter 2 of FY '21, around INR 257.93 crores, a growth of 42.86% for half yearly basis and 52% per quarter basis. The EBITDA of the company for half year stood at INR 98.25 crores and for the quarter INR 62.02 crores as compared to INR 64.5 crores for half year '21 and INR 35.67 crores for December '20. Growth of 53% for half year and 74% for quarter FY '22. The profit before tax of the company for half year up to September stood at INR 87.39 crores and for the quarter, around INR 56.34 crores as compared to INR 51.97 crores and INR 29.93 crores for half year and quarter 2 FY '21, a growth of 68.15% for half year FY '22 and 88% for quarter 2 FY '22. The profit after tax of the company for half year stood at INR 64.36 crores. And for quarter FY '22, INR 41.25 crores as compared to INR 38.80 crores for half year FY '21 and INR 22.36 crores for quarter 2 FY '21, a growth of 67% for half year FY '22 and 84% for quarter 2 FY '22. Now moving on to brand-wise contribution for half year FY '22 vis-a-vis half year FY '21. Big Boss stood at 42% versus 41% in last year. Champion, 0.41% versus 0.39%. Dollar Socks remained at 1%; Force Go Wear, 1%; Force NXT, 3%, a growth of 1% from last year. Missy, 8% from 6% last year; [indiscernible] 0.15% from 0.06%. Regular brand, 34% from 37%. Our total Thermal sale is around 10% of the revenue in first 6 months as compared to 9% in the last year. I now open the forum for question and answer.
[Operator Instructions] The first question is from the line of Ankit Babel from Subhkam.
Congrats for an excellent set of numbers. Sir, my first question is on your working capital, again. So you did mention that the channel financing has been started and you expect 100% of the distributors to come under this channel financing thing. But I need to know that time lines are there -- when you expect full coverage of your channel financing amongst all your distributors, sir?
Yes, Ankit. Ankit here. So with respect to our total number of distributors, which is currently around 1,000-plus distributors. And during the month of September and only we got into the contract with the private sector bank, regarding the channel financing. And we are very optimistic that within 2 to 3 years time, we'll be able to cover the entire population, like the entire number of distributors that we have. So we'll first start with the Lakshya distributors also because when we appoint a Lakshya distributor or when we enroll a distributor under this particular project, we have a higher bargaining power with them. We keep our condition. So from now on, this will be our foremost condition with respect to channel financing with them. And apart from that, we'll be pitching to all our distributors in a phased manner. So the distributor who is more distressed, we'll approach them first. We'll try to convince them first. See, it's not an easy task to bring a distributor on board, right? It's easy to say, but when we implement it, it's really very difficult to get them on board. So a lot of convincing would be required from our side as well. And that's why Mr. Patodia is making the team under him to drive this particular project. So like in 2 to 3 years' time, we should be able to get maximum of our distributors on board.
So even if you get 80%, 90% on board, where do you see your receivables after that?
It would be -- see, if we bring 80% of our distributors on board. So our overall debtors would reduce by what maybe 60%, 70%.
No, in terms of days. So currently, it is around 90 days. So you believe it will come down to, say, 25, 30 days?
Definitely, it should come down to that particular level because the distributors will get enrolled in channel financing, we are getting the payment in day one. As soon as we bill to the distributor, we get the payment from the bank, right?
Yes.
Yes. So the remaining distributors who would be around 25%, odd distributors who are less. So their receivable days -- yes, overall, at a company level, if you see the receivable days would come down to 20, 25 days. It's easily possible, once we get everyone on board.
Okay. And your current inventory days is around 116 days. Now where do you see your inventory days once you achieve your this INR 2,000 crores sales target by FY '25?
So overall, what we aspire is, if you see at the industry level, also, all the listed players in this particular industry, either 95 days is the optimum point that inventory will be there. Because we deal in men, we deal in women, then there is kids segment. And the n number -- and also, if you see that -- the total number of SKUs that we carry is a new number. And day-on-day, we are increasing our product range also, like in Dollar, we are going ahead with the lingerie segment.We are increasing our number of sites that we have in our athleisure range. From next year onwards, we'll be focusing on kids range as well. Apart from that, if we distinguish ourselves with the peer group also, we have the entire backward integration, which none of the other companies have. So we have large stocks over there as well. So in the filing mill, our stock would be -- raw material stock would be what, the cotton. So we have to store a huge amount of cotton as well. So what we see that 95 to 100 days should be the point where we would aspire to come down to. Currently, it's around 116 days. So over 2.5 years time period, we'll aspire to get down to this 95 to 100 days level.
Okay. So just to conclude this working capital part. So 95 days in inventory and the 30 days in receivables, and you have a trade payable days of around 50 days. So on net working capital, you are targeting at around 75 to 80 days. Is the calculation right, sir, over a period of 2, 3 years?
If you look at this last call that we had, the kind of guidance we gave was in FY '24, '25, what we aspire is 120 days, right? So 120 days, we said when we were in talking terms with the channel financing partners. And currently, just the numbers that we have gotten into is solely based upon how many distributors are onboard with respect to channel financing. We are giving our 100% -- 200% to bring all the distributors on board with us. .In respect of -- with respect to debtor days coming down, receivable days coming down, right? So it's all contingent upon how many distributors come on board with respect to the channel financing. But -- so if 80%, 90% of the distributors come on board, then your calculation is obviously right. But I would still maintain the same that by '24, '25, we aspire to be at around 120 days level.
Okay. Sir, my second question is that now definitely, this channel financing will come at a cost. So -- and earlier you had guided that at around INR 2,000 crores revenue, we'll do somewhere around 18% margins. So after taking this cost also you believe that you can do an 18% kind of an EBITDA margins when you achieve your this INR 2,000 crores sales target?
So what we have said was the EBITDA level would be around 17.5%, 18%, that's correct. But see, in channel financing, what would happen is, obviously, it will come with the cost, we have to incentivize our distributors also. But see -- but that we can, over time, gradually that we can build in our listing only, the pricing market because we still have a gap from our competitors also. Like before also, I said that we have a price gap of around 2% to 3% from our peer groups. So we'll try to cover that also plus building the expense ended that we have to give to the distributor. So yes, by '24 '25, we are very much hopeful and we'll be able to achieve the guidance that we had already given.
Okay. That's helpful. And sir, my last question is that, historically, your Q3, Q4 has been better than your Q2. So you have already at a run rate of around INR 400 crores now. So can we expect this run rate to continue in the coming quarters? And with that, would you like to revise your earlier guidance of just a 15% growth in this year?
So the guidance that we'll give would be around 15%, 16% overall growth, we won't be changing it. That the reasons are, basically there are 2 to 3 reasons. One is the volatile market in terms of the raw material because the yarn availability is an issue in the market, that rising prices is an issue. So one is that. The second would be the government regulations because from January onwards, they are they to revise the GST structure for our products for the textile industry and the hosiery industry as well. So these are the 2 dynamic variables that have come into the picture plus the rumors about the third wave and the COVID not been going. So we don't know how the market will react or how the situation would be by the end of third quarter or the fourth quarter starting. So overall, we won't be able to change our guidance, maybe 1% or 2% here and there.
[Operator Instructions] The next question is from the line of Bajrang Bafna from Sunidhi Securities.
Yes. Congratulations. Terrific set of numbers by the company. So Ankit, again, I think everybody is going to try to understand more on your guidance part and how things look like going into Q3 and Q4. So since you guided there are a couple of moving parts to the future growth trajectory in terms of wave 3, which is perhaps experts are guiding as of now that since most of the country is getting vaccinated, so even if it comes, the impact is going to be pretty limited. And second, on the GST part, which you highlighted that are by January, I think the rates are going to be revised in the higher side, and which we have some impact on the unorganized part which could come into play. So even then if we see in the first half, we have achieved INR 600 crores kind of top line and our margin is again closer to 17%, which is a 15% guidance. So you want to keep yourself safe by saying that we'll be at our earlier guidance of INR 1,200 crores. But looking at the momentum and the circumstances and since the product sizes have gone up, so end of the day, the value criteria will be higher for the company. So if you could break it up in terms of the volume part also, will be really helpful?If assuming there is no third wave aspect and no meaningful impact from that? So considering the normal circumstances, what could be the growth trajectory? And how are you seeing the impact from the GST side from your own conviction will be helpful?
Hi, Bajrang. So overall, if we talk about the EBITDA levels, the profitability of the company. Earlier, we gave a guidance of around 14.5% to 15%, which we are hopeful that we'll be able to do 15% to 16% this year, this particular system given the results that we had in the first half. Apart from that, in the revenue side, maybe from 14% to 15%, we can give a guidance of 15% to 17%. Because we don't want to overcome it since the market is very volatile as there are a lot of variables that are there in the market, right? So we really don't want to overcommit anything and underachieve. Instead we'll still be under committing and overachieving.
Got it. Got it. And can you give some color on the festive demand, which is going right now in terms of your, the Durga Puja, which has gone recently and now the Diwali, which is -- again, there are n number of photographs that we are seeing that the people are -- whether they are in a buying mode or in a corona, buying mode nobody knows. But there is a humongous crowd on this street, and we have heard from a couple of distributors that they are on the textile side, are completely running out of stock, the kind of demand that they are seeing after an null of, let's say, last almost 1, 1.5 years. So are we seeing similar sort of demand for our products also when we'll talk about the general market and the festive season?
So the demand has been really, really good. And that's why we were able to achieve this kind of growth in quarter 2. We had a volume growth of around 21% this particular quarter. So it's not just the value which has driven up the growth levels of 52% for this quarter, it's also the volume growth that we have got.So it is majorly the athleisure sale that we had. Apart from that, we saw a very good sale in terms of Missy leggings and which was not there last year, which took a great hit last year. Apart from that, we were able to maintain sales for the Socks range also, which took a hit due to the COVID pandemic. And also Force NXT. So if we talk about Force NXT, we saw a growth of around 40% during the quarter. And in 6 months, we saw a growth of 43%. So this is the kind of growth that we saw during the quarter 2. And the athleisure range for Force NXT, the athleisure range in Big Boss we saw huge growth in that. The Thermals which was 9% last year, was that 10%, this particular half yearly. So we are seeing a good traction in Thermals also. It does that -- there's no speculation going around. There's a [ conversation ] that this year, the winter would be harsher and it would be -- but the winter would be colder this particular fiscal. So we are hoping for a very good winter and the Thermal sales should shoot up in quarter 3.
Got it. But any new category that you're looking at because our -- the major brands like Big Boss and Dollar, which contributes close to say 80% of our overall turnover, which are slow moving or slow-moving growth, but the higher growth you are seeing in Missy and Thermal and maybe this NXT brand of the new generation, the premium products. So how do you see that portfolio moving going into maybe next 2 to 3 years perspective. Can this be a sizable number closer to, let's say, 30% from current 20% contribution over next 2, 3 years time frame?
So Missy and Force NXT taken together is about what, 11%... .
Thermal also, Thermal also.
Yes. So the Thermal contribution overall is around 9% to our sales. So that comes to around 20% overall currently. Yes. In 3 years, 4 years time -- time period, we can move up to 28%, 30% kind of a contribution from these particular brands. So we are very hopeful that Force sales would grow at around 35% year-on-year for next 2, 3 years. And Missy would grow around 20% and 30%.
Okay. Okay. So I think best of luck because most of our parameters, whether in terms of top line growth or in terms of margin trajectory, in terms of working capital, I think we are all moving in the right direction in terms of high ROE and ROCE in days to come. And I wish all the best for your future growth perspective.
The next question is from the line of [ Moksha from Moksha and Associates ]
First of all, I have to congratulate you on a great set of numbers.
Okay. Thank you.
Okay. So I have just a small question. So I just got a news that you opened your first EBO in Ayodhya, U.P.So I wanted to ask like how are we planning it forward, like, are we going all in on EBOs or are we going for a slower kind of growth?
So we are -- we'll be opening 8 to 10 stores this particular fiscal. All these stores would be on FOFO model. So the company investment is the least when it comes to EBOs. And we will watch those EBOs for like 3 to 4 months. We'll observe the working because we are not into retail currently. We are trying to move towards that like opening EBO and interacting with the consumer directly. So that is a new model for us. So we don't want to goof up in the very first time. So we'll observe their working for, like 3 to 4 months. And if everything goes well, then over a 3-year period, we'll be opening around 75 to 100 EBOs.
[Operator Instructions] The next question is from the line of Vaishnavi Mandhaniya from Anand Rathi.
Just a quick question on the channel financing. We had done this earlier as well, right? Historically, we had tried to implement this across our distributor network, right? So what is the difference between what we were doing then and versus now?
Vaishnavi, this is Ajay Patodia. Previously, we had the channel financing scheme we signed with SBI, State Bank of India, but there is some problem with the -- in the system. There is a time -- more time taken for sanctioning the loan. But this time, we have [ made our intent ] with the private sector bank, ICICI bank. And the platform is fully digitized. There is a time gap of only 35 minutes. If a dealer applies for the facility, within 35 minutes he get the sanction or rejection. If rejected, there is a reason behind it, if there is any -- which taken CIBIL or any type of ranking. But in this model, it is fully digitized and very simple to join the scheme. So we are very hopeful that this is very beneficial to our dealers.
Okay. And any update on the Lakshya, Project Lakshya. I think we did say that we have 491 distributors under the project currently, right?
Sorry, can you just repeat the question?
Any further updates on Project Lakshya, I must have missed your beginning remarks. I think that you said that there were 491 distributors under the project currently, right?
No, no, no, it's not 491. So last -- by last quarter, like the first quarter of this fiscal, we had around 60 distributors who got enrolled with us. And during second quarter, we added around 31 new distributors under this particular project. And by the end of this fiscal, it would be somewhere around 125 to 150 distributors under this project.In 3 years' time, we are aspiring to complete this particular project in 3, 3.5 years' time. So the new sales that we are opening for this particular project is Bihar, the entire Northeast and Andhra Pradesh. So these are the few states that we have started working on. And apart from that, we were already present in Gujarat, Maharashtra, Rajasthan, Karnataka, Telangana.
Okay. And one last question. Can you please just like the gross margin decline that we had in this quarter, right? The reason for that?
So our advertisement expenditure was a bit high in this particular quarter. The overall -- the cost of material consumed was a bit high than quarter 1 due to higher production and the Thermal production and everything. So these are the few reasons and the difference is not much. So this particular quarter, we did around 15.86% against 17% last quarter.
The next question is from the line of Ankit Babel from Shubkam.
Sir, just a follow-up this channel financing, will it have a recourse on Dollar Industries?
Yes. Ankit, so yes, there will be a recourse. But the thing is that our each and every payment is being secured through the [indiscernible] that we have. So there will be no bad debts coming on to our books. And we are totally secured in that particular respect.
But I mean there would be a debt -- no still debt in the balance sheet to the amount of channel financing done because of [ IndAS ] right? Is my understanding right?
No. I think only the liability part is in our balance sheet, not the -- because the -- in channel financing, the bank sanctions the loan directly to the dealer. And we are the secured by our deal trader agent. So in this case, I think that...
Okay. Secured by our agent?
Yes. Yes.
Okay. So recourse is basically on the agent and not on you?
Not on us, true, correct.
Okay. And sir, sorry, I missed that part, which I asked earlier this -- as we discussed that there will be some cost which would be there in this channel financing. So the guidance of 17.5% to 18% is after considering that cost?
Yes. After considering all the costs, we are the target of around 17% to 18%.
Okay. And sir, you also mentioned that it is easier said than done to include all the channel partners under this channel financing. So what is the reason for a protest? I mean, why a dealer will protest for it?
So what happened is, Ankit, these distributors in our particular trade are mainly unorganized. So they are more comfortable to work with the company directly instead of dealing with the bank. So once the bank comes into picture, they are very much afraid about the mortgage part or the bank taking over the interest, the paperwork that comes along with it. So they're not used to doing all those stuffs right now, currently. And this is true for all the distributors in our industry, whether it be for a Dollar distributor or any other peer group distributor. So most of the distributors are unorganized. Now we are seeing that new distributors are coming into this field who are originally from maybe real estate or FMCG, or any other trade. So the other trade distributors who are coming are much more organized than the original distributors who belong to this trade.
So it's just an operational [ task ] there won't be any financial loss to them?
No. It's just that some paperwork from the bank side or the interest calculation that they have to pay to the bank. Currently, it's very easy. They pay to the company, and there is no interest being charged for late payment, right? But for the bank, even one day would matter. So this is the only problem. I think this is the only reservation that the distributor has.
Okay. So so far, whomsoever you are discussing with, how is the response, I mean?
So we have just signed it. We have -- so the -- all the onboarding would start from the month of -- from this month itself, like from November month itself. So if we're pitching to the distributor from this particular month because the platform was getting ready with the bank, and they were onboarding us on their platform first. So the agreement part has just completed and all the back-end integration has been done. Now from this month onwards, we'll start onboarding the distributor.
So when the bank is doing a discounting, they consider the credit rating of the distributor or the agent to whom the recourse is there?
They first check the CIBIL of the distributor. If the CIBIL is correct...
So if the CIBIL is not good, then?
Then the case is rejected. And even we don't want that, if any dealer who is defaulted in payment to bank will be...
Your distributor.
Yes.
It has nothing to do with the CIBIL of the agent?
No, no.
So the agent will just act as a guarantor?
Yes.
As a new guarantor?
The next question is from the line of Akhil Parekh from Elara Capital.
My first question is on Project Lakshya. We say that 9% -- almost 90 distributors are onboarded on the Project Lakshya. [ Math ] is around 9% to 10% of the total distributors, while the contribution of sales for this distributor is only 3%. So could you help us explain the discrepancy? Is it that we have onboarded distributors who are not contributing significantly at this point of the time towards the business?
Hi, Ankhil. Ankit here. The total contribution in sales is 6%. And the number of distributor is around 91 distributors who have got onboarded. The number of distributors who got onboarded in the month of September itself, is around 10 -- 10 or 12 distributors got onboarded in September. It takes generally around 3 months' time for a distributor to get settled down and to get stabilized. Because the -- all the enrollment process or the people, the sales team going to the retail point enrolling them and then bringing them on the platform with respect to whether it be telecallers or the order replenishment system model, the beat plan. So it takes around 3 months' time for a distributor to get stabilized. So if I say that 91 distributors have been enrolled into this particular project, I mean they have just started working. So there are a few distributors who have just started working. So their datas would be a bit on the lower side, if you see. And with 1,000-plus distributors, it's almost like neck to neck. So 7.5% kind of a distributor versus 6% of our total sales. And by the way, this 6% of total sales, the total sales under this particular project is not the old sales which have been converted into Lakshya project sales. It's the sale coming from the new areas also where we have made new distributors under this particular project where we were not present earlier.
Okay. Okay. Yes. So that's an incremental sales.
Yes, yes, that's obviously the incremental sales for the company.
Got it. Second question is on the cotton prices and the price hike, if at all, what we have taken during the quarter and for the quarter 2?
So during the quarter, we didn't take much of a price hike. And going forward, yes, there will come a situation where a price hike would be necessary because of the rise in prices. And it's -- so actually, we don't plan to increase it very recently, to be very honest. Let's say, how the purchases go during the mid of the month and yes, there may be a requirement of taking a price hike in the month of December, but not currently.
But as of now cotton prices are stable right now or they are still, I mean, changed?
They are still unstable currently. And it's on -- we can see a price hike in terms of yarn prices and the cotton prices as well.
And how much of inventory we are holding right now in terms of the cotton inventory?
Cotton inventory, it's around 1.5, 2 months cotton, I think, we have on our books. I will get back to you on this, Akhil. I'm not very much sure about the number, but it should be somewhere around that only.
Got it. And just one last clarification. In terms of the brand-wise contribution, I missed how much was for Force brand, please.
Sorry?
The brand-wise contribution for Force for this quarter versus last year?
So Force NXT was 3% with respect to 2% earlier.
The next question is from the line of Sonal Minhas from Prescient Capital.
This is Sonal Minhas. I have 2 questions.First one was regarding the terms of your channel financing. I just wanted to broadly understand what margin do you leave on the table as a trade-off for the data days going down for you? That's the first one. If you could answer that, I will then go on to the next.
Currently, we have the credit rate for our distributor is around 45 to 60 days. In channel financing, whenever distributor is joined with our scheme, we get the certain incentive in the bill also. And he has to pay within the -- and once the bill is generated, we get the payment from the bank side. And there is very minimum interest rate for our distributor, which he is to pay to the bank. If he pay direct -- if he pay the bank within 5 to 10 days, he get the full incentive on his account. Otherwise, the interest rate is almost half of the total incentive.
Okay. Got it. So sir, just asking this out of curiosity that these incentives could have been done on your balance sheet in the past? I know you are new with the company, but just understanding and you've done this earlier as well. Typically, like the new disciplined dealer/distributor on working capital, there is a lot which starts behaving and there's a lot which doesn't want to accept this. So I'm just trying to understand where are we in terms of our practice of reducing our working capital as to -- is this the last resort left for us because we've been doing Project Lakshya, we've been trying to do channel financing. And we've been trying to discipline our dealer distributors to actually pay on time and then maybe take a higher percentage of margins, right? So this financing is a way, but I think fundamentally, at a business level, I just want to understand where are we in terms of our discipline of our dealer distributors to pay us actually?Because can we control -- if we can control them, we can control them through whatever we do on our own or through Project Lakshya or through bank finance as well. So this is just a way to execute this -- the scheme. So just asking this to understand this more.
Yes, Sonal.
Yes. So Yes. In our Project Lakshya, the credit period is around 45 days, which our -- which unlike our traditional business, where we have around 60 days credit period. And currently, in Project Lakshya, the average number of days of payment is way lower than what we have in general. So currently, we are standing at around 109 days. So in Project Lakshya, it's around 55, 60 days. And that is only due to the kind of lockdowns that we are seeing during the Phase 1, Phase 2, which really slows the payment from the retail market to them. So first in channel financing, what happened is we -- there is a proper SOP that has been made and the distributor has to follow that particular SOP. Plus, we have a lot of conditions also, which is different from the traditional business that we do. So in that particular terms and conditions...
My question to you is let's take your top 5 distributors, which make up your -- a large part of your sales. And where are they in terms of their debtor days right now? And if we were to bring them to 60 days or to 45 days under Lakshya. Lakshya is being more conservative on numbers there, or lower on numbers there. What would it actually mean to your business? This is what I'm trying to understand. So I don't want to look at the tail of your business through Project Lakshya, which is very small in terms of the impact on the top line. Let's look at the head of your business and look at your top 5 bigger distributors, distributor, sorry. And where are they in terms of their credit because you say we typically give 60 days, but you're sitting at 109, 115 days. So what does it actually entail to bring them under maybe channel financing, maybe Lakshya? Just want to understand that.
Yes. So what happened is typically the big distributors that we have, currently, they occupy around 2 to 3 districts among them, right? First part is they cover a bigger area than what we actually give it to a Project Lakshya distributor. So currently, we are not touching them. Because they are a good part of our sales, right? We don't want to take a big risk until unless we cover or we generate equal amount of sales from the surrounding areas. This is the first part. The second part is their data days would be around 110 and 115 days. I wouldn't deny that. And that's why the whole receivable days is skewed towards that number only. So the big distributors are also paying late. I won't deny that. But once we plan to bring them on board, so what we did with the old distributors who were onboarded into Lakshya projects, is that we gave them a time frame of around 1 month, 2 months' time. We told them to bring the overall credit to a particular limit. And then only we started those distributors. It's not that if a payment cycle is being disturbed -- is disturbed for a particular distributor, we can just start the Lakshya project for them. So we have made a criteria that if you come down, we give them 2 months, we give them the ultimatum. We tell them if you want to take a bank loan or the working capital loan from the bank, you can take that. But within 2 -- 1.5 months' time or 2 months' time, you have to come down to 60 days, then only we can enroll Lakshya to you, otherwise, it's a no-no for us.
Okay. So tell me, what is the resistance of them actually moving down to 60 days, forget bank financing, forget Lakshya. So today, if you, as the promoter of the company goes to them and say, sir, you've been giving money bring me back in 110, 120 days, roughly. And this is the margin I give you. I -- and this is just for the sake of building an argument. So throwing the numbers. So let's say, I give you 3 more percentage points, 5 more percentage points on margin. And you come down to 60 days. What is the nature of the discussion with them?I just want to understand, would they -- and if they won't, why won't they as of now? With the financing and Lakshya are [ execution pieces ] but you can do this even without these write-offs by putting more margin on the table actually. So just trying to understand that.
So let me give you an analogy. So if there's a thief in Singapore and there's a thief in India. So the thief in India would be much more relaxed. And the one who would steal things in Singapore, maybe UAE, Dubai, they would be in much more bad shape due to the only fact that the system -- the police department is how strong, that's the only criteria, which really -- which is a real criteria for the thief also. [Foreign Language] So the same analogy is over here as well. The distributor when they come into a regime or a design with the bank where they have a stricter policy, they would behave in a particular manner. But as soon as the company is targeting extra discount without proper policy in place, or even though we keep a policy, we make a policy for them, they know that in the past, it has happened, we have moved from 75 days to 130 days. Because before demonetization, if you see our numbers, it was around 75 days of total receivable days. So which has now increased to 130 days. We were been liberal with them. We didn't take a hit on our sales.
Basically in your analogy, you are saying you've outsourced the police job, eventually, right? That is exactly what you are saying.
No, no, that was true for most of the industry who used to deal with the consumer durable. So there was a point in 2018/'19, where there was a huge liquidity crunch in the market, where everyone all the companies had of bad debtor days. The receivable days role in that particular period. And the company who could take a hit on their sales was able to control the debtor days. Otherwise, the debtor days increased on every one at that point of time. So when they know that of the -- they can get some kind of a liberty from the company, the company doesn't have an option because they have good sales in their particular area. So that's when the bargaining power of the distributor is higher, that's what creates a problem. So in Lakshya project, we are trying to bring that particular bargaining power into check and maintain the company's bargaining power. Keeping the company on the upper hand in that particular syatem.
I appreciate the analogy. I think that explains, that explains. So just trying to underpin these large top 5 data distributors. From a disclosure perspective, if we could just talk about in your disclosures not taking leaps that the second calls that have we moved the needle for the top 10, top 15, maybe that will help us to also understand that are we moving the mountain here or are we actually moving the tree, I think, that's one. And secondly, I just want to understand, do you -- these large deal distributors, do they deal with your competitors, I'm assuming as well? And they have similar issues with them, too, sorry, your competitors have issues with them as well? Just asking out of curiosity actually here.
Yes. So basically, most of our distributors are exclusive to us. They don't deal with the peer group, mostly the big distributors that we are talking about. So I wouldn't be able to comment upon how they deal with the competitor and other peer companies. Apart from that, yes, we'll take your advisement into consideration that now that we'll be onboarding distributor for channel financing, we'll also talk to our big distributors who are willing to come to channel financing or not? And maybe in the next quarter results or like maybe 1, 1.5 months after if you want to -- if you want to have a follow back up on this, we can surely give you the results or like what's happened, did not tell you what happened with that.
Sure. I think we're just looking at 80-20, then the 80% of the puzzle, then actually 20% of puzzle may help us see how you are moving in your working capital cycle. That's all. You've been really helpful on this. Sure.
The next question is from the line of Devanshu Bansal from Emkay Global Financial Services.
Congratulations on a big set of numbers. Sir, you sort of indicated that realizations have improved about 30% in this quarter. Can you help us by -- can you break this up into the price hikes that you have taken and what has come through the product mix change?
So out of the 52% growth that we saw in this particular quarter, 21% was the volume growth and 31% was the value growth. The overall ASP of the company was INR 67 vis-a-vis INR 66 last year, second quarter. And for our half yearly figure, if you see it's INR 64 vis-a-vis INR 54 last year.
So broadly, 20% of this has come from price increase and 10% order has been due to product mix?
Sorry.
Broadly 20% has come from price hikes and 10% through product mix. Is that correct?
Yes, due to product mix, right, right.
Okay. Secondly, I wanted to understand this challenge which you indicated in terms of GST increase in January '22. So given the condition, do you think that we'll be able to pass on the entire price increase or we have to absorb some of that?
No, we'll be able to pass it down the channel. So we don't have to like absorb it in our books.
And how much of that increase would be, sir?
That's uncertain right now because the government has not made any announcement with respect to the GST slab that our industry would be in.
Sure. So I wanted to understand since we have already taken over the last 2 years, we have taken quite a bit of price hike. So -- and this incremental price hikes, won't it affect the demand for our products?
So whenever -- what happened is if there's a price hike in the raw materials and which is a very substantial hike. So we have got no other option but to pass on to the consumers. Is this that -- till now we are able to pass it on very smoothly, and there has been no resistance from the market. And in fact, after increasing 20% till April of this particular year, we still did a very good second quarter vis-a-vis last year second quarter. So we are very hopeful that the overall demand wouldn't change much, shouldn't change much.
Mr. Dhiral Shah, you can go ahead with your question, please.
So my question is what was the at athleisure growth which we have seen on a Y-o-Y basis?
So athleisure contribution is around 12%, this particular half yearly. It was somewhere around 10% contribution last year.
Okay. Okay. And sir, on the EBO side, what was the ROI for our franchisers? And what will be the minimum investment required in this? And who bears the inventory risk?
In the EBO part?
Yes.
EBO is a completely FOFO model, wherein all the CapEx investment is being done by the franchisees. The total amount for a store of around 500 square feet would cost around INR 10 lakhs to INR 11 lakhs, the CapEx expenditure. So if we are doing -- so there are 2 models. There is one model where the products would be sold on an SoR basis. And there's one model, which is a outright basis, wherein we'll provide some small amount of stock collection in 6 months' time. So the first store that we have opened is on outright model. And the realization for the company would be much better than what we have in our traditional sales.
Okay. And sir, on the modern trade side, what was the growth we've seen in online channel?
Around 75% to 77% kind of a growth that we have seen over last year.
Okay. And sir, lastly, on the export side. So what was the contribution from the export? And what was the growth register?
So overall, export was around -- from a half yearly -- on a half yearly basis, we saw around 32% growth from last half year. So last year, 6 months was around INR 20 crores, INR 22 crores, which was around INR 30 crores this particular half yearly.
Pardon, sir, this year it was INR 22 crores.
Last year, it was INR 22 crores. This year, it was INR 30 crores.
Okay. And, sir, what was the ad spend in H1? And the volume growth for H1?
The volume growth was around 21% for -- sorry, 16% in H1. And advertisement expenditure for 6 months was around INR 32 crores -- INR 32.74 crores, which was 5.49%.
And for the full year, sir, we are restricting it to INR 65 crores to -- maybe INR 60 crores to INR 65 crores, right?
Yes, around INR 55 crores to INR 60 crores.
Ladies and gentlemen, this was the last question for today. I now hand the conference over to the management for their closing comments. Over to you, sir.
Yes. I take this opportunity to thank everyone for joining this call. I hope we have been able to address all your queries. For any further information, kindly get in touch with us. And thank you, thank you once again and a very, very happy Diwali to everyone. Thank you. Thank you very much.
Thank you. Thank you, members of the management. Ladies and gentlemen, on behalf of PhillipCapital, PCG Desk, that concludes this conference call. Thank you for joining us. You may now disconnect your lines.