Ladies and gentlemen, good day and welcome to the Flair Writing Industries Limited Q1 FY 2027 earnings conference call. As a reminder, all participant lines will be in the listen only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this call is being recorded. I now hand the conference over to Ms. Mamta Nehra from MUFG Bank. Thank you, and over to you, ma'am. Thank you. Good afternoon, everyone. Welcome to the Flair Writing Industries Limited Q1 FY 2027 earnings conference call. Today on the call we have Mr. Vimalchand Rathod, the Managing Director, Mr. Mohit Rathod, the Whole-Time Director, Mr. Sumit Rathod, Whole-Time Director, and Mr. Alpesh Porwal, the Chief Financial Officer. A short disclaimer before we start this call. This call will contain some forward-looking statements, which may be based upon our beliefs, opinions and expectation of the company. As of today, these statements are not a guarantee of future performance and will involve unforeseen risks and uncertainties. With that, I would now like to hand over the conference call to Mr. Vimalchand Rathod, the Managing Director, for his opening remarks. Thank you, and over to you, sir. Good afternoon and welcome to everyone. Thank you for joining Q1 FY 2027 earnings call. I hope everyone had the opportunity to go through our investor presentation and press release that has been uploaded on the exchange. We are pleased to present our Q1 FY 2027 performance with 11% year-on-year revenue growth and a 23% year-on-year increase in EBITDA. We are seeing increase in demand of our products in the domestic market with growth across key categories, despite challenging arises from the prevailing geopolitical situation, which impacted our Q1 gross profit margin and affected our certain market and supply chains. Our overall business remains resilient and continue to deliver growth. Coming to our segment performance, our core pen segment delivered 9% year-on-year growth, with demand remaining positive during the back-to-school season. Our creative products and steel bottles and houseware business also recorded double-digit growth. Together, those categories now contributes approximately 31% of our overall revenue, reflecting the progress we are making towards diversifying our product portfolio. Flair Cyrosil Industries Private Limited, a subsidiary of Flair, currently operates three stainless steel bottle manufacturing lines. The order for the fourth next generation manufacturing line has recently been placed and its commissioning is expected by Q4 2027. The new line is expected to increase our manufacturing capacity by approximately 35%, enabling us to cater the growing domestic and international demand. Looking ahead, our focus remains on maintaining our leadership in writing instruments while increasing our market share in our creative products and steel bottle and houseware business. At the same time, we are continuing to improve capacity utilization, better throughput in our distribution network and drive products capacity utilization better throughput Innovating and strength of our presence in our own branch and international markets. I now hand over the first to Mr. Alpesh Porwal, our Chief Financial Officer, to discuss in detail about our Q1 FY 2027 financial performance. Thank you. Thank you, MD, sir. A warm welcome to everyone. Let me take you through our financial performance for Q1 FY 2027. Revenue from operations stood at INR 319.2 crores, registering a 10.6% year-on-year growth. Gross profit stood at INR 158.6 crores, up 10% year-on-year, with gross margin at 50%, broadly in line with historical levels with a modest 31 basis point year-on-year decline, which is driven by geopolitical uncertainties and an elevated cost environment across the industry. We have also taken proactive measures to protect margins, including rationalizing schemes and discounts and implementing selective price increases across all our three segments of businesses: Writing Instrument, Creatives, and Steel Bottle & Houseware business. EBITDA stood at INR 53.3 crores, growing 7.7% year-on-year, while EBITDA margin stood at 16.7%, a 46 basis points decline year-on-year. The moderation in margins reflects elevated and volatile raw material costs driven by geopolitical uncertainties. As capacity utilization improves and newer businesses gain scale, the company expects operating leverage benefits to support margin expansion and remains confident of progressively moving towards its EBITDA margin target of 17.5%-18%. PAT stood at INR 29.1 crores, increasing 0.5% year-on-year, with PAT margin at 9.1%. The relatively slower PAT growth was primarily due to lower other income and increased raw material cost during the quarter. Despite the prevailing geopolitical uncertainty and the challenges arising from West Asia situation, we remain confident in the underlying demand environment and reiterate our FY 2027 revenue growth guidance of 15%. The above comparison is on year-on-year basis, and if you see quarter-on-quarter performance, the revenue shows a decline of 1.1%, with gross profit margin declining by 151 basis points and EBITDA declined by 116 basis points and PAT margin declining by 220 basis points. All these were primarily due to geopolitical situation in West Asia with sharp increase in raw material prices. We took prudent steps to mitigate and minimize impact through targeted price increases across key Steel Bottle and Houseware categories, rationalize trade schemes and discounts, and intensified its focus on premiumization and product mix enhancement. Coming to our segment performance. Our core pen business grew 9% year-on-year, reaching INR 220 crores compared to INR 202 crore in the previous year. The segment continues to be a consistent growth driver, supported by healthy demand in the domestic market and ongoing product innovation. Importantly, growth during the quarter was largely volume driven. We launched 18 new pens across different price segments, further expanding our product offering and catering to a wider range of consumer needs. The Creative segment witnessed a growth of 23% YoY to INR 80 crores as compared to INR 65 crores in Q1 FY 2026. However, growth could have been higher, but the impact of sharp increases in raw material costs amid geopolitical uncertainties in certain categories where we consciously prioritize a balance between volume-led growth and protection of margins. This growth was supported by the existing portfolio as well as new product launches. During the quarter, we introduced 10 new products in the Creative range. Going forward, we will continue to expand the portfolio through new product development while progressively building our in-house manufacturing capabilities. We will maintain prudent balance of volume-led growth and margin protection to achieve our previous guidance. Our Steel Bottles and Houseware business grew by 54.3% year-on-year to INR 19 crores, compared to INR 13 crores in Q1 FY 2026. The segment continues to see increasing traction as we expand our presence in these newer categories. It currently contributes around 6% of our overall revenue, and our focus will be on broadening the product portfolio and expanding distribution. Over time, we expect the revenue mix to progressively shift towards Creative products and Steel Bottle and Houseware, with these businesses contributing a larger share of our overall portfolio. During the quarter, we introduced 32 new products across categories, further expanding our product portfolio. For FY 2027, we have a pipeline of launches across pens, creative products, and steel bottles and houseware. We will continue to deepen our pencil portfolio, introduce higher value formats in pens, and expand our steel bottles and houseware portfolio across channels. To support the growth of our steel bottle and houseware business, Flair Cyrosil Industries Private Limited has placed an order for a fourth state-of-the-art, next generation manufacturing line for stainless steel bottles. The new line is expected to be commissioned by Q4 FY 2027 and increase our manufacturing capacity by approximately 30%-35%. Creative products and steel bottle and houseware remain key growth engines for us. Together, these businesses contributed approximately 31% of the company's total revenue in FY 2026, and both continue to witness strong momentum. With the planned capacity expansion in steel bottles and continued scaling up of the creative product business, we expect their combined contribution to increase to approximately 35%-38% of overall company revenue in FY 2027. Coming to our domestic and export performance. Domestic sales grew 13% YoY to INR 277 crores compared to INR 245 crores in Q1 FY 2026, reflecting continued demand for our brands in the domestic market. Exports stood at INR 43 crores and remained broadly flat year on year, primarily due to disruptions in the West Asia, resulting in longer transit times and higher freight costs during the quarter. While the near-term environment in West Asia region remains challenging, we have started focusing on increasing sales in other geographies and expanding our brand presence across international markets. In the current quarter, we have started seeing a positive growth in the export in various markets. Exports will continue to be an important area of focus and growth for the company. During Q1, the company incurred a total capital expenditure of INR 43.42 crores, of which INR 33.25 crores was capitalized towards the factory building in Valsad facility. This investment is aligned with our long-term strategy of strengthening manufacturing infrastructure. This also includes a CapEx of INR 38.7 lakhs recorded at Surat facility, comprising investments and molds. We are a zero debt company and all the internal accruals are for future expansion and for the shareholders. Overall, we remain focused on building a stronger and more diversified Flair. We continue to drive premiumization across our product portfolio, strengthen our integrated manufacturing capabilities, expand our distribution and market presence, and improve our working capital efficiency. We are confident in delivering consistent growth and creating long-term value for our stakeholders. Thank you everyone. I would now like to hand over to the moderator to open the floor for questions. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use answers while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Sneha from Nuvama. Please proceed with your question. Hi. Good afternoon, team, and congratulations on good margins sustenance here. The first question is related to margins itself. We have seen your gross margins falling just about 150 with quarter-over-quarter and remaining actually flattish YoY. While you said on the opening remarks that you reduced schemes and discounts there, is that a sustainable level of margins? I understand polymer prices are moving too swiftly, but can we actually look at these kind of gross margins continuing over the next two to three quarters? Thank you, Sneha. Let me just give you a background of the entire calculation and the margins which you are posing, which are seen. So Q4 FY 2026 margins remain largely protected due to lower cost inventory procured earlier. However, the impact of elevated raw material costs started flowing through from Q1 FY 2027, resulting in margin compression. To mitigate this impact, the company has already implemented targeted price increases across key steel bottles and houseware categories, rationalized trade schemes and discounts, and intensified its focus on premiumization and product mix enhancement. As a result, despite the inflationary environment due to geopolitical uncertainties, the sequential gross margin decline has been limited to 150 basis points, which basically demonstrates the effectiveness of these corrective actions which we undertook during the quarter. EBITDA margin declined to 16.7% from 17.9% in Q4 FY 2026, and 17.2% in Q1 FY 2026. While gross margins softened to 49.7% from 51.2% and 50% in corresponding period last year. The raw material prices across key inputs have increased, Sneha, as we speak. You are aware of that, which creates significant near-term cost pressure. Management had previously also indicated a potential 100-200 basis points impact on margins. That was during the last quarter call. And the Q1 performance approximately reflects about 1.5% impact due to these higher input costs. To answer your question, looking ahead, how do we see it is that as the geopolitical situation stabilizes, the management expects the cost pressures to gradually ease over the next three quarters as a full benefit of pricing intervention measures, including rationalization of schemes and discount, shall flow through the P&L. We expect to target an EBITDA margin of 17%-18% for the year. Understood. That was quite helpful, sir. The second question was more on your segmental revenues. Our last quarter we gave the guidance that pens will actually, we are looking at around 5% CAGR sort of growth. But this quarter we actually saw 9%. On the other hand, creatives, which we were very positive about 50% guidance out of a number, we were at 23%, while steel bottle was largely in line with our estimate, and in fact higher. Could you actually tell us what is happening in pens and what went wrong in creatives, on the other hand? Yeah, Sneha. Hi. Just to answer about the Creative, nothing went wrong as of in Creative. We witnessed a growth of 23% YoY, primarily impacted by the raw material prices due to West Asia crisis. There were certain categories wherein we took a conscious decision of going for balancing of volume-led growth and protection of margins. This impact were on categories such as geometry boxes, pencils, and certain subcategories within coloring portfolio. It was a very conscious call that we took to protect the margins. Overall, if you look at the pen category as a whole, we have seen a decent growth of 9% in Q1, which always we used to consider like whenever we had a call earlier, we would always say that it will be higher single digits. It is mainly due to our strong brand pull for writing instruments of pens under Flair and Hauser brand in domestic market. That was quite helpful, Mohit. Any change in guidance in the overall revenue number? No, I think, looking at Q1 and the way things are progressing in Q2, Q3, we are positive that we will be sticking to our original guidance of 15% year-on-year. Understood. Team, thirdly, great that you have announced steel bottle business expansion here. Just wanted to understand a few numbers. What will be the key utilization currently that we are operating at? Potential revenues from the current line, and when is the new line expected, and what sort of offerings are we bringing in and potential revenue there? See, currently if you look at the Sorry. Yeah. If you look at steel bottles, currently the capacity utilization is about 65%. Going forward, as you know historically also, whenever we cross 65%-75%, we tend to invest in the new expansion. Given the positivity and the signs from our buyers, mainly in general trade and e-commerce and Quick Commerce, we have taken a call to increase the capacity by 35%, where we will be investing in one more state-of-the-art automatic line of steel bottles, where we would be investing about INR 15 crores, and the expected revenue generation would be around INR 30 to INR 35 crores because it all depends on the product mix, what we make on that line. To answer one more question about the existing line revenue. The existing line, looking at the product mix, what we have been giving in last two, three quarters to our customers, it looks like we would be doing about INR 100 odd crores with the current capacity. Thanks, Mohit. That was helpful. One last one, if at all I can ask a bookkeeping question here. What would be the split of OEM business this quarter, both domestic and? When we talk about OEM business, overall OEM business witnessed a subdued demand during the period as highlighted earlier. Also, our domestic OEM business has been fully phased out, with our legacy OEM relationship reduced to zero. When we talk about export OEM business, of course, because of the West Asia crisis, there was a demand issue and also because of the logistics issue. It impacted the demand and the consumer operation. I would say overall, if you look at the OEM business, it is hardly contributing to about 5% of our overall business. Yeah, it will be looked as a regular business. We are not focusing on OEM. For last two years, we have been focusing on our own brand sales. Understood, Mohit. Thanks a lot, team, and all the very best. Thank you. Thank you. The next question is from the line of Aradhana Jain from 360 One Capital. Please proceed. Hi. Thank you for the opportunity. Couple of questions. First, I wanted a little more understanding on pens business. So one is, we have seen a good growth, 9% growth this quarter. Wanted a little more understanding of how are you looking at this growth, what led to it? Was there any one-off sort of demand that we saw in this quarter? Can we expect this kind of growth to sustain over the next few quarters? Because, like the previous participant also said, for the full year, we were expecting low to mid-single digit kind of growth in pens. But given we have already done 9% this quarter, can we expect the run rate to continue in the rest of the year as well? That is my first question. Yeah. So, when we look at the overall pen business, I think we have grown by 9% year-on-year. It was mainly driven by the volume growth. So if you look at the overall volumes, we are increasing our market share in the domestic market as well as the export market. So, going forward in Q2, Q3, Q4 also, we are hoping to continue with the same guidance of high single-digit growth in pen division. Sure. It was also led by the new product launches, what we have done in back-to-school season. Okay. And any sense if you could give us as to what could be our market share today in pens? The reason I am wanting to understand that is that recently, one of your competitors has also taken over Reynolds as a brand. So, wanted to get your sense also on how you are looking at the competitive intensity to change henceforth, and what is our strategy going to be. Are we changing any strategy there with respect to pens? To answer that, Reynolds was always there in the market earlier too. As the leaders in writing instrument industry, we have a strong brand portfolio with Flair and Hauser, and we will continue with our high-growth strategy in this segment. So I do not see any impact at all due to this takeover. And any sense on what would be our market share today in the pen segment? Currently, the market share as per the last CRISIL report, in writing instruments, we have a market share of 18%. 18%? Yeah. Understood. Is it fair to assume that going forward also, the growth will be driven by our own brand rather than the OEM business for us? Yeah, absolutely. Understood. Yeah. It will be our own brand growth. Understood. What would be the mix of mass, mid-premium and premium? Any change in that mix for this quarter? You said it was volume led, but still wanting to understand was there any change in the mix or it is mostly 50/50 for us, 50% coming from mass and 50%? I would say mass and mid has increased. Of course, because of the volumes, the mass and mid has increased. Understood. In the pen segment- Sorry to interrupt, ma'am. May we request you to join the question queue for a follow-up question? Sure, sure. I'll do that. Thank you. Thank you. Thank you. The next question is from the line of Shubhi Gupta from Trinetra Asset Managers. Please proceed. Good afternoon, sir. Thank you for the opportunity. My first question is that the new unit that we are putting in Valsad, for writing instruments. Sir, how much is the total revenue potential for the maximum utilization? My second question is on working capital. Sir, inventory, if you could just share some thoughts like how we are doing inventory-wise. That would be good. The new unit at Valsad which we are putting is basically it will suffice our growth projections for the next one and a half year, which we have. It is not only for writing instrument, it is for writing instrument and creative, both. We have historically also, you would have seen that our CapEx to revenue ratio has been around 3x, and our calculation also says that it is going to be 3x this time also. Sure. On the working capital? I'll share with you, I would say the working capital here. Working capital has, in fact, year-on-year, if you see, my working capital has gone down by six days, has improved. It's improved by six days year-on-year, if I was to previous quarter one to quarter one. It has broadly remained stable during the quarter, this quarter compared to the previous quarter. That's Q4 FY 2026. With inventory, receivables and payables remaining largely in line with the previous quarter. We got the advantage of keeping, you would have seen in our numbers, we got the advantage of keeping higher raw material stocks, especially in the time of the uncertain geopolitical situation. But going forward, we expect to streamline inventory levels as the West Asia crisis stabilizes, with an anticipated improvement of approximately 10 days. In our entire working capital cycle levels. We should be doing this by the end of this year. Also on working capital, just to add to this, that the inventory heightened inventory levels, one thing which I said majorly because of the crisis where the uncertainty of supply of raw material and the pricing issues which we face, but we also have new product launches across creative and steel bottles, which require somewhat higher inventory. Particularly as these categories are still establishing distribution relationships. This is expected to normalize as these businesses gain traction. Given our experience in the pen business, inventory levels can be managed more effectively, while the newer categories will see a gradual optimization as demand visibility improves. Overall, we expect a continued gradual improvement in both inventory and receivable days, which will support a healthier working capital cycle in FY 2027. Thank you so much. This was very helpful. Thank you. Thank you. The next question is on the line of Atul Mehra from Motilal Oswal. Please proceed. Yeah. Hi, sir. Good afternoon, and thanks for the opportunity. My question is on the revenue guidance. Basically, sir, if we are to meet our 15% guidance, we have to do 18% growth for the rest of the year. In the current environment, what gives us the confidence of 18% growth for the rest of the year? If you can maybe break it up in business or segment-wise, what will drive the growth? Are you already seeing acceleration in top-line growth now that half the quarter already passed by? Yeah. Overall, if you look at the numbers, and going forward in next three quarters, we would like to stick to our guidance, looking at the kind of demand, what we are generating in domestic market as well as export market from our customers. Based on that, we would like to stick to our guidance. As far as category-wise is concerned, as we had always mentioned that it is going to be high single digit in writing instruments for us, the growth. Creative and steel bottles is, of course, a higher number digits, like about almost 40%. I think we would like to stick to the guidance. Got it. And sir, other than maybe the near-term guidance, maybe if you were to think about it from a three-year perspective, would we be confident of similar 15%+ top-line bottom-line growth over the next three years as well given the growth and expansion plans? Right, Atul. All the projections which we are sharing with you, this is for the current year. But three years 5% cycle is easily achievable. I would not like to give you a higher number at this point of time, but we are sure about it and confident about the plans which we have in place. Got it. One final question, Alpesh, is on operating leverage you spoke about in opening comments. Given, obviously, the current environment where cost pressures on the raw material side are on the higher side, if you can highlight a little bit more like what is the potential for operating leverage, which can unlock some of the margin loss from gross margin, if you can maybe specify. Yeah. Currently, like I shared, we have taken few measures here, mitigating measures to kind of counter the increase in the raw material prices. There are certain products in one or two of these segments where we have also taken a conscious decision to kind of market them in a different way to maintain a balance between margins and that. A combination of volume-led growth and targeted price increase is what has worked in our favor. Q3, Q4 are always better, Atul, if you were to see Q1 and Q2. Q1, obviously, it is marred or whatever is influenced a little by the ongoing crisis in the raw material price increase, and exports have been affected. But as we move forward, based on the measures which we have already taken in terms of reducing discounts, rationalizing discounts and schemes, and also increase in prices, the combination of this should not be an issue for achieving the projected numbers. Got it. Go ahead. Thank you very much, sir. Thank you and all the best. Thank you. Thank you. The next question is on the line of Nilesh Doshi from Prospero Tree. Please proceed. Thank you. Congratulations for encouraging result in the light of the sharp increase in raw material price, sir. Thank you. Congratulations. Sir, my question is regarding the creative segment. Sir, creative segment is our one of the fastest-growing segment, and you have given the guidance of 15% on overall revenue basis. Our presentation indicates that we have a 75% production capacity in-house. Is the company thinking to expand the capacity for the creative segment in the near future? Yeah. As we mentioned earlier also, Nilesh, that we are expanding our production base for creative, and whatever infrastructure we build on new buildings for the factories, it is always fungible where we will make pens as well as stationery creative division. Will that capacity cater to the future demand also? Because the creative is the fastest growing, and we are something anticipate that there will be a much more growth than the pen segment. Our capacity must be ready for the future demand also. Is it like that? Yeah. For future demand, everything is planned accordingly to meet the future demand. When that capacity will be ready, sir? By end of next quarter is when we have the entire capacity in place. The building has been capitalized so far. It is built, but the machineries and molds, et cetera, are yet to be installed. By end of this quarter is where we say it should start commissioning. Nilesh, you would realize that it's not a switch on, switch off. Over the next two quarters is where we'll see the optimum utilization of the capacity there, where we start. Just to add to this new Valsad plant, where we plan to manufacture pens, writing instruments, as well as creative products. Simultaneously, our capacity at Surat has also begun its operation in 100% operations in the new property or new factory, which we capitalized in the previous year. These put together shall be sufficient to power our growth. Okay. Sir, my next question is to the earlier participant, you have mentioned that the Reynolds was already in the market, so not too much worry to us. But now it is owned by some strong competitor. So we must be ready with our strategy to maintain and increase our market share. You mentioned that 18% market share in the pen segment, and now the Reynolds is acquired by the DOMS Industries. Are we ready, or what is our future plan to maintain our growth? Because pen is already a single-digit growth trajectory, so we should not lose the market share and maintain at least our growth trajectory. Yeah. Nilesh sir, if you see in Q1 as well, we have seen a growth of 9%. When I talk about domestic market alone, we have seen a growth in terms of revenue, is almost about 13%. But- So- Okay. Please continue. Domestic pens, I would say, and it is all volume driven. There is no way we are losing market share to anybody, and of course, we have to be over-aggressive. We have been always aggressive in writing instruments to protect our leadership, and we will be aggressive in the future as well. In short, we are ready to fight any competition. Is it correct? Yeah. We are, sir. All the new product pipelines are already ready for next two years. Thank you, Mohit sir, and all the best. You are maintaining the good trajectory, sir. Thank you. Thank you. The next question is from the line of Nirmam from Unique PMS. Please proceed. Yeah. Thank you for the opportunity. Great work on the margins. My first question is, we were implementing an inventory management system, right? Is that complete? Secondly, how does that impact our working capital, especially inventory days going forward? While we speak, the implementation is underway. Within two, three, or three months, we will see a proper optimization of the new ERP and all the benefits shall start flowing in. To answer your specific question regarding the inventory management, the software has a very robust integrated platform for handling the materials, the finished goods, raw materials, semi-finished goods. What happens out there is the timing of the reorder quantity, level, et cetera, and the utilization of the machines, per machine utilization. All these calculations will come into play once we have this fully operational ERP. That happens, then this will bring about economies in a much larger way. What we see at inventories also shall come down. The production cycle shall also be calculated within the software. We will procure inventory at the right time. The pricing will be another factor which will show up on the software, and hence it will have a positive impact on maintaining the inventory. Overall, working capital cycle shall also improve in a big way. Okay. Secondly, on the steel bottles. Can you comment on the profitability now that we are operating on a very good utilization level? What kind of margins do we make in this segment, and how do you see these going forward? See, when we talk about steel bottles, the profitability is going to improve further. Currently, we are still working on the product mix, and as the product mix changes as per the season, the profitability also varies. But more or less, we are in line with our original target of having an EBITDA of 17%-18% in that segment as well. Okay. Last question on the creative. You mentioned we had some raw material challenges. Now that we are increasing prices in some categories, do you think we will be able to pass on the price increases and grow as well? Because we will also have to improve our growth rate sequentially, right? Yeah. As I mentioned earlier also, I'll reiterate the same thing that we took a conscious decision of balancing a volume-led growth and protecting the margins as well. There are a few categories, as I mentioned earlier, like geo boxes, pencils, and some categories of coloring, where we had the issue of pricing, passing it on to the consumer. But most of the categories, we have reduced the schemes and increased the prices. What kind of price hikes would we have taken across the board, if a ballpark number? See, the price increase in the raw materials have been to the tune of 10%-12%. But our price hike, here we're talking of 10% ± is where we have done. Okay. Yeah. Thank you, and all the best. That's it from my side. Thank you. The next question is from the line of Manpreet Singh Arora from Arora Wealth Advisors. Please proceed. Yeah, thank you. Sir, my first question is on the Flair Cyrosil subsidiary. We did INR 86 crores of revenue in the last financial year on the steel bottles. Does it all get booked under the Flair Cyrosil subsidiary? The reason I am asking is, the annual report shows Flair Cyrosil doing INR 41 crores last year, but we have reported INR 86 crores of steel bottle revenue. So we- Just want to understand. We look at steel bottle and houseware as one division. The steel related ones are manufactured in Flair Cyrosil Industries. There is also a big quantity of bottles which we are also trading. We are buying from a vendor and selling it, which we are not manufacturing. That is also a part of it. Okay. Just to understand- Which we will be manufacturing with the current line, what we are setting it up, we will be doing that. Okay. Just to understand this then, out of INR 86 crores that we did last year, INR 41 crores was done in-house, and the rest was done using trading outside the company? No. That was, the balance was a combination of in-house plus trading. Okay. And that revenue doesn't get booked under the Flair Cyrosil Industries subsidiary? It gets booked under the parent. It is booked in another legal entity. Flair Cyrosil subsidiary has only the in-house manufacturing, which we do. The trading, et cetera, is kind of booked in the other legal entity. I see. Okay. This INR 100 crore potential of revenue that you are talking about is out of the Flair Cyrosil subsidiary, or including Flair Cyrosil manufacturing plus trading? No, it is about the Flair Cyrosil subsidiary. Okay. Yeah. So just to follow up on this because there is some discrepancy. So you said we have reached 65% capacity utilization here. So does that mean that Flair Cyrosil Industries is probably doing- Yeah. As I mentioned, we will reach 65% in next couple of quarters. So if we plan to expand our capacity now, in next three quarters, we will be able to commission the fourth line, and then we will start producing it after a subsequent quarter. Yeah. So the expansion takes time, so we have to plan before. Okay. Thank you. The other question was on the distribution reach. Now, we had limited our creative distribution to 68,000 outlets last year. Do we intend to increase that in the current year or still limit to 68,000? No, I think current year also, we are focusing mainly to cater to those 68,000 only, and to increase the throughput, and increase the sales in the existing outlets only. Okay. The reason I am asking, sir, is I have done a bit of going around the modern trade stores here in South India and some of East India just to look at our product. While I see that our pens are present everywhere, we have a very good presence in the pen segment. Right. The creative segment, especially here in Bangalore and Chennai, it has been a mixed bag where some of these products are present but are not there. The steel bottles I have still seen in some of the tier 2 towns as well. Just want to understand, which regions are you targeting? Are the metros always covered? The creative, while I see that some of these products are very innovative, your Disney branded pencils, et cetera, but the availability has not I am not seeing the availability. That is what we mentioned earlier also that we are focusing these 68,000 outlets are those which are the main stationary counters in India. When we look at our field assess report, when we analyze the reports and we break shop wise, we feel that there is a huge scope to cater to these existing outlets rather than increasing the number of outlets because the increase in the number of outlets can be done once we achieve a reasonable per store value, what we have targeted. Also to answer that, as you said, that you visited few modern trade stores and there were few products in our creative category. Until last year, we were seen as a writing instrument player in modern trade, but since last year, they have accepted our creative categories as well, be it mechanical pencils or wooden pencils. Now slowly we are making inroads in these stores as well. All right. Sir, the next question is on the employee expenses. Now, between FY 2025 and 2026, our employee expenses almost increased by 25%. Now, where has this employee expense increase mostly gone to? Is it on the sales force side or on the manufacturing side employees? Just trying to understand what has caused this drastic increase, and then also what is the sustainable run rate. Now I don't know where are you seeing these numbers of increase of 25% and 30% over here. If I were to share with you my employee expenses, which would include the job work and other charges which are shown in other expenses. This has historically been ±0.5%, ±0.5, so ± 21% is what we see if I were to take up all the job work charges, et cetera. Thank you. If I were to talk only of employee, which you are seeing over there, which is been in the range of 16.5%- 17.5%, that's the maximum range which we see. Okay. What I meant was that between FY 2025 when we had INR 171 crore in employee expenses, and then in FY 2026, we had INR 214 crore in employee benefit expenses. Right. Almost a 25%. If you see the percentage to the employee expense as a percentage to the revenue, you will get a stable number which is going around. Yeah. But, sir, if we have- It will always be between. Yes, sorry. Yes. What I was saying was if we have to see operating leverage play out, sir, so at some point of time, some of these expenses have to remain constant or not increase in proportion to our revenue. That is where- You are right. Also, if you see that over the last two years, we have forayed into major expansion, and the new categories which we have got into, the new segments, which is creative and steel bottles, also require a lot of focus there. Also- The employee expenses. Yeah, sorry. Yeah. The question is, was it more on the sales side that we had to increase our headcount, or is it on the manufacturing side? It is both. Manufacturing also, since we have increased our manufacturing capacities, we have increased our headcounts in factories, and as well as sales side also, we have increased around 250 people in sales in last two years. Okay. This current run rate of INR 55 crore, is that going to stabilize now or we are expecting more? No, it is more or less stabilized now. We are anyways working towards having economies of scale and which will impact our lower growth in the employee expenses. This is all said and done that this is what we feel today, but tomorrow, if we go for another expansion or another segment which we get into, obviously the numbers will change. The range has always been between 16.7% to 17.5%. That is the range of the percentage of employee expenses over revenue. Okay. And sir, on the Valsad operationalization, has there been some delays? Because from the last two quarters we've been saying it will operationalize. But now I think you mentioned that only the building has been capitalized and will probably start operational. No, this quarter we will have it completely. By end of this quarter, it will be completely operationalized. So when we say it's going to be commissioned, 100% commissioning is what we are talking about. But as we discussed earlier also, there was a little delay, but not so much that These are normal delays which you see in having the building and stuff. Okay. Thank you, sir. Thank you and all the best. Thanks. Thank you. The next question is on the line of Saloni from ValueQuest- Investment Advisors. Please proceed. Hello. Hi, am I audible? Hello. Yeah. Yes. I only have one question, and that is, out of the current creative and the steel bottle revenue that we are generating, what would be the ratio of outsourced/created revenue and the in-house one? You mean to say the revenue mix of creating an in-house capacity? Right. Yeah. It remains broadly similar. It's about 75%-80% is our in-house capacity, and balance 20% is what we outsource it. Thank you. Due to time constraint, that was the last question. I now hand the conference over to the management for the closing comments. Over to you, sir. Thanks. Thank you everyone for taking time out for this conference call today. If you have any queries, please feel free to contact our IR team, MUFG Intime India Private Limited. Thank you all, and have a good day. Thank you. On behalf of MUFG Intime, that concludes this conference. 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