Rupa & Company Limited Q4 FY22 Earnings Conference Call Insights

Key highlights from Rupa & Company Limited (RUPA) Q4 FY22 Earnings Concall

Q&A Highlights:

• Rohit Ohri from Progressive Shares asked about any growth capex plan related to property at Bangladesh. Vikash Agarwal President replied that just because of COVID in last two, three years, it was unable to take off, but RUPA is reviewing that again, and hopefully in FY22, it will be able to start some business activity there.

• Rohit Ohri from Progressive Shares also asked about the turnover expectation from the Bangladesh property. Vikash Agarwal President answered that it’s difficult to comment but anywhere between INR50-100 crores is quite achievable. RUPA is looking for some partners and the delay is just because of COVID.

• Rohit Ohri from Progressive Shares asked about the growth capex for the Domjur property. Vikash Agarwal President answered that that’s part of every year process, which RUPA spends around INR30-40 crores, which is stitching part, making part and increasing cutting capacity and warehousing capacity. So that’s part of the regular year-on-year process. Apart from this nothing on the growth capex.

• Dhiral Shah with Phillip Capital asked about the value and volume growth for FY22. Vikash Agarwal President said that RUPA had a value growth of about 12.3%, and volume was 0.5%. Majorly the growth what is seen is driven by value.

• Dhiral Shah with Phillip Capital enquired the reason that despite the degrowth in volume, subcontracting cost on a YoY basis was higher. Vikash Agarwal President answered that subcontracting is more related to inventory, it does not impact the profitability or gross margin. So if inventory is up subcontracting will be up as such.

• Devanshu Bansal of Emkay Global asked about the 10% volume decline in 4Q22, if it’s a postponement of demand. Vikash Agarwal President said that in 1Q23, RUPA is expecting solid growth of 20% plus. It added that some of the sales is going to move to 1Q23, which is expected a little bit. But major drop is seen in couple of categories where the demand should come back in summer season.

• Devanshu Bansal of Emkay Global asked about the reason for volume decline in bumchums. Vikash Agarwal President said that the reason was that after COVID there was a huge jump in athleisure, but in 4Q22 there was little softness in demand due to sudden rise in prices also, which was 15-20% hike.

• Devanshu Bansal of Emkay Global asked about the volume and pricing breakdown of the 15-18% growth target for FY23. Dinesh Lodha CEO said RUPA is expecting 8% on volume and 10% will be giving a value on 18% basis. Accordingly, it can be taken to 15%, but on 18%, 8% will be volume and 10% value.

• Manish Poddar with Motilal Oswal enquired about the split in inventory between finished goods and work-in-progress. Dinesh Lodha CEO said RUPA has work in progress INR163 crore, finished is INR341 crore and raw material is INR74 crore. So almost 25% on work in progress.

• Ankit Kedia of PhillipCapital asked about the revenue contribution from athleisure and how has been the demand for athleisure in 4Q22.  Dinesh Lodha CEO said there was a 26% drop on volume. However, in 1Q23 RUPA is seeing a good momentum right now with summer getting stronger.

• Ankit Kedia of PhillipCapital asked about the price increase RUPA is expecting in FY23 given the way yarn prices are there. Dinesh Lodha CEO said that 10% will be value. And already in 1Q23, RUPA had a price increase of INR35-40, basically about 4%.

• Ankit Kedia of PhillipCapital asked about the percentage of athleisure sales. Dinesh Lodha CEO said athleisure is approx. 8% of sales, bumchums is about INR110-112 crores sales, out of that, so about 8%.