Stove Kraft Ltd Q3 FY23 Earnings Conference Call Insights

Key highlights from Stove Kraft Ltd (STOVEKRAFT) Q3 FY23 Earnings Concall

Q&A Highlights:

• [00:07:01] Devansh Nigotia from SIMPL asked about the challenges STOVEKRAFT is facing in retaining top level management. Rajendra Gandhi MD said that the company has experienced a change in its CFO and CEO positions in the last 1.5 years. STOVEKRAFT is now looking to bring in a new leadership team and have five executive positions that will take over the current leadership team.

• [00:09:54] Devansh Nigotia from SIMPL asked about the employee count and its cost increasing. Rajendra Gandhi MD replied that the company has invested in backward integrating manufacturing facilities, increasing the number of employees from 2500 to 4500 in 8 months and achieving 60-70% growth on revenues.

• [00:13:18] Devansh Nigotia from SIMPL enquired about the employee cost expected in 4Q23 and FY24. Rajendra Gandhi MD answered that the company continues to maintain the same cost percentage, but because of revenue growth, the absolute number has gone up.

• [00:15:45] Devansh Nigotia from SIMPL asked about the absolute amount of inventory and trade receivables. Rajendra Gandhi MD replied that receivables are estimated to be between INR160-170 crores and inventories are estimated to be between INR240-250 crores.

• [00:16:39] Devansh Nigotia from SIMPL queried about the capex till date and the expectation for FY23 and FY24. Rajendra Gandhi MD answered that in FY23, the company expects to close between INR70-75 crores. For FY24, the company expects INR50-60 crores.

• [00:20:28] Lokesh Maru from Nippon India asked about the strategy going ahead if any price cuts are expected. Rajendra Gandhi MD answered that STOVEKRAFT will continue to grow due to the existing product categories and new ones that are being added. STOVEKRAFT will continue to push to sell its products even during times of softer demand, and expects to grow at a much healthier rate in normal times.

• [00:30:31] Pankit Shah from Dinero Wealth asked about the 40% increase in other expenses. Rajendra Gandhi MD said that during the first two quarters of the last fiscal year, due to the effects of COVID-19, there was a lot of restraint in terms of costs such as travel and marketing expenses. This was further bolstered by increased demand from COVID-19, leading to higher sales. This year, the numbers are more normalized and reflective of what to expect without the added effects of COVID-19.

• [00:35:26] Pankit Shah from Dinero Wealth asked if it’s not logical to invest in advertising and marketing based on expected revenue rather than spending a set amount and then not seeing the expected return. Rajendra Gandhi MD replied that STOVEKRAFT has done well compared to the industry when it comes to marketing spends, and its spend is within the expected range of 3.4%.

• [00:54:22] Rahul Ranade from Goldman Sachs asked if the city office thing is more of a talent retention effort. Rajendra Gandhi MD answered that the factory is about 30-40 kilometers from Bangalore, and the sales, marketing, finance, and corporate functions are based in the city. This allows for better talent retention and attraction.

• [00:55:16] Harshil Shethia from AUM Fund Advisors enquired, what is FTOVEKRAFT’s take on finding a new CEO for the business. Rajendra Gandhi MD replied that the company has a new structure with five executive positions: CFO, COO, Chief Revenue Officer, Chief Growth Officer and CHRO.

• [00:56:33] Harshil Shethia from AUM Fund Advisors asked about how the company is seeing Jan and 4Q23 panning out for now. Rajendra Gandhi MD said that the company has grown by 9% this quarter, and the demand remains soft but STOVEKRAFT is doing well overall.