Good day, and welcome to the Relaxo Footwears Limited Q2 and H1 FY 2023 Earnings Conference Call, hosted by Motilal Oswal Financial Services. 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 conference is being recorded. I now hand the conference over to Mr. Aliasgar Shakir from Motilal Oswal Financial Services. Thank you, and over to you, sir. Yeah, thank you so much. Good evening, everyone. On behalf of Motilal Oswal Securities, very happy to introduce the senior management of Relaxo Footwears for our Q2 and H1 FY 2023 Earnings Conference Call. Welcome all to this call. From the management we have with us today Mr. Ramesh Kumar Dua, Managing Director, Mr. Gaurav Dua, Whole-time Director, Mr. Ritesh Dua, Executive Vice President, Mr. Sushil Batra, Executive Director, and Mr. Vikas Tak, Company Secretary. I'll hand over the call to the management for opening remarks, and then we can open the floor for questions. To you, sir. Thank you, Ali. Good afternoon, ladies and gentlemen. Thank you for joining the Q2 and H1 FY 2023 earnings call of Relaxo Footwears Limited. We have already uploaded our earnings press release and presentation at the exchanges, and we hope you have got an opportunity to review them. Before we open the floor for question anwer session, I would like to take you through an overview of the numbers of Q2 and H1 FY 2023. During Q2 FY 2023, the company reported total revenue of INR 670 crore as compared to INR 714 crore in Q2 FY 2022, registering a decline of 6.3% year-on-year. The performance remained subdued mainly on account of fall in volumes in Q2 FY 2023 in the categories serving the masses. With consumers facing inflationary pressures affecting affordability, there has been a shift in consumer habits as they move towards cheaper alternative at the cost of quality. This prompted the company to take an aggressive price correction in September 2022 to remain competitive in the current market. This price specialization approach has been welcomed by distributor and customer, which would help us clear high cost inventory in the coming quarter and ultimately improve our volume number going ahead. EBITDA in Q2 FY 2023 was at INR 59 crore as compared to INR 117 crore in Q2 FY 2022. This weak growth in EBITDA was mainly due to steep increase in raw material prices. EBITDA margin during the Q2 FY 2023 was at 8.9%, declined by 748 basis points year-on-year. The profit after tax was at INR 22 crore in Q2 FY 2023 as compared to INR 69 crore in Q2 FY 2022. Moving to our H1 FY 2023 performance, the total revenue was at INR 1,337 crores and grew by 10.3% year-on-year as compared to INR 1,212 crore in H1 FY 2022. EBITDA was at INR 146 crore from INR 183 crore in H1 FY 2022. The company reported a profit after tax of INR 61 crore in H1 FY 2023 as compared to INR 100 crore in H1 FY 2022. With strong fundamentals complemented by a wide distribution reach, strong brand recall, and better sourcing capability, we are optimistic about overcoming this tough phase and focus on delivering steady revenue growth in both domestic and export markets going forward. Thank you. Now we can open the floor for questions. Thank you. Ladies and gentlemen, we will now begin with the question and answer session. Anyone wishing to ask a question, may please press star and one on your touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is on the line of Gaurav Jogani from Axis Capital. Please go ahead. Thank you for the opportunity, sir. My first question is with regards to the sharp volume decline that we have seen, and you know, you have also mentioned that you have taken aggressive price cut in September 2022. One, if you can highlight what is the quantum of the price cut that you have taken, and how much of that has impacted the initial volumes? Because, you know, we understand that your distributors would have de-stocked initially, and because of which also there will be some volume impact. Yes. I'm Ramesh Kumar Dua this side. Just in the background, I want to tell you a few things. You know the main cause of our price increase in the past, for 1.5 year, has been some of the raw material polymers like EVA, PVC, polypropylene. They started gradually rising and kept on rising to an extent, the thing which we are getting INR 120 per kg, reached INR 300 per kg. It started falling also, and it came down to INR 160. In such a kind of volatile situation where our company has to maintain a long supply chain because materials are imported, it has to be at least 6 months supply chain. When the things rise, then it is beneficial for the entire trade company and our customers. When there is a sudden fall, which historically at least I have never witnessed such a fall from INR 300 the thing become INR 160, and local market becoming cheaper than the international market at which we got. Our way of pricing the products has been based on our costing. Now during this period when the local raw material prices became lower than our cost prices, the local industry or other people who are always sourcing their material from local sources, they became competitive. Also the affordability of the mass segment that has been affected because of inflation all around. As a result, for our mass customers, they started shifting to cheaper products. Never mind the quality, whether it lasts two months or three months, they are not bothered. They just want to while away this difficult period which they are facing for inflation. You know, when the prices were rising gradually we are forced to revise the prices upward. When the raw material started falling or it became cheaper to the competition, they reacted very fast. As far as our company concerned, which has a long supply chain, we took our own time. Meanwhile, because of unaffordability of our article to the masses, they went for cheaper alternatives. So that started affecting our sales. Now in the month of September, we have made some price correction so that we are competitive in the market. Never mind it will affect our bottom line, but to be in the market have volume sale that has become very, that is a kind of a cautious call to maintain our market share in the market. So that has been the reason. Otherwise, if I want to tell you the gravity of the thing, EVA polymer we are consuming around 1,000 tons per month. That is in a year, 12,000 tons. The material of this, which was INR 120/kg in 2021. Sorry, 2022. Last year for the year it became average INR 210. INR 100/kg. You can see a difference. INR 100/kg, 12,000 tons, INR 120 crore of revenue for a single material. Even in this another six months this year also our average has been 240. This is the magnitude of the aggressive. This thing which we say average is 240, but in local it will be 160, so they became more competitive. Sure, sir. Took this aggressive step to be competitive. In the coming months, you know, although things are not still stabilized, the INR 160 which was costing locally now it has become INR 200. Things are very volatile. We are keeping an eye on the market and we will keep on taking timely corrections, keeping in view how the other markets are reacting. That's it. Sure. Just to follow up on this one. One, what is the magnitude of price cut that you have taken in September? Second thing, sir, now because you are saying now the local markets again that price has become INR 200 per kg and, you might be having some inventory because of this. Now does that place you better, versus the competition because you have some, earlier inventory also with you? Yeah, no. Generally our supply chain is around six months. Cut is around 20%. 15%-20%. The price correction has been around 15%-20%. Our main segment that is affected is Hawaii and EVA segment. Other PU related footwear and sports shoe that is not affected. That has grown also and it's okay also. It's only where EVA polymer is being consumed. They are in our Bahamas brand, Relaxo and also Flite EVA category. There our company has, I mean, suffered because of this volatility. The volatility earlier we were able to say, "Okay, next year what will be the price of this material?" We were able to predict. Now our purchase department is not able to tell with guarantee what is going to be the price next quarter. Such is the kind of volatility and instability. Under such volatile chaotic conditions, things have become quite challenging. Now we are keeping a close watch on the market and taking timely correction, not based on our costing, but based on market conditions. Sure, sir. One last question from my end. Sir, what would be, I mean, you know what we are seeing a dichotomy, you know, in terms of consumption in footwear at least is, you know, that the premium and the mid-premium segment continues to grow well. You know, I mean, you have highlighted that, you know, for you the Sparx and the sports shoes, you know, are relatively unimpacted. According to you, what is driving this difference, you know, wherein the sports shoes and the higher segment is growing, but, you know, people are not able to afford the lower end of the segment? Well, you all know richer are becoming richer and poorer are becoming poorer. This mass segment, its affordability has been affected, and that was our quite a big share of business. Plus rural market in India, they are really suffering. If you read The Economist and today also even Hindustan Unilever were facing heat because a lot of inflation in rural market. The purchasing power in rural market is more affected than urban India. Oh, sure. Sir, anything that you are doing, you know, in terms of, you know, cater to that, the demand that is shifting towards a bit, I would say, to the premium and the mid-premium segment. What is the company's, you know, efforts on the same and how the company is looking to, make more from it? We are focusing on our other categories which are doing well. Sorry to interrupt, members of the management team. Sir, there's a lot of disturbance from your line. From our line? Yes, sir. Just hold on. Let us check. Thank you. Is it better now? No, sir, it's still the same. The audio is cracking actually. Is it better now? Sir, no, it's still the same. What I'll do is I'll just disconnect and I'll reconnect you. No problem. Ladies and gentlemen, please stay connected while we reconnect the management team. Ladies and gentlemen, thank you for patiently holding. We now have the lines of the management reconnected. Over to you, sir. Yeah, I think I have concluded. Now we can go for next question. Thank you. The next question is from the line of Bharat Chhoda from ICICI Securities Limited. Please go ahead. Yeah, thanks for the opportunity, sir. Our cost of goods sold per pair has been around INR 60-INR 65 over the last few quarters or so. Then probably this quarter it has gone to INR 88 per pair. In the ensuing quarters, do you see like in Q3, Q4 that could come down to between INR 75-INR 80 or even lesser than that? Do you see that possibility? Yeah, you know, although raw material conditions are quite volatile, but you know, we have long supply chain, and we have a lot of goods purchased at higher prices of the last year also, we are carrying inventory. You know, in this quarter, that is October to December, I think all that old inventory will be flushed out. January, February, March, there our cost of production will be definitely low and things will be better. Probably from Q4 onwards we would see normal gross margin kind of things returning? Things will start improving, top line will start improving, but at the same time, we have to keep ourselves, what you call it, competitive and relevant as per the market. You know, we have to also be very watchful. What is affordability of the mass segment? Accordingly, we have to take corrective action timely. This high cost inventory will be there for one more quarter, at least? Yeah, at least. This quarter it will be fleshed out. Okay. By November or maybe December by all means. Okay. Sir, our raw material prices, what was the peak level that was there and from a percentage increase on a YOY basis, and from there how much it has fallen down right now? If you could, give a benchmark on that. Yeah, yeah. You know, a thing which was INR 120. Mm-hmm. It gone up to INR 300. Okay. Now it has become 200. That is the kind of volatility you can understand. Oh, okay. Thank you. We're consuming 1,000 tons a month. Just understand. Yeah, yeah. Consuming 1,000 tons a month, you can understand the volatility and the effect. Mm-hmm. Okay. Sir, how is this higher end segment doing? Like, you said it is growth in that. What kind of growth are we witnessing in the shoe segment or something? Any color you can provide on that? Yeah. Gaurav will tell regarding sales figures of. In shoe division, our growth in last six months is around 30%. There's a healthy growth coming in shoe division, which is sports shoes and, you know, sports sandals. That has grown well, but open footwear, which is Hawaii, that has degrown. What is the quantum of degrowth over there? Hawaii. That is also around 20%. This you are speaking in terms of volume, sir? Value. Okay, sir. Thanks a lot for answering my question. Thank you, sir. Okay. Thank you. The next question is from the line of Naysar Parikh from Native Capital. Please go ahead. Yeah, hi. Thank you for the opportunity. My question is, I think in continuation to what you know was being asked earlier. Is if you can just break up your volume or revenue and just give us some directional view in terms of how is the performance of some of the lower end categories or price points versus some higher end categories? You know, yeah. Gaurav. Actually, the out of home category, which is sports shoes, formal slippers, that has grown well and indoor like, you know, we have Hawaii and Flite EVA, that has degrown. Now after lockdown there has been a shift. People are going for more premium out of home categories. That is growing well. In Hawaii segment we are feeling the heat. Facing the heat, yeah. Out of home would be what percentage of your revenue? See, in out of home also, like we have Flite category in which we have EVA and PU. PU is more than 50%. That is growing more. If you say open footwear, but if you add Sparx is also giving more than 41% contribution to our total business. That is growing at around 30%. Okay. What would be the average selling price for the Sparx category and the shoes category? Sports shoe, every category is different. Like sports shoe has around 800+ INR ASP and sandal is around 500+ INR ASP. My second question is just in terms of, you know, your price and margins. Given the recent, you know, give some directional view on, you know, how do you see the price carrying out and how should we see margins impact? Your voice is not clear. Mr. Parekh, your audio is breaking up. Yeah. Sorry. Is this better? My question was on pricing and margins. Sir, can we request that you use the handset mode while speaking? Your audio is not coming clearly to us. Yes, sorry. I use this better. Sorry, am I audible? No sir. It's still the same. Okay. Never mind. Thank you, sir. Thank you. The next question is on the line of Priyam Khimawat from ASK Investment Managers. Please go ahead. Yeah. Hi sir. Just wanted to understand, you alluded that price of EVA has moved from INR 120 to INR 300 per kg and then again falling back to INR 200 per kg. What percentage of raw material is this for us? What you want to know, consumption of the material? Breakdown of a raw material in terms of what percentage of raw material is this component? Well, you know, that is defined in category Y, you will not be able to make anything out of it. I just told you our total consumption of this polymer is around 1,000 tons a month. The volatility has been INR 120-300 and then INR 300-200. How much? Awesome. 20% is the consumption of EVA in the total cost of the materials. Okay. If you could give some color on what are the other component in our raw material? Yeah. There are so many other materials we have reviewed. The EVA is there, PVC is there. These are the major polymer. Natural rubber is there, EPDM is there. You know, there are host of so many materials. The main reason has been too much fluctuation on these three core key materials EVA, PVC, low-density polyethylene, and some natural rubber. That's all. Okay, sir. That helps. Sir, you alluded to a six-month supply chain cycle and most of the raw material imported. Now that we've seen that this raw material can be so highly volatile, anything we're doing to reduce this import component and reducing the supply chain? No, you know, we can't depend upon local sources, otherwise our factories will not be able to run. Local source availability is only meant for small manufacture, small. If you go to the market, the total rate will out of control locally because our 1,000 ton nobody can match. We have to maintain this kind of supply chain so that there is no disruption in the manufacturing process. It is only this is one time in a life phenomenon these things have fallen. Otherwise, it has always kept our company in a very healthy position. Understood. It has been beneficial. Got it. Sir, did I hear it right that Sparx is currently at 41% revenue contribution and it is growing at around 30% for us? Right. Despite that 41% component growing at 30%, our sales have declined around 7% this quarter. The other part, which is 60%, has declined that steeply. You're right. There is a factor, you know, the Hawaii factor, the EVA factor, what we are doing in Hawaii and Flite, that has de-grown a lot. Whatever gains we are getting from shoe division is getting nullified, so that's why the 10% growth is coming. In this quarter, it was not that also. Because of too much rains and, you know, the market was not responding. Understood. Sir, our ASP right now is trending at around INR 169. Can you give us, because 41% is Sparx, you alluded to an 800 ASP and 500 ASP for sports shoes and sandals, respectively. We need to correct that. That's INR 800, that's if you take as a Sparx, we have INR 437 as ASP. INR 450, you can say. INR 450. It has, yes, INR 450 rupee. Okay. All categories put in Sparx. Understood. Going ahead, should we assume that since Sparx is growing at such a high pace, our ASP structurally will move towards INR 200-INR 250 in the coming years? It will be increasing, but by how much we have to see. ASP will increase. Okay, sir. Okay. Got it, sir. That's all from my side. Thanks. Thank you. The next question is from the line of Harsha from InCred. Please go ahead. Yeah. Hi. Thank you so much, sir. So my question is, we have made a press release where we have stated that we have canceled some 15,000 stock options under our ESOP plan to five employees because of their resignation. Just wanted to inquire, are these senior, mid-senior level exits and when have they kind of resigned? Is it a near term or a kind of in that perspective, sir? I mean. Many. We give the ESOP to our AGM and above. There are 110 people in that category. Out of these, five people have left the company, and one was retirement case. These are the mid-level senior mid-level, you can say, and they have left. Okay. The company, you can say. This is basically, I mean, exit by retirement? Some retirement and some people left voluntary at their end. Okay. Thank you for clarifying that. Secondly, sir, what is our current capacity of Sparx, and what will be our capacity of Sparx in next two years? Currently it is around 50,000 pairs a day of this Sparx, which we are increasing the production to 100,000 pairs a day. Okay. That will be, I mean, operationalized by what time, sir, approximately? April onwards. Next April onwards. Okay. We should be able to double our capacity in next six months, basically. Correct. Okay. Sir, then what would be our CapEx outlay for FY 2023? FY 2023 our CapEx will be around INR 120-INR 140 because we have already placed the order. It is in pipeline and we have added some back-end operations also, and including all these molds and so many other expenses on building part. It will be in the range of INR 140, you can say, FY 2023. Okay. Thank you so much. Thank you. The next question is from the line of Aliasgar Shakir. Please go ahead. Yeah, thanks a lot, sir. A couple of questions. First is on your sportswear. If my understanding is correct, out of about 20% of closed footwear, about 50% is sports and athleisure, right? Which should be somewhere about ballpark around INR 250 crore odd. So just wanted to understand, you know, I mean, what are our plans there, you know, few of the recently listed companies, and in fact, you know, overall market also a lot of smaller players have, you know, rapidly grown in the recent past. So what are our plans here? I think we've recently also added capacity in the sportswear. You know, how do we plan to grow this business over the next probably three years, if you could share your insights. This sports shoe segment, you know, this is divided into online sale and distributor sale, the channel sale. In both channel we are seeing a good demand coming from the market, and that's why we have added the capacity there only. We are adding more designs every year. Like, you know, this year also we have added a lot of designs and giving a lot of trust to, you know, a placement of products in the market. We are expecting a good growth also coming from this Sparx segment, especially sports shoes. Could you share what is our plan over three-year, if you could share some number, what kind of growth we can expect here, given that, you know, I mean, there are players who have reached upwards of INR 1,500 crores kind of revenue, and we certainly have a very deep distribution reach. We should be able to use our existing distributor reach or does sportswear require a different reach and therefore it should be a very slow growth business. No, this won't be a slow growth. We are growing at 30% and we continue to grow more than 30% year-on-year in this category. The demand will come from both channels, online, offline, both. Understood. Is the number that I shared about INR 50 crore to INR 50-odd crore for the Sparx sportswear number correct? Or is my understanding- That is only typical sports shoes, which we did last year, 250. Definitely we'll grow here from here. Yeah. Understood. This second question is on, you know, the inventory situation. Given the fact that you have taken price cuts, you would obviously have a lot of inventory yet in the system, which is at a higher price point. You know, by when do you expect that inventory to get unwind and, you know, then you should only have, you know, one price point or lower price point inventory available in the market. At company level, I think by December end, we'll be able to clear almost all the inventory of old prices. It will go to the retail end, you know. That will take 1-2 months more. At the retail. At the retail level. It's a long supply chain. You know, company can get over quickly, but at retail and distributor level, it'll take time, maybe 2-3 months more. By March, I think, it will be everywhere in the new prices. Got it. So far, whatever is the current price point, we should be able to normalize our inventory by probably March. Yes. Unless we see some more volatility. Correct. From company point of view, by December we'll be clear. Got it. This is very helpful, sir. Thank you so much. I'll come back in the queue. Thank you. We'll move on to the next question that is on the line of Ankit Kedia from Phillip Capital. Please go ahead. The price cuts of 15%-20%, which you alluded in the open footwear category, is it in line with the, you know, the raw material price deflation, what we have seen? Or the price cuts are more towards volume protection and not towards RM, you know, fall, which you have seen from average perspective. You know, price, this revision has been taken keeping in view the local market conditions, affordability of the consumer and what is the competitive environment. To be competitive, we have brought these prices, and we have to, always remain competitive in the market. That is what we have done. Is it fair to assume that the price cut is more than the RM deflation, which we have seen in the market, and hence the gross margins could bleed actually because of this? You know, this gross margin will be under pressure till December. I think we'll start looking up in January onwards. One thing I must tell you, the raw material situation is very volatile. You can't even predict in January, February, March at what rate we'll be buying. Based on whatever we have in supply chain and what we are making current buying arrangements from international suppliers, we are able to tell today. Let me put it the other way. If the RM increases, we will continue to maintain our prices to gain volumes and not increase our prices further. Is that the thinking? That is a very strategic viewpoint you are raising. We have to watch the market condition at the same time. Whatever is the market environment, accordingly we have to respond. Sure. My next question is, you know, on your sports footwear. From the current, you know, MBO retail network, how much is for the closed sports footwear? If you can share that and over the next two years, because we are expanding capacity, how much is, you know, coming predominantly for online? Are we going to have a differential product like some of our competitors have for online, where we will focus more or it's going to be fungible between online, offline as the demand comes in? Currently, we have same portfolio, but going forward, we'll have different portfolio, you know, especially SMUs for e-commerce and different products for the offline. Because we want to control the pricing. There's a lot of sometimes, you know, price war, one channel giving more discount than what we have heard in, you know, this Big Billion Days. We are going to change our strategy and making SMUs for online channel. Sir, how many exclusive MBOs do we have for Sparx out of the 60,000 retailer network which we have? Oh, sir. You're talking about wholesale or you're talking our own retail outlets? Oh, no, sir. Wholesale, sir. Wholesale. See, what we have, we are going currently to 60,000, 50,000-60,000 outlets. We have a data of 90,000 outlets. In that 10,000 outlets we are covering through Sparx. Over next three years, what is the target? What is the potential for Sparx for these outlets you feel, given that open footwear will obviously be more? How do you plan to target the South and West market for Sparx? Sparx does well in South and West. All right. Already we are doing good in the south and west. Now we have to do good in east and north. Other way around. This 10,000 outlets definitely will increase to 15,000-18,000 outlets in next 3-4 years. Sir, one last question on the online side. Today online, you know, last year was around 12% of your revenues. What is the target given that the strategy is gonna be more focused on online over the next two years, predominantly for the closed footwear contributions from online? See, 12% is all brands put together, but if you take Sparx, it will be more than 20%-25%. Over the next two years, sir, what is the target, given that you'll spend more on online? Definitely our this 12% contribution will increase to roughly around 15% in two to three years' time. This 25% will also increase with Sparx we are doing. Sure. That's helpful, sir. Thank you so much, and all the best. Thank you. The next question is from the line of Mithun Soni from GeeCee Investments. Please go ahead. Thanks for the opportunity. I just wanted some clarifications. How much of our revenue comes from the EVA-based product? Because that's where, from what we understand, is where the maximum pressure has come because of the long supply chain. Around 50%. 50 to 60. Fifty. Fifty to sixty. Fifty. PU based. No, EVA. EVA-based products. EVA consumption is around 50%-60%. Out of the 50%-60%, how many of this business will be like where we'll be at a reasonably priced product like Hawaii of the world and where it is at the mass segment? Because that is where you would have faced the most of the pressure in the Hawaii or you have faced the pricing pressure even in the Hawaii category. We have faced this pricing pressure, this Hawaii, which comes under brand Relaxo and Bahamas, and also EVA coming under Flite brand. In these two categories we have faced this problem. The price correction 15% has been taken across the entire portfolio of 50% or 60% of the EVA products. No. Yeah. EVA and Hawaii segment, we have done the correction. PU and sports shoe, we have not done any correction. For 50% of the products, of the total sales, say 50%, which is that we have taken the correction. For the PU wear and sports and Sparx, we have not taken any price correction. Yeah. One more very important element we are missing is that GST has increased from 5%-12%. Correct. Mm-hmm. That also has impacted a lot. Okay. In this lower segment, you know, 5-12, that has also impacted. Raw material plus GST. Correct. Correct. Second thing, you know, like, as one of the participants asked, you know, that there is a clear shift what we are seeing that the premium, semi-premium has been doing well, and versus the mass segment has been facing the pressure and there is a market which is moving over there. So what are the things we are doing to promote and to expand the share of the semi-premium and the premium category for us? We are increasing the capacity of, what you call it, our sports shoe manufacturing capacity. We are doubling up the capacity. We are also focusing on online sale. You know, online sale is maximum of premium and these segments only, not slippers or lower price articles. That is what we are doing. How would you say Hawaii, how are they priced, Hawaii? They are also priced at the semi-premium or even they are also priced at the mass pricing? Hawaii is meant for mass segment. Okay. 50% of our business comes from the premium and semi-premium segment is the way to look at it. Yeah, almost. Given that we have our own 400 store outlet distribution, any plans on that front? Like, what are the things we are looking to do over there to promote our products in the premium category? Well, our retail outlets, especially, they are doing well, and we are trying to see if need be, we'll do the expansion on that front. Okay. You're looking to do expansion in that front, I understand. We are watching how much business we can expect. After all, you know, retail is contributing to around 8% of the business. Mm. Strategically, our idea of putting a retail outlet has been to showcase all of our products. Correct. So that we understand what is the consumer behavior, and then we spread across multi-brand outlets. It is not the main. It is just 8%-10% of the business. Correct. Okay, thank you very much, sir. Thank you. The next question is from the line of Divya [uncertain] from Trident Capital. Please go ahead. Yeah. Thank you for taking my question, sir. I wanted to understand what would be the break-up of open footwear and closed footwear in our revenue for this six months. It is same like what it was last year. It's around 80% open and 20% closed. Okay. Sparx would be a part of the closed footwear or some part of it will also be open? Yeah, it has both. It has open and closed both. Open is sandals and closed is sports shoes. Okay, fine. In terms of our price release, we have mentioned that since we have taken the price cut, you know, it has been welcomed by trade and consumers. Are we seeing some kind of volume uptick till now in Q3? Like, have you seen after taking price cut in September, has there been some increase in volume on the Hawaii side? Yeah, it has. It is helping. It is happening. In the month of November, it will be much better. Because there is old inventory also in the system, it will take some time, but things are very promising. Okay. In terms of volume, for next quarter also, we can assume that 80-20 would be the breakup of open and closed? Yes. Yes. Yes. Okay. That's it from my side. Thank you. Thank you. The next question is from the line of Harish from Oculus. Please go ahead. Hello. Yeah, hi, sir. Traditionally, we have been strong in the northern and the eastern market. However, in the Sparx category, we are just starting in the northern and eastern market. Are we facing some headwinds in these two markets? No. Can you repeat the question? Hello. Yes, sir. Traditionally, Relaxo has been very strong in the northern and the eastern market. However, in the Sparx sports shoes category, we are just starting off. I mean, majorly our revenue is coming from the south and the western market. What are the specific headwinds that we have faced in these two markets? I mean, why are we not big even right now in the northern and the eastern market in Sparx sports shoes? North also, you know, we are focusing and, you know, north is a little more competitive market than south and west. All manufacturing base of footwear is this side. In north, west and south, there were no, you know, manufacturing bases of sports shoes and all that. We got an easy entry into that market. Here it is, in the north side, the competitive environment is more competitive. We are focusing and, I think things will be improving here also. Okay. Thank you. Thank you. The next question is from the line of Akhil Parekh from Centrum Broking. Please go ahead. Yeah. Thanks for the opportunity. My first question is, would you be able to quantify how much of the EBITDA margin erosion in first half of the year is because of the inventory losses? I mean, there is no, I think, effect of inventory on the EBITDA margin. It's mainly raw material prices that is hitting. Otherwise, generally, we never sell any goods below cost. It has never happened. Whenever we either decrease the prices, but it is never below the cost. The effect upon EBITDA is mainly due to the raw material prices. Okay, got it. Sir, second question is on the price hike we took last year. I need to interrupt. Sir, we are not able to hear you clearly. Just one second. Is it better now? Yeah. All right. The price hikes we took last year, right? The channel feedback was suggesting that, you know, some of our bigger competitors have not taken the hikes in quantum to what Relaxo took. Has the shift happened from Relaxo to the other big competitors, or have they gone largely to the unbranded segment? It is mostly unbranded who are offering cheaper products, cheaper quality. Since the affordability of the consumer had gone down, so for the time being, they shifted because their affordability was not there. That was one of the reasons. Okay. We have not lost market share to any of our bigger competitors, right? Would that be a fair understanding? No, no. Not at all. Okay. Sir, third and last question is on the volume front. If I look at volume from FY 2019 and probably for next year as well, broadly, they have stagnated at around 17-19 crores. Is there any saturation which we are seeing in terms of a volume growth? Because the volume growth is kind of missing. I understand the pandemic was there, but which has been actually good for us. If I look at last five years trend, FY 2019 to say 2022, 2023 as well, the volumes are by and large muted. So anything if you can highlight on that. Yeah, you know, when people were not moving around, outdoor footwear was really totally stagnant or lowest. These kind of footwear people were, I mean, indoor footwear, these kind of things were more. You know, in the lockdown, there were a lot of people who were out walking, going to villages and so all of a sudden, too much demand had emerged. That was one of the reasons. Now things will. I don't say maybe this year things may stagnant, but next year again we will have growth. Like peak volumes we did in FY 2021, which is around 90-odd crore. Would it be fair to say we will probably cross that number in FY 2024, that is next year? I hope so. Okay, sir. Got it. That's all from my side. Best wishes for coming quarters. Thank you. The next question is from the line of Viraj from Banyan Tree Advisors. Please go ahead. Viraj, your line is unmuted. Please go ahead. As there's no response from the current participant, we'll move on to the next. That is on the line of Anush Mokashi from Yadnya Academy Private Limited. Please go ahead. Yeah. My question is around the EBOs. Basically what we are looking at is there is a decline in the EBOs. Those were 390 as of March 2021. Those have declined to 388 as of Q2. Can you please help us understand the reasons behind that. No, we generally are maintaining at 400. Sometimes few stores which are not doing well, then we rationalize and then we put new outlets, stores. Can you share any guidance on the EBU cash, maybe over the years? Sorry to interrupt, sir. Your voice is breaking up, Mr. Mokashi. Am I audible? Hello? Sir, your audio is breaking up. Is it fine now? Hello? Sir, slightly better. Please go ahead. Can you share any guidance on any EBO target over the next few years? How much are we looking at? No. We are presently maintaining around 400. That is what we like to have this year, 400. Okay. Essentially, do we have any plans to go international with these EBOs opening up, any guidance on that? No, we are already exporting. Our share of export is around how much? I think 4%. 4%. Me opening up, maybe Sparx EBO. No, no. Internationally, we are not opening any our EBOs. It is only domestic that we have exclusive our brand outlets. As a test marketing, what we are doing is we are opening the stores in few countries through our distributors. Just to check the consumer taste there of our style what we are promoting here. That we are doing in few countries, and eventually we will take a call how to go about it. Okay. Just wanted to confirm lastly, probably the EBO margins at the distributor level are much higher than the retailers' or MBOs we have. Am I- Sir, your voice is not very clear. You have to repeat it. Sorry. Apologies. I'm assuming that EBO margins are much higher than the MBOs or the retail outlets we have. Am I right in my assumption? You mean multi-brand outlets? Yes. The exclusive brand outlets. What you say? MBOs. The retailers. How many number of you want to know? No, no. My question is around the margins. Basically, the margins to which we get at the EBO level, the distributor margins, those are much higher in EBOs compared to the MBOs. No, EBOs definitely margins are higher, but because you have to do so many expenses, rental, staff and so many things. MBOs is a different model. They have their own shop or just proprietary running the shop. We give margin around 30% to the MBOs, and then they pass on some discount and they are earning around 25%-30%. That is more profitable. But in case of EBO, yes, definitely margins are high, but expenses are also high. Oh, okay. Okay, sure. Thank you. Thank you so much. That's it from. Thank you so much. Thank you. The next question is from the line of Manish Poddar from Motilal Oswal AMC. Please go ahead. Yeah. Hi. Hi, sir. Thanks for doing the call. A couple of questions. First is, what is the total CapEx for FY 2024 and 2025? 24, 25, say we have been, I think, spending around INR 80-100 crore every year. This year, FY 2023, we have planned around INR 140. 24 and 25 it should be around INR 80-100. It's an ongoing CapEx. We have always to expand. Okay. Okay, and in terms of, you know, just on this, when you say you've not lost market share, how do you get a gauge on that? Sorry, we have not lost the market share. Next. What you were saying? You mentioned on the call that you have not lost market share. Mm-hmm. I'm just trying to understand, how do you get a gauge on that? You know, do you track shelf space? How do you get a sense of that? Just trying to get a handle on that. We have our sales officers. You know, we have more than 300 sales officers visiting 50,000 outlets. We keep track of the primary sales, the secondary sales, the shelf space, and what we are seeing, the volume degrowth in Hawaii and EVA category. That clearly indicates that the shelf isn't taken by unorganized, you know, unorganized players. Now we are getting back. Now we are getting back, yes, definitely, after taking price correction. Just one last one. Is the demand environment at the bottom of the pyramid really that bad? Because when you look at a couple of data points, let's say, you know, price increase taken by, you know, mobile players or, you know, you look at a couple of online players in apparel, you know, doing really well. You know, somehow that thing doesn't add up. I'm just trying- Yeah, because if you just read today's newspaper, The Economic Times, clearly mentioned rural India big pressure by Hindustan Unilever, ITC, all. Rural India is really under pressure there because of inflationary pressure, and urban India is doing very well. That you can easily see that. All urban brands, urban consumption is there in mobiles or in automobiles. Rural India, we are seeing a sharp decline in consumption also. Okay, fair enough. Thank you. Thank you. The next question is from the line of Abhishek, an investor. Please go ahead. Thank you for the opportunity. I have a couple of questions. My first question is around, as you mentioned the opening remark, right, that the EVA prices in the domestic markets are around INR 200 per kg now. Does it mean that now there's an even playing ground for us and the other unorganized players? Yes, now it is better because now, after taking price correction, we are at same level because we are buying at INR 200 and they're also buying at INR 200. Right. Are there any further price cuts expected by us? No, no. No, I don't think so. Okay, got it. My next question would be around the Sparx brand. Is there any competition from the organized sector, you know, from other listed or other main, like, large players in this sector, in this brand or this Sparx brand? Yes, there are a lot of organized players and there is a competition, no doubt about it. We have a different market, different product portfolio, and the athleisure demand overall is increasing for every brand. Because the consumer trend is shifting towards fitness, lifestyle, health, you know. Demand of athleisure footwear is going up. For the industry itself is growing up. That is why we are doubling up the capacity. Yeah. Got it. My next question would be around the contribution of Sparx brand from its open footwear and from closed footwear. Is the open footwear competition, like, its sandals much higher compared to shoes? No, it is, the competition is both levels, sandals and shoes. It is not that competition is less in shoes or sandals. It's athleisure category. It's growing category and the market is growing. Got it. Okay, thank you. Thank you. The next question is from the line of Tejas Shah from Spark Capital. Please go ahead. Hi. Thanks for the opportunity. Just one question from my side. Yeah. Usually we have seen that in a category where there is a large participation by unorganized sector, inflationary period is always beneficial for organized players because of the scale, ability to manage supply chain volatility and in procurement, planning, production. Understandably, they should have an upper hand versus unorganized players. In our case, it did not play out like that. Just wanted to understand, was it different in our case, or there were some more headwinds or unprecedented headwinds which did not allow us to capitalize on this opportunity? No. As long as things were rising, we were in a better position. It is only because there was a decline of the price of our main material from 300 to 160, which we consume 1,000 tons a month. At that time, local market availability of the material came down at INR 160-180. We have a long supply chain, which we are buying, our average price was INR 240 for the year. It was just a, I mean, this 3, 4 or 4-month period when they became advantageous because we have a long supply chain, they have a supply, a short supply chain. This is once in a life it happens, that prices go down and they become advantageous. It's a very rare phenomenon. It's just a matter of time. Otherwise, we cannot be dependent at all on local sources. We can't even source ours, our factory will come to a halt. To have uninterrupted no-disruption manufacturing process, we have to maintain this sufficient inventory in the pipeline. You know, during the lockdown period, even there was so much scarcity of material and even getting containers to ship the material became a challenge. That is why we took little abundant precaution and added a little more stocking also, just to avoid any manufacturing disruption. Fair point. Sir, just expanding that point, what percentage of your competition would be importing either raw material or finished goods from China, especially from unorganized? I can't comment on that. I can tell you about ourselves. Okay. No, I was asking about unorganized, not organized, but anyways, thanks. Unorganized, you know, their figures are not at all available to anybody. They pay GST to the government. I can't say anything. Fair point, sir. Fine. Thanks and all the best. Thank you. Ladies and gentlemen, due to time constraints, that was our last question. I now hand the conference over to the management for their closing comments. Thank you all for joining the call. This is all from our side. Looking forward to join you again. Thank you. Thank you. Ladies and gentlemen, on behalf of Motilal Oswal Financial Services Limited, I conclude this conference call. We thank you for joining us and you may now disconnect your lines. Thank you. Have a good day.