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Ladies and gentlemen, good day, and welcome to Stove Kraft Limited Q3 and 9 Months FY '25 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Parth Patel from Orient Capital. Thank you, and over to you, sir.
Thank you. Good afternoon, everyone. On behalf of Stove Kraft Limited, I extend a very warm welcome to all participants on this earnings financial results discussion all.
Today on the call, we have Mr. Rajendra Gandhi sir, Managing Director; and Mr. Ramakrishna Pendyala, Chief Financial Officer.
Before we begin the call, I would like to give a short disclaimer. This call may contain some of the forward-looking statements, which are completely based upon our belief, opinion, expectations as of today. These statements are not a guarantee of our future performance and involve unforeseeable risks and uncertainties.
And with this, I would like to hand over the call to Gandhi, sir. Over to you, sir.
Thank you, Parth. A very good afternoon, ladies and gentlemen, and thank you very much for attending our Q3 FY '25 earnings call. A detailed presentation and the press release of our quarterly performance has been uploaded on our website, and I hope everybody had an opportunity to go through them.
We are pleased to report a robust performance in this third quarter, reflecting our continued progress and operational improvements. Revenue grew by 11.7% year-on-year, underscoring our consistent growth trajectory. Our profitability saw a remarkable increase of 80%, driven by better operational efficiencies. This robust performance reinforces our belief that our ongoing investments in optimizing operations and strengthening our manufacturing capabilities will continue to deliver positive results in the coming quarters.
During the quarter, we had quite a lot of exciting developments, which took place for us. Firstly, we entered into a strategic partnership with IKEA to develop and supply a range of cookware products for the IKEA global network of stores. This will be in the stores starting from FY '26. This collaboration aims to leverage Stove Kraft's manufacturing expertise and IKEA's extensive retail presence to offer quality kitchen solutions to a broader international market. To support this partnership, we are establishing a dedicated manufacturing facility spanning 1.8 lakh square feet of area at our Harohalli campus in Karnataka. This facility is expected to enhance production capabilities and align with global best practices in manufacturing and supply chain processes. This collaboration aligns with Stove Kraft's strategic objective of expanding its global footprint and strengthening its presence in the international markets.
Sharing update about our cast iron foundry, which we commissioned in November last year is now fully commercialized with an installed capacity of 2.2 million pieces per annum and has been designed to reach 4.4 million pieces per annum in the future. The facility has now started full production of a wide range of cast iron cookware and high-quality cast iron components, allowing us to now offer a variety of products in order to meet the evolving needs of our consumers. These products are designed to cater to traditional cooking preferences, while ensuring durability and health benefits.
I'm also excited to share that we have expanded our product portfolio by launching a new line of personal care items, including hair dryers and trimmers through e-commerce platforms starting January 2025. The strategic move aims to diversify the company's offerings and tap into the growing online market for personal care products. By leveraging our established manufacturing capabilities and distribution efforts, we plan to deliver high-quality, innovative personal care solutions to our consumers.
Also our product, Pigeon Air Fryer, received CSD approval for their canteens, showcasing strength of our in-house manufacturing, which meets high-quality standards. This now allows us to distribute through the extensive network of CSD outlets across India, opening up newer opportunities of presenting our topnotch products to diverse range of consumers.
The company continues to grow 6% in COCO and COFO retail models for the Pigeon brand. In this quarter, we opened 17 new stores, bringing our total to 230 stores across 14 states in 63 cities. Our strategic marketing efforts in the launch of Pigeon brand retail stores are enhancing visibility while our focus on retail expansion is set to drive long-term growth for the brands across India.
Channel mix for Q3 was 39% from general trade, 34% from e-commerce, 10% from modern trade, 3% from corporate sales, 6% from retail and 8% from our exports. E-commerce and general trade continue to show high growth, with retail channel also growing significantly. The expansion of our product in both within existing categories and the new ones present a dynamic journey for the company, offering ample opportunities for growth across multiple sectors through our diversified channel mix.
Now I will discuss the Q3 FY '25 financial performance. The consolidated revenue stood at INR 404.1 crores for the quarter versus INR 361.6 crores in the previous quarter last year and registering growth of 11.7% on a year-on-year basis.
Gross profit for the quarter stood at INR 151.7 crores versus INR 139.2 crores in Q3 FY '24, registering a growth of 9% year-on-year.
Gross margins for the current quarter stood at 37.6%, showing stability over the last few quarters.
EBITDA for Q3 FY '25 stood at INR 40.5 crores versus INR 30.1 crores in Q3 FY '24, showing a growth of 34.7% year-on-year. The EBITDA margin for the current quarter stood 10% versus 8.3% in Q3 FY '24, improving 170 basis points year-on-year.
Profit after tax for Q3 FY '25 stood at INR 12.1 crores versus INR 6.8 crores in Q3 FY '24, registering a growth of 79.7% year-on-year. The PAT margin for the current quarter stood at 3% versus 1.9% in Q3 FY '24, improving by 110 basis points year-on-year. This is post the [national] impact of indirect lease accounting of INR 2.09 crores.
Now I will discuss the 9 months FY '25 financial performance. The consolidated revenue stood at INR 1,136.8 crores for 9 months FY '25 versus INR 1,039.1 crores in 9 months FY '24, hence registering a growth of 9.4% on a year-on-year basis.
Gross profit for 9 months FY '25 stood at INR 431.7 crores versus INR 383.3 crores last year, same time, same period, registering a growth of 12.6% year-on-year. Gross profit margin stood at 38.1% at an increase of 110 basis points year-on-year.
EBITDA for 9 months FY '25 stood at INR 121.2 crores versus INR 94 crores in 9 months FY '24, showing a growth of 28.9% year-on-year. EBITDA margin for 9 months FY '25 stood at 10.7% versus 9% in 9 months FY '24.
Profit after tax for 9 months FY '25 stood at INR 37 crores versus INR 31.5 crores in 9 months FY '24, showing a growth of 17.7% year-on-year. PAT margin for the period improved from 3% to 3.3% with substantial efforts underway to improve the same even further.
Now I would request the moderator to open the floor for question and answers. Thank you.
[Operator Instructions] We have our first question from the line of Chirag Jain from Emkay Global.
I think we have delivered a fairly healthy performance in an otherwise subdued consumer sentiment and a decline reported by -- listed here, larger listed peer. So how do we see growth going ahead? I believe festive season was very strong. Have you seen the consumer sentiments weakening post festive? Or how are -- let's say, the broader consumer sentiments, is it like improving, stable? And probably going ahead, how do we see, let's say, the growth shaping up? Obviously, we are taking a lot of initiatives. So if you can share some thoughts around that?
For us, the first and the last quarter are relatively softer than the second and third quarter. But the consumer sentiment, of course, we don't say they are very strong. But we are also driving our sales through special offers during this period. This is normal for us every year in this quarter, the way our consumer offers. So we are seeing continuous growth.
Okay. Okay. So broadly, I think earlier, you were indicating or usually you have been indicating 8% to 10% revenue outperformance compared to the industry trends, that, by and large, the guidance remains in terms of growth outlook.
So we will definitely grow faster than the industry. And as and when the demand again gets back to the normal demand, we'll definitely grow better than what we are growing now. Otherwise, we believe that we'll be able to grow better than the industry.
Okay. And just on the IKEA tie-up, by when do we see, let's say, this business coming into our, let's say, numbers, P&L? And how big, let's say, could be the opportunity based on the capacity that you are setting up in the current phase?
This business go through a very methodical kind of arrangement. So the initial business will only start between the third and the fourth quarter of this coming financial year. That is post October '26, FY '26. And then it is a continuous process where we keep on developing products. The first range of products will start rolling out from the factory in October, November this year.
And as we progress, there are going to be newer and more product range. The capacity, of course, the size of the factory itself is quite large. They have 1.8 lakh square feet dedicated exclusively for this arrangement. And there is a large scope. It will be unfair to quantify in absolute value, but it is a very good arrangement in terms of both in the growth potential for the company, but also in the learning potential. They bring in, from their side, global best practices in manufacturing excellence, supply chain, I mean, digitizing the whole supply chain. So all these learnings are there. It also enhances the product offering for our domestic brands that we do with here.
Okay. Just last thing from my end and then I'll fall back in the queue. How much is the CapEx that we are committing for the IKEA business?
The building is already there. We have already built. Additionally, we'll be investing INR 15 crores, INR 20 crores overall over the next, say, 1 year.
Okay. So it won't be very large in terms of the overall CapEx requirement?
No. This is an ongoing business for us. It is only that we have exclusive facility for IKEA so that it matches to their expectations and there are some automation levels that we will be doing. So in my opinion, it will be in the range of INR 15 crores to INR 20 crores.
We have our next question from the line of Natasha Jain from [PhillipCapital].
Sir, my first question is on the top line. So you had mentioned that you would grow at a CAGR of almost 15% or whatever you've grown at the last 3 years. If I see that number, you fall short in terms of your top line. Now fourth quarter being softer than a leaner quarter, is there any change in top line guidance? Are we expecting a slight miss this year?
Yes, we would ideally want to grow at the historical growth rate. I can say there is a relatively shortfall in the growth, definitely. But related to the quarter that we have seen last year for the fourth quarter, we believe we are in line with the same growth. It is not in line with our historic growth rates. We realized this. There has been a little softness in the demand. But with the new initiatives, new products, we believe that we'll get back to that growth.
Sir, you mentioned that you will be in line to grow at what you had grown in the last quarter, last year, first quarter.
No. Historically, we have been -- if you will take away the last year, we have been growing at 19% CAGR. Our endeavor is to get there.
Okay. All right. And sir, how does fourth quarter look like to you, at least in terms of the start?
As I mentioned, we are seeing growth.
Okay. And sir, now if I even see your margins at a gross level, there has been a margin decline. Can you just allude as to what the reason would be for this?
Particularly, the month of December-Jan, we have customer offers. And so there is a small decline in the gross margins. But overall, for the year, we believe that we will continue to be at the level that we aspire for this year. And we are taking initiatives to improve our margins from here.
Got it. And sir, one last question before I fall back in the queue. You have -- you did for quite some time that at an EBITDA level, you will land at 11% margin in FY '25. Now you've landed at 10.7% on a 9-month basis. That means in quarter 4, you'll have to deliver beyond 12% to get where you want to. Are we on track in terms of that number or even there, there is a slight chance of a miss?
Yes, we believe, of course, our endeavor was to be deliver a minimum of 11%. But we will be in that range. It will not be way off.
We have our next question from the line of Pritesh from Lucky Securities.
Sir, this IKEA partnership, if you could tell us what is the scale up possible with IKEA and your -- when will you start your supply to IKEA?
The business invoicing will start in October-November of the coming financial year. And to tell you the program that we've initiated annualized, even if we talk about the whole year, is for about 2.5 million to -- 30 lakhs -- 3 million, close to 3 million pieces annually. And if you -- the current program, if it is for an annualized basis, is not that this year, we recognized this. It will be in the range of about INR 150 crores. But this is not the only program that the arrangement is. This is to start with, this is one range of products that we are starting.
So just to clarify, 3 million pieces is INR 150 crores or INR 150 crores is your one-off supply?
This one, 3 million -- the current range at 3 million pieces is about INR 150 crores. And this is not the only line that we are doing with them. This is already finalized. That is the range -- the supply for this range of products, the designs and everything and schedule is all finalized. But there are also several other products that we are discussing.
So if you start next year, let's say, quarter 3 of next year, will the following year, which is FY '27, will you be ramping up to the full of that program or it will take more time than that?
No, no, you're right. If you say 1 year from the time when we start, the second year will be full. So if you tell 12 months for this product range, 12 months from next year, November-December, will have this full volume of 3 million.
And the facility now that you've created, the total facility for the company, what revenues it can support?
You are talking about Stove Kraft as a whole?
Yes, Stove Kraft as a whole.
We will be able to -- with the current capacities that we have and with small tweaking, we can double the revenue.
Double the revenue?
Yes. Yes.
Which means, you were at about INR 1,400 crores, INR 1,500 crores, you can actually do INR 3,000 crores from the same setup?
With some -- maybe there will be some maintenance CapEx. I don't want to assure you like that. But without the large new expansion, definitely we can give this.
Okay. And if I look at the OpEx line, with that doubling of revenue, what operating expenses should move higher with that -- in the OpEx line?
More and more of automation we are doing now, see, there will definitely be increment in people cost. And as we produce more, there will be some increase in power cost. And because if we will transport more of that goods, definitely, there will be, not in terms of percentage but in terms of absolute value, all this I'm telling you in absolute value, there will be increase in freight costs. In terms of percentage, I think there is a scope for improving from where we are now.
[Operator Instructions] The next question is from the line of [ Varun ] from [Equitree] Capital.
A couple of questions. So firstly, you mentioned that you have given some discounts during this quarter. So will this continue going forward? Or can we look -- can we see the margins coming back to 38% gross margins in the upcoming quarter?
Another business is designed for 38% together for the year. Every year, during this period, during the month of December-January, we give consumer offers every year. This is in line with our business plan. And so we are in line with our margin expectations. On the gross margin, there is no dip on the gross margin. But for this period, that is particularly December-January, we gave some special discounts to our customers. And so there is generally a 1% variation. But overall, when you see for the whole year, they are in line with the margin.
Okay. And secondly, how much growth can we see in the small appliances and how much will it contribute to the overall mix?
Yes, our smaller appliances is growing faster than the overall other categories put together. So currently, if you see for the -- we have been witnessing continuous growth there. Of all the categories, our small appliance has grown the highest. It is at about 25.6% is the growth. And if you will only see the contribution alone for the quarter 3, 45% is coming from small appliances. And if you will see for 9 months, the period, we are at 39.9%, 40% contribution coming from small appliances versus if you will see the same time last year for 9 months, we're at 34.6%. So continuously, we are seeing growth in our small appliances category.
What are the gross margin level in -- is it lower in smaller appliances?
They are the same -- for us all this under the Pigeon brand channel or product, we are agnostic on product category. So the margins are the same.
Okay. And how do you see the overall demand outlook given the tax cuts in the budget? And how does the company prepare for the sale?
We believe, it should be positive for us with -- if there is more money in the hands of the particular TG, if it's the middle class, the emerging class, definitely, we believe it is a positive for our business. People will be able to buy more of our products. That's what we believe.
One question I had was, what is different that Stove Kraft is doing compared to the competitors, apart from the pricing that is helping it increase the overall volumes?
One is we are able to manufacture these products. This will all go through supply chain disruption if people are there depending on nonmanufacturing. Today, the BIS -- the compulsion from BIS is also making it mandatory for people to produce in the country. It's not only limited to that. Overall, our manufacturing facilities and our expansion on our distribution channels, both is giving us that advantage. We are increasing our retail stores that is giving us some positive.
Our exports, we are, in the peer group, we are the largest exporter and our export is actually growing. While we are -- there is a correction in our export. Temporarily, there is a change from earlier, all the exports that we are doing are linked to only nonstick that is PTFE coating. Now globally, there is a shift from PTFE to ceramic coating. I'm not very sure whether you understand the technicality of this. So we have corrected all that. And so you'll also see again our exports growing faster than what it was, and that category is also contributing.
In my opinion, these are the 3 reasons why we will want -- we will grow better than the industry because we are able to produce this product ourselves. We are able to make high-quality products and give it to the consumer at a very -- I mean for the consumer is very attractive. And also, we are able to do this. along with expanding our channels.
Understood. And one last question I missed on the overall potential revenue from the IKEA tie-up, which you mentioned in FY '27.
I can say our overall exports per se will -- in the next 3 to 4 years, from a current 12% will be 25% of our business.
[Operator Instructions] The next question is from the line of Khush Gosrani from InCred Asset Management.
Sir, I missed your opening remarks. So just wanted to understand our retail expansion plan. This quarter, we have added only 70 stores, and we were supposed to reach 270. So any revision in that guidance? And for next year as well...
There is no change. We continue to open between 25 stores to 30 stores every quarter. In this quarter, we have also done some corrections. So wherever -- we believe that we need to relocate, we would have also done that correction. And also, we are now focused on building more of COCO and COFO stores. We have tapped the number of stores. So we are in line. Maybe if we don't reach 270, we may be at around say, between 250 and 260. So the next -- the number that you see is net of those corrections.
So how many stores we would have corrected, relocated or closed?
In the overall, historically, as of today, about 14 stores we have relocated. For us, we will watch for a store to at least be at breakeven. And if does not happen between 6 to 9 months of the opening, we will start looking at relocating.
And for next year, we will add same number of stores, 20 to 30 stores per quarter?
We will continue to open between 25 to 30 stores every quarter.
Okay. So then your depreciation and interest would increase because of lease liability, right?
Yes. So we are -- we are aware of this. We are also working on improving our margins.
Got it, sir. And sir, in terms of exports, we were looking -- we had added Walmart, right? So how is the [PR] ramp-up happening?
Like I mentioned, there's a correction from the current pure nonstick to the additional range of products. Our business with Walmart is also, in the coming quarters, is growing. We have good orders from our Walmart also.
Got it. And these, both the IKEA opportunity and the Walmart, would be at similar margins or better margins than currently that we do at gross level?
I think more or less, the export margins are in similar levels, and it is in line with our EBITDA.
Sure. And going forward, we should able to for -- even for next year or next 2 years, we should be able to do 11% plus margins? That would be a reasonable assumption?
Yes, yes. We will work towards bettering from 11%, while that is -- our business is designed to deliver minimum 11% now.
Got it, sir. And sir, last question, since December and Jan, you had to provide higher discounts. This is still a continuing trend or you feel that this should be stopped now?
Every year during this period, the company, the distributor, the dealer, everybody comes forward to contribute to this special offer that we have. The last 10 years from 2013, we have been doing this. So some portion of our GT business will be at a little lower margin than the normal during the whole year. So this -- overall the difference is very small. But when you see YTD, our margins will be closer to 38%.
We have our next question from the line of Prateek Poddar from Bandhan AMC.
Sir, 2, 3 questions. One is just on CapEx, right? I heard you talked about INR 3,000 crores of revenue from current capacity. Also from a CapEx perspective, fair to assume that the requirements will be quite muted and only maintenance CapEx for the next couple of years till the time you reach capacity...
You're absolutely right.
Okay. The second, sir, just on working capital, if you can help us, how is the working capital being trending? I remember you talked about controlling that and being almost negative or being flattish? Close to 0 I mean...
So we have improved our net working capital days, the way we calculate, of course, to -- we were at 77 days in FY '22. We were at 62 days in FY '23. We were at 59 days in FY '24. For the quarter ending FY '25, we are at 45. We are very confident to improve from here.
Okay. Fantastic. Fantastic. And just quickly, just on a Y-o-Y basis also, we have seen some gross profit compression. And last year also, you said we do give discounts. So what is really impacting our gross margins?
So YTD FY '24, we were at 36.88%. And YTD in FY '25, we are at 37.97%. We have seen an improvement of about a little more than 1%.
Sure. I was asking for the quarter, sir, but okay. It's fair.
Yes, yes. For the quarter Y-o-Y I know there is [different]...
Based on something or...
Yes. This year, maybe actually, our sales were -- I mean -- but -- for this quarter, if you see versus the previous quarter, not the Y-o-Y, it is a larger quarter. This is a smaller quarter versus the Q2. So the contribution of these discounted sales is a little higher than normally what it was last year. So you'll see a little shift. But when you see annualized for the year, you will get a number which is closer to 38%.
Got it. And what would be a full cost of rent in the sense, a lot of the rent goes into depreciation and finance? Can you call that out? Is it possible? How much would be the cash cost of rent?
So what I can tell you what it is, average of our rent is INR 60,000 into the number of stores. I'll just tell you what it is, the total -- INR 4.39 crores, INR 4.4 crores for the quarter.
For the first quarter, right?
Yes.
Okay. Fantastic. Fantastic. And just from an IKEA perspective, you said there are several products under pipeline. How big can this account be for you in the next 3 to 5 years or, let's say, next 3 years? I think you've talked about exports being 25% of your sales. So just from an IKEA perspective, how big can this account be, sir, for us?
So of that, IKEA can be as big as 50% of our export sales.
Okay. And this is assuming -- I mean, look, yesterday, there were tariffs et cetera, on China, which would mean that we become even more attractive from a sourcing perspective. Is that a fair understanding?
It's not -- this new development is not linked to current situation geopolitical. But this is -- I mean, I think this process has started more than a year back. If there is something very -- I mean, a lot of it is moving to India, we don't know, there can be an acceleration of this process. But currently, with the plans that we have, we have a good pipeline of orders for export. We also have some new customers who want to work with us. And in our opinion, we'll also start working with them very soon.
Got it. And lastly, from a new product development, any new products you talked about trimmers, et cetera, which you've launched on the e-comm platform? Any new products you are looking for or do you want to scale that?
Yes, these are -- the grooming products are new. We have just launched it on the e-comm platform and gradually, we'll bring it to the modern retail. If there is enough traction and if there is a good demand, we will start manufacturing them. If we start manufacturing, definitely we'll get to leadership in that project.
So as of now, you're trading these products, is it?
Yes, yes. That is the process that we follow.
We have our next question from the line of [Shreyansh J] from Swan Investments.
Can you hear me?
Yes, sir.
Sir, my first question is, again, on the gross margin. So last year also, sir, in Q3, you would have had the same festive and the additional customer offers that you would have run. But last year, we had seen some kind of gross margin improvement. And this year, Q2, we've seen some kind of compression. So I'm really not able to understand what is happening. So...
Okay, let me explain to you. See, last year, we had the bigger sales of Diwali in the Q2. This year, we had -- in Q3, sorry. And this year, we had more in Q2. And the contribution of these discounted sales has been a little more than the festive sales. There is -- in the quarter, we have festive sales. We had discounted sales at the fag end of the quarter. So the contribution of this discounted sales is a little higher, and that's why you are seeing that. But that all gets corrected when you annualize it.
Okay. Okay. Sir, my second question is on the IKEA front. So you're saying, we will supply 3 million pieces worth INR 150 crores. That is which product category, sir?
It's cookware, is a combination of stainless steel and aluminum. It is all to do with only with cookware.
Okay. And over -- gradually over the next 3 to 5 years, we can supply all of our product categories to them or it's just restricted to cookware?
No, no, the current arrangement and the capability that we are building is only for cookware. Today, all our exports are only cookware.
Okay. Okay. So sir, is there an opportunity for you to cater to other product categories because IKEA, I think, would be selling all products, right?
That is possible for across the export business. But today, all the focus and arrangement that is there is to build a cookware category.
Okay. Sir, my next question is on your retail business. So from what I understand historically, we've been saying that we won't be doing COCO, and we would be doing FOFO. But if in this quarter, I'm just looking at it, you've opened 17 stores. Out of which, 15 are on a COCO basis.
No. No. So see, it's like this. When we open new stores, it's not that the new stores are going into COCO or COFO. We will equally have COCO or FOFO stores for the number of stores that we will be opening. Yes, there is a -- 2 store difference between the number of -- so between the quarters that would have happened that we have 2 more stores than what we have moved from our existing stores to COCO or FOFO. But we, as a business, the retail business, we are -- our endeavor is that we will cap the number of COCO stores to be 171 for all times. It will not increase beyond that. All the incremental stores will be either [COFO] or FOFO.
So sir, when you're saying you opened 15 COCO stores this quarter. So in the base, number of [ 2],[17 ] whatever stores that were there. So out of that, 15 were converted to FOFO is it? And then you...
You're right. You're right, sir.
Okay. Okay. So sir, then with this logic, our interest and depreciation going forward, you've mentioned earlier in the call, should increase. So then, sir, technically, it shouldn't increase? I mean other than the rental, increase in rental rates, other than that, there should not be increase...
No, no, no. Only if we do a [ FOFO ] store, then it is not on the books of the company, which we don't intend to. All the stores, the lease arrangement is with the company. The store technically belongs to the company, but there is no cash outgo because this is funded by the deposit that the franchisee pays us, both for inventory and fit-outs and including the deposit. But the lease agreement, the lease arrangement is with the company and not with the franchisee.
Okay. So sir, this INR 100 crores annual run rate should more or less be at this level only?
Yes, I think it will be at the level, sir.
Okay. Okay. And sir, just one last question. In terms of new product developments you were talking, we will continuously evaluate that thing. So just wanted some sense, when you're doing new product development, these are all part of small appliances, right? And small appliances now is about 46-odd percent of our business. So how comfortable are you with this number? Or I mean, do you see this number will be capped at 50%? So how do you look at this whole piece, sir?
No. No. we are not worried about capping this -- and that too, I'll tell you, for us, in the small appliances business, we don't consider the induction cooktop business as part of our small appliances though it falls -- or generally, it is considered as a small appliance for any other peer group. For us, we classify the induction cooktop under the cooktop business. So we are not worried about this category of products, but we only wanted to highlight that our appliances business is growing faster than the other product categories that we are already stronger.
Sir, in small appliances, in spite of we doing a lot of consumer offers this quarter, the growth rates in [ SBA ] seems to be a little volume growth of 12%. Isn't that type is lower?
So I can -- compared to the industry, we have grown at that rate, I mean both in volume and value.
Sure. And sir, last question, on a 9-month basis, if you have to look at your induction cooktops as a category, 9 months volume growth has been 10%, but overall value growth is minus 3%. So what is really happening in this category, sir?
There are 2 things that go into the manufacture of the induction cooktop. One is the glass. The glass is -- has a lithium element in the glass. There was a disruption in the cost of lithium. And so there was a huge spike in the cost of the glass in the preceding year. And also, there are a lot of electronics that go into the manufacture of this induction cooktop.
So both these costs are corrected, not in the last quarter, in the last 8 to 10 months, the costs have drastically corrected. We, as a company, generally work on a cost-plus model and passed on that. And so we are seeing good growth in volume. But because of the ASP coming down, the value you are seeing, a little drop in the value.
Okay. And sir, last question. Cookware, sir, 9 months, volumes have been flat. So how do you look at this whole category?
No. So see, cookware is also -- our exports is all about cookware. I told you about the correction that is happening in the category. The PTFE coated cookware is slowly going down, and it's getting replaced by the new range of cookware that we have developed. So we are going to that phase in this current quarter. This will all come back. We have good orders for the cookware, and we have corrected that, the product category in the sense, if we are moving a lot of PTFE to ceramic cookware now.
Okay, okay.
There is a transition happening in that...
Sorry...
There is a transition happening from PTFE to ceramic.
We have our next question from the line of Mustafa Khedwala from Cube Investments.
Sir, can you please repeat what is the online contribution for us?
For the quarter or for the overall?
For quarter and 9 months, sir?
Just a minute. YTD is 34.7%. For the year, YTD is at about 34.7% online.
And sir, for the quarter?
For the quarter, it is approximately the same, 34.3%.
Okay. And sir, since you are selling more this new category of trimmer -- grooming products online only. Going forward in the future, sir, do you expect our online contribution to be in this range or it will become even higher?
I think it will be in the range. So if you see our GT this quarter, it was at about 39.3%. And for the YTD, it was 32.8%. So for us, I think, between the GT and these 2 should be around between 65% and 70%.
And sir, I'm guessing, sir, the margins might be a tad bit lower in online, sir?
No. Let me assure you, for us, all the channels and the products, the margin is agnostic. We are -- for the margins are the same for us. We work on a concept of MRC, minimum realization cost to the company. And we don't breach those numbers, whether we are selling on e-comm, modern retail or general trade. Of course, for exports, our margins are lower. But then at EBITDA, they are at the same level. And on retail, the margins are higher, but there are costs in the retail.
Fair enough, sir. So sir, our IKEA contract manufacturing will probably mirror the margins of our export business or our online and GT business, sir?
It is an export business. The business itself is export.
Okay. So sir, margin will be a tad bit lower there?
Yes. The gross margins will be lower and EBITDA, it will be at the similar levels of the company's margin. There are no other costs in between.
Fair enough, sir. Sir, in the small appliances segment, although volume growth has been 12.2% for the quarter, the growth in value has been 31.6%, sir. So can you just shed some lights around this particular...
It's a product mix because if [high] value, as you see, volume is for overall as a category, we calculate the volume. And if you have -- so I'll also tell you on small appliances what is happening. Particularly, starting with the last quarter, one of our new SKUs, I mean, range of products that is the OTG, we have started manufacturing this and that has started contributing significantly and it is growing very fast. I'll give you some number on the OTG. We used to sell about 10,000 to 15,000 units per year. And in the last quarter, we have already started selling 40,000 units per month. So because it is a high value, I mean, high ASP product. So you will see higher growth in value than in the number. The number of units will be not very high, but the value is high.
Okay. Okay. And sir, similarly, in the cooker segment, sir, what is the contribution? The growth has come from some of the premium cookers or the lower value item cookers?
So there is a movement from aluminum to stainless steel. And as we -- I mean while we want to grow both in volume and value, our value growth in the future in pressure cooker will be larger than the volume growth because there is a shift from pure aluminum pressure cookers to value-added pressure cookers like pure stainless steel or [rice] like pressure cookers, which are -- which the ASP of these stainless steel pressure cookers is higher than the aluminum pressure cookers.
Okay. Fair enough. So sir, basically -- got it. And sir, lastly, sir, we have set up such a large capacity for cast iron cookware, sir. So are we -- I mean enameled cookware, is the company looking at launching anytime in the future because that is a progression only of cast iron.
That is a natural progression. Today, our plant is fully operational we are having both opportunities in export and our domestic market is also accepting this product very well. Currently, we are doing seasoned cast iron cookware. But definitely, this is a natural progression. In the next 2, 3 quarters, we'll have an enameling line. That will also include enameled cast iron cookware.
Sir, how much extra CapEx would be required to set up this enameled? Last question, sir, after this...
We already have the ovens. So even for seasoning line your require the ovens. These are at only different temperatures. There will be some additional booth. Of course, which is not very significant for the facility that we have, it is a very small cost. It will be maybe between INR 1 crore and INR 2 crores.
We have our next question from the line of [Punit Mittal] from [Fort] Capital Limited.
Just 2 questions. One is you mentioned that for all the stores, the lease is with the company. In that case, what's the difference between the COFO and FOFO model?
Okay. See, when we say the lease, only the lease agreement is with the company. The rent is paid by the franchisee. And that gets adjusted in the commission that we pay to them. Example, when it is on the COCO model, we incurred the cost -- we pay the people cost -- the rent of the store is paid by the company. Whereas in the franchisee model, the rent is paid by the franchisee and the people cost is paid by the franchisee. But we share a margin with him. And because the landlord would want to and the company would want to have a control on the stores, we collect this rent and deduct it from the commission that we are supposed to pay to the franchisee and pay it to the landlord. And accounting standards, because the agreement for the lease is with the company, that has to be accounted the way it is done now.
Okay, okay. Got it. The second question related to the same thing. You have listed that your average revenue per store per month is about INR 3.56 lakh. Can you give more color on -- in terms of what the revenue for vintage stores versus new store that has been opened? And what is the maximum potential for a store to do in terms of revenue?
For us, the breakeven is at INR 2.5 lakhs. And if you don't see any store doing that between 6 to 9 months, we will relocate them. So we don't have, today, any store which is doing anything below INR 2.5 lakhs. But for any new store that we have started and still it is going through that journey. Any store which does not perform to that breakeven level between 6 to 9 months, we start relocating.
Okay. What is your target to -- what is the target number of stores that you're looking for, for example, 3 years down the line?
So we would be able to open between 80 to 100 stores every year.
Sorry, one more final question. And can you give us some break on the geographical spread of these stores?
Currently, we are in the south across Karnataka, Kerala, Andhra, Tamil Nadu, Telangana. And in the North, we are there in UP, Himachal, J&K, Punjab, Delhi NCR region. We have also started our stores in Gujarat.
So we are spreading across the country now from more concentrated?
Let me say in the next 3 years, we'll be there across every region of the country.
Next question is from the line of Praful from [Shravas Capital]
Congrats on a good set of numbers. I just wanted to check, what would be our gross margin for the export sales?
Around between 27% to 30%.
Okay. So the INR 150 crores deal with IKEA, so gross margins would be somewhere between 27% to 30%. Would it be the same or would it be closer to 38%, 40%?
Yes, the margins for export business will be in that range.
Next question is from the line of Anand Mundra, individual Investor.
Congratulations on good results, sir. Sir, wanted to clarify how much revenue from IKEA will come in this year that we start in September-October of -- in FY '26?
It will be small, sir. It should be in the range of INR 30 crores. This 1 quarter, we'll have 1 quarter for this year.
Okay. And from FY '27, we can assume INR 150-odd crores, right, sir?
No. For the whole year, yes, would be in that range.
Yes. So that would be an extra 5% odd growth over and above your regular growth because of IKEA being a new customer, which you have added. Can we assume that?
Yes. Yes. So our overall export business will continue to grow at a faster rate than what we are growing as a company for the next few years because it's not only limited to IKEA. We also have good business plans that we have with our existing export customers, but there are also new customers whom we are talking to and which can also fructify in the next 2, 3 quarters.
Okay. And sir, this IKEA, you mentioned that this -- you are talking about only one product. And can there be other products you can also start with them over the next...
We are already discussing. So from the time we start discussing a product to actual production and supply, it is 9 to 12 months. So apart from the range that is finalized and for which we are working and where we believe we will be able to start delivering these products from October, November this year. There is another range of products that we have already started discussing.
Okay. And potential of that product can be also similar to this product, sir?
Normally, the volumes of IKEA are very large because they will manufacture one product from one factory only, and they have about 550 stores across the globe. Any product that they produce is all very large in number. By value, yes, it may not be exactly this because this line that we are currently doing is 11 SKUs. The product category that we are talking now is about 4 SKUs, but the volume is almost equal to the level that the current range is, but the current range is at a little premium. So it will not be exactly the same, but it maybe in the range of 50%, 60% of the...
Okay. And sir, the other customer, Walmart, is there any scope for increasing product lines over there also?
Yes, yes. We have already replaced some of our PTFE range of products with a very premium range of products. They're also very keen for our cast iron range of products. We are also -- while we have not disclosed this since you asked me, I would -- this is for general consumption. We are setting up a line for bakeware. This will be both for Walmart, the other retailers and also, this may have interest from IKEA.
Okay. And this is expected to be built from next year, sir, for Walmart?
No, next financial year. Yes.
Yes. Okay. Understood. Sir, another thing, sir, there are multiple photos circulating on WhatsApp saying that there was some sales to State government or local politician in the first -- in quarter 2 of this financial year. Can you quantify. Was there any free distribution by any government, state government or local politician and we have got some sales from that?
Can you please...
So I got a photo of induction cooktop saying that it's made by Stove Kraft. And it's actually -- so I was just wondering whether we have participated in any government contract in this financial year, sir?
There are 2 things. We don't do any government contract as a policy. And we also, in the past, have given products to some politicians in the past. As a policy, we don't directly deal with any political parties. And we are not aware how through any channel, any of these products will end up with any of these free distribution. But we don't have any large single order from any of our channels for the induction cooktop that you are mentioning.
Okay, sir. And sir, how much is CapEx for next year sir, guidance, maintenance CapEx?
We can safely take it between INR 25 crores and INR 35 crores. In our opinion, we may not require that much.
That includes the CapEx for IKEA...
Retail stores, that includes retail stores, any tooling that we will do for new products, any line additionally that we set up or if we do any civil construction for any of the adjustments required for any of this CapEx. So you can classify this as maintenance CapEx, but safer side, you can take it between the range of INR 25 to INR 35 crores.
And sir, how much is the debt on the balance sheet, sir, rather than the lease liability?
Net debt is about INR 150 crores.
Okay. This is short-term and long-term, both, sir?
We don't have actually long term. This is overall net borrowings. Net is [1,528].
Last question, sir, at INR 400 crores revenue size, I expected we to deliver 11% margin. So we got a hit of 1%. This is because of higher revenue expenditure in this quarter other than gross margin comparison?
There are 3, I can tell you. One, we spend a little bit more on marketing about INR 1 crore. People cost, I mean, if you will compare it with the last year's quarter 3, there is a increase in people cost by INR 1 crore. Marketing, INR 1 crore. And we did a lot of maintenance which we charge it to P&L on our factories. So this is about INR 3 crores overall.
Okay. And sir, in the last quarter, you mentioned that you are also writing off the acquisition of light business which you have done over the next 3 quarters?
A substantial portion of that, we have written off, sir.
How much that is part of this quarter -- this quarter, sir?
INR 1.2 crores. It's about INR 1.2 crores.
So that INR 1.2 crores would be an extraordinary item then? Or it's because it's a write-off...
Yes. Generally we have not separately called it -- called off this, but we have written off with that expense because that business, we are not focusing now.
Right amortization...
Amortization of expenses?
Yes.
Yes.
And how much is remaining, sir, that would be written off next quarter or...
Another [INR 1.2] crores over -- I mean there are some tools that we have. We'll accelerate the depreciation of these tools.
Next question is from the line from Natasha Jain from PhillipCapital.
Sir, my question is just on the market share. So you said that you've given a lot of schemes and offers in December and January continue. So can you indicate if we have -- if you've got market share from our peers? Any sense on numbers as to what market share you command versus your peers?
We are dealing in various product categories. And this is not very special offer for this year. From 2013 onwards, every year, we have this property where our consumers, our dealers and our distributors wait for this and this is an ongoing effort. And so different product category will have different -- so there are a couple new products. Example, if I tell you that for OTG, we are getting to leadership. So that is the kind of market share acquisition is happening. Some of the products like induction cooktop, in our opinion, we must be at leadership. The air fryer, of course, we are acquiring lot of market share.
So there are different products. I don't think you can bucket it all in one and say this is a market share. And we don't have a quantified comparative data to actually give you. We'll try to do this maybe in the next 2, 3 quarters, we'll start doing this.
Got it. And sir, one last question now. I understand that you said that because you have done these offer sales, it impacted your gross margin a little. Sir, but, see this is something that we do every year, so this is a known information to us. Then do you think that we were optimistic in terms of giving 11% guidance in terms of EBITDA? Or has there been more demand slowdown than we actually anticipated? Which way did it go?
Both. Both. So there is -- we would have ideally wanted another INR 10 crores, INR 20 crores additionally on our revenue for this quarter. And also maybe the contribution of this offer sales is a little higher. But I think overall, for the year, we are in line with our business plan. I don't think we are way off. Of course, don't come and tell me, if we land up at 10.8% for the year, say it is lower than the 11% guidance. So that was the endeavor. So we -- it is not that we are way away from that 11%. There could be a small variance versus the expectation.
Participants in the interest of time, we will take that as a question. I'll now hand the conference over to Mr. Rajendra Gandhi for closing remarks.
First of all, thanks, all of you, for the patience and for listening. I hope I have addressed all your questions. But if you have any further inquiries, please feel free to reach out to us directly or contact our Investor Relationship partner, Orient Capital. Thank you.
Thank you very much. With this, we conclude today's conference call. Thank you for joining us, and you may now disconnect your lines. Thank you.