K
Kaya Ltd
NSE:KAYA
Kaya Ltd
NSE:KAYA
Price:
344.2 INR
-0.36%
Market Closed
Updated:
Apr 29, 2024
Section:
Earnings Call Analysis
Summary
Q3-2024
Q3-2024
Kaya Limited Shows Strong Q3 Growth Despite Middle East Impact
Kaya India continued its robust growth in Q3 with a clinic revenue increase of 19% year-over-year (YoY), and product business in clinics rising 26%, reflecting a successful brand refresh strategy. Customer interactions benefited from the highest Net Promoter Score (NPS) ever at 86. Investments in new products and remodeling of clinics improved collections significantly, with new clinics growing at 73%. Despite geopolitical issues in the Middle East, causing an 8% revenue dip, overall consolidated revenue grew by 2% to INR 102 crores. EBITDA saw a 67% increase to INR 11.2 crores, while losses narrowed from INR 17.6 crores in Q3 last year to INR 9 crores.
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Ladies and gentlemen, good day, and welcome to Q3 FY '24 Earnings Conference Call for Kaya Limited hosted by Dolat Capital. [Operator Instructions] I now hand the conference over to Mr. Sachin Bobade from Dolat Capital. Thank you, and over to you, Mr. Sachin.
Thank you, Manav. On behalf of Dolat Capital, I welcome you all to the Q3 FY '24 Earnings Conference Call of Kaya Limited. Hope you all and your family members are staying safe and healthy. From the management side, we have with us Mr. Rajiv Suri, our Global Chief Executive Officer and Managing Director of Kaya Limited; Mr. Rajiv Nair, Chief Executive Officer, Kaya India Limited; and Mr. Saurabh Shah, Chief Financial Officer.
Now I hand the floor to Mr. Rajiv Suri for his opening remarks, and then we will have question-and-answer session. Over to you, sir.
Thank you. Good morning. I would like to welcome you to the quarter 3 conference call on the company's behalf. The investor presentation has been updated on our website, kaya.in, and contains the financial key metrics and business updates. I hope you have had a chance to go through it.
Let me begin the conference call with highlights for the quarter 3 performance. Starting with Kaya India performance, the company maintained its strong revenue growth trajectory in clinics, which grew at 19% versus quarter 3 last year. And on a YTD basis, had 17% growth versus last year. This growth indicates that our brand refresh strategy is working, which, in addition to the highest ever NPS at 86 is having great customer acceptance, which in turn is driving these positive results. The product business in clinics grew at 26% versus quarter 3 last year, mainly driven by categories like hair care, skin care and nutra and our new omnichannel initiative. On a YTD basis, product growth has been at 24% versus last year, reflecting our product growth strategy is working. Quarter 3 clinic collections were strong at 11% versus last year. Collections from body witnessed 109% growth and beauty facials at 29%.
Moving on to our strategic growth pillar updates. New product development contributed to 18% of the product business. Nutraceuticals contributed to 20% of the product business. And as part of our brand refresh, we relocated one clinic in quarter 3, making it 4 clinics for the year. This relocation clinics had a growth of 73% for the quarter. We renovated 11 clinics on a YTD basis that witnessed a growth of 16% in collections versus last year in quarter 3. To uplift customer experience and outcome, we invested in 39 new derma technology machines, including anti-aging, acne scar and hair care, making it 102 new technology machines for the year. On the people front, we attained notable success by clinching 3 esteemed awards, Best Brand of 2023 by ET. This achievement is a testament to our commitment to excellence. Kaya also won the prestigious customer-centric L&D Award at the HRAI. And also, Kaya proudly achieved its 5th Great Place to Work certification, a renowned gold standard in workplace culture assessment, recognizing our commitment to excellence.
Now going on to the Middle East business. On a quarter 3 basis, the performance for Middle East was impacted due to the geopolitical situation, which flared up in the region in October, which impacted the performance for the full quarter. October was at a double-digit negative. And the situation now, however, is stable, and we are witnessing a recovery. The productions were at INR 52 crores and declined by 8% versus quarter 3 due to this geopolitical impact in the quarter. Net revenue declined by 8%. However, product revenue grew by 13%.
On the financial performance, Kaya Limited posted consolidated revenue from operations of INR 102 crores for quarter 3, a growth of 2% over corresponding quarter, largely impacted by the situation in the Middle East. Consolidated EBITDA grew by 67% for quarter 3 at INR 11.2 crores as compared to INR 6.7 crores in quarter 3 last year. Consolidated loss after tax and exceptional items for quarter 3 stood at INR 9 crores loss as compared to a loss of INR 17.6 crores in quarter 3.
As you may be aware, our CFO, Mr. Saurabh Shah is leaving Kaya at the end of next month after completing 7 years of service. The company would like to thank Saurabh for the excellent work he has done. We wish him the all the best in the future. The Board at its meeting held yesterday appointed Mr. Arihant Dhariwal as the CFO, who would take over from February 29, 2024. Arihant has been in Kaya for 5 years, and we are expecting continuity to stability with his appointment. The detailed financial information update is already with you in the uploaded investor presentation, and you may refer to that for additional information on the performance.
I now open the session for questions and my colleagues and I will be glad to answer them. Thank you.
[Operator Instructions] We have our first question from the line of [ Ishith Seth from Annual Wealth ].
Sir, I think on the India front, I think it's heartening to finally see double-digit growth. And I think the quarterly revenue is at almost, I think 4-, 5-year high that we have seen for the India business. If you could throw some light on what is driving this close to 18%, 20% kind of customer growth that we have seen specifically in the India business.
And on the India business second thing was the average transaction size for this customer is down by 1%. So despite new services like body contouring coming in, why is it that the EPS has degrown by 1%?
And if you could also brief on how is the growth likely to be for the India business with the new strategy that we've embarked upon on tapping more customers from the funnel that Kaya generally gets. So that's on India business.
And second question was on the Middle East part. In Middle East as you said in your opening comments, roughly 8% was the degrowth that we saw in collections also, partly because of the Middle East impact -- geopolitical impact that we saw. The question over there is that how -- is there any impact of Minal, 2 clinics, which we've sold off in this quarter? And what is generally the impact of Minal if it didn't come in this quarter on the revenue for the next quarter and also on the cost? Because I understand that Minal was slightly profitable for us at the clinic level. So if you could shed some light on both these questions.
Thank you for your question, Ishith. So in terms of the quarter performance that you mentioned, I think, yes, it is -- it's actually after a few years, actually, we've seen this kind of growth in the business. And it is driven largely, as you mentioned, by the building blocks that we've been putting together over the last couple of years. So I think it's a culmination of multiple activities that we have done in the business, both from the customer front, also from the improvements that we are doing inside the clinic and also investments in technology. If I were to call out a few areas which have actually worked very well for us, one is that we, after COVID, over the last couple of years, we've been focusing on how we can improve our customer experience inside the clinic, which is reflected in 2 things. One is the investments in terms of quality of the clinic, which is the infrastructure inside the clinic. So multiple renovation, relocation projects and also a few new clinics actually opening up has helped us. In addition to that, the focus on customer service. So right now, NPS scores in the clinic sit at about 87, which is one of the highest that we have achieved as of today. We have also invested a lot on refurbishment of technology. So multiple new machines have been added in the business because post COVID, we have -- it is the first time in 1 year, we've actually invested in revamping a large part of our technology in areas like laser and also some body machines as well as some anti-aging machines. So that has kind of built more refreshing to the clinics, which are there.
And that is also impacting our productivity inside the clinics, which means time taken to perform some services, et cetera. New verticals like Body have also contributed quite a bit to the business. So Body now is almost 6% of our total business, which is actually helping us.
And also, we have looked at new categories and products which has also helped us. One is innovation and bringing in new NPDs, at the same time, also continuing to invest on nutraceuticals. And you'll be happy to know that we also in the middle of working towards our own brand on nutraceuticals, so that's kind of going to help. But at this moment in time, we have used partner brands to actually drive this growth in nutraceuticals.
We also adopted a lot of technology, both for getting in customers through the funnel. So we tied up with a company, which was a partner company for improving our funnel, optimizing our funnel and also building in new methods of reaching out to our customers. For example, actually, we have now the WhatsApp channel for booking appointments -- automated appointments. We're also doing a lot of automated nudging for customers who are probably people who are dropping off the funnel and actually pushing in for these customers to come back and we are seeing good amount of success there.
There is also a consistent drive towards doctor-driven categories. There is a lot of push and a lot of engagement that we are doing with doctors. So I think largely, all these components put together have actually helped us in there. One of the things that has actually happened, Ishith, you mentioned the drop in overall customer ATS. That is also because quite a bit of our customer acquisition today is coming from the online channel towards the product business. So as we speak, we have now activated omnichannel into all our clinics. So while these customers are today not the customer for services in the clinics, they are buying products through the online channel, and they are getting serviced from the local unit or local store, which is impacting that.
So while Body has positively impacted our ATS and quite a few doctor-led categories positively impact our ATS, the volume growth in products also brings down the ATS simultaneously. And yes, so that's broadly, I think, the current strategies that are there. You also asked whether this can sustain. As I mentioned, these are called building blocks. So we have been working on this over the last 2 years, and we'll continue to sustain some of these and improve on these areas. So this strategy is something is put in place more than a year ago now. And I think that's something that is going to continue. Some elements we will improve. Some new areas could be added in the next year strategy. But at this moment in time, we'll continue to dwell on the same strategy. So I think this will help us improve overall customer volume and definitely improve our overall top line, bottom line in the business. So that's a summary for me for India. Yes.
Got it. Sir, just one question on India. The product business as of this quarter contributes how much for our India business?
14%.
14%. So this is in line with the nutraceutical launch and all that we've done and some new products that we've got in dandruff and all of that, is in line with our earlier strategy that we want to drive product to almost 25% in the medium term. Is that correct?
Ishith, yes. This current numbers that we are talking about are purely clinic numbers. We'll continue to pursue on D2C e-commerce, direct-to-customer model. At the same time, we have partner channels with Nykaa, Amazon and partner retail, which is e-commerce specifically. So those will also add to the overall product.
Got it. Got it.
So Ishith on -- I think before we go to Minal -- Middle East questions addressed by Rajiv, we have just given insight on the Minal business. I think Minal business is declining from both on top line and we started building in this financial year on the bottom line. So if you look at Minal once, maybe if I give a indicative number for last year, 9 months number, they were doing almost INR 14 crores worth of revenue and this 9 months roughly is around INR 9 crores. And maybe we shut down in October.
And if you look at the movement, it was making an EBITDA positive of INR 1.3 crore approximately. And if you look at this financial year, we are making a loss of once a year. So that's a movement of INR 2.3 crores savings or [ arresting ] the loss of the business through Minal strategy. So that's the ideology.
For next quarter, it will be completely run down -- I mean it will be zero for us, for Minal?
There will be no Minal transactions or Minal numbers consolidated in the quarter 4 financials.
Got it. So in that case, even a part of the cost will also come off, right? Correct, right?
Yes. Absolutely correct.
Okay. Got it. Got it. Okay. Sir, and just to follow up, one more question that I had was on the rights issue. I understand we have -- the Board has cleared issue -- raising INR 300 crores via right? Is there any update on the same? And why is it taking longer than what we think it should?
So Ishith, Saurabh here once again. For rights issue, we -- see we have done an [indiscernible] resolution and it's been approved. We just got the intimation yesterday. And the due diligence is in process, we'll submit to the regulatory authority and post that we will proceed further. So give us more time, I think we are on the track of rights issue. So we will need some more time to close it.
Okay. And last, what is the net debt as we speak today, consolidated?
So I can give that net of cash is INR 117 crores. This is including India and Middle East. And if you look at the cash currently in both India and Middle East would be around INR 75 crores plus.
INR 75 crores is what we have liquid cash. But considering how the run rate is now, at least we are not losing money on our cash profit basis. So it's not like we require more cash to be infused in any of the businesses, right? Is that correct?
So we are -- so if you look at the cash what we have draw down in last quarter, okay, so it is towards more expansion. The strategy, what we have, currently, seen a success traction in the top line growth. We will be deploying this energy resources in the same strategy.
Correct. And the average...
[Operator Instructions] We have our next question from the line of Nihar Shah from Crown Capital.
Just 2 questions. One is on -- first is on our expansion plan, which we said that we are expanding to Tier 2 cities. Can you please give an update on that, like where have we proceeded on that?
This is Rajiv Nair here. We have actually currently done 4 clinics in the new expansion model. They are focused more on Tier 2 cities. And we continue to look at opportunities in Tier 2 cities at the moment or peripheral clusters in the main cities. So I'll give you 2 examples here. We have opened up a clinic in Siliguri, which is in a Tier 2 city, while we also opened up a clinic in Electronic City, which is off our main city, which is Bangalore, that is something that we are doing. So as of today, we have 4 clinics. But we are currently in the process of identifying multiple clinics in various cities. And as of now -- as it happens in every quarter, we'll keep updating you.
Okay. And the second question will be like we -- as you said that this is the growth we have seen for the first time in a very long period. So can you -- when can we expect our company to be profitable?
Look, we cannot give any forward-looking exact statement. But I think the math can be done. If we maintain this growth trajectory then in a matter of time, we should turn positive.
Okay. So our growth is sustainable this time, right?
So actually, as I mentioned in the earlier question also that we've put together a lot of new growth avenues, both from the customer front -- customer experience front and technology front. And those are something that we've been building over the last 1.5, 2 years. And they will continue. And obviously, as part of that, it will result in growth. But yes, that's all the guidance I can actually give on this sustainability.
We have our next question from the line of Apoorva, an individual investor.
So my question has been asked with the previous investor. So I don't have any further questions.
[Operator Instructions] We have our next question from the line of Dr. Vijay, an individual investor.
Congratulations, Mr. Suri and Mr. Nair, I think, for a decent show. And we've been invested in this company for a very long time. And I know the markets are running up and it was painful to see our investments not moving in this company. But I think at last year, we are seeing some green shoots there.
So my -- a lot of questions, I think are already answered, but now -- you have in your presentation showed that the CAGR growth for next till '26 India 17% and Middle East 29%. But we are not growing at that rate, right? I think -- and efficient player or leader in this segment, I think it should grow much higher than projected market opportunities. Is my thought process aligned with your thought process?
So the industry is growing at about 17%, the aesthetic industry, in which we work in, which is the services industry. And as such, our growth now is at par and a little bit ahead of the market growth. Our product growth is at 26%. So therefore, even if you were to look at the product industry, we are on par with that. So it's taken us a little bit of time, but I think that now we are in line with how the market is growing. Yes, clear?
Okay. Okay. But the base of product business is very low, right? I think we are doing around 14%. But at some point, I think a couple of years ago, I think in one of the calls, I think, we were told 40% is what we were looking at in overall sales. So is that target changed? Or that's still relevant?
Yes. I think we may have discussed in terms of path of where we want to see the product business growing from the current level of 13%, 14%. But at the same time, as we have seen, I think most of our products largely are sold through the clinics partly through e-commerce. We don't do GT, MT business at the moment, which is there.
But I think we are driving this business through 2 significant areas.
One is the NPD launches that we are doing, which are there, which are also in line with our business growth strategy. For example, as we mentioned, Body, we are also doing quite a bit of work in the hair care space. So last quarter also, you must have seen launches in hair care. This quarter also, you must have seen launches in hair care and nutraceuticals being the next vehicle that we are actually looking for growth, which we have seen significant growth in the last 1 year. Yes, is 14% our aspirational number? Definitely not. That's something that we'll be focusing towards. But honestly, I won't be able to give you a percentage number there. But focus is towards product growth and the fact that over the last 10 months, we have seen -- 9 months, we have seen almost a 24% growth in the product business. I think we are getting there in terms of -- yes, I agree with you that the base figure is not very large for us in terms of product.
And my last question. I fully agree with you guys, this is a very, very competitive industry. But I think at least the number shows that we are turning around -- just around the corner to be on PAT positive. And INR 35 crores in the 9-month EBITDA positive is also a good thing. I think we'll be ending this year at around INR 40 crore, INR 50 crore EBIT.
I think if we were not listed, we would have been a billion dollar company, frankly, if we were coming up for an IPO today. But anyway all the very best and really I'm staying focused and wishing you all the very best.
[Operator Instructions] We have our next question from the line of [ Sakshi from Swan Investments ].
So my first question is I wanted to understand that the product sales, are they coming majorly from clinics or also there is some traction on the e-commerce side?
Bulk of our sales actually come from the clinic side, but we're also investing now on the D2C business over the last 1 or more years. And we also opened up to omnichannel recently. And I think you're seeing some very good numbers both from a customer acquisition perspective as well as sales coming in. But as of today, bulk of the business comes from the clinic and about 14% of the clinic mix today is in product. But definitely, our own website is something that we'll continue to invest on.
Okay. That's great. And I wanted to understand, so renovating our clinics has brought about good traction in getting more customers plus increase in our sales. So I wanted to just understand that how many more clinics are we looking to renovate in the next year?
Yes, we can't give you a guidance right now in terms of number of clinics that are getting renovated, but we are in the path of making sure that all clinics become relevant both from the customer experience, which is the refurbishment part of it and also in terms of technology. So our entire focus in the last 6 to 8 months has been to make it more contemporary, at the same time, also improve the level of technology that we invest in. So it will -- I mean, that's the path we are taking right now.
So there are still significant number of clinics that need to be -- need to undergo renovation?
Yes, yes, yes. We do have.
Okay. And is it possible to give just an average rough number to what is the cost that you invest in the renovation for clinic?
So -- I mean, the refurbishment cost depending on whether it's a simple refurbishment to a relocation varies anywhere between sub INR 10 lakhs of expenditure going all the way up to INR 70 lakhs, INR 80 lakhs, depending on whether we are doing a relocation of a clinic or a renovation inside existing clinic. So the band varies depending on size and complexity of refurbishment.
Okay. And are you looking to open any new stores in the coming next year?
We have some in the annual, but I can't really give you a specific locations at the moment. But as quarters pass, we'll keep updating you. We're definitely on the lookout for more properties and as I mentioned in the suburbs of the larger cities at the same time in Tier 2 cities.
Okay. So even though you can't give locations, is there any rough average number that you are targeting like -- you can just give a range, that will also work.
About 6 to 8 clinics is what we'll be looking at in the short term.
[Operator Instructions] As there are no further questions, I would now like to hand the conference over to management for closing comments.
Thank you, participants and for participating on the call. We appreciate the time you took to attend our investor call. Thank you and speak to you at the next quarterly meeting. Thank you so much.
Thank you.
On behalf of Dolat Capital, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.