Dollar Industries Limited (DOLLAR) Q3 FY23 Earnings Concall Transcript

Dollar Industries Limited (NSE:DOLLAR) Q3 FY23 Earnings Concall dated Feb. 15, 2023.

Corporate Participants:

Ankit Gupta — President, Marketing

Vinod Kumar Gupta — Managing Director

Ajay Kumar Patodia — Chief Financial Officer

Analysts:

Saurabh Ginodia — SMIFS Limited — Analyst

Ankush Agrawal — Surge Capital — Analyst

Surya Narayan — Sunidhi Securities and Finance — Analyst

Shikha Mehta — Equitree Capital Advisors Private Limited — Analyst

Abhijit — BI Asset Management — Analyst

Atul — Kamini Financial — Analyst

Shrinjana Mittal — Shree RatnaTraya Capital Partners — Analyst

Nishit Shah — BLF Partners — Analyst

Jitendra Agarwal — Individual Investor — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to Dollar Industries Limited Q3 FY ’23 Earnings Conference Call hosted by SMIFS Limited. [Operator Instructions]

I now hand the conference over to Mr. Saurabh Ginodia from SMIFS Limited. Thank you and over to you, sir.

Saurabh Ginodia — SMIFS Limited — Analyst

Yeah. Thank you, Birav. Good evening everyone present on the call today. On behalf of SMIFS Limited, I welcome you all to quarter three and nine-month FY ’23 post results earning call of Dollar Industries Limited. We are pleased to host the senior management of the company. And today we have with us on the call Mr. Ankit Gupta, President, Marketing; and Mr. Ajay Patodia, Chief Financial Officer of Dollar Industries Limited. We will start the call with some initial comments on the results from the management and post which we can open the floor for Q&A.

I will now hand over the call to the management. Over to you, sir.

Ankit Gupta — President, Marketing

Good evening, ladies and gentlemen. On behalf of the entire management team at Dollar Industries Limited, I welcome you all to the third quarter FY ’23 post results conference call. I would like to inform you that today we have Shri. Vinod Gupta, our MD, who has joined us in this call.

I’d now like to hand the conference over to him for his opening remarks.

Vinod Kumar Gupta — Managing Director

Good afternoon, everyone. It’s always pleasure talking to you and thank you for joining us on the call. As you are aware, currently the entire hosiery sector is going through the most challenging environment of volatility in raw material prices coupled with shift in seasonality and cyclical slowdown and discrepancy of demand of winter products.

Our margins have degrown this quarter mainly due to higher material costs resulting from the utilization of raw materials which were purchased at higher prices in the previous quarters. But now things are getting settled down and channel inventory has also been reduced due to low volume opted [Phonetic] by the business partners in this quarter.

Recently company conducted an overseas conference where good feedback and positive responses were received from the attendant dealers, which is a sign of confidence that Q4 should be good. With these, we are expecting a good demand in the coming quarters. Due to early festival, sales [Technical Issues] into quarter four. Our marketing spends have also been optimized, and we do not have any major campaigns in the coming quarter.

And now I would like to hand over to Ankit who shall share the highlights of the quarter with the team. Thank you.

Ankit Gupta — President, Marketing

As mentioned by Vinod sir, regarding current situation in hosiery industry, we are damn sure these are the temporary effects and we’ll overcome all the hurdles. We are happy to announce that despite all these challenges, company generated a positive cash flow of INR98 crores from operating activities in nine months FY ’23 as compared to INR92 lakhs in nine months FY ’22.

In order to strengthen our market share, we have always been aggressive to increase our product portfolio by including a new range of products in the women’s athleisure segment and in Force NXT we have launched activewear. Our newly launched product women’s brassiere is getting good response and traction from the market, and we are sure that its sales will keep on increasing.

Project Lakshya, our flagship project, is doing well and has increased the share of revenue contribution in our sales from 7% in nine months FY ’22 to 17% in nine months FY ’23. This has led us to strengthen our sales force for smoother operations. We have also planned to start this project in two new states of Southern India, being Tamil Nadu and Kerala. We are sure that our idea of theory of constraints will help us in the long run to reach our FY ’25 vision of INR2,000 crores in revenue.

Our efforts towards channel financing arrangements for our dealers continues to see good acceptance. We have already received positive response of 245 distributors, and we expect to onboard several more every quarter, which will ultimately improve our receivables and also help us move forward our overall working capital improvement efforts.

We at Dollar are happy to announce that we have opened our 12th EBO on pan-India level and five to six EBOs are expected to open by March ’23, which will create extra demand in the D2C segment. In order to cater the demands of consumer, we ensure the supply of products through various channels from where demand can be fulfilled, as a result of which our modern trade showed a growth of 52% on nine-month basis and e-commerce sale has shown 16% growth in sales on nine-month basis.

Our domestic sale contributed 89% to our entire revenue whereas export and modern trade contributes 6% and 5% each. We would continue to focus on increasing our distribution network, strengthening the product portfolio, and keeping our supply chain robust.

Thank you all. Now I would hand over the call to our CFO, Mr. Ajay Patodia.

Ajay Kumar Patodia — Chief Financial Officer

Thank you, Ankit ji. Good evening, friends, and I hope all of you are well and thanks for participating in Dollar Industries earning call. I will detail the financial performance, starting with quarter three.

The revenue, however, as now some of you had read [Phonetic], that is INR285.89 crores compared with year-on-year INR382.98 crores, yearly [Phonetic] growth of 25%. Our EBITDA stood at INR19.96 crores as compared to INR65.8 crores in quarter three FY ’22, a degrowth of 70%. Profit after tax for the quarter stood at INR8.74 crores as compared to INR44.41 crores, a degrowth of 80% on a year-on-year basis.

Coming to nine-month FY ’23 performance, revenue stood at INR990.94 crores as against INR973.34 crores in nine-month FY ’22, a growth of 2% year-on-year basis. Our EBITDA for the nine months stood at INR90.44 crores as compared to INR164.06 crores in the nine months FY ’22, a degrowth of 45%. Profit after tax for the nine months stood at INR54.56 crores, as compared to INR108.76 crores, a degrowth of 50% on year-on-year basis. Our inventory stands at INR435 crores as on 31st December ’22 as compared to INR469 crores in September ’22 quarter.

Now moving onto brand-wise contribution. In quarter three FY ’23, Bigboss contributed around 38%. Our regular Dollar Always product contributed around 33%, Thermal segment contributed 12%, Dollar Woman Missy segment contributed 10%, Dollar Socks 4%, and our premium segment Force NXT contributed 3%. In nine months ended FY ’23 Bigboss contribution is around 41%, Dollar Regular 36%, Dollar Missy is around 10%, and Thermal segment is around 8%, Dollar Socks 2% and premium segment Force NXT around 3%.

With this, we will now open the floor for the question-and-answer.

Questions and Answers:

Operator

[Operator Instructions] The first question is from the line of Ankush Agrawal from Surge Capital. Please go ahead.

Ankush Agrawal — Surge Capital — Analyst

Hi, sir. Thank you for taking my question. Firstly, sir, can you help me understand what is the reason for slower dealer addition in Lakshya scheme? And the on-ground feedback on the distributor is very good, but still…

Operator

Ankush, sorry to interrupt you, but your voice is not coming very clear. May I request you to speak through the handset?

Ankush Agrawal — Surge Capital — Analyst

Is it better now?

Operator

Yeah, slightly better. Go ahead.

Ankush Agrawal — Surge Capital — Analyst

Yes. So my first question was around the slow dealer additions in the Lakshya project. So the on-ground feedback from the distributor is very good for the project, but even after that the rollout has been very slow. This year nine-month only we’ve added about just 50-odd distributors, even though we had earlier added about [Indecipherable] (0:09:5) distributors for the year. So can you help me understand why is it taking so long to rollout to existing distributors?

Ankit Gupta — President, Marketing

Hi, Ankush. Ankit here. The thing is that from past two months, we have been implementing the new DMS system. And the reason why we had to change from our existing DMS to the new DMS is basically we wanted to create an environment wherein the DMS system talks with the Field Assist on a real-time basis, which will also be given by the new vendor as well as the retailer app that we are working upon.

So to create this environment, we had to shift from our old DMS to the new Distributor Management System. And while implementing this thing, it’s a technical thing, so obviously, there are always glitch when you implement a new system, right. So this is the reason why the rollout has been really slow, because without the proper DMS system, we can’t rollout the project or onboard any of the new distributors. And that is the reason why there has been a slowdown in onboarding new distributor. But now in seven, eight days we’ll again start rolling out new distributors in this particular program and the speed will be increased.

Ankush Agrawal — Surge Capital — Analyst

Okay. So in Q4 it will pick up, right?

Ankit Gupta — President, Marketing

Sorry?

Ankush Agrawal — Surge Capital — Analyst

From Q4 onwards it will pick up, the new distributor addition?

Ankit Gupta — President, Marketing

Yeah.

Ankush Agrawal — Surge Capital — Analyst

Okay. Secondly, couple of data points. So what was the volume growth for the quarter?

Ankit Gupta — President, Marketing

So for the quarter, there was a volume degrowth of around 22% and a ASP growth of around 7%. So overall, there is a degrowth of 25% at the company level.

Ankush Agrawal — Surge Capital — Analyst

You said 22%, right, volume degrowth?

Ankit Gupta — President, Marketing

32%.

Ankush Agrawal — Surge Capital — Analyst

32%, okay. And secondly, can you give the data points from Lakshya scheme like what is the total revenues for Q3 and nine months? And also the like-for-like growth that you had given last quarter, so for six months you had given a number that we had done about 43% [Phonetic] volume growth for six months in Lakshya, so similar kind of metrics you can give for this quarter and nine months?

Ankit Gupta — President, Marketing

So, if we see that, at a company level there is a volume degrowth of 32%, but when we talk about nine months ended figure, year-on-year for the distributors who were present last year also and this year also working, we saw — sorry, year-on-year for the third quarter, not nine months ended. If we compare the distributors’ performance last year third quarter versus this year’s third quarter, we saw a volume degrowth of somewhere around 4% to 5%, which is still very lower than the kind of the degrowth or the volume degrowth that we have faced overall at a company level.

Ankush Agrawal — Surge Capital — Analyst

Right. This is for Q3, right?

Ankit Gupta — President, Marketing

Yeah, for the Q3. Overall the revenue share coming in from Lakshya project has increased from 7% to 17% in nine months.

Ankush Agrawal — Surge Capital — Analyst

Yeah, that is given, like for six months we had done sales of around INR98 crores, so that number for nine months or the Q3?

Ankit Gupta — President, Marketing

Yeah. So in nine months ended, we have done around INR150 crores odd business through this particular project.

Ankush Agrawal — Surge Capital — Analyst

INR150 crores?

Ajay Kumar Patodia — Chief Financial Officer

INR152 crores.

Ankit Gupta — President, Marketing

INR152 crores, yes.

Ankush Agrawal — Surge Capital — Analyst

INR152 crores. Okay, and so you can give that volume growth and revenue growth like-for-like, for example, six months, it was 43% volume growth and 46% revenue growth, which you gave in Q2. So similarly, that number for nine months would be?

Ankit Gupta — President, Marketing

So I don’t have that number handy with me right now on a nine-month basis. But if you see, for the third quarter, it’s 4% volume degrowth and the value degrowth would be somewhere around 2.5%, 3%.

Ankush Agrawal — Surge Capital — Analyst

And lastly, so if I see the overall revenue contribution for nine-month for Project Lakshya is about 17%, which as you know, for last many quarters fairly similar to the count of distributors. So our distributor count versus the total count in Project Lakshya is nearly around 17%, 18%. So I wanted to understand why is it not increasing, because if the Lakshya distributors are doing so well, ideally their revenue contribution to the overall business should be much higher than the number of distributors. So where is this mismatch coming from, if you can explain?

Ankit Gupta — President, Marketing

So we closed last year, FY ’22, with 142 distributors. And this year we have onboarded somewhere around 65, 66 new distributors into this particular project in nine months, right? And part two months what’s happening is there has been a problem with our DMS system implementing the new system and that’s why it’s difficult to actually compare. And while you are onboarding new distributors also, it takes around three months to stable them — to stabilize in the market to do the complete rollout in the market also. So that is why you are unable to see much of a difference over here, but I’m very sure that as soon as we onboard, more-and-more distributors will be able to see the exact growth levels that we are getting in this particular project.

Ankush Agrawal — Surge Capital — Analyst

But in a qualitative sense, would you be able to confirm that the Lakshya distributors are doing much better than your traditional distributors on a like-for-like basis?

Ankit Gupta — President, Marketing

Just a second. So on a nine-month basis, I would love to tell you that we did a volume growth of 19% in this particular project, Project Lakshya, on a nine-month basis. So obviously, we are doing really good with this particular project, because at a company level, on a nine-month basis, we have a volume degrowth of 6%. And if you see the other players also in the industry who are at a overall volume degrowth, but in this particular project there has not been a volume degrowth till now. So this is a very good sign or a positive sign, which shows that this particular project is the way to go forward.

Ankush Agrawal — Surge Capital — Analyst

And that was very helpful. I’ll get back in the queue for further questions. Thank you.

Ankit Gupta — President, Marketing

Thank you.

Operator

Thank you. Next question is from the line of Surya Narayan [Phonetic] from Sunidhi Securities and Finance. Please go ahead.

Surya Narayan — Sunidhi Securities and Finance — Analyst

Hello. Good afternoon. Thanks for giving me the opportunity.

Operator

Surya, sorry to interrupt you, your voice is not coming very clear.

Surya Narayan — Sunidhi Securities and Finance — Analyst

Okay. Is it better now?

Operator

Yeah, slightly better.

Surya Narayan — Sunidhi Securities and Finance — Analyst

Okay. Thank you, Ankit ji, for giving me opportunity. Just to understand that the current situation is not that conducive for us to grow volume-wise. Volume degrowth is happening. So just to understand because we are more or less focused nearly 80% economical section. So what has led to such kind of degrowth? So is it the price that is the factor because if income level has not gone down, so what is, in your case, what is the feedback you got from the field level?

Ankit Gupta — President, Marketing

So the thing is that the feedback that we’re getting from the market of what we are seeing in the market is although there is a psychological effect with the channel partners, but at the consumer level also there has been some amount of decline on the demand-side during the third quarter. Since in the first-quarter what happened is, all the retailers pushed the innerwear segment in the back-store and in the front-side there are thermals or hoodies, jackets, or winterwears which are showcased at the retail store. But this time the winter season was very late, first. And secondly, there was very less offtake in the market. So this is a major reason why there has been degrowth of the particular product.

Surya Narayan — Sunidhi Securities and Finance — Analyst

But are we seeing any degrowth in the men and Always?

Ankit Gupta — President, Marketing

Yes. So overall volume degrowth which we have seen in the third quarter, so there has been a volume degrowth in our Bigboss and Always as well, Dollar Man and Dollar Always. We have seen a degrowth. And the major reason is because of the shift of winter season and the retail stores are more focused on the winterwear segment rather than the innerwear. Plus the psychological — psychology was the people were really skeptical in purchasing more and more goods because they were thinking that there will be more price cuts, even though we gave them a lot of comfort didn’t come into play. That was the main reason why there was a volume degrowth in the third quarter.

Surya Narayan — Sunidhi Securities and Finance — Analyst

So is there any cyclicality exist in this segment, especially innerwear, men innerwear, are we foreseeing [Phonetic] that now again sales will return after a lag of, let’s say, one year or so?

Ankit Gupta — President, Marketing

Sorry, I didn’t get your question.

Surya Narayan — Sunidhi Securities and Finance — Analyst

I’m asking whether there is cyclicality exist in the buying the — demand of these men’s innerwear wherein you foresee that demand will again — robust demand will again come back after one year or two years on some quarters?

Ankit Gupta — President, Marketing

What happened is, we deal in a very basic product. It’s not fashionable. And the thing is people can’t do away with innerwear. They can defer the purchase, they can postpone the purchase, but can do away with it. so the demand will always be there for the product. It’s just a phase that will pass. So that demand will definitely come back.

Surya Narayan — Sunidhi Securities and Finance — Analyst

Okay. And do you believe that the consumers have stocked heavily during earlier parts so that there no more willing to buy?

Ankit Gupta — President, Marketing

Sorry?

Surya Narayan — Sunidhi Securities and Finance — Analyst

Can we assume that probably consumers have stocked heavily their wardrobes in the last year, so probably the sales are not returning, because sales across the industry is down, so that is the reason I’m asking.

Ankit Gupta — President, Marketing

The thing is…

Surya Narayan — Sunidhi Securities and Finance — Analyst

Basically it is perceived that, no, it is very essential items. Still essential items are not moving. So that is the reason I’m asking.

Ajay Kumar Patodia — Chief Financial Officer

Generally in quarter three, that is — mainly sale contributes through the winter garment only. And innerwear contribution is during quarter four and quarter one only. So generally, in this quarter, winter garment sale is more contribution, but due to late coming of winter and shifting of seasonality, the winter sale is not happened in this quarter. Therefore, there is a degrowth in this total revenue. But in this quarter, in current quarter, already consumer is back and demand is back, and we think that we’ll get good improvement in the current quarter.

Surya Narayan — Sunidhi Securities and Finance — Analyst

Are you going to scale down your advertisement expenses in relation to the declining sales?

Ankit Gupta — President, Marketing

Currently, no, but in the fourth quarter there is no major campaign which is going to happen, but overall, our spend would be somewhere around 5.5%, 6% of our total sales.

Surya Narayan — Sunidhi Securities and Finance — Analyst

Okay, any progress on the new states?

Ankit Gupta — President, Marketing

For Project Lakshya?

Surya Narayan — Sunidhi Securities and Finance — Analyst

Not Project Lakshya. We were actually attempting to spread over new states like some of the south states and some central states. So what is the progress, where you have reached?

Ankit Gupta — President, Marketing

See, we were trying to bring our focus to the southern part of India wherein our sales have been around 6% up till now. But this particular year it has been 9%. 9% contribution is coming on from south. And the reason why we are starting Tamil Nadu and Kerala also is because we want to complete the entire south India through Lakshya project because we are seeing a very good traction coming in from south through this particular project. And that’s how we’ll be taking more and more market share in the southern part of India.

Surya Narayan — Sunidhi Securities and Finance — Analyst

Okay. And what is the status of your production planning to [Indecipherable] your integration?

Ankit Gupta — President, Marketing

Sorry?

Surya Narayan — Sunidhi Securities and Finance — Analyst

What is the current status of your integration — the production planning with SAP, FICO and the other modules.

Ajay Kumar Patodia — Chief Financial Officer

Yeah. We are starting that SAP trial from 1st of March itself and implemented from the 1st of April ’23.

Surya Narayan — Sunidhi Securities and Finance — Analyst

Okay. Ajay ji, what level — because now you are unable to raise the prices, because of the competitive scenario, at what level of cotton [Phonetic] do you see you will be generating at least normal profits. This profit is really subnormal. So I would say, do you think now, at least at INR160 or so per kg it will be profitable?

Ajay Kumar Patodia — Chief Financial Officer

Pardon? Regarding the 150 total profit for the current year?

Surya Narayan — Sunidhi Securities and Finance — Analyst

At what level you believe you will be making at least normal profits for the shareholders?

Ajay Kumar Patodia — Chief Financial Officer

Current year up to nine months, we have done profit of around INR90 crores, total turnover of around INR990 crores, and we expect in the current quarter, we expect more demand and also some increase in the EBITDA margin also.

Operator

Thank you. Sorry to interrupt you, Surya. I’ll request you to come back and join the queue for a follow-up question. The next question is from the line of Shikha Mehta from Equitree Capital. Please go ahead.

Shikha Mehta — Equitree Capital Advisors Private Limited — Analyst

Good evening, sir. I have a couple of questions. Can you tell us how much you did on the thermal side this quarter and for the nine months?

Ankit Gupta — President, Marketing

Yeah. So we have seen almost 30% degrowth in our thermal sales. So last year on nine months basis, it was somewhere around INR100 crores vis-a-vis the INR75 crores this year. And on third quarter basis, last year it was somewhere around INR40 crores odd and this year it was INR34 crores.

Shikha Mehta — Equitree Capital Advisors Private Limited — Analyst

Okay. And in Q1 — sorry, in Q4 since the winters have now come in Jan, are we expecting any thermal sales or will that not happen?

Ankit Gupta — President, Marketing

No, no, that won’t be happening because what happened is the channel partners or the retailers, they already stock up their goods in the month of — they start stocking up from the month of September and goes up till November. And after that they stop the purchase of thermal wears. Until and unless it’s absolutely necessary, they just give the orders for the current [Phonetic] sizes that is happening in the market. Otherwise, it’s a no-no.

Shikha Mehta — Equitree Capital Advisors Private Limited — Analyst

All right. And do we still have some amount of high-cost inventory on our books or is that done away with in Q3 and Q4 should not see the impact of that?

Ajay Kumar Patodia — Chief Financial Officer

We already optimized the inventory cost in quarter third only. So there is no — I think there is no high-cost inventory in current quarter.

Shikha Mehta — Equitree Capital Advisors Private Limited — Analyst

So Q4 will not see the impact of this, right?

Ajay Kumar Patodia — Chief Financial Officer

No, no.

Shikha Mehta — Equitree Capital Advisors Private Limited — Analyst

And on an industry level, are we seeing restocking happening now? What are the inventory levels at? Would you have any idea?

Ankit Gupta — President, Marketing

So at a industry level, some amount of destocking has happened from the distributor and the retailer side. And that is the reason — that is one of the main reasons why there has been a volume degrowth. But going ahead, we see a very positive energy amongst our distributors. And lot of distributors are doing retail conferences also in their particular regions, which will definitely boost the demand for our products.

Shikha Mehta — Equitree Capital Advisors Private Limited — Analyst

Any idea what the inventory levels would be at?

Ankit Gupta — President, Marketing

It is very hard to tell without proper system in place because still most of our distributors are not in the Distributor Management System. In Lakshya project, it is being maintained somewhere around 30%, 34% — 30 to 34 days, not more than that.

Shikha Mehta — Equitree Capital Advisors Private Limited — Analyst

Okay, I’ll come back-in the queue. Thank you.

Ankit Gupta — President, Marketing

Thank you.

Operator

Next question is from the line of Abhijit [Phonetic] from BI Asset Management [Phonetic].

Abhijit — BI Asset Management — Analyst

Sir, thanks for the opportunity. My first question is, how are raw material prices shaping up? And what is your expectation going forward?

Ankit Gupta — President, Marketing

So currently, the cotton prices are somewhere around INR65,000, INR67,000 per candy. And I think it has gone stable right now, and we don’t see any major movement happening at the cotton level. The yarn prices also, on an average, it has come to INR280 per kg. And I think that’s a stable price currently, and we don’t see any major movement happening in near future.

Abhijit — BI Asset Management — Analyst

So in a case when we don’t have any high-cost inventory left, so will it be fair to resume that margins have bottomed around the current level?

Ankit Gupta — President, Marketing

Yeah, the margins are definitely at a very low level, but that’s the rock bottom margins that we have touched right now. But going ahead, the margins are going to improve, definitely.

Abhijit — BI Asset Management — Analyst

Can you quantify the improvement?

Ankit Gupta — President, Marketing

It would be very hard that in the environment that we are in currently, not only in terms of raw material volatility, but also at industry level also, the external factors are huge. It would be very hard to quantify a particular amount or percentage. But definitely what we have seen in the nine months ended the figure, it has to be better than that.

Abhijit — BI Asset Management — Analyst

The next question would be regarding demand. Can you shed some light on the demand scenario and triggers going forward?

Ankit Gupta — President, Marketing

So in the fourth quarter, what we are thinking, around 14% to 15% growth year-on-year in Q4. This is what we are focusing towards.

Abhijit — BI Asset Management — Analyst

So that would be a big number, I guess.

Ankit Gupta — President, Marketing

Sorry?

Abhijit — BI Asset Management — Analyst

So we can assume that Q4 and Q1 of next year will be much better than Q3 of this FY ’23, right?

Ajay Kumar Patodia — Chief Financial Officer

Sure.

Ankit Gupta — President, Marketing

Yes.

Ajay Kumar Patodia — Chief Financial Officer

Correct.

Abhijit — BI Asset Management — Analyst

Okay. That would be all. Thank you.

Operator

[Operator Instructions] Next question is from the line of Ankush Agrawal from Surge Capital. Please go ahead.

Ankush Agrawal — Surge Capital — Analyst

Yeah. Thank you for the opportunity again. Sir, now like you had given your guidance that by FY ’25 we want to be at INR2,000 crores top line company which has 17% margins. So I wanted to understand what are the levers that will lead you to this margin. So will it largely be scale-driven or some cost savings will come in? Or do you expect that with the new Lakshya distribution and brand rebranding, you expect a better pricing for yourself? So what are the levers that will help you go from like 12%, 13%, which was your normalized margins to the 17% that you’re targeting?

Ankit Gupta — President, Marketing

So we are still focusing on having INR2,000 crores revenue by the end of FY ’25. And our main focus is to implement or to roll out more and more distributors under this particular project, as well as we are increasing our sales team, increasing our distributor strength also in order to increase our volume and also to increase the ASP at a company level. So like if you see nine months ended in our athleisure segment also, which was contributing around 11% to our total revenue, now currently this particular fiscal it is contributing around 12% of the total revenue. So we are seeing that shift in terms of newer product categories getting traction and all those things. And that’s how we are trying to achieve INR2,000 crores by FY ’25.

In terms of margin, so in terms of margin, what would happen is we — as you rightly said that we said it would be INR2,000 crores with somewhere around 16% to 17% of a margin level at an EBITDA level. So a lot of costs will also get rationalized, the fixed cost that we have. That will also get rationalized. The advertisement cost won’t be at a 6% level at a INR2,000 crores revenue level. So there will be a percentage saving over there as well. Overall employee cost won’t increase to that particular level. So from INR1,300 crores revenue to INR2,000 crores revenue, the employee cost will also not increase proportionately. You just need to add few more employees, but with the — but majorly it will come from the current strength that the company has. So all this rationalization taking into place, we were very hopeful that we’ll be able to do 16% to 17%.

Ankush Agrawal — Surge Capital — Analyst

Thanks. Sir, within this margin band that you’re saying, so have we accounted for the reward scheme that we have rolled out to the retail and distributor channel for the Lakshya scheme because I think that is a decent amount that we might have to shell out?

Ankit Gupta — President, Marketing

No. So we already take provision on every quarter based on the number of points that we have given to the retailers. And there are many retailers who are redeeming their products on a quarterly basis as well. So till now, from the start till now, we have already redeemed 1,200 gift items for our retailers, which is like around 1,100 retailers who have redeemed their points, and they are more than satisfied. And once after that redemption happened, after they received the goods also, so their energy level was also to be seen. They connected, they became loyal to the company even more. So, yeah, it is well within the limit, and it has been accounted for.

Ankush Agrawal — Surge Capital — Analyst

So would you be able to give some blended rates? So, for example, if we do a sale of INR100, our sales, not the retail and distributor level sales, our sales, what could be the approx reward that will be accounted, like it would be like 1%, 0.5% broad range?

Ankit Gupta — President, Marketing

So generally in our industry what happen is that schemes and discounts that we pass on to the channel partners, whether the distributors or the retailers, it’s somewhere around 5% to 6% in totality. In Lakshya what we are doing is we are curtailing it to 3% to 4%.

Ankush Agrawal — Surge Capital — Analyst

Okay. And for the differential, you are doing these rewards?

Ankit Gupta — President, Marketing

No, this is the differential. Like the rewards account for 3% to 4%. Rest, it has been given to the distributor for the margin protection because we are freezing the distributor’s margin in this particular program. Whereas in our traditional channel there is no margin protection or the distributor can even work in 1% margin, 2% margin. But over here, we are giving them a decent margin so that their ROI — overall ROI also increases.

Ankush Agrawal — Surge Capital — Analyst

Okay. So you’re saying that in traditional channel we used to give 5% to 6% dealer scheme. Instead of that, we are just giving straight 3% rewards is what you are trying to say?

Ankit Gupta — President, Marketing

Yeah, 3%, 3.5% is the amount that we have earmarked for our reward scheme.

Ankush Agrawal — Surge Capital — Analyst

Okay. So you get, say, 1%, 2% delta from there itself.

Ankit Gupta — President, Marketing

Yeah.

Ankush Agrawal — Surge Capital — Analyst

Right, right. Secondly, sir, I wanted to understand a little bit on the credit policy. So what would be the credit policy in the current general channel? And what is the credit policy for the new Lakshya scheme, if you can highlight?

Ankit Gupta — President, Marketing

The credit policy at the company level has always been 45 days. So initially we used to give them a levy of around 10, 15 days. But post-GST, demonetization, we got a bit liberal also. And that is the reason why our receivable days are somewhere around 99, 100 days. It rose to 125, 126 days also in between. But past two years we have been working really, really hard to bring that down from 182 kind of a working capital day cycle to 153 in the last year. So this is how we have been working. And we are trying to reduce our overall receivable days as much as possible.

Ankush Agrawal — Surge Capital — Analyst

So within the new Lakshya scheme, like are there some hard rules or something that will allow you to receive your credit within this 45 days limit that you have set. Like earlier, like you are saying that earlier also it was 45 days, but you were not able to collect. But with the new Lakshya scheme, are there some kind of firewalls or something that will allow you to do it much better?

Ankit Gupta — President, Marketing

We have been really strict in our Lakshya project. And the bargaining power stays with the company. We are not being kind or liberal so that our sales increases. We are very stringent about the collection policy. Yeah, sometimes we give them, given the market scenario, we give them a leeway of 10 plus [Phonetic] days, but not more than that, yes.

Ankush Agrawal — Surge Capital — Analyst

So like you’re saying 100 days is the receivable at the company level, so at Lakshya scheme level I think you earlier mentioned about 60, 65 days. So that is a broad number that we have to work with, right, assuming that at four, five years down the line, the entire company is on Lakshya, so your receivable days should come down to about 50, 60-odd days?

Ankit Gupta — President, Marketing

Definitely.

Ankush Agrawal — Surge Capital — Analyst

Right. Sir, and lastly a follow-up to this. So now you have started getting a lot of distributor on the channel financing as well. So will channel financing help you reduce this more from like 50, 60 days to much lower on that?

Ankit Gupta — President, Marketing

So most of our distributors in Lakshya are already there in dealer financing scheme. And in DFS system what is happening is our overall receivable cycle is somewhere around 10, 11 days because we pulled their money after they receive the goods. So after the invoice has been made, we pull the money after 10, 11 days. So minimum that will be there. And we are trying to bring onboard more and more distributors. So there are large distributors also in each and every state who contributes around 10% sale of that particular state or 11%, 12%. So these kind of big distributors, they won’t be coming — currently we are not finding any traction from them to come onboard for the DFS system. So yeah, that is one point where we are stuck right now. But overall, yes, the distributors are very happy to come onboard on the DFS system, and we are getting more and more distributors’ inquiries also for onboarding them.

Ankush Agrawal — Surge Capital — Analyst

Okay. So the distributors who are in the DFS scheme, they will have 10, 15 kind of credit days? The Lakshya is like around 50, 60 days? And the traditional is around 100 is what you are saying? Hello?

Ankit Gupta — President, Marketing

Yeah, yeah.

Ankush Agrawal — Surge Capital — Analyst

That was very helpful, sir. Thank you so much.

Ankit Gupta — President, Marketing

Thank you so much.

Operator

[Operator Instructions] Next question is from the line of Atul [Phonetic] from Kamini Financial [Phonetic]. Please go ahead.

Atul — Kamini Financial — Analyst

Yeah, my question has been answered. Thank you.

Operator

[Operator Instructions] Next question is from the line of Shrinjana Mittal from Ratnatraya Capital. Please go ahead.

Shrinjana Mittal — Shree RatnaTraya Capital Partners — Analyst

Yes, hi. Sir, my question is similar to the previous question that you were asking. So it was around Lakshya project. So last two quarters, the distribution addition that we saw was — it was a bit slower than — earlier it used to be around 20 distributors used to be added per quarter. But last two quarters, we saw that — since last two quarter distribution addition has been a little on the lower side. So just wanted to know that is there any change in your thinking or has recruiting new distributors become difficult?

Ankit Gupta — President, Marketing

No. So the thing is that since our industry was going through a turmoil, what happened was — and also the technical side where we were changing the DMS, so both were into play, and it’s not that we have slowed down the project or something like that. It’s just that the states that we have started already, like Haryana, Rajasthan, Gujarat, Mumbai, part of Maharashtra, which is the Vidarbha area, Karnataka, Telangana, all these states are almost at the verge of completion. So they are almost completed, right? And so now we need new and new states who can jump into the picture. So we have earmarked Tamil Nadu and Kerala for coming into this particular project. Bihar, Odisha, northeast, so we have started few states and few more states will be given in the time to come. Whenever we start a new state or decide to start a new state, we have to hire a lot of team members, whether it be the state head or the field sales officers, like the TSOs that we call. So it takes a bit of a time. So that is the only reason why you are seeing a small slowdown kind of a thing. But there has not been any change in our thinking process. We are very in for this particular project and the overall concept of theory of constraint.

Shrinjana Mittal — Shree RatnaTraya Capital Partners — Analyst

Okay. Understood. And just one follow-up. So from the distributor side, there is — like distributor side there is no resistance, right, to get on the Lakshya?

Ankit Gupta — President, Marketing

No, no, no, not at all, not at all. In fact, they are really very happy also.

Shrinjana Mittal — Shree RatnaTraya Capital Partners — Analyst

Okay. Thank you.

Ankit Gupta — President, Marketing

Thank you so much.

Operator

[Operator Instructions] Next question is from the line of Nishit Shah from BLF Partners. Please go ahead.

Nishit Shah — BLF Partners — Analyst

Hello, sir. Thank you so much for taking this call. I’m new to the company, so I have a few questions about Project Lakshya. Firstly, could you just briefly explain what is Project Lakshya and how is it very different from the traditional business model — distribution model that existed before? I found some details in your previous calls, but I’d like to hear maybe a more detailed explanation if possible.

Ankit Gupta — President, Marketing

So this Project Lakshya is based on the theory of constraint wherein we are trying to achieve the increase in the reach and range of our product. In our traditional channel, what happens is our sales gets completed when we bill it to the distributor, and we have no visibility that which retailer we sell into or in what quantity, which kind of a product the retailers are demanding, and there are some nuances also in terms of encroaching each other areas or slashing the price, working on a very thin margin levels. But in this particular project, what happens is we fix the distributor’s margin. We fix the retailer’s landing price as well. And also, we give the distributor our Distributor Management System, so we track each and every movement of the goods.

So after we bill it to the distributor also, at a company level the sales is completed, but we take extra efforts so that the secondary also happen at the same rate, and it is based on our replenishment model. So in traditional channel, we used to see the quarterly spikes or yearly spikes in terms of sales. But over here, the sales spikes have done away with. And we are having a stable sales all throughout the year each and every month with a variation of like 5%, 10% here and there, that’s it. But overall, there’s a regular demand in the market. There’s no push selling that is happening. So we are moving from push sale to a pull sale model. And also, we have each and every data as to in which pincode which retailer is buying what and what he is reordering. So ultimately, we get an idea as to what are the kind of products that the consumer is purchasing at a retailer point at which pincode. So we can do target marketing also after we collect a lot of data. So we can do a target marketing. We can do product-focused marketing. So a lot of strategy can be made around that data points. So this is what we are trying to achieve through this particular project.

Nishit Shah — BLF Partners — Analyst

Understood, thanks. And in further, as you go along with this, so then you had traditional distributors who would — who you would stock with earlier. The same distributors are opting in for Project Lakshya as well?

Ankit Gupta — President, Marketing

So it’s a mix of both. There are old distributors who are coming onboard with this particular project. But in some areas where the distributors are not comfortable, first right of refusal has been given to them. So we are chasing the distributors also where the distributor is not cooperating.

Nishit Shah — BLF Partners — Analyst

Got it. And so the traditional model wherein you all bill to distributors and they bill to retailers, that model as it stands has not changed, but it’s basically giving you additional visibility via Project Lakshya. Am I right?

Ankit Gupta — President, Marketing

Yes.

Nishit Shah — BLF Partners — Analyst

Got it. And can you also shed some light on the distributor financing scheme that you have going on right now and the linkages for that with Project Lakshya?

Ajay Kumar Patodia — Chief Financial Officer

Yeah. Currently, in our channel financing scheme, our partner is ICICI Bank. And through ICICI Bank we finance our distributor. And in this process, we follow the — we provide the detail to the ICICI Bank after receiving the request from the distributor. And once the ICICI Bank check their CIBIL and other requirement as per RBI guidelines, they sanction the loan. And all the process is digitized and in digital mode only. Once the request given by the distributor, it only takes six to seven days to sanction the loan and use the same facility. And in this case, after 90 days of the payment — within 90 days, the distributors have to pay it to the ICICI Bank. And the total interest is reimbursed in the billing process around 2% in discount format. And in this case, company get the money within 11 to 12 days. And the distributor have to pay within 90 days through the ICICI Bank. So it is beneficial for the company also and distributor also.

Nishit Shah — BLF Partners — Analyst

Understood. Understood. Great. And I had another question about the distributor setup as we had. So an existing distributor would then go ahead and bill to a retailer. Do you have any visibility as to how many retailers would a distributor be working with? And is there a possibility of, say, Dollar working directly with retailers since it’s a financed scheme anyways? Sir, your voice is breaking. I’m unable to hear you.

Ajay Kumar Patodia — Chief Financial Officer

Yeah, in Lakshya project, in Project Lakshya, we have the total detail about total retailers made with the distributor itself. We have all the data within our system that when the retailer pays the order, when he gets the order, what quantity he ordered, what type of quantity he ordered, and what are the numbers and what are the sizes is required by him. So we have the proper databases regarding the product requirement in particular area. So accordingly, we have projected the future sales which type of product we have to project in taking in the production. So inventory level is maintained at every level. But in traditional sales, we have only knowledge about the total databases of retailer attached with the distributor. But day-to-day data, we have not mapped in our system. Only retailer attached in our — with Lakshya distributor is captured in our system. So we are in the process to implement Project Lakshya to all over India so that 60% to 70% of our distributor come in the purview of Project Lakshya. So once this is happened, we have all the data related to retailers also.

Nishit Shah — BLF Partners — Analyst

Understood. Great. And sir, any idea about how the competition has reacted to Project Lakshya. And do you think Dollar is uniquely positioned to capture this if this picks up really well, which it has?

Ankit Gupta — President, Marketing

No. I would say that we are the first mover in this particular project. And it is really very difficult to replicate this particular model. And we have already hired the pioneer who are — the consultant who are pioneer in this particular Theory of Constraint model with some exceptional USPs that they have, which others don’t. So obviously, given the traction in the market, the feedback, the other players might be trying, but we have no such knowledge about it.

Nishit Shah — BLF Partners — Analyst

Understood. Okay. Thank you so much for answering these questions.

Ankit Gupta — President, Marketing

Thank you.

Operator

Next question is from the line of Jitendra Agarwal [Phonetic], individual investor. Please go ahead.

Jitendra Agarwal — Individual Investor — Analyst

So my questions are actually not related to the quarter. So if you could pardon me for that. And they are actually to be addressed for Mr. Vinod Gupta. Good evening, sir.

Vinod Kumar Gupta — Managing Director

Good evening.

Jitendra Agarwal — Individual Investor — Analyst

I have four questions. I’m sure there are business reasons for some of them, but I would like to know your thought process and probably consider some of these points that I raise today on the call. Sir, the first point is related to Dollar Brands Private Limited. So I believe the brand actually sits [Phonetic] in the private limited. And again, I would presume that, that is owned by the family. And as per page number 146, I think there is a very small amount of royalty that we pay out. I presume that, again, that is only for the brand usage. This is the largest listed business of the promoter group. Why would you like to have a brand sitting outside in a private limited company, which again is owned by the same promoter family?

My second question is related to your auditors. I think we changed to the current auditor sometime in 2018. Coincidentally, they are also the auditors for one of our competitors, and they are also based out of the same city. Maybe at the upcoming AGM, if you could reconsider appointing another chartered accountant for our statutory audit.

Sir, my third point is related to related parties. So when I look at page number 159 of the Annual Report, there are a host of actual related party companies which seem to be in textile, plus or minus, here and there, and then there are some other companies. Again, the transactions that we do with them on the next page are not really material. If you could share your thoughts and maybe how to go about looking at these numbers as we go forward.

My last is, again, a request, actually. I have had the opportunity to meet Ankit, but I believe the third generation is again in the business. Gaurav is in strategy and Aayush is in sales. If you could actually host a meet maybe in Calcutta or in Mumbai, whatever, we would get the opportunity to interact with the third generation in the business. So these are four points. You could share your thoughts. And that’s it from me. Thank you.

Vinod Kumar Gupta — Managing Director

Yeah. Thank you, Jitendra [Phonetic], for being on this line and asking relevant questions. Firstly, I would like to say that Dollar brand actually doesn’t — was not previously owned by Dollar Brands Private Limited. It was being owned by my father only, Sri Dindayal Gupta, who had pioneered into this business with 1972. Now since he is very old and this particular Bhawani Textiles was the owner of the brand. He got converted that Bhawani Textiles into a private limited company, Dollar Brands Private Limited, wherein all the 40, 45 brands have been transmitted, with the permission of the Registrar of Trademarks Authority of India. And now we have an opportunity, maybe two, three years later of getting these Dollar Brand Private Limited merged into Dollar Industries Limited, so that we can bring in this brand on the platform of Dollar Industries. That was back-end exercise we have done. Because getting to a proprietorship organization brand into the company, there are lots of hassle in terms of taxability and the other problems are there. So our first step was to get that proprietorship organization converted into a private limited company. That first stage we have already covered. Now we will continue with this Dollar Brands Private Limited for two more years, and we will look for some specific opportunity wherein then we can get these Dollar Brands Private Limited merged with Dollar Industries so that the brands should come on the main platform.

Jitendra Agarwal — Individual Investor — Analyst

Thank you.

Vinod Kumar Gupta — Managing Director

Now regarding the royalty part, royalty is hardly INR0.05 of the total revenue of the company we are paying to this company. Number two, you were speaking about the auditors. Auditors, actually, we have got Singhi & Co. They are the — after big four, they are one of the largest auditors of the country. They have a good number of big companies into their file. They’re working for them. And we have recently renewed their terms of agreement — assignment for five more years. And after this second slab of these 5 years is getting exhausted, then of course we will have no option but to go in for big four only. So that will only happen after this second tranche of assignment is over.

Jitendra Agarwal — Individual Investor — Analyst

Got it.

Vinod Kumar Gupta — Managing Director

Now number three point is on the RPT. See, all the related party transactions are being done with our own group companies. Those are spread out at arm’s length only. We have appointed auditor also to look into this because the quantum of the RPT now is as big as we need to get it verified by an independent auditor to certify that the things have been done at arm’s length. And there also we are already working on the program wherein we can get some of the companies who are there on the RPT to get merged with the Dollar Industries. That proposal is also on the table. But it is taking some longer time because of the complexity. So in future, we might get some of the companies merged with Dollar Industries.

Jitendra Agarwal — Individual Investor — Analyst

Perfect. And sir, on the last request to meet the third generation.

Vinod Kumar Gupta — Managing Director

On the last request, Ankit will take care of your request, and we’ll try to make it possible as soon as possible.

Jitendra Agarwal — Individual Investor — Analyst

Perfect. Thank you. Thanks a lot, sir. That is very helpful.

Operator

Thank you very much. I now hand the conference over to the management for closing comments.

Ankit Gupta — President, Marketing

I take this opportunity to thank everyone for joining this call. I hope we have been able to address all your queries. For any further information or any queries that you might have, kindly get in touch with us. Thank you once again. Have a good day.

Operator

[Operator Closing Remarks]