Stove Kraft Ltd (STOVEKRAFT) Q4 FY23 Earnings Concall Transcript

Stove Kraft Ltd ( NSE: STOVEKRAFT) Q4 FY23 Earnings Concall dated May. 30, 2023

Corporate Participants:

Rajendra Gandhi — Promoter & Managing Director

Balaji A.S. — Chief Financial Officer

Analysts:

Devansh Nigotia — SiMPL — Analyst

Lokesh Maru — Nippon India Mutual Fund — Analyst

Pritesh Chheda — Lucky Investment Managers — Analyst

Khush Gosrani — InCred Asset Management — Analyst

Harshil Shethia — AUM Fund Advisors LLP — Analyst

Achal Lohade — JM Financial Services Ltd — Analyst

Anand Mundra — Soar Wealth Managers — Analyst

Paras Bothra — Ashika India Alpha Fund — Analyst

Rusmik Oza — Nine Rays Equity Research — Analyst

Arijit Malakar — Ashika Stock Broking Limited — Analyst

Akash Jain — Moneycurve — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to the Stovekraft Limited Q4 FY ’23 Earnings Conference Call. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions, and expectation of the company as on date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict.

As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. Rajendra Gandhi, Managing Director. Thank you and over to you sir.

Rajendra Gandhi — Managing Director

Thank you. Good evening, everyone. I hope that all of you and your families are safe and healthy. On behalf of Stovekraft Limited, I extend a very warm welcome to all participants in the Q4 and FY ’23 financial results discussion call. Today on the call, I’m joined by Mr. Balaji AS, our CFO; and Orient Capital who are our Investor Relations Advisors.

We have uploaded our investor deck and earnings press release on the stock exchanges and the company’s website. I hope everyone had an opportunity to go through them. During the year FY ’23, the industry witnessed weak demand scenario across market and despite the challenging business environment, the company has emerged with significant volume and value growth in revenue by 13% in FY ’23 to INR1,284 crores and EBITDA growth of 4.4%.

All product categories grew in volume ranging from 8% to 16% aided by our strong brand identity, robust distribution channels and effective marketing strategy, and the strong manufacturing facility. The company continues hard to gain market share across business verticals and distribution terminals. In FY ’23, we delivered a robust growth across product categories on year-on-year basis. Our cooker category reported a growth of 19.6%l non-stick cookware registered a growth of 16.8%; induction cooktop grew by 13.4%; small appliances grew by 11.1% and glass cooktop marked a growth of 4.3% during the year.

This growth across various categories is testament to our robust and resilient business model and our ability to steer on to the growth journey in the most challenging periods. Our aspirational brand growth in a sustained and responsible manner while being future-ready to capitalize on the upcoming market opportunities forms the backdrop of our success. As of — we communicate — also we communicated in our last earnings call the implementation of our new organization structure. It gives me immense pleasure to announce we have successfully completed the hiring for all new positions and the team has already started working towards achieving the organization goal.

During the two years, we have also decided to strengthen our composition of the Board of Directors, and in this direction, we have now two new Independent Directors on the Board, Mr. Avinash Gupta and Mr. Natarajan Ramakrishnan for effectively advocating the interest of stakeholders through their vast years of experience in professional career previously.

Our growth momentum continues in addition of company-owned and company-operated retail stores for the Pigeon brand. During the year, we have successfully added 54 stores in Southern markets. We remain committed to accelerate our store reach in FY ’24 with the target to open seven to eight stores every month. The Company is in final stages of formulating a business model to expand retail stores also through franchises. This model would help us reduce the initial cash outplay and recurring Pigeon [Indecipherable] substantially.

Given the challenging business outlook, we have taken a call to stagger some of the planned capex in FY ’25 and FY ’24, surely, FY ’25. As they move in FY 2023 we remain committed to continuous growth trajectory while taking cognizant of development and challenges in the market environment. We would continue focusing on expanding our product offerings and enhancing the distribution network, which will lead Stove Kraft to the next leg of growth and create long-term value for our stakeholders.

Now I will discuss Q4 performance. The consolidated revenue for the quarter stood at INR278 crores versus INR261 crores in Q4 FY ’22, registering a growth of 6.4% on a year-on-year basis driven by 12% increase in volumes and a 6% drop in prices. EBITDA for Q4 FY ’24 stood at INR5.9 crores versus INR15.5 crores in Q4 FY ’22. Profit after tax for the quarter stood at a negative INR6 crores versus INR8.6 cores corresponding quarter.

Moving to FY ’23 performance, the consolidated revenue for FY ’23 stood at INR1,284 crores versus INR1,136 crores in FY ’22 registering a growth of 13% on year-on-year basis driven by a 10% increase in volumes and 3% increase in price. EBITDA stood at INR99 crores versus INR94.8 crores in FY ’22. EBITDA margin reported was 7.7% as compared to 8.3% in the corresponding period. FY ’23 profit-after-tax stood at INR35.8 crores versus INR26.2 crore in FY ’22. PAT margins for FY ’23 stood at 2.8%.

Now I would request the moderator to open the floor for question-and-answers. Thank you.

Questions and Answers:

Operator

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Devansh Nigotia from SIMPL. Please go ahead. Devansh, your line is unmuted, you could please ask your question?

Devansh Nigotia — SiMPL — Analyst

Am I audible, hello?

Rajendra Gandhi — Managing Director

Yeah, we can hear you.

Devansh Nigotia — SiMPL — Analyst

So of other expenditures, if you look at our long-term average of around 12% to 13% and this quarter has grown 17%, so which line item in our P&L has been significantly higher than what we normally guide?

Rajendra Gandhi — Managing Director

Yeah, Balaji.

Balaji A.S. — Chief Financial Officer

So, Devansh as you could see, our expenses are primarily fixed. So if you look 3Q on Q3 versus Q4, there is close to INR2 crores of increase, which was entirely on account of the business promotion spend that we had in Q4, other than that most of our expenses are fixed given that the pressure on demand meant that the actual sales numbers for Q4 was much smaller than Q3, and that is why you are getting the expenses, the proportionate to sale is much wider than what it is. So it’s not that we spend that actually increased significantly between Q3 and Q4, but rather that does quarter in terms of sales is much small.

Devansh Nigotia — SiMPL — Analyst

But if I compare it to last year was 12.5% in March ’22 quarter, in this quarter, 17% as a percentage of sales and I think half are fixed, and half are variable. So the variable expenses should have come down because Q1 down at least. I think at least 15%, but our other expenses are actually up INR4 crore which is 10%, so that variable part should actually drop I think but it has actually trended upward, so, I mean, I’m not sure if —

Rajendra Gandhi — Managing Director

If you look at our overall expenses, you will find in terms of what is variable versus fixed. I don’t think we have 50/50 in terms of variable versus fixed. To an extent, the marketing expenses are variable, but that is more in terms of the planned revenues that we target because when you get into third-quarter and fourth-quarter all these spends are largely committed with the [Indecipherable] partner that we work with. Freight is one expense which is variable and it has remained variable per se and the sales commission, that would be variable.

Otherwise, most of the other expenses are primarily fixed and not necessarily directly correlated to sales. Between last year and this year, I think we had explained last Q4 of FY ’22 was also affected with COVID per se. So we were sort of smaller in terms of our expenses base itself. So to give you a view between FY ’22 and FY ’23, we have spent an additional INR5 crores on marketing. Our travel expenses is more by about INR1.2 crores, INR1.3 crores. [Indecipherable] I assume they have INR2.5 crores to INR3 crores, and the sales commission per se is more by about INR1 crore but if you ask me, the actual fixed-cost base cost it’s close to what is — what you’ve been seeing in Q3 and Q4 is more realistically close to our current base in terms of operations.

Devansh Nigotia — SiMPL — Analyst

Okay. So our ad expenses are INR30 crores in March ’23, near INR34 crores [Indecipherable].

Rajendra Gandhi — Managing Director

Full year.

Devansh Nigotia — SiMPL — Analyst

Yeah, well, for March FY ’23.

Rajendra Gandhi — Managing Director

Yes, it’s about INR34 crores.

Devansh Nigotia — SiMPL — Analyst

Okay, and can you help us with the amount of [Indecipherable] doubtful debts and provision for the warranty?

Balaji A.S. — Chief Financial Officer

So, probably our doubtful debts for the full-year, we’ve taken at about INR4.25 crores.

Devansh Nigotia — SiMPL — Analyst

Okay. And provision for warranty.

Balaji A.S. — Chief Financial Officer

So warranty includes, warranty portion of obviously a sort of warranties are actually warranty spend in terms of the service providers that they’re getting through. Lastly, because INR6.9 crores, this year is INR9.6 crores for the whole full year.

Devansh Nigotia — SiMPL — Analyst

Okay. And can you talk about guidance for capex, why is that [Indecipherable]t trended upward the INR60 crores to INR70 crores but we have spent almost INR295 crores, so what has led to this actual capex to be higher than our guidance?

Rajendra Gandhi — Managing Director

Capex is at INR75 crores. The additional INR20 crores is actually a cash outflow that is in advance for the future, this current year, those money has been given as advance. The actual spend is INR75 crores, for the capex.

Devansh Nigotia — SiMPL — Analyst

Okay. And why are [Indecipherable] is 13, 20 weeks this year? So is this mainly in general trade because I think e-commerce is 30 days, so how the data are shaping up can you just tell something?

Rajendra Gandhi — Managing Director

Most of our channels, we have moved to channel financing but particularly the e-com companies are still on the credit days, we are working on that and our revenues from Flipkart in the last quarter was — I mean, it will not be impacting the receivables. So it is longer than 30 days for Flipkart but we are also working on having a bigger platform for this sales.

Devansh Nigotia — SiMPL — Analyst

Okay. So and how will the mix — channel mix trending towards the FY ’22 to FY ’23.

Rajendra Gandhi — Managing Director

For the general trade, it’s 42%, because we grew potentially in the trade last year. Modern retail is 10% down. E-commerce, which can then be 30%. We have corporate sales of 5% and exports at 10%.

Devansh Nigotia — SiMPL — Analyst

Okay. and how are we —

Operator

Devansh, I’m sorry to interrupt you there. Due to fairness to others, could you please join back the queue.

Devansh Nigotia — SiMPL — Analyst

Sure. Thank you.

Operator

Thank you. Ladies and gentlemen, a request please restrict you to two questions per participant. We move on to our next question from the line of Lokesh Maru with Nippon India Mutual Fund. Please go ahead.

Lokesh Maru — Nippon India Mutual Fund — Analyst

Thank you. So my question is more around absorption of fixed-cost. So given that we are in a growth phase. We are expanding our capacities distribution, reach everything. we for last two years, we are not being able to absorb the kind of fixed costs that we are increasing, right? So any change in strategy for last quarter or last year before, we are in the top line would be INR1,400 crores or so. So we have been able to absorb those costs and deliver on the commitment of the spend.

Rajendra Gandhi — Managing Director

[Speech Overlap] I can say the third quarter and the fourth quarter revenues were not as planned at the budgeted, otherwise, we would have already got there, there is a little shortfall in the plant revenue and with the strategies that we now have and the plants that we have setup and the new pipeline of products that we’re launching, we believe that in the current year, we’ll be able to reach that threshold number where we can cover all the fixed costs.

Lokesh Maru — Nippon India Mutual Fund — Analyst

Okay. So, again given that Q1 is again going to be seasonally weaker. So to start with, how is the demand momentum mean for the month of April and May?

Rajendra Gandhi — Managing Director

Demand is depend, it’s not that it is very strong, but again, I won’t repeat, we have a strong network distribution network, our brand is made, we are ready to grow over the previous year’s quarters but it is not as desired. The desired — normal desired demand scenario we will be able to grow much higher our CAGR for the last five years is at 19%, while last year we grew at 13%, so there would be normalized demand, we will on the higher double-digit but is lower double-digit.

Lokesh Maru — Nippon India Mutual Fund — Analyst

So, again given during this step demand environment, again, sequentially covering for absorbing the fixed costs will be difficult. So are we trying to absorb the same, while our expanding our gross margin? So gross margin stood at where they are or how do we plan to absorb these costs?

Rajendra Gandhi — Managing Director

Margins by about 0.8%, and we believe that we will be able to improve our gross margins, even in the current year by not less than 10%. While we our focus is also to improve the gross margins. We are also cognizant of the cost considering the current scenario, so I think both these will enable us to get back to our EBITDA margins maybe by the end of September.

Lokesh Maru — Nippon India Mutual Fund — Analyst

Okay, sir, understood. Thank you.

Operator

Thank you. Our next question comes from the line of Pritesh Chheda with Lucky Investment Managers. Please go ahead.

Pritesh Chheda — Lucky Investment Managers — Analyst

Sir, we are a large market share in by volume terms in lot many categories and we have expanded or put up a large capex in the last three years. Now, last year’s combined is something like INR270 crores to INR280 crore of capex that we have put we just corresponding added on the manufacturing overheads. What is the way that you’re going to balance the margin assumption or margin expectation and the growth expectation from here on because from what we’ve seen in the last two years is that, the growth and the capex is unable to just absorb the cost that you have added and we are a large market shareholder any case by volumes? So, any thoughts on the strategy side, sir?

Rajendra Gandhi — Managing Director

All the three will want to continue to grow. There is absolutely no looking back at the growth, we are on a vision to be leaders in the category. Having said that we are also cognizant on the margin front. These are — I can say favorable times. The material cost is also quite stable. Now with this and with the price hikes that we are taking reasonable — reasonable price hikes. So we believe that our gross margin will also go up now. Particularly, I can say that you can see significant growth in our gross margins, before the end of the first half, and as our revenue grows, the leverage will definitely help us to get to that margin level that EBITDA level.

Pritesh Chheda — Lucky Investment Managers — Analyst

Have you revisited your capex now?

Rajendra Gandhi — Managing Director

Yeah. [Speech Overlap] Planned capex for this year we believe — I really want to do is we want to not actually let go that will differ it, so I can say the capex that was planned for this year, we’ll be doing between this year and the next year.

Pritesh Chheda — Lucky Investment Managers — Analyst

So what is that capex number as such.

Rajendra Gandhi — Managing Director

We would guide you that we would want to not spend more than 25% of our PAT along with the EBITDA that mean — along with the depreciation together. Some of the depreciation and 25% of our PAT is what we would not want to exceed on the CapEx going forward.

Pritesh Chheda — Lucky Investment Managers — Analyst

Sir, I still couldn’t understand your — I understand that if you grow your top-line then the margin comes but what has happened in the last two years that cost increases because of the capex there have been high. And you are saying now you will take price increase or when it go — so are you now willing to flex your muscle a bit on the brand and the market-share, the volume that you have.

Rajendra Gandhi — Managing Director

I can say still there is enough room for growth on the market share, we will continue to focus on our market share, that does not deter us from being confident about our position in the market.

Pritesh Chheda — Lucky Investment Managers — Analyst

Sir, what we have learned is that when you have a 20% market share by volume. Every incremental market-share gain is a little bit costly affair. So would you try to balance margin and growth?

Rajendra Gandhi — Managing Director

Yes. Definitely, without compromising on the growth, we are confident of increasing our gross margins.

Pritesh Chheda — Lucky Investment Managers — Analyst

And by virtue of price hike.

Rajendra Gandhi — Managing Director

Obviously, the gross — I’m telling at the initial, it’s not about up to the various costs at the point of realizations to the company. So the gross margins is where we will definitely focus to increase. We are evident from 31.8% last year. We are confident that by the end of this first half, we should be at least 2% above that.

Pritesh Chheda — Lucky Investment Managers — Analyst

So then when we listen —

Operator

Sorry to interrupt you there.

Pritesh Chheda — Lucky Investment Managers — Analyst

It’s just a follow-up. Let me finish it. So, then next time in the second half as your strategy instead of end of gross margin waste giving which was I think 31 to 35. If I’m not wrong —

Rajendra Gandhi — Managing Director

Definitely midway.

Pritesh Chheda — Lucky Investment Managers — Analyst

That band will change on the higher side.

Rajendra Gandhi — Managing Director

So, I can suggest. I mean, what I can assure you is that with the one thing that we currently have. We believe that definitely, this 50% price band, 31% to 35% we’d be not less than 33.5% is what I would say.

Pritesh Chheda — Lucky Investment Managers — Analyst

So as a lot longer-term strategy that band will change, right, because we.

Rajendra Gandhi — Managing Director

As soon as the when you get economies of scale, even in manufacturing, there is an advantage that you get and obviously, that leads to lower costs it does not mean that we lower our realization to that extent. And also the backward integration is also helping us to increase our margin with lower costs, but this is not all of it is retained, but majority of this is we are competitive enough now.

Pritesh Chheda — Lucky Investment Managers — Analyst

But sir, you mentioned that you are postponing your capex, right? So in a situation where what assets you have put on-ground and we have to work with that, price increases is the way to improve that band, gross margin band, right?

Rajendra Gandhi — Managing Director

Yeah, so. I would tell you on the capex, there are two large capex this year. We have a requirement for a larger warehouse that is a work-in-progress. There is another [Technical Issues] done very well in the. FY ’23, we would use that money to invest on this getting to mine, while all the orders are placed, we will only differ it a little to the last quarter, first quarter of this year.

Pritesh Chheda — Lucky Investment Managers — Analyst

Okay, sir, I’ll come back with some clarification. I am a little bit confused on the whole concept, but I’ll come back in the queue.

Operator

Thank you. Ladies and gentlemen, a reminder, if you wish — please restrict yourself to two questions per participant. Our next question comes from the line of Khush Gosrani with InCred Asset Management. Please go ahead.

Khush Gosrani — InCred Asset Management — Analyst

Yeah, hi, sir. Sir, I wanted to understand since we have a high revenue coming from income. Is there any inventory provision that we have made this year and what would be that amount?

Rajendra Gandhi — Managing Director

So it’s not very high, but [Technical Issues].

Khush Gosrani — InCred Asset Management — Analyst

Okay sure, sir, and sir, we have realigned, we are increasing our advertisement spends have given despite there has been a weak demand environment. So do you feel that the cost side, justifying the spends because the sales growth is not flowing through as of now?

Rajendra Gandhi — Managing Director

[Technical Issues].

Khush Gosrani — InCred Asset Management — Analyst

Sir, your line is breaking. Hello?

Operator

Ladies and gentlemen, the line of the management has disconnected. Please stay online while I reconnect. Ladies and gentlemen, we have the management connected. Khush, if you could please go ahead and re-ask your question?

Khush Gosrani — InCred Asset Management — Analyst

Yeah, sure. Sir, I wanted to understand, given that the demand environment is still very weak, across the industry players, higher — is doing higher advertisement spends right now justifying the costs.

Rajendra Gandhi — Managing Director

So our advertisement spend is not more than 3.5%. We continue to be in that range, therefore, a decimal point and there, and we believe that being a consumer brand, we need to invest on our maybe these are temporary times when there are weak demand, but the demand is definitely going to come back. We are in a product category, which is actually consumer related though it is consumer durables. We are very confident about the demand and also we are introducing new products in the market, it also requires a reasonable communication to our consumers and we believe that we should continue to invest this 3.5% at the lower end on marketing spend.

Khush Gosrani — InCred Asset Management — Analyst

Okay sure, sir. And sir what capacity utilization will be would be sitting on?

Rajendra Gandhi — Managing Director

Our business itself, as for every quarter is different. The past and the last quarter that it will, smaller quarters. and the second and the third quarters are larger, we have a big peak out during the second quarter. Maybe the third quarter will be it’s very close to the peak, but the percent the last quarter there and it’s been mean relatively fair capacity available, but since this is seasonal we cannot have 100% utilization of our capacity, but it’s not that during the peak, we have too much of spare capacity, that’s where we are.

Khush Gosrani — InCred Asset Management — Analyst

Sure sir. And sir, you just highlighted that gross margins will improve from here. So how will it flow to EBITDA margins as well because you’re guiding for a double-digit EBITDA margin, but the cost does not seem to get absorbed, and gross margins also not improving too much?

Rajendra Gandhi — Managing Director

The increase in our top-line, directly close to EBITDA. These are kind of fixed costs. Currently, whatever is the cost level we are but for a small increase we believe that we will be at the same level, and even a 10% increase on our topline, can give us closer to 3% implement on our EBITDA.

Khush Gosrani — InCred Asset Management — Analyst

Okay. Okay. Sure, sir. And if you could just last question, highlight the categories or product lines volume growth which used to give till last year, which you are not given this year. So, if you could give.

Rajendra Gandhi — Managing Director

I can again repeat, because in the cooker side, we have grown by 19.6%, in the non-stick cookware, we have grown by 16.8%, in the induction cooktop segment, we have grown by 13.4%, the gas cook top-up segment we have grown by 4.3% and small appliances overall we have grown by 11.1%.

Khush Gosrani — InCred Asset Management — Analyst

And sir, LED.

Rajendra Gandhi — Managing Director

LED, it is a very we did a lot of dummy in the last quarter. So we have grown for the year at 3.1%.

Khush Gosrani — InCred Asset Management — Analyst

And sir, what would be the manufacturing in-house manufacturing versus traded mix.

Rajendra Gandhi — Managing Director

We remain in the same range of 90%. 90% is manufactured and closer 10% is what we trade.

Khush Gosrani — InCred Asset Management — Analyst

Okay sure sir, I’ll get back in. Thank you.

Operator

Thank you. Our next question comes from the line of Harshil Shethia with AUM Fund Advisors. Please go ahead.

Harshil Shethia — AUM Fund Advisors LLP — Analyst

Hi, sir. Sir, with the current gross logs that we have, what kind of turnover can we do at this utilization?

Rajendra Gandhi — Managing Director

Yeah, we are ready for a INR2,000 crore revenue.

Harshil Shethia — AUM Fund Advisors LLP — Analyst

Sir, I just INR2,000 crore revenue which you said you also use it at all. We also here also with the current capacity that you had at MNAL gross block was around INR220 odd crores.

Rajendra Gandhi — Managing Director

So, there are two, I mean, investments that we have been doing. Of course, we have added some lines, we’ve manufactured those products that we that they were importing, and also a lot of it where backward integration. We also mitigate the dominance of the supply chain, particularly for the import. I mean the component that we are reporting. So it may not necessarily only increase in the revenue, it is also to ensure that we do not have a disruption in our manufacturing. But both I can say, there are some lines that we have added which have moved from trading to manufacturing. So in the last three years, if you would have seen, there used to be a 70% contribution to manufacturing has moved to 90%.

Harshil Shethia — AUM Fund Advisors LLP — Analyst

Okay. Sir, one more thing, you said that we have invested in backward integration in the last two years but our gross margins have remained the same inspite of such kind of backward integration.

Rajendra Gandhi — Managing Director

You are right. In the particular period during COVID, we had It is not in line with what generally, the costs are, and in that, we are we definitely had a higher gross margin but it’s also because of our backward integration, which is helping us to be more competitive in the market and that’s why we are able to get back to that gross margin that’s there in during the COVID.

Harshil Shethia — AUM Fund Advisors LLP — Analyst

Okay. Sir, secondly my thing is you said that our peak — at utilization we can do around INR2,000 crores of top-line at currently with around INR1,250 crore of topline that we did in the last year, we are almost at 60% utilization and we are hardly doing breakeven levels in terms of EBITDA. So, taking them. Yes, because last quarter we almost get 2% EBITDA margin.

Rajendra Gandhi — Managing Director

It is an exception. Please don’t devalue based on only the last quarter, last quarter was a challenging quarter. I can say the industry itself has witnessed very weak demand. I can say that we have been able to grow in this challenging time. And the first and the last quarter do not really reflect through revenues of the company. 60% of the revenues are coming from the second and the fourth quarter.

Harshil Shethia — AUM Fund Advisors LLP — Analyst

Okay, but even though for breakeven levels also, what I’m trying to understand just annualizing the figures of last quarter year revenues also which is at around [Foreign Speech] INR1,100 crores. Does that 55% of utilization, not 60% range, not a major change in terms of utilization levels where we are just being breakeven kind of margin?

Rajendra Gandhi — Managing Director

I think we can also go INR600 crores, not even INR500 crores with the capacities that we have. There are two things, one is the business that is planned for revenue and sometimes what you deliver at first, we believe there are have been, but particularly the last quarter, there was a mismatch between the expected revenue number and actually what we deliver but the capacities that we currently have we can actually stretch INR600 crores if I say, at full.

Harshil Shethia — AUM Fund Advisors LLP — Analyst

Okay. Sir, secondly not going into the margins, the process. You said that overall the whole demand environment was tepid and we almost grew at a high-single-digit, double-digit number what I want to understand is going ahead with almost like 30% market share while and being a brand like Pigeon and I mean having a pan-India presence, why aren’t we able to pass on the price hike in terms of raw material?

Rajendra Gandhi — Managing Director

We do not have any talent passing on the price or there are actually, I can say that there is no price hike during the particular last quarter, it is not linked to passing on the price input costs, it is more to do with the market scenario, the demand per se. And if there would have been a price hike in the input cost, obviously, we would also have passed on those price increase to the market. It is not a scene where we are not able to pass on the interest rate hike. It is a different scenario. It is a scenario where the market demand and the sentiment that we will be kept.

Harshil Shethia — AUM Fund Advisors LLP — Analyst

I’m talking about the full-year, sir, you said that we overall volume growth was around —

Operator

Sorry to interrupt you here. If you could please join back the queue for follow-up questions. Thank you. Our next question comes from the line of Atul Lohade with JM Financial. Please go ahead.

Achal Lohade — JM Financial Services Ltd — Analyst

Yeah, good evening, sir. Thank you for the opportunity. Just taking forward the earlier participant’s question. With respect to, you said, basically, the March quarter was very weak, we couldn’t absorb the cost and hence the margin impact. Now what I’m trying to understand from you is that where the mismatch was, was it really sudden, was it gradually the weakness was setting in. And if it was to repeat, how do we deal with that now?

Rajendra Gandhi — Managing Director

Okay. To give you some number, Achal, we had done a revenue of INR350 crores, we would have definitely had another say INR22 crores of EBITDA, and then on the whole pack of numbers will totally look different. And in a normalized situation — normal situation like you already know that we are going upwards in spite of this — even the rate for the slow growth in the last quarter. In the last five years, we have grown at 19% and we believe the company the way the system is build the team capacity, the brand, the dynamic of our distribution networks. All these are able — are built for that kind of growth. That’s a big part.

To simply answer you if we add even been closer to our planned number. We would be in the range of the EBITDA that we had set. I make lowered the breakeven, even if you do a INR10 crore number, at least not less than INR2.5 crore to INR3 crores growth to EBITDA.

Achal Lohade — JM Financial Services Ltd — Analyst

Okay. No, where I was coming from is that you said, basically, the margins got impacted because the 3Q and 4Q are lower than our expectations, our costs were budgeted with certain revenues in our mind. Now what I’m trying to understand is, where the negative surprise was from, was it from a particular category, particular geography, was it overall sluggishness, how do we see that, and yeah.

Rajendra Gandhi — Managing Director

Okay. So to tell you the fact of the matter is we have grown in all channels and all products, but for the e-commerce channel, and I can say that the numbers do not fact because we do not grow on the e-commerce channel but I also want to assure you that we are seeing growth again in the e-commerce channel now. For the last year, we are either flat or I can say EBITDA de-grew by over 2% of EBITDA. That revenue depends up what the company grew at, yeah, if we had also continued to grow on the e-commerce, our overall growth at the company-level would be in the range of 17% to 18%, the difference of about INR100 crores to INR150 crores straight away flow to I mean, 30% an updated more or less EBITDA number.

Achal Lohade — JM Financial Services Ltd — Analyst

Okay. So if I understand you correctly, it is the e-com, where the negative surprise was and that is what corrected, have I understood?

Rajendra Gandhi — Managing Director

Yeah, perfect. Actually, we’ve grown well, on the general trade, we had done very well on the modern trade, our exports have also done well 38% in export about 14% in modern trade and 17.1% in general trade. We exactly grew, what we call de-growth by 1.9% on e-commerce. We are very positive over the e-commerce channel, but there are many multiple reasons over the different products that we had in e-commerce. There are also I think some consumer behavior also after that shopping offering apart from the obvious is validated in the beginning of the year that we had in the past. But all that is past, I can say that we are seeing again good growth on EBITDA.

Achal Lohade — JM Financial Services Ltd — Analyst

When you say good growth, is it double-digit. Can we assume that?

Rajendra Gandhi — Managing Director

Yeah, we believe that any growth point of in the double-digit is only good growth. I believe this will be in the higher double-digit but yeah, we are seeing good growth at this point of time, we can say we are seeing good growth.

Achal Lohade — JM Financial Services Ltd — Analyst

Right. And you also mentioned that some of just a clarification, this is a extension, let me just finish, please. This April and May was weak. So given that context, A, what is the revenue growth and margin guidance we wish to have for FY ’24 as a whole? And B, if there was again supplies on whatever reasons in terms of revenue growth. How do we ensure that we still touch the double-digit magical?

Rajendra Gandhi — Managing Director

So I can say that we have this year, we have got there maybe there, very close to what we have incurred in the last year and we are very confident of delivering growth even. of course, as you rightly have analyzed in the data, there is a slowdown kind of a situation currently but we are still growing, it’s not that we are not growing. And we believe that with the onset of the festival season, the growth, the demand is going to be back and with all that. If we normalize, historically we have grown at 19%, and even under the challenging period of last year, we have grown at 30%. So I think we would be anywhere between this and in a good time, it may also exceed that.

Achal Lohade — JM Financial Services Ltd — Analyst

Got it, I’ll come back-in the queue, sir. Thank you so much.

Operator

Thank you. Our next question is from the line of Anand Mundra from Soar Wealth. Please go ahead.

Anand Mundra — Soar Wealth Managers — Analyst

Yeah, hi, good evening, sir. Sir, what is our guidance for capex for FY ’24 and ’25, since you have splitted the amount?

Rajendra Gandhi — Managing Director

Well, ideally Mundra ji, we would want to spend not more than 25% of our PAT on capex along with adding up the business that we have for the particular year. So it depends on how the year that we already have a capex plan, but we would want to differ it to the last quarter and between the last and first quarter of next year. That is the plan now.

Anand Mundra — Soar Wealth Managers — Analyst

Because earlier we were thinking of INR60 crores and INR70 crores, to the absolute amount since you have differed it, can we assume that you are doing INR30 crore capex for FY ’24?

Rajendra Gandhi — Managing Director

Yeah, no, to an ideal situation, we would have been capex of about INR55 crores to INR60 crores, but there is some capex is ongoing and some which is already paid off, I mean, and that was have been paid up until a major portion of our capex for this year is to set up this foundry for our GAAP and cookware which is already planned, but we would want to take this investment in the last in the first quarter next year.

Anand Mundra — Soar Wealth Managers — Analyst

Okay. And sir, since you have taken a prudent decision on delaying the capex, given the slowdown. Is there any way you can you think about your retail store expansion plan also can be delay that also because there is no growth and it’s encouraging an increase in expenses below EBITDA also.

Rajendra Gandhi — Managing Director

No-no, so I want to again guide you on this. We are committed to expand our retail, but we have formed a new strategy where we are also onboarding franchisees, which will substantially, bring our cash outflow to expand the stores down. The model is already in place and we are also seeing good interest. So as it — as the year progress, you’ll see a lot of our new stores from existing stores and the new stores being company-owned, but franchisee operated which would bring the cash investments into the business.

Anand Mundra — Soar Wealth Managers — Analyst

Sir, can we assume that we will not be doing any funding for any retail stores from our balance sheet then for this financial year or there can be some mix.

Rajendra Gandhi — Managing Director

Say in. At the rate that we would want to build a stores, it is close to 100 stores for this year and in normalized capex will be in the range of INR15 lakhs to INR18 lakhs, but. I would say it will not be zero, it could be very-very substantially lower than otherwise not is that. It allows.

Anand Mundra — Soar Wealth Managers — Analyst

Sorry, can you give us guidance in terms of number of stores, say, 100 stores, how much we will be funding from our own balance sheet?

Rajendra Gandhi — Managing Director

Seven to eight stores per month is what we would want to do that is the run-rate we are now moving.

Anand Mundra — Soar Wealth Managers — Analyst

So that I understood, sir. So I’m saying out-of-the seven to eight, how much would be franchisee-owned??

Rajendra Gandhi — Managing Director

In all these 100 stores, we believe will be funded by the franchisees it’s not limited to the new stores alone, so there would be the stores that are already performing well, and we would also move this to franchise.

Anand Mundra — Soar Wealth Managers — Analyst

Okay, thanks. Sir, one more thing on gross margin is because was asking you what is our guidance on gross margin for FY ’24, so since we have done 31.8%.

Rajendra Gandhi — Managing Director

On gross margins, we already improved about 0.8% in compared to the previous year to this year. We believe that we will be able to get to a normalized, which unless there is any volatility on the input cost we will be in the range of 33.5%.

Anand Mundra — Soar Wealth Managers — Analyst

So it would be minimum 33%.

Operator

This is the Operator. If we can please join back the queue for follow-up questions.

Anand Mundra — Soar Wealth Managers — Analyst

Okay, thanks, I’m done. Thanks a lot. Sir, one last statement I wanted to make, below EBITDA also there are a lot of costs. Now depreciation is very high interest cost has gone up because of retail lease expenses. So would request you to also increase the PAT, [Foreign Speech] we need to have minimum for 20%, ROE, we need to have 11% EBITDA otherwise the PAT goes into single-digit very low-single digits, sir. Okay sir, thanks a lot, sir.

Rajendra Gandhi — Managing Director

Definitely that we are cognizant of the EBITDA number and but for this one will take, we have a setting during a time when we are underperformed in the quarter, but the company’s cumulative strength to deliver the 11% EBITDA is very much intact.

Operator

Thank you. Ladies and gentlemen, in the interest of time and fairness to others, please restrict yourself to two questions per participant. Our next question comes from the line of Paras Bothra with Ashika India Alpha Fund. Please go ahead.

Paras Bothra — Ashika India Alpha Fund — Analyst

Good evening, and thank you for the opportunity. So this is with regard to what you see that there has been a slowdown, so I wanted to understand what is it that is leading to the slowdown for the industry per se and for you as well and more particularly on the e-commerce side, when you say that this has been a real drag for us. So what is happening in the eCommerce space, is it that the competitors are taking your place, or what is that is that it is driving, if it is an industry-wide phenomenon as far as e-commerce is concerned, and why you are so confident that next season, things will pick up. So this is one question.

Rajendra Gandhi — Managing Director

Well, let me guide you to one thing that we continue to lead in both the e-commerce platforms. The platform itself has witnessed this thing in the base that what during the COVID times probably the base is high and the way they’re doing business there were flat sellers on the platform which have moved out and the new are coming. There was an opportunity in the beginning of the year, but it all the. And the consumer behavior also as impacted to a certain extent but I can tell you that in the recent times, we expect the e-commerce channels also performing to earlier levels and growing at earlier levels. So we believe that the e-commerce business is again on the same trajectory of growth that we were talking about earlier.

Paras Bothra — Ashika India Alpha Fund — Analyst

Okay.

Rajendra Gandhi — Managing Director

Growth, on the demand side. I can tell you that particularly during the festival there is good demand for the kind of products that we have. Starting in the second quarter all these festival seasons are kicking in but starting from the South. So we believe the growth will be back to normal.

Paras Bothra — Ashika India Alpha Fund — Analyst

Okay. Got the point. Second is, with regard to other expense. So when you say that you will gap your expense to what it was last year, say for FY ’23, so how do we look at it, is it going to be as a percentage of sales that it will be caped and why, what has been the reason or the components of it that the expenses have gone up, other expenses by 22%, whereas the topline was at 13%.

Rajendra Gandhi — Managing Director

You’re right. So, if you will see the number we are closer to at the end of box? Yeah, complete debottleneck went in the manpower per. We are at about INR310 crores of expenses in the previous year. And we have added enough people to cater to all the demand that was — that we envisage. So more or less it is there, but for say INR10 crores to INR15 crores, additional spend for this year. This is not going to exceed that number. There is a combined spend on those and manpower on the business.

Paras Bothra — Ashika India Alpha Fund — Analyst

Okay, fine. So last question from my side, and this is a basic question, I wanted to just have a clarification on with regard to the Indian brand, is it Stove Kraft or how is it. Stove Kraft, right?

Rajendra Gandhi — Managing Director

The time it was registered it has remained with Stove Kraft.

Paras Bothra — Ashika India Alpha Fund — Analyst

Okay, perfect. So that’s all from my side. Thank you so much.

Operator

Thank you. Our next question comes from Rusmik Oza Azer with Nine Rays Equity Research. Please go ahead.

Rusmik Oza — Nine Rays Equity Research — Analyst

Yeah, thanks for the opportunity. Sir, our strategy has been that we are backward integrated and manufacturing has been a forte and we sell on markup. And we are very competitive in terms of pricing, so I just wanted to understand as compared to FY ’23, what kind of price realization increase you’re looking at in FY ’24 through a little lag up to the EBITDA margin.

Rajendra Gandhi — Managing Director

So I can say that we are working towards increasing our gross margin by not less than 1% over the base of last year.

Rusmik Oza — Nine Rays Equity Research — Analyst

Okay. So because in the morning in one of the TV channels, you had given some guidance of 11% EBITDA margin and we are at seven point —

Rajendra Gandhi — Managing Director

It’s clear that the company has all the capability and the strong enough to deliver the 11%, we believe in a what I like that we have already putting all the efforts to build a strong team for manufacturing facility and the brands and we are able to we are confident that by the end of the first half we should be able to be back there.

Rusmik Oza — Nine Rays Equity Research — Analyst

Okay. Okay. Is it fair to assume that we have 7.7% EBITDA margin FY ’23, and it’s very good, you need to increase the 330 bps, out of which 100 bps will come from gross margin and around 230 bps will come from maybe because of static fixed-cost, something like that.

Rajendra Gandhi — Managing Director

Yeah, more or less that should be the correct understanding.

Rusmik Oza — Nine Rays Equity Research — Analyst

Okay. And sir, you have some targets of snow in taking exports around 20% of revenue in next two to three years. So just wanted to understand the part is just export go from 10% to 20% the next two to three years. Does it impact the EBITDA margin positively or negatively or indirectly are the margins in the export better-off, better than the domestic business?

Rajendra Gandhi — Managing Director

No, at the EBITDA, both domestic and export margins are neutral, at the gross margins as export margins are lower, we are we have one last year at 38%, we believe that happens, let’s say, the good, but we still continue to see good demand from our export markets but the answer to your question at EBITDA margins it’s neutral maybe a point-by-point. That will be fair but our EBITDA margins both the business at budget.

Rusmik Oza — Nine Rays Equity Research — Analyst

Sir, last question, sir, for FY ’24 to ’25, ’26 any guidance you’re trying to give on the ROE or ROCE, what kind of internal benchmark you have for return ratios for the next two to three years?

Rajendra Gandhi — Managing Director

We will get back to our ROCE in the past year, You may feel that we didn’t believe to will get back to the 20% is not I can assure you, at this point of time.

Rusmik Oza — Nine Rays Equity Research — Analyst

Okay, okay. Thank you, sir and best of luck.

Rajendra Gandhi — Managing Director

Thank you.

Operator

Thank you. Our next question comes from Arijit Malakar with Ashika Stock Broking Limited. Please go ahead.

Arijit Malakar — Ashika Stock Broking Limited — Analyst

Thank you for the opportunity. Yeah, my question is, sir, what gives you the confidence that demand scenario will improve and we will be able to clock high-teen growth in FY ’24. And my second question is, what strategies actually we are taking to improve the margins going ahead?

Rajendra Gandhi — Managing Director

On the margin front, we have already taken see, all our margins are cost we consciously ensure that we do at least a 33.5% gross margin and we have delivered about 32.5%, 32.8% gross margin last year. So we are confident of the increase in the gross margin. 30%. Our update about the gross margin and about the demand scenario. Second question, and the demand scenario, and the demand scenarios.

Arijit Malakar — Ashika Stock Broking Limited — Analyst

Demand scenario, what gives you the confidence that the demand scenario will improve.

Rajendra Gandhi — Managing Director

It’s not that always the markets are sluggish and the category that we offset are actually having high replenishment, high we are targeting. We are actually addressing TD, which is again, the now can be a lot of them are going to be affordable segment and we are the first brand of choice for them. This growth that we have witnessed in the last year, about 13% of growth is under very-very challenging consensus is not that every time there is the market will be remaining, is going to remain the same.

In a normal situation normal scenario our growth rate as I again want to reiterate that we have been growing historically in the last five years at a CAGR of 19%, so we believe that we are actually the business that we have built and the company that with all those capabilities that it can easily deliver that historic growth rate in a normal situation and 13% was delivered under very-very, I can say weak demand scenario.

Arijit Malakar — Ashika Stock Broking Limited — Analyst

Okay, thank you, sir. Got it, sir. That’s all from my end.

Rajendra Gandhi — Managing Director

Thank you.

Operator

Thank you. Our next question comes from the line of Khush Gosrani with InCred Asset Management. Please go ahead.

Khush Gosrani — InCred Asset Management — Analyst

Yeah, hi, thank you for the follow-up. Sir, A, I wanted to understand what will be the channel-wise, gross margins because as you highlighted that it is so there was a negative surprise for e-com and hence it is due to sales and lower margins. So if you can just highlight what are the margins and channels very straight.

Rajendra Gandhi — Managing Director

I just want to reassure that other than the export business all the Pigeon brand, whether it is channel or product or margin agnostic, I can tell you the margins are the same whether it is with the tenant that we operate or with the product at the mean number, they are all the same for us at the point of realization net of all the what you call schemes or discounts that we provide to this various channels. The net realizations, most of all at the same number.

Khush Gosrani — InCred Asset Management — Analyst

Okay. And sir, as you highlighted 54 retail stores were opened. So if you could highlight what kind of revenues they have generated and what kind of profitability levels we are at right now.

Rajendra Gandhi — Managing Director

The gross margin for these stores are in the range of 45% to 48% and our cost to run any store is in the range of INR1.25 lakh to INR3 lakh. And on an average, these stores are delivering upwards of INR4 lakh per month. So I can say that the number of 54 this month, current month and we guide you to we are able to get to INR2.5 crore revenue. It’s not 54 number at the end of the quarter. and going to we added stores. We added the rate of adding it seven to eight stores a month.

I tell you the other advantage with our stores — we 69% of our customers that visited the Pigeon stores are first-time customers of the Pigeon stores. These are absolutely new to this brand. Then, we also experienced that wherever our Pigeon stores are there in the regions where the Pigeon stores are there, our GT is starting to perform better than in the past.

Khush Gosrani — InCred Asset Management — Analyst

Okay, okay. No I agree with the strategy. I just wanted to understand.

Rajendra Gandhi — Managing Director

We at the corporate-level also we are now making profits on our retail, but store-level even at INR4 lakhs we make good progress.

Khush Gosrani — InCred Asset Management — Analyst

So and how much time does do these stores profitable because they initially there would be impacting the margin has said.

Rajendra Gandhi — Managing Director

After two months, first two months of operation and then all the stores that we have so far opened they have been profitable after the third month.

Khush Gosrani — InCred Asset Management — Analyst

Okay. Got it. Got it, sir. Thank you.

Operator

Thank you. Our next question comes from Akash Jain from Moneycurve. Please go ahead.

Akash Jain — Moneycurve — Analyst

Yeah. Thank you, sir. I think the message from all investors in the call has been quite consistent right in the sense that the market is tepid beyond the point we have limited control over how demand will play out and other structure given the fact that there is very-high fixed and just we will always travel margin and on ROE in a normal environment, where demand is not very strong and I think over the last few years, unfortunately, the timing of additional cost in capex has been such we have run into a lower demand scenario. Any sort of scenario in a time when we have actually done a lot of cost and capex unfortunately from capex. So the only thing. I want to say there is a market even if you don’t go too much as compared to your competitors but you are able to protect margins to some extent, I think that probably will play out better for us as investors and in categories where our market share is already quite high. That’s a good product, etc. I don’t see any reason why we should give up to 25% discount to the market, but I think that the category-wise level some price hike is warranted. As an investor and as someone who visits Pigeon product, I can tell you that there is the product is very good. I don’t see any reason why should be a 25% discount to the market leaders on categories where we are not going to have too much of additional market share. I don’t see any reason why we should not. So the tonnes of to increase pricing and see what happens, because again this is not growing at 7% to 6% are growing at 2%, but we are able to protect our margins better. My sense is that we play on the.

So my only request to you is in a demand scenario, it is not necessarily that we try and increase so much because it’s number will happen because the tailwind or the headwind is there on-demand. So let us also look at margins because whatever scenario, if you grow a little bit, the strategic approach of ROE and margins is probably not something that investors and shareholders that difficult, but so I think I’ve limited feedback on that. I think that feedback is probably consistent from all investor I point out that I’ll just say my point of view because the margin is very important. So if you don’t have margins and ROE after a 7% to 10% growth. It does not really help too much because you have to protect margins and operations.

Rajendra Gandhi — Managing Director

First of all thank you for the evaluation and observation on the quality. The point is fully taken in whatever you’ve said.

Akash Jain — Moneycurve — Analyst

Thank you, sir.

Operator

Thank you. Our next question comes from Harshil Shethia with AUM Fund Advisors. Please go ahead.

Harshil Shethia — AUM Fund Advisors LLP — Analyst

Hello.

Rajendra Gandhi — Managing Director

Yes, sir.

Harshil Shethia — AUM Fund Advisors LLP — Analyst

Sir, one more last question sir, what kind of price hikes that we’ve taken in the first quarter to reach gross margins of 33.5%?

Rajendra Gandhi — Managing Director

33%, I tell you, while that we I’ve been a higher price increase. We also at the beginning of the year, been more potent to general trade, so particularly on the BT, it’s not that because of all the price hikes that we take, I can say that we have taken good price hikes in this current year. Again, all with the base that we believe that we are very confident of increasing our gross margin at least to a level of 33.5%.

Harshil Shethia — AUM Fund Advisors LLP — Analyst

Okay.

Operator

Thank you. Ladies and gentlemen. In the interest of time that was the last question. I would now like to hand the conference over to Mr. Rajendra Gandhi for closing comments.

Rajendra Gandhi — Managing Director

First of all, I would like to thank each one of you for having the interest and confidence in the company and how they are trying to understand. The company ended the consensus a company could deliver. good growth of course, we are let down on the EBITDA and PAT numbers, but we would want to assure all our analysts here and investors definitely on the whole, that the company’s on a very strong for high growth and we’ll be able to deliver both EBITDA and the margin number in the coming quarters. Thank you for the patience today.

Operator

[Operator Closing Remarks]