TTK Prestige Ltd (NSE: TTKPRESTIG) Q2 2025 Earnings Call dated Oct. 30, 2024
Corporate Participants:
Saranyan R. — Whole Time Director & Chief Financial Officer
Venkatesh Vijayaraghavan — Managing Director & Chief Executive Officer
Analysts:
Yash Jain — Analyst
Resha Mehta — Analyst
Hitesh — Analyst
Sameer Gupta — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to TTK Prestige Limited Q2 FY24-’25 Earnings Conference Call hosted by Ambit Capital. [Operator Instructions] Please note, that this conference is being recorded.
I now hand the conference over to Mr. Yash Jain from Ambit Capital. Thank you, and over to you, sir.
Yash Jain — Analyst
Thank you. Hello, everyone. Welcome to TTK Prestige 2Q FY25 earnings call. From the management side today, we have Mr. Venkatesh Vijayaraghavan, Managing Director and CEO; Mr. Shankaran, Advisor to the Board; and Mr. Saranyan, Whole-Time Director and CFO.
Thank you and over to you, sir, for your opening remarks.
Saranyan R. — Whole Time Director & Chief Financial Officer
Good evening. This is Saranyan here. Welcome you all for the Q2 earnings call of TTK Prestige. Before I hand over the proceedings to our Managing Director, Mr. Venkatesh, I just want to remind the participants that today’s discussions may contain certain statements which are futuristic in nature. Such statements represent the intentions of the management and the efforts being put in by them to realize certain goals. The success in realizing these goals depends on various factors, both internal and external. Therefore, the investors are requested to make their own independent judgment by considering all relevant factors before taking any investment decision.
Thank you. I hand over the proceedings to Mr. Venkatesh for his opening remarks.
Venkatesh Vijayaraghavan — Managing Director & Chief Executive Officer
Good evening and welcome to this call. So while we look at the performance of the company and the industry, I think our view of the economy is quite robust and we see a lot of positive offshoots coming in from an Indian economy perspective. Despite issues around the global turbulence and other geopolitical tensions around, we do believe that the economy is on a robust platform and that is sort of also reflecting in some of the numbers at a macro-level.
From our business perspective, if you are to look at, some of the global tension is sort of reflecting in our business impact in terms of container availability and in terms of some of the freight rates related, which has some bearing on our export business, which we would talk about as we move.
Overall, the economy seems to be robust and we do believe that that’s a good positive sign for us as we move in the direction of growth for the industry as well. Closer home from an industry perspective, we believe we — after a long period of time, the industry is starting to bounce-back again. Our categories and our core categories have started to see good growth coming in, particularly on the retail environment. And this sort of gives us the confidence that the overall direction with the categories are moving in the right direction.
Our trade channels have done very well in the last two quarters and seeing — and this is complemented by our growth coming in from e-commerce and modern format stores. We do have specific issues around the rural channel, which in this category is sort of finding a little bit of struggle given some of the model changes that’s happening and some of the economy related issues on the rural demand as well.
On the Commodity side, like I had mentioned, there is a surge that we’ve seen in terms of our prices. While it’s being managed from the quarter perspective, we do believe that this probably would have an impact as we move forward. This level of increased commodity pricing is expected to be there across the year and that’s something that we would factor-in as we move forward.
Our export orders are robust. There has been delay in shipment because of freight-related challenges given the global tension. But our belief is that as we move forward, we would look at a robust export growth and some of our shipments have got deferred to the second-half of the year and we believe that will also get sort of — that demand will get addressed as we move forward.
Overall, our outlook from the channel’s perspective is quite good. We do believe that we’re moving into a phase of good growth. And as we move forward, this would sort of help us drive the growth much more faster ahead as we move forward. That would be my sort of remarks, and I think we’re quite confident as we move forward that we would continue to keep the path of growth.
We’ve also sort of looked at some of our investments to be made in a few areas of improvements and that is work-in progress as we move forward. Some of them would reflect as we move in the quarters coming by. So overall, a confident position and we do believe that we are in the right place and position and we will take this forward as we move.
Saranyan R. — Whole Time Director & Chief Financial Officer
We’re open we for the questions. Yash, we can proceed with the questions-and-answers.
Questions and Answers:
Operator
Thank you very much. We will now begin the question-and-answer session. [Operator Instructions]
The first question is from the line of Resha Mehta from GreenEdge Wealth. Please go-ahead.
Resha Mehta
Yeah. Thank you and Diwali wishes to the entire team. So, the first question is on the consultants. So we are engaged with consultants. So, if it would be possible to elaborate on what were the observations, corrective measures, gaps, et-cetera that have been recommended? And what we have chopped out as a plan?
And also a related question that what would be the recurring cost for the consultants each quarter going forward and till what time would we incur such a cost? That’s the first question.
Venkatesh Vijayaraghavan
So while we’ll come back on specifics, at this point of time, what we have done is to take an active stock of where we stand and some of the opportunities and efficiencies that we would be able to unlock as we move forward. The consultant has actually done the first phase of the work and they have come back with their recommendations to us. That is getting internally evaluated and as we move forward, we will take appropriate steps in that direction, including sort of looking at the boundaries of operations with the consultant and the related costs as well.
But at this point of time, I think the first part of the exercise has given us quite a visible set of opportunities that we would like to work around our core and therefore, be able to bring in efficiencies as we move both in terms of top-line growth and in terms of some of the related efficiencies that we can bring in.
Specifics to the costing, I probably we would — we would not at this point of time be able to talk about it. And over a period of time as relevant, we will then — we will sort of talk about it later.
Resha Mehta
Any specific findings or anything that you can elaborate from the consultants’ recommendation?
Venkatesh Vijayaraghavan
So we’ll come back on that and maybe at an appropriate time we’ll come back on that.
Resha Mehta
All right. The second question is basically on the channel. So, you’ve called out that institutional channel is seeing some headwind for — has been seeing some headwind for quite some time. So, what exactly is the issue there? And also on the Prestige Xclusive stores, if I see the closing as on this current September quarter is similar to what was there as on March quarter. So there is like a reduction of almost 40 stores. So are we seeing any kind of mark closures or any kind of stress on the Prestige Xclusive store format? So, that’s the second one.
Saranyan R.
Yeah, I will — Saranya here, I will answer the second question first. This is on the Xclusive stores. Yes, there were — see, what we have done is we have rationalized the stores to ensure that I think the partners where they are not doing well, I think we have closed down in those markets. We have filtered up that gap with the other distribution process. So, that’s why you see a reduction. But going-forward, I think we keep adding as we move forward depending on which market is required and where exactly those stores are required, we’ll keep adding it up.
Over to you, Venky on the other half.
Venkatesh Vijayaraghavan
So some of these do not have a visible bearing on the top-line, but it is more about rationalization that has been required at this point of time and that’s been done in the Prestige Xclusive chain as we look at. From a channel perspective, like we said, one of the very positive signs that we see is that the overall traditional channels, which includes general trade, Xclusive stores, e-commerce and modern trade are doing well. While we see a little bit of pressure on the general trade channel because of the e-commerce scale-up and modern trade scale-up that’s happening, as a combined bucket, we do see that there is a significant growth that has happened and that would probably continue as we move forward.
However, unique to the current situation has been the rural channel and institutional channel. These have been some structural related challenges that are at-the-market level, not from Prestige perspective or not specific to TTK Prestige, but at a market level. And TTK Prestige being a very dominant player in this segment, we’ve sort of seen this impact our top-line. These are some structural changes that have happened combined with weak demand from these markets. So to that extent, I think this is something that would be a transitory in nature, but we would have to address it as we go.
Resha Mehta
So just a follow-up here, if I may. So, when you say institutional channel, you are meaning the CSD channel or the corporate sales channel? And also on the Prestige Xclusive, so broadly, the major part of store rationalization exercise has been done or is still underway?
Venkatesh Vijayaraghavan
It’s done. It is more or less done. This was work-in progress that got finally sort of consolidated right now. It’s largely done. And you would also see that as we move forward, the expansion plans would be visible. We are rapidly expanding new stores in specific targeted geographies and that would reflect as we move forward. And as I said, the bearing of this at this point of time is very little from a top-line perspective, but it will — the expansion will continuously keep adding to the —
On the International channel, yes, that includes the CSD channel as well.
Resha Mehta
And even the corporate sales channel?
Venkatesh Vijayaraghavan
Corporate sales channel, we’re not seeing too much of a problem. It is more of the CSD channel and the rural channel that we are seeing this sort of a channel challenge that’s happening right now.
Resha Mehta
Got it. All right. Thank you.
Operator
Thank you very much. [Operator Instructions]
The next question is from the line of Hitesh from Kosha Capital. Please go-ahead.
Hitesh
Hi, thanks for the opportunity. Can you hear me?
Venkatesh Vijayaraghavan
Yeah. Please go ahead.
Hitesh
Sure. Sir, could you share how have been the demand trends this festive season? And also if you can dissect this demand between, say, the mass premium segment and the premium segment? When I say premium, I mean products priced at a higher price point, how the demand has been in both the segments, if you can elaborate there? And also how much of still season sales are already reflected in Q2 numbers or is it in Q3 that we will get to see the festive sales numbers?
Venkatesh Vijayaraghavan
Some part of the season sales would be felt in this season as well in Q3 partially, but a major portion has already been reflected in the Quarter 2 as we speak. So, to the question of where is the growth happening? We are seeing the growth happen at the mark end, which is reflected in terms of the insights coming in from e-com channels as well as the other where we’re seeing growth coming in from Tier-2, Tier-3 expansion that is happening.
We’re also seeing growth coming in from the premium end. We are not export directly to the super-premium end, but our belief is that the super-premium end is offering us the growth opportunity as we move forward.
From TTK Prestige perspective, across the three segments of premium, mass premium and mass, we believe there is enough growth opportunities that are there and that’s getting addressed as we speak. Rural, there has been a weak demand and that is sort of reflecting in the rural channels that we’ve seen. But otherwise from a mass market perspective, and a mass premium store premium perspective, the growth rate in our view is robust. And like I said, after a long period of time, they’re coming back, the categories are coming back to a growth rate right now.
Hitesh
Sure. And sir, how has been the implementation of BIS in the appliances side because growth that we see is quite subdued. And is there any — I mean, how is the industry gearing up for this whole transition to this BIS?
Venkatesh Vijayaraghavan
So BIS implementation would largely impact the flexibility of having new products coming from exports perspective, which is from other countries that they get imported. There is a progressive implementation of this across multiple categories and that I think is a short-term challenge. But from our perspective, we would say that over the last few years, we’ve been consistently working on that with our vendor partners. We are better-positioned to handle this challenge as we move forward.
The subdued performance that you see is also partially due to the reflection of the rural channels. Appliances overall is growing well in the trade channels as we mentioned. So, going-forward, I think we do see that happen. BIS and the implementation of BIS is long-term in our view is good. It ensures that there are certain quality parameters that come into the industry. From our perspective, we are better equipped to handle it given that we have our vendor partners also doing this for us for the last three, four years now.
Hitesh
Sure. And sir, just a last thing, because you know, as you mentioned that the general — the traditional channel continues to do well, we had a 12% kind of growth. But if you look at the overall number, it’s still lower than the FY22 number that we had, at least on the domestic side. Now if we do a like-to-like basis for the same traditional channel, how has it been vis-a-vis FY22? Is there a growth or is it — is there a negative growth there too?
Venkatesh Vijayaraghavan
There is a growth.
Hitesh
Sure. And sure, sir. I’ll get back-in the queue. Thank you very much.
Venkatesh Vijayaraghavan
Sure.
Operator
Thank you very much. [Operator Instructions]
The next question is from the line of Sameer Gupta from India Info line. Please go-ahead.
Sameer Gupta
Hi, good evening, sir, and thanks for taking my question. Sir, given there is an early festive this year and we had a base of minus 15%, how do you look at this 2Q performance? Optical, it should have been a good growth because it’s an early festive and the base is also favorable. Secondly, the industry is bouncing back. So, what kind of growth are you targeting in second-half of FY25?
Venkatesh Vijayaraghavan
Yeah, I wouldn’t be able to give you a direct number on that. But like I said, I think our outlook is quite positive given the way we’ve been sort of looking at some of the channel performances and others, right? The overhand of rural continue and that would be a challenge as we move forward. But from — we would definitely look at a good growth as we move. Specific, I wouldn’t be able to sort of walk on right now.
Saranyan R.
As far as the festive sales if you look at the Diwali from the last week of October, so the festive demand, festive filling of the stores has happened in the second fortnight of September and the whole of October. So October, it looks very robust.
Sameer Gupta
Got it, sir, got it. That’s all from me, sir. I’ll come back-in the queue for any follow up.
Operator
Thank you very much. [Operator Instructions]
The next question is from the line of Sameer Gupta from India Infoline. Please go-ahead.
Sameer Gupta
Hi, and thanks for giving the chance again. Just a follow-up. Sir, you have mentioned that rural is facing an issue, but most of the companies till this quarter have specifically mentioned as to the problem being urban India and rural is actually coming back very strongly. So, just wanted to understand, is it a specific geography issue in rural that you are facing? A little bit more color here would be helpful.
Venkatesh Vijayaraghavan
So I think it’s backed by two-parts. There is a demand — there is a demand challenge in rural in our view. And also there is a channel-related structural issue that is being sort of addressed at this point of time. So, a combination of channel and a combination of weak demand in rural is in our view creating this issue as we speak or the challenge as we speak. We are not too sure that there is a robust rural demand which we are not witnessing at this point of time.
Sameer Gupta
The structural challenge is basically the MFI channel you are saying?
Venkatesh Vijayaraghavan
Yes, yes, yes. Both PFC and MFI have passed on structural challenges, which is internal to them and that is sort of reflecting in our performance, right?
Sameer Gupta
Got it. And it’s not very geography specific as to — it’s only a South-related problem. It is across-the-board in rural that you’re facing an issue?
Venkatesh Vijayaraghavan
This is across — the channel is more dominant in non-South, but this is across.
Sameer Gupta
Got it, sir. Thanks.
Operator
Thank you very much. [Operator Instructions]
The next question is from the line of Resha Mehta from GreenEdge Wealth. Please go-ahead.
Resha Mehta
Yeah. Thanks for the follow-up. Just on this BIS bit, if you could elaborate on how well the overall industry is prepared to handle this transition? And do you see that as a distinct advantage for players like us? And are we prepared for this transition? So if you could just share some granular details on this would be very helpful.
Saranyan R.
So we are not depending on the input so much. So, we have built a individual structure and we are able to meet the base around the appliances which we sell-in India.
Resha Mehta
Okay. And how about the industry at large, the unorganized payers are the very small regional brands company and —
Venkatesh Vijayaraghavan
Regular and the other companies. Directionally, that would be a challenge given the dependency that some of the competitive other companies would sort of depend upon. I think over the last three, four years, we’ve invested steadily in our domestic capabilities, particularly in the appliance side that we hope will help us in good stead as we move forward.
In the short-term, there would be transitionary pressures on new product development and new product launches. But I think as we move forward, that’s a good sign and we are better poised to take advantage of this.
Resha Mehta
Right. And on the China bit, right? So of course, I recall post-COVID, we had greatly reduced the dependency on China. But overall at an input level, would it be possible to quantify that what is the China sourcing? Maybe we don’t do it directly, but via our vendors possible to give some color here, it’s not in an exact quantification?
Venkatesh Vijayaraghavan
See, there are some — the reality is that there are some core parts that still get imported from China. The domestic capability through them is not there in appliances. That part of it is including the challenge of BIS is getting addressed. So, I think as we move forward, that is something that will get addressed. But from some of the vendors of ours are importing some critical parts that is still work-in progress as we speak, but that’s an area of focus that we’ve taken upon us to ensure that does not sort of derail us as we move forward.
Resha Mehta
So can you just elaborate on which are these small kitchen appliances, what parts exactly, motors etcetera something, some colour here would help?
Venkatesh Vijayaraghavan
Not at this, not in this call.
Resha Mehta
All right. Okay, sure, I’ll reach-out to you offline. Thank you so much.
Operator
Thank you very much. Since there are no more questions from the participants, I now hand the conference over to the management for closing comments.
Venkatesh Vijayaraghavan
First of all, our wishes for the festive season and Happy Diwali to all of us. I think thank you for having taken the time to be on this call. And as we said, I think we do look at positive options coming in terms of category, some of our performances as well and we are quite confident as we move forward, we would continue to do well as we’ve done in the past. And once again, Diwali wishes from our side. Thank you.
Operator
[Operator Closing Remarks]