Monte Carlo Fashions Ltd (MONTECARLO) Q1 FY23 Earnings Concall Transcript

Monte Carlo Fashions Ltd (NSE:MONTECARLO) Q1 FY23 Earnings Concall dated Aug. 05, 2022

Corporate Participants:

Rishabh Oswal — Additional Executive Director

Sandeep Jain — Executive Director

Dinesh Cogna — Director

Analysts:

Deepan Sankara Narayanan — TrustLine Holdings Pvt. Ltd — Analyst

Vikas Khemani — Carnelian Asset Management — Analyst

Naresh Kataria — Money Curve Investments — Analyst

Nikhil Jain — Galaxy International — Analyst

Zaki Naseer — Retail Investor — Analyst

Riya Mehta — Aequitas Investment — Analyst

Sachin Kasera — Svan Investments — Analyst

Viraj Parekh — Carnelian Asset Advisors — Analyst

Anil Jain — Equipassion Capital — Analyst

Sakshi Somalia — SE Associates — Analyst

Deepak Mehta — Individual Investor — Analyst

Jigisha Kapoor — Emkay Global Financial Services — Analyst

Presentation:

Operator

Ladies and gentlemen, welcome to the Monte Carlo Fashions Limited Q1 FY ’23 Conference Call, hosted by Emkay Global Financial Services. We have with us today Mr. Dinesh Gogna, Director; Mr. Sandeep Jain, Executive Director; Mr. Rishabh Oswal, Executive Director; Mr. R.K. Sharma, CFO; and Mr. Ankur Gauba, Company Secretary.

[Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Jigisha Kapoor from Emkay Global Services. Thank you, and over to you, ma’am.

Jigisha Kapoor — Emkay Global Financial Services — Analyst

Good afternoon, everyone. I would like to welcome the management and thank them for this opportunity. I shall now hand over the call to the management for the opening remarks. Over to you, gentlemen.

Sandeep Jain — Executive Director

Yeah. Good morning, everyone, and thank you for joining us for this earning call of Monte Carlo Fashions to discuss the financial and the operating performance for Q1 financial ’23.

I would like to highlight that certain statements made or discussed over the conference call today will be forward-looking statements, and a disclaimer to this effect has been included in the results presentation shared with you earlier. Result documents are available on company’s website and also have been updated on our stock exchanges. A transcript of this call would also be made available on the Investors section over the company’s website. And now let me share with you the financial and the operating performance for this quarter.

The company reported revenues of INR113 crore during Q1 financial ’23 as against INR42 crore in Q1 financial ’22, thus registering a growth of 171% year-on-year. This quarter has been the best ever Q1 throughout the entire existence of this company. Operating EBITDA for this quarter was INR4 crore as against loss of INR8.6 crore in Q1 financial ’22. Loss at PAT level lowered at INR3.9 crore as against INR10 crore in Q1 financial ’22.

Our balance sheet continues to remain robust, and we continue to enjoy a net debt-free status. We have a cash balance of INR275 crore, which comprises of cash and bank balances along with current and noncurrent investments. Long-term borrowing is INR7.5 crore as of June 2022 as compared to INR8.3 crore in March ’22, which shows our efficacy in serving the debt.

Monte Carlo continues to — continues with this endeavor to build a leading branded apparel company with a well-diversified portfolio such as cotton, woolen, kids and home furnishing. Apart from cotton segment, we also produce different other garments, we also produce cotton and cotton-blended T-Shirt in economic category under the brand Cloak & Decker. The ability to tap various segments over the market provides the company with tremendous opportunities for growth in coming years. The key strength is wide and growing distribution network with a diversified presence across India.

The company’s product reaches the end users through different distribution channels. The company has presence through 1,363 MBOs, 323 EBOs, 268 national chain stores. With regard to our online sales, we are looking to focus more on selling to our own portal, but also our clothes are available on various e-commerce websites such as Ajio, Amazon, Flipkart, Myntra, First Cry, Jabong and Kapsons. Majority of our net revenues from the franchise, EBOs and MBOs where we primarily sell on preorder or outright basis, by virtue of this business model, there is no major inventory risk, and it’s always remain insulated from the normal hazard sales in the branded apparel business.

I would like to highlight that till date we have experienced almost zero bad debts in our business, which stands as a testimony to our strong business model based on zero credit risk policy for the company. At Monte Carlo, we are blessed to provide our customers with the finest clothing through product innovations, high-quality and the launch of new collections from time to time. Moreover, we continually work towards changing the look and feel of our stores to give our customers best-in-class experience.

Setting up a new cloudy blanket manufacturing unit by subsidiary company Monte Carlo Home Textiles Limited. Monte Carlo Fashions Limited is entitled under the PLI scheme for manufacturing home textile products like rugs and mink blanket fabric post the visibility in the foresaid PLI scheme, the management conducted a feasibility study on the product profile, competitive landscape and economic viability of the scenario above. The company’s feasibility study concluded that the manufacturing of said products were not favorable even with the aid of PLI team. Thus the Board of Directors concluded to undertake other projects, which will be beneficial for the company and will also benefit our stakeholders.

Now under our subsidiary company, Monte Carlo Home Textile Limited, we are planning to set up a cloudy blanket manufacturing unit with a project cost of INR80 crore approximately in Jammu & Kashmir, which will align with the overall growth strategy of the company. The benefit of setting a plant in J&K are capital investment incentives, capital interest subvention, GST-linked incentive, a low rate of electricity and other tax exemptions.

We are optimistic about our future growth and earnings potential. We believe that we have a strong foundation for the future, which can provide us sustainable and profitable growth for the longer term. While our focus will be to maximize revenue growth going forward, our large interest is to build profitability by maintaining cost control measures.

With this, now we can open the floor for question-and-answer session. If you have any queries post this earning call, you may also contact us at investors@montecarlocorporate.com or through Dickenson World, our Investor Relations Advisers. Thank you very much.

Questions and Answers:

 

Operator

Thank you very much sir. We will now begin with the question-and-answer session. [Operator Instructions] We take the first question from the line of Deepan Sankara Narayanan from TrustLine. Please go ahead, sir.

Deepan Sankara Narayanan — TrustLine Holdings Pvt. Ltd — Analyst

Good morning, everyone, and congratulations for good set of numbers. So firstly, I wanted to understand this INR80 crore investments we are talking about in home textile. So will this capex be enough to replace our current trading volumes in home textile business to manufacturing? And what kind of margin improvement we can foresee from this our own manufacturing division?

Sandeep Jain — Executive Director

Yeah. Thank you, Mr. Deepan. Basically, in our home textile segment, it’s not only the blanket, which we trade, we also do towels, bed sheets and quilts. So this plant is basically for blanket manufacturing, we are putting up at J&K. Out of that also there are some of the blankets, which we cannot produce in this unit. So some of that would keep on outsourcing from China. And 70% to 75% of this blanket, what we do right now can be produced in this blanket unit.

And as far as EBITDA is concerned, we have kept that as far as the standalone unit is concerned, the EBITDA, including the incentives are in the range of 20%, 22%, which is in line with the company’s strategy. And also, when we start producing blankets, it will definitely add in our profitability because right now the EBITDA of the blanket trading is around 14% to 15%. So when we have higher EBITDA in our manufacturing, that benefit will definitely come to the company.

Deepan Sankara Narayanan — TrustLine Holdings Pvt. Ltd — Analyst

Okay. Okay, sir. And so what kind of asset have on this INR80 crores investment?

Vikas Khemani — Carnelian Asset Management — Analyst

Pardon.

Deepan Sankara Narayanan — TrustLine Holdings Pvt. Ltd — Analyst

What kind of revenues we can generate from this INR80 crores investment?

Sandeep Jain — Executive Director

See, if we see the standalone revenues from this unit should be in the range of INR140 crores to INR150 crores. But out of that, around INR50 crores will be sourced in-house. So the additional revenue, which the company will generate is around INR70 crores to INR75 crores. And this plant, we hope that would be operational by second half of next fiscal.

Deepan Sankara Narayanan — TrustLine Holdings Pvt. Ltd — Analyst

Okay. Okay, sir. And secondly, sir, how is the order book pipeline for our winter goods? Have you taken any price increase for current season as well?

Sandeep Jain — Executive Director

See, the order book is quite strong, as we already mentioned in our earlier conference call also, we had a very strong trade show where we have very good order booking. And another advantage we have is that a low level of stock at the retail level. So we are very optimistic and hopeful for this year going ahead.

Deepan Sankara Narayanan — TrustLine Holdings Pvt. Ltd — Analyst

So, are we planning to increase our growth guidance for full year, sir?

Sandeep Jain — Executive Director

Right now, we are — we stand by the growth guidance of 20% to 25%, which we gave earlier in our last conference call. So, if there is any change in the guidance during the course of the year, we’ll definitely update you.

Deepan Sankara Narayanan — TrustLine Holdings Pvt. Ltd — Analyst

Okay. Okay. So, lastly from my side, so last quarter, you have shared that we are planning to add 20 to 25 new stores every year. But I think this quarter itself, we have added some 11 stores. So are we planning to do aggressive expansion of stores?

Sandeep Jain — Executive Director

Yes, we are on track to open around 30 stores this financial year. And I hope that we might even grow this figure going forward in this financial year.

Deepan Sankara Narayanan — TrustLine Holdings Pvt. Ltd — Analyst

Okay, sir. Okay. Thanks a lot and all the best.

Operator

Thank you, sir. We take the next question from the line of Vikas Khemani from Carnelian Asset Management. Please go ahead.

Vikas Khemani — Carnelian Asset Management — Analyst

Hi Sandeep, congratulations on good set of numbers and the entire team.

Sandeep Jain — Executive Director

Thank you.

Vikas Khemani — Carnelian Asset Management — Analyst

I think first time in the quarter Q1, you have reported a positive EBITDA, which I think is a very good sign of slowly reducing the seasonality.

I have a couple of questions. One is that what happens to our earlier rug plant, have you scrapped that or is there any update on that, because last call you said that you’re reviewing it. And of course, you have announced a new plant in the Jammu & Kashmir for the blanket. But what happens to that plant? Is there any decision you made on that?

Sandeep Jain — Executive Director

Yeah. So, decision is already taken in the Board that it’s not lucrative enough to go with the rugs manufacturing plant, seeing the global scenario and the overall EBITDA after making the detailed project report. So as of now, we have canceled the rugs manufacturing plant. And now we are going ahead with the cloudy blanket manufacturing plant in J&K and which the company has made a detailed project report and which is definitely EBITDA-accretive to the company and also in line with the company’s existing blanket marketing.

Vikas Khemani — Carnelian Asset Management — Analyst

Correct. But I think, see, given the size of our balance sheet and opportunity and all, I think there were lot of PLIs, earlier the investment side was far bigger than what we are currently doing it. So are there then any more projects of similar kind on the drawing board, which you are considering, because we have a reasonably good amount of cash opportunities where you pay especially on the export front? So are there any sort of projects on drawing board still?

Sandeep Jain — Executive Director

See, we are always in the lookout of good projects, which we have shared earlier also that it should be having the same kind of EBITDA level what the company doing right now. In Monte Carlo, in the blanket manufacturing unit when we made the detailed project report. So the EBITDA level was coming at the same level. So it is not going to affect our EBITDA and will definitely add to the revenues.

We are thinking of actually going into two phases. In one — first phase, we are putting up our investment of INR80 crores for this first line. And if everything goes well, then there’s a second line, which will come up in the same area, because we are taking the land according to three lines. So second, capex, we also expect of INR70 crores, which will follow once the first line is commissioned, and it still as per the expected lines. So I think the company is always open for future investments in the areas where it can have a good EBITDA, which is in the line of the company and also the company is open for higher dividends and buybacks in the future.

Vikas Khemani — Carnelian Asset Management — Analyst

And this project is only for domestic or replacing our demand, because our demand will — may not — is that export element out there as well?

Sandeep Jain — Executive Director

See, most of it will go into the domestic market because the benefits which we get by putting up this plant in J&K are GST, SGST, CGST, where we get the refund of all the duties, whatever we pay. So most of the products will go into the domestic market also. But I cannot rule out even small percentage can be done for the exports also.

Dinesh Cogna — Director

Vikas, one thing, this is Cogna, here.

Vikas Khemani — Carnelian Asset Management — Analyst

Hello, sir.

Dinesh Cogna — Director

Yes, hello. How are you?

Vikas Khemani — Carnelian Asset Management — Analyst

I’m good, good sir.

Dinesh Cogna — Director

Yeah. In fact, like, this is basically part of it is for the captive use also. We can say so, because we have been trading. We have been giving the textile trading in our results, like you must have noticed this. And textile trading includes trading in blankets. And hitherto, we have been importing all the blankets from China and only some portion of this year, like we have taken the blanket from Panipat and other places, because of some problems with China.

So now when this unit is put up, basically, like, some portion of that will be sold to Monte Carlo main unit, I mean, a holding company. And from there, they will — I mean, do as hugely like they used to do earlier trading in that. And that will certainly increase our EBITDA margin in Monte Carlo also.

Vikas Khemani — Carnelian Asset Management — Analyst

Sure, sure.

Dinesh Cogna — Director

And secondly, so far the expansion process is concerned, as I mean, Mr. Jain has already explained to you, see that this is a beginning. Now to begin with, we cannot — we are very careful, like, and we have been always going ahead with the expansion, which actually earns company a profitable growth. That is the reason, like, to begin with, we are going ahead with the INR80 crores of this total project. And thereafter, this project will go to INR150 crores. And we will not stop there. If we find a good opportunity, we’ll go further ahead.

Vikas Khemani — Carnelian Asset Management — Analyst

Sure. I think that’s good. And one more, sir, only suggestion or observation other than any question. I think while we are expanding about 20, 25-odd stores, and I guess, this quarter, you’ve done very well, but given the fact that we are a very category leader and there is no other any meaningful brand which is there to compete with us. I thought probably and right now, demand environment across the board is very, very strong. So using this opportunity to scale up the growth slightly faster would be a great idea according to me. Of course, I know that you guys are conservative and generally, you follow a very conservative policy. But I think environment right now, sir, unorganized to organized shift is happening in our brand as we recall, capturing the white space would be a great sort of idea. That’s my observation. But any comment on that?

Sandeep Jain — Executive Director

I think, Vikas, we’re in line with what you were saying. As you know that the company has grown 45% last financial year. So on the larger base, we are projecting a growth of 20% or 25%. That shows our aggressive nature as compared to last few years where we were growing at 10% to 15%. So I think we are in line with what you were saying. And, definitely, we noted your points also.

Vikas Khemani — Carnelian Asset Management — Analyst

Great, sir. Thank you.

Operator

Thank you, sir. We take the next question from the line of Naresh Kataria from Money Curve Investments. Please go ahead.

Naresh Kataria — Money Curve Investments — Analyst

Hi, sir. Congratulations. My question is on the long-term growth. So very good to know that you are reiterating this 20%, 25% growth this year. I’m hoping that this growth momentum continues. I’m thinking what’s changed structurally to give us this growth confidence, because our last five years growth was more like 10%, 12% CAGR. Of course, we had COVID, but is it that we have reached a scale where we are able to grow or is it the previous year’s focus on?

Sandeep Jain — Executive Director

If I clearly understood your question, you wanted to ask that — how we are very confident of achieving this growth of 20%, 25% going forward.

Naresh Kataria — Money Curve Investments — Analyst

Exactly, exactly.

Sandeep Jain — Executive Director

See, what happens is that. So we have different areas in Monte Carlo. We have — are basically in our distribution channels also, we have four basically different channels, which is large-format stores; then SIS, which is shop-in-shop; then EBOs and MBOs. So it takes time when you like consolidate all the areas as well as when they start complementing each other rather than competing with each other. So we were doing a lot of exercise in the last few years so that all these channel with complement each other.

And also, we are keeping a strategy of almost setting the same price at all the levels. So that is helping the company to grow and giving the confidence among the retailers and the consumers as far as when they go to any other — any channels. So I think besides that, we have been doing well in our economy range, Cloak & Decker. We are doing well in our blanket section, which is home textile section and our Rock It brand is also picking up in this financial year. So I think all these things which company was doing efforts on the last three, four years is actually giving us the fruits and that is why we are confident over giving this growth.

Naresh Kataria — Money Curve Investments — Analyst

Perfect. Good to know. And of course, you mentioned in the last call and interview also on — and even on this call on the winter visibility de-growth, so, what — winter is still away? What gives us the confidence that winter will work out to be good? Is it the economy is opened or is it our retailers and MBOs and EBOs are telling that inquiries are good or what’s the [Technical Issues]?

Sandeep Jain — Executive Director

See, basically, when we say that our winter should be good, it depends on our order book. In the recently conducted trade show, we have got a very strong order book. Now the second benefit, which we get in this financial is a lower inventory at the retail level and also at our MBO level. So that gives us another confidence that when the inventory is low, the order book is strong, economy is doing well as far as India is concerned, I don’t see any issues as far as any forthcoming recession is concerned. So we are very confident that if the economy is performing, so definitely, all the brands, including us will definitely perform.

Naresh Kataria — Money Curve Investments — Analyst

Perfect. Thank you.

Operator

Thank you, sir. We take the next question from the line of Nikhil Jain from Galaxy International. Please go ahead, sir.

Nikhil Jain — Galaxy International — Analyst

Yeah. Thank you for the opportunity. Just a couple of questions. First was about just reconfirming that the new plant that you are setting up in J&K so that is primarily for domestic and we will be using it for under the Monte Carlo brand, right? So the product that will be out from the blankets and all, they will be under the Monte Carlo the brand, right?

Sandeep Jain — Executive Director

See, basically, if we do our current business and the kind of capacity we are putting up in J&K as of now, I think we should be able to use around 50% to 60% of the capacity of that particular unit and rest I think we can sell in the open market in blankets, so that is how we perceive.

Nikhil Jain — Galaxy International — Analyst

All right. Okay. And as the requirement grows, then you go ahead with Phase 2 of expansion as you suggested, right?

Sandeep Jain — Executive Director

Pardon.

Nikhil Jain — Galaxy International — Analyst

As the demand grows —

Sandeep Jain — Executive Director

This can increase, because we have been growing at 30% to 35% per year in our blankets and Home Textile. So going forward, we think that the demand will keep on rising. And definitely, the outsourcing will be more from our blanket units rather —

Dinesh Cogna — Director

And expansion would also be there.

Sandeep Jain — Executive Director

And we are planning expansion also in the second phase, once this is — we start in the second half of this next fiscal.

Nikhil Jain — Galaxy International — Analyst

Okay. Great. My second question is with respect to this quarter. So as compared to the last year first quarter, our top line has tripled, right? So almost like some INR40-odd crores to INR120-odd crores and a great achievement on the EBITDA side also. So we are not positive. But I’m just trying to understand what could make us a net positive on this particular quarter? So because our sales have grown 3 times, but it’s still on the net profit side, our — we were not positive. So what is it that actually will make us positive? So is the product mix different which we actually sold in this quarter, which is having less margins as compared to our regular products and all.

Sandeep Jain — Executive Director

See basically, this is historically a weak quarter for us. The reason for this weak quarter as far as PAT is concerned, the biggest thing is that because we start manufacturing of our sweaters, jackets and other winter goods in the month of February, March itself. So all the production expense in making those garments are actually in this quarter, but the product gets sold only in the second and third quarter. So that is why there we are showing some loss in this quarter. But otherwise, if you see that all the manufacturing expense when we enter in this quarter, we don’t take note of other than we book it when we sell it, then it can turn into profits. So that is basically a reason why we’re showing growth in this quarter.

Nikhil Jain — Galaxy International — Analyst

Okay. Thank you. Thank you. And just a last question. So the 11 stores that we have opened, so can you just, let’s say, advise which zones or which states have you opened these stores, sir?

Sandeep Jain — Executive Director

Your voice is not clear, can you please repeat it?

Nikhil Jain — Galaxy International — Analyst

So I was saying, that the stores that have opened, 11 new stores in this quarter, so our goal, which states are those stores in, opened in?

Sandeep Jain — Executive Director

Yeah. The two were opened in Southern state, which is one is in Bangalore and one is in Hyderabad and rest — one is opened in the Eastern region, then balance are opened in the Northern and Central region.

Nikhil Jain — Galaxy International — Analyst

Right. And can you also highlight what is your strategy for expansion, because winter, if you say privately, we are selling the winter wears, so we are a very strong brand on the winter wear side. So, are we, let’s say, looking lo open it more on the states where the winters are much stronger compared lo

Let’s say other slates where winter may not be so heavy?

Sandeep Jain — Executive Director

We are opening pan-India. As I said just now that we have opened in Hyderabad also we have opened in Bangalore also. But we’re making a very conscious movement to these states as and when we get a good location and good rentals and definitely, because being a tropical country, we know that there are 9 months of summer. And in those states where we have very less winters. We have to be present only because of smart wear products that is why we are making growth in Southern states and Western states. And I’m glad to say that we have been growing in those states also. If we just compare the first quarter number of Southern states. Last year, the sale was INR2 crore in South and others. It is INR8.9 crores in this financial year. And in case of West also it grew from to 0.24 to 3.78. So there has been a growth in Western and Southern states also and also a plan of opening retail outlet in these states going forward.

Nikhil Jain — Galaxy International — Analyst

Okay. Great, thank you. Thanks, that’s all from my side.

Operator

Thank you, sir. We take the next question from the line of Zaki Naseer from Retail Investor. Please go ahead sir.

Zaki Naseer — Retail Investor — Analyst

Hello. Hello, can you hear me.

Sandeep Jain — Executive Director

Yes, yes, we can hear you.

Zaki Naseer — Retail Investor — Analyst

Sandeep bhai, Namaskar. Congratulations on a phenomenal first quarter as you had performance last year. And thanks for opening a place in Hyderabad, purely you were looking quite for a long time.

Sandeep bhai, now my question number one is regarding raw material prices. Cotton and yarn has been pretty volatile. So how does this affect you? Does it affect your product pricing in this season, sir? Number two is, this year, more or less, you have given a growth guidance of 20%, do you think a year after that, you will be able to maintain that momentum? Or if you get back to more of a normalized growth? Thank you, sir.

Sandeep Jain — Executive Director

Yeah. Thank you. See, as far as raw material prices are concerned, see, we remain — we made ourselves insulated, whenever we go for a trade show, we normally cover all around the real, depending upon the availability and depending upon the like order book we expect. So I don’t think any variation in the raw material price going forward after the trade show would affect us because already we have covered the material whichever we require for the winter products.

But going forward, now you see that the cotton prices are coming down. So going forward, we see that the MRP doesn’t come down once we fix it in the last season also and this season also, we don’t see that the MRP goes down. So if the MRP don’t go down and there is a reduction in the raw material prices, definitely benefited the company going forward in the summer wear product. And as far as growth guidance is concerned, see, even though last year, we grew at 45% and we gave a very strong guidance of 20% to 25% and we are very optimistic about the economy of this country as we see that there have been many steps taken by the government, which is pushing this economy to grow at 7.5% in this fiscal. And as per the RBI report, going forward also, we don’t see any recession which is coming to India and the economy should remain strong going forward. So we don’t see any problems or any issues that we should not continue our growth going forward also.

Zaki Naseer — Retail Investor — Analyst

Thank you, sir. And if I may just ask one more thing, sir, in regards to your digital marketing, what is the share of your sales on the online networks right now? And how do you plan to push this up going forward, sir?

Sandeep Jain — Executive Director

I would request Mr. Rishab to answer this question.

Rishabh Oswal — Additional Executive Director

So, hi, good afternoon. So, currently, this year around 4% of our sales have come from online channels. This is less as there were some supply constraint from our side towards supplier to the online channel. And our website is undergoing maintenance in this quarter, but we are confident of making it up in the coming quarters or good financial year. So at the end of the financial year, we’ll be in a growth mode in online as well.

Zaki Naseer — Retail Investor — Analyst

Yes. Rishabh Ji, but let’s say 2025, what is your aspiration for this figure, sir, 4% would become 7%, 8% in 2025?

Rishabh Oswal — Additional Executive Director

So our target is 7% to 8% of our overall sale will come from online channels going forward.

Zaki Naseer — Retail Investor — Analyst

Thank you, sir. Fantastic. Fantastic, sir. Best wishes, sir.

Operator

Thank you. We take the next question from the line of Riya from Aequitas Investments. Please go ahead, ma’am.

Riya Mehta — Aequitas Investment — Analyst

Hello. Thank you for providing an opportunity. Congratulations on a good June quarter comparatively —

Sandeep Jain — Executive Director

[Foreign Speech]

Riya Mehta — Aequitas Investment — Analyst

Hello.

Sandeep Jain — Executive Director

Yeah, yeah, please continue.

Riya Mehta — Aequitas Investment — Analyst

Yeah. Sir, my first question would be like since we are expecting this kind of growth in online presence as well as we have a lineup for new stores to be opened, what kind of brand and marketing expense do we see coming forward, like, are we going to invest in that or how is the outlook?

Sandeep Jain — Executive Director

So, see, as far as Monte Carlo brand is concerned, I think the brand recognition and brand pull is good enough that we can maintain our advertisement spend at 2% to 3% of our turnover. And that is what we are spending currently and that is our guidance going forward. However, there is a shift between the composition of the spend that we do, so we are shifting more from offline towards online ad spend. However, the total ad spend will remain at 2% to 3%. So we are focusing more on digital advertisement and performance-based advertisement when it comes to this point.

Riya Mehta — Aequitas Investment — Analyst

Okay. Because I think for increase in penetration in online channels, you will need a much more brand presence because in other parts of the country it’s less prevalent..

Rishabh Oswal — Additional Executive Director

It can cross 3%, but overall it will be at the same level, but obviously we can increase our exposure towards Southern states in Western states when it comes to digital advertisement.

Dinesh Cogna — Director

But as you know that, the revenue is almost growing from INR900 crore to INR1100 crore, so even that 3% become INR30 crore, as compared to INR20 crore in this financial year.

Rishabh Oswal — Additional Executive Director

Yeah. The quantitative [Speaker Overlap] —

Riya Mehta — Aequitas Investment — Analyst

Right, right. And in terms of store network, do you want to give any guidance for the current year? How many stores you want to open up and what kind of sales from the stores do we look forward to?

Sandeep Jain — Executive Director

We have given a guidance of 30 stores to open up in this financial year. And normally, we see that 1000 square feet store should do a sale of around INR1.2 crores.

Riya Mehta — Aequitas Investment — Analyst

Okay. And all these 30 stores will be more than 1,000 square feet?

Sandeep Jain — Executive Director

Pardon.

Riya Mehta — Aequitas Investment — Analyst

All these 30 stores —

Sandeep Jain — Executive Director

Yeah, yeah, more than 1000 square feet, sometimes we get lesser area also depending upon the location when it is not available, but mostly it is around 1000 or more than 1000 square feet.

Riya Mehta — Aequitas Investment — Analyst

Also now coming to a broader outlook, from demand point of view, could you give me a sense of how is the demand, because I was recently reading about some articles where the demand is going down, so demand region-wise as well as product wise, woolen as well as cotton wear?

Sandeep Jain — Executive Director

See, we are very glad to say that we are not seeing any downfall in the demand as far as any growth is concerned. We are having very strong demand coming from the retail outlet also and also our other channels like our MBO asset and LFS channel, we have seen a very strong demand coming up. And we don’t see any fall in the demand in the near future.

Riya Mehta — Aequitas Investment — Analyst

This is for both North region as well as South region, right?

Sandeep Jain — Executive Director

Yes, in both regions.

Riya Mehta — Aequitas Investment — Analyst

Okay. And what percentage of product is not booked for the order book? And can you give me a time line how much — how many months before the order book is placed? And what is the exact procedure like if I may ask?

Sandeep Jain — Executive Director

See, we do a ratio almost six to seven months in advance. So like for winter, we do a trade show in the month of March, and then we start producing our goods and the goods goes normally after five months, like we start dispatching in August, and it ends in October basically, 90% of the goods. And then again, in summer, we do a trade show around August and September and the dispatches are in January, February, and it ends in April.

Riya Mehta — Aequitas Investment — Analyst

Okay. Okay. And what percentage of our products are non-order book oriented?

Sandeep Jain — Executive Director

That is very small. There are some repeats, which comes once the order goes into the retail stores, but that percentage is not that much, mostly, we produce on the order-based goods only. But there are some corporate inquiries, which is — comes as and when it is demand for that. So that is separate from the normal trade business.

Riya Mehta — Aequitas Investment — Analyst

Okay. Okay. I think that’s it from my side. Thank you.

Operator

Thank you. [Operator Instructions] We take the next question from the line of Sachin Kasera from Svan Investments. Please go ahead, sir.

Sachin Kasera — Svan Investments — Analyst

Yeah. Good morning, sir, and congrats for a good set of numbers. I had a few questions. One, if you could tell us what is our currently mix of revenue between economy, mid, and luxury segment? And what is the type of gross margin difference which we enjoy there between the three segments?

Sandeep Jain — Executive Director

We have only a Cloak & Decker brand, which is an economy segment, rest everything is upper premium only. And the Cloak & Decker revenue is basically — if I talk about the overall revenue of the company, it should be around 5% to 6% of the turnover, not more than that. Otherwise, everything is upper premium only. And the gross margins at both the brands are in Monte Carlo, it is little higher, in Cloak & Decker it is little lower, 100 basis points.

Sachin Kasera — Svan Investments — Analyst

Sure. So if you could tell us a little bit about the niche that you’re trying to do in terms of X of Monte Carlo, which is primarily your winter segment, in the cotton segment, what we are trying to do to improve the realization or more of the chain in terms of the presence?

Sandeep Jain — Executive Director

See, cotton realizations are even more than the winter realizations. So at PBT level, we are having the more PBT at cotton segment rather than the winter wear segment.

Sachin Kasera — Svan Investments — Analyst

So you mentioned that we are trying to increase the cotton, non-cotton mix in favor of cotton. You also mentioned that you’re plan to have an expansion of footprint more into Western, Southern region, where it is more of cotton based. So does it mean that going forward as the share of this cotton keeps increasing, overall EBITDA margin should increase in that, because you mentioned that margins in cotton are higher than wool.

Sandeep Jain — Executive Director

Yes. I think the cotton segment is growing faster than the woolen wear segment and winter segment. Being a tropical country and the cotton products are sold nine months in a year. So definitely, it has more growth rate as compared to winter wear products. And going forward, we think that as overheads are also becoming less when you increase your turnover, definitely it should help us in increasing our margins going forward. But it also depends on the economy and kind of discounts and EOSS sales of other brands, but we are very positive of sustaining our margins, especially front margin of 18% to 20% of EBITDA.

Sachin Kasera — Svan Investments — Analyst

That’s fair. So that’s something that we’ve been maintaining, but my sense was that the type of growth we’re talking and the way we are talking of increasing mix of cotton, should be from a two to three perspective, we aspire the range to move like 22% to 24% from 18%, 20% that we have there today?

Sandeep Jain — Executive Director

I can’t say at this moment that we can increase our EBITDA to 20% to 24%. But what we can say the confidence is that we will be able to sustain our margins for the increase in EBITDA.

Sachin Kasera — Svan Investments — Analyst

What is the difference in margin between the cotton and non-cotton, if you could tell us at least that could help us model once how the share of cotton moving will help in terms of the margins?

Sandeep Jain — Executive Director

At PBT level, I would say that it is around 50 to 100 basis point more than the non-winter segment.

Sachin Kasera — Svan Investments — Analyst

How much sir. Sorry.

Sandeep Jain — Executive Director

50 to 100 basis points more than the non-winter segment — winter segment, sorry.

Sachin Kasera — Svan Investments — Analyst

Sure. Secondly, sir, on the capital allocation policy and how do we look at the company, so from what I understand we primarily more of a branded and retail apparel company, now we announced this manufacturing thing. So is it that most of the manufacturing that we plan to allocate would primarily be mainly based on decision if we have it has for a captive, like for example, this new plant that you mentioned 50% will be captive and rest will be non-captive. So how do we look at in terms of allocation of your funds for manufacturing would always primarily driven by the fact that a large portion should be captive consumption or we may look at independent manufacturing opportunities also where there is not be any synergies with our retailing?

Sandeep Jain — Executive Director

See, if I clearly understand the question, you wanted to, like, you wanted to ask that, how much we are doing captive and how much we are doing outsourcing?

Sachin Kasera — Svan Investments — Analyst

No. No, sir. My question is that going forward when we have to allocate any large capex for any manufacturing plant, will it be mainly for segments where we have a good portion of captive consumption or is manufacturing also an independent profitable, so for example, you may look at an opportunity where the IRR is good. And we may have to invest, INR200 crores, INR300 crores, but need not have any captive consumption. We will also avail dual opportunity. So how should we look at the company, is it that it’s more of a branded retail apparel company or it’s a manufacturing cum trade apparel, how should we say?

Sandeep Jain — Executive Director

See, we will do captive only where we think that there are some roadblocks for outsourcing like in sweaters, it’s a very complex process. So we are completely 100% captive like production. But in case of blankets, again there are bottlenecks from importing from China and a lot of variations in the dollar and also the freight, and also sourcing from other. So we are putting up a J&K this blanket manufacturing plant. But as far as T-shirts, shirts and trousers are concerned, so it’s not that margin accretive as we see that it’s not like, in our case, we’re going to put up more of captive production in case of shirts, trouser and T-shirts. As the margins in this is not that much as we compare to blankets and these sweaters. So we don’t see much capex coming up in T-shirts or shirts and trousers and denims but yes. If there is any demand for sweaters, we might do some capex in that.

Sachin Kasera — Svan Investments — Analyst

Okay. So, majority of the manufacturing capex will be primarily the main purpose would be for captive consumption. It’s not like, for example, some of these players that we have like Indo Count, or we Fund which primarily do as example our home textile.

Sandeep Jain — Executive Director

Yeah. So to answer your question. Going forward, even if we invest in more capex, it will be primarily we will be focusing for our captive consumption where we already have a presence. So like blankets, we already have a presence and 50% of the production will be consumed by our brand itself. So going forward, we would prefer for any manufacturing for products where we already have our brand presence.

Sachin Kasera — Svan Investments — Analyst

Sure. And there’d be still last question.

Dinesh Cogna — Director

Can I say something dear friend. Like, so far my both the colleagues they have said so. So far the captive consumption is concerned, we are the people like we have two categories, one is the cotton and other is woolen. So when woolen is concerned, like, we have got the manufacturing facilities available with us. In case there is a increase in demand of the woolen, then in that case the balancing machine and other things we will install but that will not be for captive consumption, that will be only to meet out the demand of the market. And so far the cotton is concerned, we are normally outsourcing because that is more profitable for us. So expansion in our area would be only as per the market demand of our products. It is not that like in-house consumption means that to increase our sales and other things. It is not something like that byproduct, that product will be used for making any production in our own house or something.

Sachin Kasera — Svan Investments — Analyst

Sure. And then lastly, sir On the payout and the capital allocation again, so in that case, are we looking at further, because I think we have lot of cash and that would mean that it may not be more than INR80 crores INR100 crores capex for a year. Would we look in terms of further increase in terms of return to shareholders either by dividend or buyback from what we have been doing last four, five years?

Sandeep Jain — Executive Director

I have already said the same thing that we’re going for some capex for the plant and definitely when Board decides it can increase the dividends or it can go for buyback also in the future to utilize the cash, which is available on the books.

Sachin Kasera — Svan Investments — Analyst

Okay, thank you.

Operator

Thank you. We take the next question from the line of Viraj Parekh from Carnelian. Please go ahead, sir.

Viraj Parekh — Carnelian Asset Advisors — Analyst

Congratulations on a great set of numbers. I just have one question on the growth front, I mean we have grown, as you said 170% on a year-on-year basis and close to 88% on pre-COVID levels. So last year on an annual basis, we’ve taken close to 18% to 20% price hike and the market had absorbed that price hike, and helped us to sustain our margins. So, could you provide me with the breakup for pre-COVID volume growth, how much have we grown on pre-COVID levels on volume and how much has it been on price hikes, if you could — if you have that number handy?

Sandeep Jain — Executive Director

We need to check that. Pre-COVID level sales are, actually I’m not having right now. Yes. We have the pre-COVID sales which is with us, we compare the T-shirt sales of pre-COVID, it was around 17, 68,000 pieces in quality and which we did in the March ’22. So the total volume, which we did in pre-COVID level in ’19, it was 47,60,000 in cotton segment, which is grown to 57.67 lakhs In March ’22 full year.

Viraj Parekh — Carnelian Asset Advisors — Analyst

All right. And sir, what would be the number as on FY ’22 — Q1 FY ’22, based on that?

Sandeep Jain — Executive Director

In Q1 financial ’22, I just shared with some of the — the volumes, which we did in last quarter was 7,40,000, and in this financial it is 11,43,000.

Viraj Parekh — Carnelian Asset Advisors — Analyst

All right. Thank you, sir. All the best going ahead great set of numbers.

Operator

Thank you, sir. We take the next question from the line of Anil Jain from Equipassion Capital. Please go ahead.

Anil Jain — Equipassion Capital — Analyst

Yes, congratulations and for the great first quarter in the company’s history. First time in the company’s history we have EBITDA positive in the first quarter. I just wanted to know, if you open a store, what is your experience or historical experience, the store become EBITDA positive in how much time at the store level?

Sandeep Jain — Executive Director

Can you please repeat it.

Anil Jain — Equipassion Capital — Analyst

Yeah, I just wanted to know from your past experience, when we open a store, how much time it takes to become the store EBITDA positive.

Sandeep Jain — Executive Director

Two to three years.

Anil Jain — Equipassion Capital — Analyst

Two to three years. And how much time it takes to come at the company level EBITDA?

Sandeep Jain — Executive Director

No. See you cannot compare the store level EBITDA with company level EBITDA, because we have normally franchisees which do the stores. So in that case, we see, we see ROI is around 16% to 18% or sometimes 20% on the investment.

Anil Jain — Equipassion Capital — Analyst

Okay.

Sandeep Jain — Executive Director

But in case of company-owned stores, we only open the stores in areas where we don’t find franchise or where the rentals are very high. So —

Anil Jain — Equipassion Capital — Analyst

Okay.

Sandeep Jain — Executive Director

So, it is more to keep our brand presence and brand awareness, it’s not for like increasingly profits in those areas.

Anil Jain — Equipassion Capital — Analyst

Okay. So you mean to say it takes three years to reach company level EBITDA approximately?

Sandeep Jain — Executive Director

The company level EBITDA, see, there is no comparison in that, because most of the stores are owned by the franchisees. We just primarily sell them out rightly.

Anil Jain — Equipassion Capital — Analyst

Okay. Okay. So immediately —

Sandeep Jain — Executive Director

And the franchisees do not share their balance sheet with us that how much they are in profit.

Anil Jain — Equipassion Capital — Analyst

Okay. So, we have become EBITDA positive from first day, which is that of franchisee also? Okay.

Sandeep Jain — Executive Director

Yes. So as far as you see our sales which is wise in our end.

Anil Jain — Equipassion Capital — Analyst

Okay. Got it. That’s all from my side. Yeah.

Operator

Thank you, sir. We take the next question from the line of Sakshi Somalia from SE Associates. Please go ahead.

Sakshi Somalia — SE Associates — Analyst

Hello. Am I audible?

Sandeep Jain — Executive Director

Yes. You are audible.

Sakshi Somalia — SE Associates — Analyst

Hi, good morning and congratulations for your results. I have one small question. So my question is, how is our sports brand, sportswear brand Rock It performing. Can you put some light on it?

Sandeep Jain — Executive Director

So, the brand Rock It was launched one year before the COVID season and once COVID hit, we took a conscious decision to make it online only in the past two years, we sold it only online, but going forward from next financial year, we are having — we are building up a completely independent team for Rock It, with the independent design team, independent marketing team. So we foresee from the next financial year, you will see good numbers in Rock It.

Sakshi Somalia — SE Associates — Analyst

And when you’re saying that it was available only online. So how it performed online? And what is your expectation when you are going ahead with in the main markets? What is the expectation to that?

Sandeep Jain — Executive Director

So, online, the response was good. There were some feedback that we got from the customers related to pricing and discounting policies, which we have incorporated and now I think majority of sales for this brand will be coming from offline channels, which is much more profitable for us as well. So we’ve got good learnings from our online team, and now we are focusing on implementing these changes in the offline segment.

Sakshi Somalia — SE Associates — Analyst

Okay. And when you are putting it from online to offline, are we doing any specific or any major modification or win-win in the strategy or design or something or is it going to go in the same way?

Rishabh Oswal — Additional Executive Director

So, there will be almost a 360-degree change in terms of what the product we are making the pricing strategy and the packaging that we are using to promote it. Also in terms of our advertisement efforts towards the brand, the exposure and expenditure towards the brand will increase as it goes offline. And so we are right now in the process of making an independent distribution channels for this brand, which is independent from the distribution channel of Monte Carlo or Cloak & Decker or our textile segment.

Sakshi Somalia — SE Associates — Analyst

Okay. Okay, thank you so much.

Operator

Thank you, ma’am. We take the next follow-up question from the line of Riya from Aequitas Investments. Please go ahead.

Riya Mehta — Aequitas Investment — Analyst

Hello.

Sandeep Jain — Executive Director

Yeah.

Riya Mehta — Aequitas Investment — Analyst

Yeah. My question is in regards to what percentage of our raw material do we import are outsource?

Sandeep Jain — Executive Director

See, we don’t import much of our requirement as far as woolen yarns are concerned, it’s our sister company, where we procure a woolen yarn, and cotton yarn is actually available, cotton fabrics are actually available in India and through we buy from various companies who make cotton fabrics and cotton garments. And, yes, there are some blankets which we import from China. And yes, there are some fabric specialty fabrics, which are not available in India we import from China and some other countries.

Riya Mehta — Aequitas Investment — Analyst

To what percentage would that be?

Sandeep Jain — Executive Director

And I think in blankets, it is approximately around 15% to 20% if I see the total turnover of the Home Textile segment and in case of jackets approximately 30% to 35% of the fabrics comes from overseas.

Riya Mehta — Aequitas Investment — Analyst

Okay. Are we seeing any issues right now with China shutting down or something?

Sandeep Jain — Executive Director

No, we are not dependent on the overseas fabrics, the percentage is very small, but yes, there are some delays as China has zero COVID policy. So some of the areas get closed in last two months, but I think now it is normal. So we don’t expect any delays as far as our procurement is concerned.

Riya Mehta — Aequitas Investment — Analyst

Do we have any impact of the delay in this quarter by any time? No, no, no, we will not have any impact on any — in this quarter or going forward also. Okay. Okay. And for the current FY ’23, give us the breakup of what kind of segmental do we see from woolen and cotton like the breakup if any?

Sandeep Jain — Executive Director

We can give you last years breakup. This year —

Riya Mehta — Aequitas Investment — Analyst

Yeah. I have the last year’s breakup. What kind of like, I was asking for guidance actually.

Sandeep Jain — Executive Director

It will be almost same. There might be some more cotton garments added to it otherwise it will remain same.

Riya Mehta — Aequitas Investment — Analyst

Okay. That’s it. Thank you.

Sandeep Jain — Executive Director

Thank you.

Operator

Thank you, ma’am. [Operator Instructions] We take the next question from the line of Sachin Kasera from Svan Investments. Please go ahead, sir.

Sachin Kasera — Svan Investments — Analyst

Yes, hello. Sir, you shared the volume number for cotton segment FY ’19 versus FY ’22. Can you also share the same for the woolen segment?

Sandeep Jain — Executive Director

It is almost stable, prices are stable for so, I don’t see any precession in the prices and as far as our margins are concerned, I think it will be sustaining our margins of last year also in woolen cloths.

Sachin Kasera — Svan Investments — Analyst

No, no. My question is, the volume in the woolen segment for FY ’22 versus FY ’19.

Sandeep Jain — Executive Director

Yes, it will definitely grow double-digit in this financial year, it was 13 lakh in case of financial ’19, and it was 15 lakh in case of March ’22 last year.

Sachin Kasera — Svan Investments — Analyst

Sure. Sir, next thing is if I see your presentation, the share of kids and home textile has grown up from 15% to almost 23%, 24% in the last three years. So can you just tell us what is the reason for this sharp increase in share of kids and home textile why are they growing so fast? Is there a special focus you’re putting there?

Sandeep Jain — Executive Director

Yeah, I think there is less competition on textile segment, which is helping it to grow more than the company’s growth rate as they have been — last year, we grew at 50% this year, we anticipate a growth of around 30% to 35%. So because of less competition in this segment, home textile segment is growing faster than the other segment and similarly in the Kids. As known many brands are present in the Kids segment, so that is why it is having a less competition from other brands and the growth is faster as compared to the overall brand. So that is why have the share has increased.

Sachin Kasera — Svan Investments — Analyst

And the margin in home and kids is in line with company or whether it’s higher or lower, sir?

Sandeep Jain — Executive Director

Kids margins are lesser as compared to parent brand, because in kids and garments, we don’t get that much price as you get in men’s and women’s wardrobe and in case of Home Textile segment also the margins are lesser than the parent brand Monte Carlo.

Sachin Kasera — Svan Investments — Analyst

Sure.

Sandeep Jain — Executive Director

Garments. Yes.

Sachin Kasera — Svan Investments — Analyst

And can you give us some sense on the market share trends for our brand to see how the market share has moved if you have any data on that?

Sandeep Jain — Executive Director

So we don’t have exact data because it’s unorganized market, but we see that in premium section in Monte Carlo in sweaters, we control approximately more than I think 50% share in the premium segment as we don’t see other brands, which are competing with us in that price range, but it is very difficult to estimate the exact market share of our brand in the Indian apparel section, because not most of the companies are listed and there’s a lot of unorganized players, which are available. So very difficult to quantify the exact market share of Monte Carlo.

Sachin Kasera — Svan Investments — Analyst

Sure. Thank you.

Operator

Thank you. We’ll take the next question from the line of Deepak Mehta Individual Investor. Please go ahead, sir.

Deepak Mehta — Individual Investor — Analyst

Yes, thank you. Thanks for the opportunity and great set of numbers. Sir, I want to ask about the breakup of right now additionally, Monte Carlo is known for the woolen wear. So right now, what is the mix of woolen and you can say T-shirt and non-woolen kind of stuff?

Sandeep Jain — Executive Director

I can share the last year’s figure, the year which has gone by, in that case the sweater contribution was INR151 crore and the cotton contribution including jackets and other garments were around INR576 crore. And in case of textile, it was, sorry, it is INR489 crore, INR489 crore in case of cotton section, which includes jackets also and in case of textile it was INR127 crore, and in case of kids cotton were INR58.39 crore and kids woolen were INR11.64 crore total INR70 crore.

Deepak Mehta — Individual Investor — Analyst

Okay. So right now, what is your focus area sir?

Sandeep Jain — Executive Director

See, focus, we just — we want that we should grow at 20% to 25% in this financial year and going forward also in all segments as we are — I think we are on the right track to achieve this growth rate going forward also.

Deepak Mehta — Individual Investor — Analyst

And what’s your expectation for three to five years in terms of revenue growth and margin sir?

Sandeep Jain — Executive Director

Pardon. See, again we say that the company is basically focusing on year-by-year and this year we have projected a growth of 22% to 25% and going forward the company is maintaining the same strategy of growing at these kind of growth rates.

Deepak Mehta — Individual Investor — Analyst

Okay, thank you so much. And what’s your expectation on margin?

Sandeep Jain — Executive Director

Could be able to sustain our margins, of last year margins.

Deepak Mehta — Individual Investor — Analyst

And I think the inflation pressure is now like high cotton prices and all, the input cost is behind us, we can assume that, right sir?

Sandeep Jain — Executive Director

Yes. Cotton prices have come down from its peak, but still it is 10% to 15% higher as compared to last summer prices, but we expect that this prices should remain stable or it may — it might come down a little few percentages, but very difficult to say unless and until we see next two months about the cotton crop and demand of cotton yarn.

Deepak Mehta — Individual Investor — Analyst

One last question sir. Do we have the breakup of online and retail sales like right now what is the online sales contribution to total sales?

Sandeep Jain — Executive Director

See, last year it contributed around 6% to 7% as compared to the total total overall revenue of the company. And going forward, we’ll maintain this kind of share in the online sales.

Deepak Mehta — Individual Investor — Analyst

Okay. So by last year, you mean FY ’22 right? March 31, 2022?

Sandeep Jain — Executive Director

Financial year ’22.

Deepak Mehta — Individual Investor — Analyst

Thank you so much, sir. You guys are doing great job. Thank you and best wishes.

Sandeep Jain — Executive Director

Thank you.

Operator

Thank you very much. Ladies and gentlemen, that was the last question for the day. I now hand the conference over to the management for closing comments. Thank you, and over to you, sir.

Sandeep Jain — Executive Director

Thank you very much for all the participants and if there’s have any questions, which remains unanswered or if there is any query which you want to have, you can definitely mail us at our montecalrocorporate.com or Dickinson World, our Investment Advisor. Thank you very much.

Operator

[Operator Closing Remarks]