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Edited Transcript of TTKPRESTIG.NSE earnings conference call or presentation 30-Jan-20 9:30am GMT

Q3 2020 TTK Prestige Ltd Earnings Call

Feb 7, 2020 (Thomson StreetEvents) -- Edited Transcript of TTK Prestige Ltd earnings conference call or presentation Thursday, January 30, 2020 at 9:30:00am GMT

TEXT version of Transcript

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Corporate Participants

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* M. Chandru Kalro

TTK Prestige Limited - MD, CEO & Executive Director

* T. T. Jagannathan

TTK Prestige Limited - Non-Executive Chairman

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Conference Call Participants

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* Achal Lohade

JM Financial Institutional Securities Limited, Research Division - VP

* Amar Kalkundrikar

HDFC Asset Management Company Limited - Senior Equity Analyst

* Ashish Kanodia

AMBIT Capital Private Limited, Research Division - Research Analyst

* Avi Mehta

IIFL Research - Assistant VP & Lead Analyst of Consumer Discretionary

* Chirag Lodaya

Valuequest Investment Advisors Private Limited - Equity Analyst

* Janakiraman Rengaraju

Franklin Templeton Asset Management (India) Private Limited - Assistant VP, Senior Research Analyst – Equities and Portfolio Manager

* Manish Poddar

Nippon Life India Asset Management Limited - Investment Analyst

* Mohit Khanna

Future Generali India Life Insurance Company Limited - Sr. Manager of Equity Research

* Niket H. Shah

Motilal Oswal Asset Management Company Limited - VP & Associate Fund Manager

* Nirav Vasa

Anand Rathi Financial Services Limited, Research Division - Research Analyst

* Ravi Swaminathan

Spark Capital Advisors (India) Private Limited, Research Division - Assistant VP

* Rita Tahilramanil;Invesco Mutual Fund;Analyst

* Sonali Salgaonkar

Jefferies LLC, Research Division - Equity Analyst

* Sreemant Dudhoria

Unifi Capital Pvt. Ltd. - Manager

* Srinivas Seshadri;Mirabilis Investment Trust;Analyst

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Presentation

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Operator [1]

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Ladies and gentlemen, good day, and welcome to the TTK Prestige Limited Q3 FY '20 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. Ashish Kanodia from AMBIT Capital. Thank you, and over to you.

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Ashish Kanodia, AMBIT Capital Private Limited, Research Division - Research Analyst [2]

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Thank you, Stanford. Good afternoon, ladies and gentlemen. On behalf of AMBIT Capital, we welcome you all to our Q3 FY '20 Earnings Call of TTK Prestige Limited. We have with us Mr. T. T. Jagannathan, Chairman; Mr. Chandru Kalro, Managing Director; Mr. K. Shankaran, Director of Corporate Affairs; and Mr. V. Sundaresan, Chief Financial Officer of the company.

Now I will hand over the call to the management for their opening comments, post which we can enter to question and answer. Thank you, and over to you, sir.

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M. Chandru Kalro, TTK Prestige Limited - MD, CEO & Executive Director [3]

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Thank you, Ashish, and good afternoon to all and welcome to the conference. We started this quarter on the back of Q3 of last year, which had a huge base because we had grown by 23% last year against the previous year and also we knew that the fact that the value was shifted forward, which always has an impact on the overall sales. Aside of that, the fact that the economic conditions haven't been exactly very favorable, we've just managed to be a little flattish on the top line side and also on the bottom line side. The good news is, however, that we've managed to maintain the EBITDA profitability. And we're going as for plan in most areas while we're waiting for the economy to bounce back.

That's it, and over to anybody who has any questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) The first question is from the line of Avi Mehta from IIFL.

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Avi Mehta, IIFL Research - Assistant VP & Lead Analyst of Consumer Discretionary [2]

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Sir, I just wanted -- I just had a few questions, sir. First, you have highlighted that there's a volume growth that you've seen, the cookers category. In contrast, the headline value has seen a decline. Could you explain what is the reason for this very sharp mix deterioration versus what we saw in the second quarter?

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M. Chandru Kalro, TTK Prestige Limited - MD, CEO & Executive Director [3]

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We have been in a process of churning some of our models, and that has caused some of our higher-value models to go down, which will correct itself going forward.

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Avi Mehta, IIFL Research - Assistant VP & Lead Analyst of Consumer Discretionary [4]

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So it's discounting. Is that what you mean by...

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T. T. Jagannathan, TTK Prestige Limited - Non-Executive Chairman [5]

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No. No. No. We launched what you call Svachh, which we launched only in the aluminum variant. So what happened was that model was so successful that it ate into our stainless steel sale; now we've launched the stainless steel Svachh. So it will correct itself.

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Avi Mehta, IIFL Research - Assistant VP & Lead Analyst of Consumer Discretionary [6]

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Okay. Okay. Okay. And sir, given that you've also highlighted, you held back primary sales as you wanted to move out, you wanted to allow the trade to destock the old models.

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T. T. Jagannathan, TTK Prestige Limited - Non-Executive Chairman [7]

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Yes.

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Avi Mehta, IIFL Research - Assistant VP & Lead Analyst of Consumer Discretionary [8]

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Would that mean -- would that be fair then to argue that growth rates should bounce back very sharply as dealers restock in fourth quarter? And in that context, would -- how -- what are the targets that you would kind of still look at for the full -- for the year? Because...

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T. T. Jagannathan, TTK Prestige Limited - Non-Executive Chairman [9]

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In the cookery segment, we do believe that will happen, that the volumes will bounce back. But for the rest of segments, we have nothing dramatic. So we expect single-digit growth, upper level single-digit growth.

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Avi Mehta, IIFL Research - Assistant VP & Lead Analyst of Consumer Discretionary [10]

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This is for FY '20, sir, that you are -- you're arguing for fourth quarter, right?

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T. T. Jagannathan, TTK Prestige Limited - Non-Executive Chairman [11]

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For fourth quarter.

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M. Chandru Kalro, TTK Prestige Limited - MD, CEO & Executive Director [12]

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So Q4.

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Avi Mehta, IIFL Research - Assistant VP & Lead Analyst of Consumer Discretionary [13]

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And sir, lastly, sir, would you be able to share any update on how is -- what is happening in the modern trade now that you've kind of argued that you've diversified? Can you can share any color over there and what exactly is happening, update? Or how long do you expect this pain to play out; and similarly, on the rural side?

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M. Chandru Kalro, TTK Prestige Limited - MD, CEO & Executive Director [14]

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So we will -- actually, what has happened is we've used this as an opportunity to broad-base our customer base in the modern trade, which has happened very successfully this quarter -- this year.

The thing is that we are trying to avoid heavy discounting or any of these accounts where payments don't come in. We're trying to move that business out to other accounts, which are more predictable and more good for the company. So that is happening. Luckily for us, even the accounts, which we're not doing so well, are also counting back slowly, but surely, but that will take some time. And overall, I think in the modern format, we have gained place in terms of our presence. And also, the new accounts for the next year would be quite good for us.

On the rural side, we are looking at, again, broad-basing account, which we have done. And luckily for us, in the Q4, some of the old accounts which weren't performing, we are hoping will start performing. And we've seen those greenshoots in the January also.

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Operator [15]

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The next question is from the line of Ravi Swaminathan from Spark Capital.

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Ravi Swaminathan, Spark Capital Advisors (India) Private Limited, Research Division - Assistant VP [16]

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Regarding the revenue that we had lost from one of the large microfinance institution and some sale to players like Big Bazaar, et cetera. Do we see that coming back, say, next quarter or next year?

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M. Chandru Kalro, TTK Prestige Limited - MD, CEO & Executive Director [17]

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Some of it will come back in this quarter to -- in the rural segment, and I think we will now try and make sure that all modern format accounts are in such a way that we are fairly derisked. That's what -- that is our attempt so that we're not dependent on any one channel going forward as we go along. Because brand is very strong, we are able to place the product in almost all the formats. And I think going forward, it is best to be more broad-based than with one account.

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Ravi Swaminathan, Spark Capital Advisors (India) Private Limited, Research Division - Assistant VP [18]

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Got it, sir. And in certain markets like Tamil Nadu, so basically some of the regional players are getting aggressive in the market, as what we have been hearing. So what are your strategy to counter that? Any sense or idea on that?

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T. T. Jagannathan, TTK Prestige Limited - Non-Executive Chairman [19]

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Every other year, they get aggressive. And every other year, they get depressive.

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Ravi Swaminathan, Spark Capital Advisors (India) Private Limited, Research Division - Assistant VP [20]

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Got it, sir.

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M. Chandru Kalro, TTK Prestige Limited - MD, CEO & Executive Director [21]

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Somebody -- if you notice from the -- some of the accounts that you're mentioning, there's a very extended credit that they've been giving, and it's your guess against mine as to how long they can carry on with that kind of aggressive credit at low prices that they're operating in. And most of the southern players, I think, are at that broad band if we believe what we know is right.

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Operator [22]

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The next question is from the line of Sonali Salgaonkar from Jefferies.

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Sonali Salgaonkar, Jefferies LLC, Research Division - Equity Analyst [23]

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So my first question is pertaining to the industry. So in January, how is the demand on liquidity scenario overall? And approximately how much percentage of your business comes from rural areas?

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M. Chandru Kalro, TTK Prestige Limited - MD, CEO & Executive Director [24]

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Okay. The liquidity situation is still a matter of concern because, overall, the collections are always under stress, and we are always under stress to bill only after we collect. So that is an issue, and we don't want to reshape the discipline that we have. That liquidity is a matter of stress.

The rural economy, we believe, will come up well if the holiday season looks good, which is what we think it will be. And we think that demand will improve as we go along. And we are also in a good position because some of the old nonperforming accounts will start performing from hereon.

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Sonali Salgaonkar, Jefferies LLC, Research Division - Equity Analyst [25]

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So sir, approximately how much of your business emanates from rural versus urban?

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M. Chandru Kalro, TTK Prestige Limited - MD, CEO & Executive Director [26]

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The rural -- direct rural, what we know, is about 5%.

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Sonali Salgaonkar, Jefferies LLC, Research Division - Equity Analyst [27]

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Okay. All right. Sir, my second question is, would you be able to share the approximate market share that you have in the appliance segments that you are in.

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M. Chandru Kalro, TTK Prestige Limited - MD, CEO & Executive Director [28]

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Different categories have different market shares, and I suggest we keep that off-line because we'll have to go through each and every category. We are in over 9, 10 major categories that we are talking about. At the top line level, other than mixer grinder, we can tell you that we are #1 in all the major categories.

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T. T. Jagannathan, TTK Prestige Limited - Non-Executive Chairman [29]

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And so -- also #1 in the grain grinder.

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Sonali Salgaonkar, Jefferies LLC, Research Division - Equity Analyst [30]

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Right. Sir, my last question is approximately how much percentage of your business currently comes from e-commerce and modern format?

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M. Chandru Kalro, TTK Prestige Limited - MD, CEO & Executive Director [31]

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In the Q3, 15% was in e-commerce; and about 17%, 18% was this modern format.

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Operator [32]

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The next question is from the line of Sreemant Dudhoria from Unifi Capital.

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Sreemant Dudhoria, Unifi Capital Pvt. Ltd. - Manager [33]

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So firstly, you had highlighted in the press release that the corporate gifting revenue was low in the current quarter. So was this a high percentage high contributor in the same quarter last year? If you could specify what was that.

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M. Chandru Kalro, TTK Prestige Limited - MD, CEO & Executive Director [34]

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Every year in the Q3, because of the valley, especially in the -- in some markets like the north, et cetera, corporate gifting is a big chunk of our business at that time. And that, unfortunately, was subdued, which is what we have highlighted. And that was subdued primarily because the general economy and the people did tighten this versus, I mean, hands on giving away gifts.

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Sreemant Dudhoria, Unifi Capital Pvt. Ltd. - Manager [35]

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What percentage of top line would that had been like Q3 of last year?

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M. Chandru Kalro, TTK Prestige Limited - MD, CEO & Executive Director [36]

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Off-hand, I don't recollect. But see, it is also very difficult to say. There are some which come directly to us. There are some that go directly to the trade, and they give it from their side. So it's difficult to quantify that. But it is significant in some markets, which is what affected some markets this time.

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Sreemant Dudhoria, Unifi Capital Pvt. Ltd. - Manager [37]

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Sir, the various channels -- sir, what's been the growth and the growth on a year-on-year basis for the quarter 3?

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M. Chandru Kalro, TTK Prestige Limited - MD, CEO & Executive Director [38]

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We wouldn't like to get into that detail at this point in time. It can be sensitive.

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Sreemant Dudhoria, Unifi Capital Pvt. Ltd. - Manager [39]

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If I look at the Horwood numbers, you have maintained the top line on a year-on-year basis. But I see that the margins have come down in that part of business. So if you could please share what is really happening there.

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M. Chandru Kalro, TTK Prestige Limited - MD, CEO & Executive Director [40]

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So if you remember, we've always been saying that Horwood, when we acquired it, was generally with the general trade there and not in many channels like online, et cetera. This year, we have made substantial investments in marketing, in adding to channels, and in our online presence there from a future perspective because this becomes necessary to be remaining competitive. Those expenses have impacted margin. The gross margin, otherwise, have been quite stable.

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Sreemant Dudhoria, Unifi Capital Pvt. Ltd. - Manager [41]

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These are kind of one-off expenses. Or do you see these are recurring one?

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M. Chandru Kalro, TTK Prestige Limited - MD, CEO & Executive Director [42]

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We are hoping that these investments will lead to a higher top line, which will then amortize these expenses as we go along. And now that the Brexit uncertainty is over, things are starting to look up there overall.

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Sreemant Dudhoria, Unifi Capital Pvt. Ltd. - Manager [43]

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Yes. Yes. And lastly, in terms of -- in the domestic market in the cooker segment, while you highlighted that you're looking to clear out the older models of cookers and bringing the Svachh range of cookers, just wanted to know in terms of inventory in the system, how many days of inventory of the older cookers are still in the system for which you have to control your wholesale volumes until then.

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T. T. Jagannathan, TTK Prestige Limited - Non-Executive Chairman [44]

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These are micro. These are -- what we are trying to say is that we'll be creating them without any loss to us. That's all.

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Sreemant Dudhoria, Unifi Capital Pvt. Ltd. - Manager [45]

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But any broad number like how many days of inventory is still there in the system, sir?

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T. T. Jagannathan, TTK Prestige Limited - Non-Executive Chairman [46]

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Normally, about 2 months inventory is held by the trade. Only one month has passed, so they would've liquidated some of that. Hopefully, by the end of this month or middle of next month, it should be back to normal.

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Operator [47]

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(Operator Instructions) The next question is from the line of Koundinya N from JM Financial.

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Achal Lohade, JM Financial Institutional Securities Limited, Research Division - VP [48]

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This is Achal here from JM, sir. Just wanted to check, first in terms of the cooker segment. Now given the situation with respect to demand, given our change with respect to distribution, especially for the rural part, how would you attribute the market share? Have we maintained? Have we lost market share in last 9 months or you think we've gained market share?

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M. Chandru Kalro, TTK Prestige Limited - MD, CEO & Executive Director [49]

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We believe we have maintained.

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Achal Lohade, JM Financial Institutional Securities Limited, Research Division - VP [50]

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Okay. And what is the kind of growth one should kind of look at for cooker, cookware at the industry aggregate level? And given the restocking, what you are probably hinting at? Do we see that we'll gain market share in the coming quarters?

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M. Chandru Kalro, TTK Prestige Limited - MD, CEO & Executive Director [51]

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Well, what we have launched in terms of the Svachh platform on pressure cookers, we believe, is a game-changer. And the initial response has been quite positive. And going forward, we think that will help us. And we are garnering market share in almost all geographies that we are looking at.

Pressure cooker as a category is a very mature category, as you know. And for the last so many years, it has been in the low single digits in terms of growth. And hopefully, with the market share increase, we can probably go beyond that and get some market share increase with this Svachh platform.

In the cookware business, there's a churn, which is happening again because there is the nonstick versus stainless steel, and stainless steel is growing. We are getting ready to get into stainless steel in a very big way. We are already there. We have made some good inroads. And next year, hopefully, that will also contribute to a significant proportion.

So all in all, these 2 markets being very mature, we're looking at single-digit growth at least at the category level, and we see how we can gain market share from hereon.

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Achal Lohade, JM Financial Institutional Securities Limited, Research Division - VP [52]

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Is it possible to share how much is the stainless steel mix at this point in time? And what is the probable mix you would look at in, say, next 3 to 5 years?

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M. Chandru Kalro, TTK Prestige Limited - MD, CEO & Executive Director [53]

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Don't know if we want to say that. But let me say, today, it's largely nonstick. Tomorrow, it's going to be significantly increasing in favor of stainless steel.

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T. T. Jagannathan, TTK Prestige Limited - Non-Executive Chairman [54]

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Achal, if you can predict what's going to happen in 5 years, I'll make you my official astrologer.

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Achal Lohade, JM Financial Institutional Securities Limited, Research Division - VP [55]

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Okay. Great. Sir, in terms of the stainless steel, what is the price difference? I mean I'm just trying to figure out what would be the incremental revenue that could be or just purely on account of the mix changing?

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T. T. Jagannathan, TTK Prestige Limited - Non-Executive Chairman [56]

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See, there will be a price increase when we go stainless. But remember that if you buy nonstick cookware, you come back every 2, 3 years to buy another one. If you buy stainless steel, you don't do that. So while there is a price increase and we will get -- the volumes may not reflect that kind of -- as with nonstick.

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Achal Lohade, JM Financial Institutional Securities Limited, Research Division - VP [57]

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Right. Right. And just last question with respect to appliances, like the growth seems to have decelerated for various reasons. Do we see, with the current offering itself, moving back to double-digit growth or you think it can be only possible with the new product launches?

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M. Chandru Kalro, TTK Prestige Limited - MD, CEO & Executive Director [58]

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No. I think -- yes, I think with -- overall, season festival has been a little depressed, and we don't expect that to continue for very long. And as soon as the economy bounces back, we will see, even with the existing portfolio, a significant growth coming back in appliances. And our pipeline of new product launches is always planned, and there is a pipeline always, which will happen as usual.

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Achal Lohade, JM Financial Institutional Securities Limited, Research Division - VP [59]

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Got it. Got it. Would be really of great help if you could help with the growth in the gas stoves, mixers, specific 2, 3 categories, the top 2, 3 categories and the plan for 9 months?

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M. Chandru Kalro, TTK Prestige Limited - MD, CEO & Executive Director [60]

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Given the enhanced -- heightened competitive scenario, we'd like to keep these numbers to ourselves at this point in time.

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Operator [61]

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The next question is from the line of Chirag Lodaya from Valuequest.

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Chirag Lodaya, Valuequest Investment Advisors Private Limited - Equity Analyst [62]

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Sir, my first question is on rural sales. So how has been the rural sales for first 9 months? If you can talk about that.

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M. Chandru Kalro, TTK Prestige Limited - MD, CEO & Executive Director [63]

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Not as good as the previous year. The first half was very bad. It's kind of bouncing back into Q3, and we are hoping that Q4 is even better.

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Chirag Lodaya, Valuequest Investment Advisors Private Limited - Equity Analyst [64]

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And in terms of full year, earlier, we had guided about INR 100 crore, INR 110 crore of rural sales in this year versus INR 180 crore. Are we on track?

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M. Chandru Kalro, TTK Prestige Limited - MD, CEO & Executive Director [65]

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No. We will be probably a little less than last year in rural, the way things are going.

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T. T. Jagannathan, TTK Prestige Limited - Non-Executive Chairman [66]

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But the way things are going, they're all coming back. So next year, we should -- it goes back.

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Chirag Lodaya, Valuequest Investment Advisors Private Limited - Equity Analyst [67]

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So sir, in terms of client addition, if you can help us understand how many clients we would have added, accounts we would have added compared...

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M. Chandru Kalro, TTK Prestige Limited - MD, CEO & Executive Director [68]

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We can't do that. That's very capital sensitive information.

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Chirag Lodaya, Valuequest Investment Advisors Private Limited - Equity Analyst [69]

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Okay. And in terms of modern trade as a channel, you have mentioned we are broad-basing customer base. Again, you would like to give some -- what kind of additions we would have done.

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M. Chandru Kalro, TTK Prestige Limited - MD, CEO & Executive Director [70]

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It's like this, we used to have most favored channel as partner at the beginning. I think that most favored channel partner is no longer there, and we are now looking at enhancing assortment in all formats that we are looking at. And that has happened this year. And next year, we want to make sure that we're not dependent on any one single partner, and we will be there everywhere. And you know what are the modern format accounts, I think I don't need to say that, and therefore for you to know that we are present in all the formats today in a significant way.

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Operator [71]

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The next question is from the line of Avi Mehta from IIFL.

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Avi Mehta, IIFL Research - Assistant VP & Lead Analyst of Consumer Discretionary [72]

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Sir, I just wanted to understand this -- in the cost line items, especially on the employee cost, we've been able to control or maintain costs despite the inflation that we've witnessed. Could you kind of help us understand? Is there any one-off, both in this as well as the other expenses? And how should we kind of assume this to go forward? Is this more structural in nature and it should continue at the INR 42 crore quarterly mark around, INR 40 crore to INR 45 crore?

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T. T. Jagannathan, TTK Prestige Limited - Non-Executive Chairman [73]

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From hereon, yes. And the normal inflation in next year will apply around this base.

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Avi Mehta, IIFL Research - Assistant VP & Lead Analyst of Consumer Discretionary [74]

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Okay. So this is more -- so what exactly have we been able to kind of -- how have you -- if you could share any -- what are the productive initiatives that you've done, which have allowed you to do the -- get in this [pattern?]

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T. T. Jagannathan, TTK Prestige Limited - Non-Executive Chairman [75]

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That's sensitive information. I don't think we can release that.

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Avi Mehta, IIFL Research - Assistant VP & Lead Analyst of Consumer Discretionary [76]

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Okay. And sir, this -- the other expense [variant], is it largely marketing-driven that we are witnessing? Or again, here, there is a different -- how should we look at that?

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T. T. Jagannathan, TTK Prestige Limited - Non-Executive Chairman [77]

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It's a combination of both.

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M. Chandru Kalro, TTK Prestige Limited - MD, CEO & Executive Director [78]

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It's a combination of both.

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Avi Mehta, IIFL Research - Assistant VP & Lead Analyst of Consumer Discretionary [79]

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Okay, sir. And would you be able to share what's the ex marketing kind of growth rate in other expenses that we're currently trending at?

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T. T. Jagannathan, TTK Prestige Limited - Non-Executive Chairman [80]

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Sorry, come again?

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Avi Mehta, IIFL Research - Assistant VP & Lead Analyst of Consumer Discretionary [81]

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Excluding the marketing spend, how are other expense growth growing?

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T. T. Jagannathan, TTK Prestige Limited - Non-Executive Chairman [82]

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They're variable. They are variable in general.

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M. Chandru Kalro, TTK Prestige Limited - MD, CEO & Executive Director [83]

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Other expense also is -- varies with category to category in terms of variable expenditure and market promotions. So depending on the actual mix, that can go up or down a little bit. I don't think there's been a violent variation between last time and now, and so I don't think there's much of a problem there.

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Avi Mehta, IIFL Research - Assistant VP & Lead Analyst of Consumer Discretionary [84]

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Okay. No. No. It is not a problem, sir. I was looking at it favorably. So that's why.

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Operator [85]

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The next question is from the line of Niket Shah from Motilal Oswal.

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Niket H. Shah, Motilal Oswal Asset Management Company Limited - VP & Associate Fund Manager [86]

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A couple of questions. First one, if you can just give us some update on your home cleaning solution business and the water purifier business in terms of scalability there and have we reached there in terms of SKU launches and in terms of presence across our distribution network. So where are we in that journey?

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M. Chandru Kalro, TTK Prestige Limited - MD, CEO & Executive Director [87]

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Okay. I think one good thing here is that we've kind of expanded distribution on the cleaning segment. The water purifier segment is also starting to offer a major opportunity, as you know, as we go along. And we're hoping that this summer, we can see some benefits of that, which is that if you just pull out of the gravity water purifier space as the market leader. So we believe that there's something to take from there. We are having very differentiated set of products.

And the other opportunity that we see here is that, suddenly, [Arrow] is not a good word because there's so much social media against it. So we're hoping the gravity comes back in some way, which was a shrinking category so far. So the distribution is expanding, our product line is expanding. And we are also very much adding to the number of feet-on-street to push this category. This summer, we should see some benefits happening.

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Niket H. Shah, Motilal Oswal Asset Management Company Limited - VP & Associate Fund Manager [88]

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And what kind of turnover will be in home cleaning solution? Would it be close to about INR 50-odd crores this year?

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M. Chandru Kalro, TTK Prestige Limited - MD, CEO & Executive Director [89]

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Yes. Close to that, yes.

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Niket H. Shah, Motilal Oswal Asset Management Company Limited - VP & Associate Fund Manager [90]

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Is this the only reason for not scaling up in a big way since the SKU launches? The supply chain and all of that in place, was that the reason? And now, at least in the next 3 or 4 years, you should see a substantial scale up.

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M. Chandru Kalro, TTK Prestige Limited - MD, CEO & Executive Director [91]

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You're absolutely right. In fact, the supply chain was getting stabilized. In fact, many of the products -- some of the products we used to import earlier, we're trying to make it here. Some of the copper, where we were having problems in manufacturer, which we have passed now. So scaling up was an issue, and therefore that was also affecting us. That's behind us now.

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Niket H. Shah, Motilal Oswal Asset Management Company Limited - VP & Associate Fund Manager [92]

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The second question was on the share of stainless steel. Would it be possible to give us a very qualitative comment, if not quantitatively, in terms of what would be our share of stainless steel within our cooker sales and cookware sales? I'm just trying to reconcile because then there's a volume growth and there's a value decline. Was stainless steel so large to really swing that number?

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T. T. Jagannathan, TTK Prestige Limited - Non-Executive Chairman [93]

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Niket, there are probably 1,500 stainless steel cookware manufacturers, and nobody's market share [is below] 1%.

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Niket H. Shah, Motilal Oswal Asset Management Company Limited - VP & Associate Fund Manager [94]

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Well, I'm not -- sir, I'm not asking about market share. I'm just asking for your -- the share of stainless steel cookers in the overall cooker revenues.

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M. Chandru Kalro, TTK Prestige Limited - MD, CEO & Executive Director [95]

--------------------------------------------------------------------------------

So if you are looking at it that way, we are looking at stainless steel being at about 1/3 of the overall volumes that we are looking at. And obviously, the value will be a little higher because stainless steels sells at a higher price than pressure cookers.

In cookware, we are largely towards nonstick today, but that's something we want to change as we go along with customer preferences. And in cookware, again, like Chairman just said, there are a lot of local players as well as branded players, and we have to find our feet there. We have a very aggressive product launch plans the next few months, which should get us strongly back into that category.

--------------------------------------------------------------------------------

Niket H. Shah, Motilal Oswal Asset Management Company Limited - VP & Associate Fund Manager [96]

--------------------------------------------------------------------------------

Sure. And one basic question. Is the pricing different for modern trade and your general trade for the same product? I mean, I -- there will be different products for different segmentation. But for certain categories, is there completely different product, there is an overlap between modern and general trade?

--------------------------------------------------------------------------------

M. Chandru Kalro, TTK Prestige Limited - MD, CEO & Executive Director [97]

--------------------------------------------------------------------------------

No. The pricing is more favorable to the modern trade. That's because they have the negotiating power. And that is why we also wanted to broad-base so that we are not dependent on any one single channel. But the general trade, our realizations are slightly higher than the modern trade.

--------------------------------------------------------------------------------

Niket H. Shah, Motilal Oswal Asset Management Company Limited - VP & Associate Fund Manager [98]

--------------------------------------------------------------------------------

Okay. And one final question, if I may squeeze in. On the rural side of the business, how many SKUs do we have in the rural versus urban, specifically on cookers? Because that's the bulk of the rural sales for us.

--------------------------------------------------------------------------------

M. Chandru Kalro, TTK Prestige Limited - MD, CEO & Executive Director [99]

--------------------------------------------------------------------------------

The rural is a very tight assortment of 8 to 10 SKUs really. And in the urban side, we have close to 700 SKUs. So the rural is a lot more focused in that way. And as we expand geographies and we find an opportunity, we add in some more categories or SKUs.

--------------------------------------------------------------------------------

Niket H. Shah, Motilal Oswal Asset Management Company Limited - VP & Associate Fund Manager [100]

--------------------------------------------------------------------------------

And that's how it'll continue to go on?

--------------------------------------------------------------------------------

M. Chandru Kalro, TTK Prestige Limited - MD, CEO & Executive Director [101]

--------------------------------------------------------------------------------

Yes. Yes.

--------------------------------------------------------------------------------

Operator [102]

--------------------------------------------------------------------------------

The next question is from the line of Manish Poddar from Nippon India AIF.

--------------------------------------------------------------------------------

Manish Poddar, Nippon Life India Asset Management Limited - Investment Analyst [103]

--------------------------------------------------------------------------------

Just wanted to first get a sense on is there any update as to how is the demand environment in Telangana and Andhra Pradesh for you now?

--------------------------------------------------------------------------------

M. Chandru Kalro, TTK Prestige Limited - MD, CEO & Executive Director [104]

--------------------------------------------------------------------------------

It is reasonably stable.

--------------------------------------------------------------------------------

T. T. Jagannathan, TTK Prestige Limited - Non-Executive Chairman [105]

--------------------------------------------------------------------------------

What's wrong with Telangana?

--------------------------------------------------------------------------------

Manish Poddar, Nippon Life India Asset Management Limited - Investment Analyst [106]

--------------------------------------------------------------------------------

Sir, because I believe this region was declining for you, and this is, I think, low double digit in contribution for you. And I think demand is like ...

--------------------------------------------------------------------------------

M. Chandru Kalro, TTK Prestige Limited - MD, CEO & Executive Director [107]

--------------------------------------------------------------------------------

It's reasonably stable. There's no problem there.

--------------------------------------------------------------------------------

Manish Poddar, Nippon Life India Asset Management Limited - Investment Analyst [108]

--------------------------------------------------------------------------------

Okay. And just wanted to get a sense that in the press release, you mentioned that there is a proliferation of brands, which is happening now in the market economy. So is there anything specific to your company in that space? Or it's just a general statement that you put across.

--------------------------------------------------------------------------------

M. Chandru Kalro, TTK Prestige Limited - MD, CEO & Executive Director [109]

--------------------------------------------------------------------------------

So we are seeing that at entry level, there are a lot more brands coming up. That is one. Second, we are also seeing is that those usual unorganized players who used to evade taxes are starting to evade yearly also. And that is why we believe the government is also trying to tighten up the screw so that these people can stop evading. But right now, that practice is starting to happen, and that is what is happening right now. The entry level pricing also is not the best economic situation. People tend to discount more.

--------------------------------------------------------------------------------

Manish Poddar, Nippon Life India Asset Management Limited - Investment Analyst [110]

--------------------------------------------------------------------------------

But isn't this [discounted a little] because the number of brands would have -- should have gone down during a downcycle, whether you're seeing that the number of brands has increased in the downcycle?

--------------------------------------------------------------------------------

M. Chandru Kalro, TTK Prestige Limited - MD, CEO & Executive Director [111]

--------------------------------------------------------------------------------

No. See, people also like to purchase a little cheaper, and then there are more brands available cheaper. So of course, regional brands are an ultimate brands. And remember, they are cheaper largely because many of them actually, as I said, evade taxes. And that is happening, unfortunately.

--------------------------------------------------------------------------------

Manish Poddar, Nippon Life India Asset Management Limited - Investment Analyst [112]

--------------------------------------------------------------------------------

Okay. Just one final one, if I may. This mention about the inventory which is that you're sort of liquidating the existing inventory, not like a discounting but liquidity. So this process is done or this is going to still happen in Q4.

--------------------------------------------------------------------------------

M. Chandru Kalro, TTK Prestige Limited - MD, CEO & Executive Director [113]

--------------------------------------------------------------------------------

Okay. We're not discounting or liquidating anything. We are waiting for the trade to de-stock and liquidate their inventory before we can go in full force with the new one. And as we said, we're probably about a month or 2 away before that can all be cleaned up.

--------------------------------------------------------------------------------

Operator [114]

--------------------------------------------------------------------------------

The next question is from the line of Sreemant Dudhoria from Unifi Capital.

--------------------------------------------------------------------------------

Sreemant Dudhoria, Unifi Capital Pvt. Ltd. - Manager [115]

--------------------------------------------------------------------------------

Yes, sir. Just a couple of questions, sir. Firstly, in the context of the regional brands gaining share, doing more discounting, how is our Judge brand doing? Can you please share how's been the performance of the Judge brand in the first 9 months?

--------------------------------------------------------------------------------

T. T. Jagannathan, TTK Prestige Limited - Non-Executive Chairman [116]

--------------------------------------------------------------------------------

I don't think we said the regional brands are gaining market share. When did we say that?

--------------------------------------------------------------------------------

Sreemant Dudhoria, Unifi Capital Pvt. Ltd. - Manager [117]

--------------------------------------------------------------------------------

Okay. I took it wrong. But how is the Judge brand doing?

--------------------------------------------------------------------------------

M. Chandru Kalro, TTK Prestige Limited - MD, CEO & Executive Director [118]

--------------------------------------------------------------------------------

The Judge brand has grown very well. It is doing well, and the distribution is also expanding as -- and performing its role of pricing at the lower end, which is why we launched the product in the first place.

--------------------------------------------------------------------------------

Sreemant Dudhoria, Unifi Capital Pvt. Ltd. - Manager [119]

--------------------------------------------------------------------------------

Please share what's been the contribution from this brand in the quarter 3 and 9 months.

--------------------------------------------------------------------------------

M. Chandru Kalro, TTK Prestige Limited - MD, CEO & Executive Director [120]

--------------------------------------------------------------------------------

The quarter 3, it's about 3% of total -- 2% of total, sorry.

--------------------------------------------------------------------------------

Sreemant Dudhoria, Unifi Capital Pvt. Ltd. - Manager [121]

--------------------------------------------------------------------------------

3% -- 2%?

--------------------------------------------------------------------------------

M. Chandru Kalro, TTK Prestige Limited - MD, CEO & Executive Director [122]

--------------------------------------------------------------------------------

2%. 2% of total.

--------------------------------------------------------------------------------

Sreemant Dudhoria, Unifi Capital Pvt. Ltd. - Manager [123]

--------------------------------------------------------------------------------

Okay. And for the 9 months?

--------------------------------------------------------------------------------

M. Chandru Kalro, TTK Prestige Limited - MD, CEO & Executive Director [124]

--------------------------------------------------------------------------------

Similar.

--------------------------------------------------------------------------------

Sreemant Dudhoria, Unifi Capital Pvt. Ltd. - Manager [125]

--------------------------------------------------------------------------------

Yes. Yes, I got it. So second question is in the context of the virus outbreak in China and in the appliances division, where, I think, for the company and the industry as a whole imports a lot of products from China. Has there been any impact on sourcing of goods from that geography?

--------------------------------------------------------------------------------

T. T. Jagannathan, TTK Prestige Limited - Non-Executive Chairman [126]

--------------------------------------------------------------------------------

Less than 10% of our sales comes from products imported in China. We have reasonable stock with us now. So we'll have -- wait to see what happen 3 months down the line.

--------------------------------------------------------------------------------

Operator [127]

--------------------------------------------------------------------------------

(Operator Instructions) The next question is from the line of Nirav Vasa from Anand Rathi.

--------------------------------------------------------------------------------

Nirav Vasa, Anand Rathi Financial Services Limited, Research Division - Research Analyst [128]

--------------------------------------------------------------------------------

I have 2 questions. The first one, can you please help me with the tax rate that we can work upon for FY '20? Because for first 9 months, that number has been quite low. And going forward, how do you intend to utilize the free cash that we have on books?

--------------------------------------------------------------------------------

Unidentified Company Representative, [129]

--------------------------------------------------------------------------------

You have to take around 35%.

--------------------------------------------------------------------------------

T. T. Jagannathan, TTK Prestige Limited - Non-Executive Chairman [130]

--------------------------------------------------------------------------------

[20 or 30] is the rate of tax that'll be for next year onwards. Free cash, we'll take a [vote] and the Board debates on that.

--------------------------------------------------------------------------------

Nirav Vasa, Anand Rathi Financial Services Limited, Research Division - Research Analyst [131]

--------------------------------------------------------------------------------

Sir, can you please repeat once again? I didn't catch it.

--------------------------------------------------------------------------------

T. T. Jagannathan, TTK Prestige Limited - Non-Executive Chairman [132]

--------------------------------------------------------------------------------

Our tax increase will be 35%. Free cash will take [it on] after the Board decides what we want to do with the cash.

--------------------------------------------------------------------------------

Nirav Vasa, Anand Rathi Financial Services Limited, Research Division - Research Analyst [133]

--------------------------------------------------------------------------------

Got your point, sir.

--------------------------------------------------------------------------------

Operator [134]

--------------------------------------------------------------------------------

The next question is from the line of Srinivas Seshadri from Mirabilis.

--------------------------------------------------------------------------------

Srinivas Seshadri;Mirabilis Investment Trust;Analyst, [135]

--------------------------------------------------------------------------------

Just one clarification I couldn't quite gather fully. This cooker sales, which are down 9%, the release mentioned there is some impact of the corporate gifting. But are there some other factors because of which -- like competition or market issues because of the sales are down so much?

--------------------------------------------------------------------------------

M. Chandru Kalro, TTK Prestige Limited - MD, CEO & Executive Director [136]

--------------------------------------------------------------------------------

No. Not really. I mean it has just been that the festival wasn't as good as what we expected, and the corporate giving also, which is significant during this period, wasn't as good as last year.

--------------------------------------------------------------------------------

T. T. Jagannathan, TTK Prestige Limited - Non-Executive Chairman [137]

--------------------------------------------------------------------------------

And you will note that for the first 2 quarters, cookware grew. It was only because of the gifting and the fact that Diwali has been preponed that this part appears bad.

--------------------------------------------------------------------------------

Srinivas Seshadri;Mirabilis Investment Trust;Analyst, [138]

--------------------------------------------------------------------------------

Okay. So there's no shift in competitive activity per se, which are explaining?

--------------------------------------------------------------------------------

T. T. Jagannathan, TTK Prestige Limited - Non-Executive Chairman [139]

--------------------------------------------------------------------------------

No. No. No. We're really #1.

--------------------------------------------------------------------------------

Operator [140]

--------------------------------------------------------------------------------

The next question is from the line of Koundinya N from JM Financial.

--------------------------------------------------------------------------------

Achal Lohade, JM Financial Institutional Securities Limited, Research Division - VP [141]

--------------------------------------------------------------------------------

Achal here again. Sir, wanted to check if there was any significant one-off in terms of the appliances growth in 3Q last year, I think your FY '19, where the growth was 22%, like in terms of institutional order or anything of that sort.

--------------------------------------------------------------------------------

M. Chandru Kalro, TTK Prestige Limited - MD, CEO & Executive Director [142]

--------------------------------------------------------------------------------

In fact, everything last year was better than this year in terms of rural or in terms of the overall market demand or everything like that, gifting and all that. So in that sense, this -- the overall slowdown, it has had its impact in this quarter. And we are looking at it because if you see the 23% growth last year, that was very significant growth, and we have almost flat to that sale this year in spite of everything.

--------------------------------------------------------------------------------

Achal Lohade, JM Financial Institutional Securities Limited, Research Division - VP [143]

--------------------------------------------------------------------------------

Right. Right. So there wasn't any one-off or anything of that sort?

--------------------------------------------------------------------------------

M. Chandru Kalro, TTK Prestige Limited - MD, CEO & Executive Director [144]

--------------------------------------------------------------------------------

No. No. No.

--------------------------------------------------------------------------------

Achal Lohade, JM Financial Institutional Securities Limited, Research Division - VP [145]

--------------------------------------------------------------------------------

Particularly for 3Q?

--------------------------------------------------------------------------------

M. Chandru Kalro, TTK Prestige Limited - MD, CEO & Executive Director [146]

--------------------------------------------------------------------------------

No. No.

--------------------------------------------------------------------------------

Achal Lohade, JM Financial Institutional Securities Limited, Research Division - VP [147]

--------------------------------------------------------------------------------

And with respect to operating margins, given the product mix we are looking at, given the overall category mix, which will probably change, how do you look at the margins? Do you see margins actually remaining stable, improving or kind of seeing some amount of margin contraction over next couple of years?

--------------------------------------------------------------------------------

T. T. Jagannathan, TTK Prestige Limited - Non-Executive Chairman [148]

--------------------------------------------------------------------------------

Margins will stay the same because we do not play the price game, if they stay the same. But it all depends upon growth. If the top line growth beyond 10%, our margin improve. If the top end does not grow 10% or below that, our margin will go down because there is inflation in terms of staff, in terms of everything else.

--------------------------------------------------------------------------------

Achal Lohade, JM Financial Institutional Securities Limited, Research Division - VP [149]

--------------------------------------------------------------------------------

Fair. Would you be able to tell us what was the A&P in terms of percentage of revenue for 3Q?

--------------------------------------------------------------------------------

T. T. Jagannathan, TTK Prestige Limited - Non-Executive Chairman [150]

--------------------------------------------------------------------------------

It's always 6.5% of top line.

--------------------------------------------------------------------------------

Achal Lohade, JM Financial Institutional Securities Limited, Research Division - VP [151]

--------------------------------------------------------------------------------

So there isn't much movement there?

--------------------------------------------------------------------------------

T. T. Jagannathan, TTK Prestige Limited - Non-Executive Chairman [152]

--------------------------------------------------------------------------------

As a policy.

--------------------------------------------------------------------------------

Achal Lohade, JM Financial Institutional Securities Limited, Research Division - VP [153]

--------------------------------------------------------------------------------

Okay. And just last question, if I may, sir. With respect to capacity, what is the capacity for cooker cookware and mixer grinder?

--------------------------------------------------------------------------------

T. T. Jagannathan, TTK Prestige Limited - Non-Executive Chairman [154]

--------------------------------------------------------------------------------

We have added significant capacity over the last 2 quarters, but [also] we expected the growth, which has not come through. But we believe it will come through in FY '21, FY '22, and we will be able to place the excess capacity.

--------------------------------------------------------------------------------

Achal Lohade, JM Financial Institutional Securities Limited, Research Division - VP [155]

--------------------------------------------------------------------------------

Correct. So would you be able to tell us the utilization at this point in time for these segments broadly?

--------------------------------------------------------------------------------

T. T. Jagannathan, TTK Prestige Limited - Non-Executive Chairman [156]

--------------------------------------------------------------------------------

Well, the capacity in terms of our products is largely how much labor we put into it. I have not employed the labor yet, so we clearly used capacity well.

--------------------------------------------------------------------------------

Achal Lohade, JM Financial Institutional Securities Limited, Research Division - VP [157]

--------------------------------------------------------------------------------

Got it. Got it. And just in terms of the CapEx, how much should we bill for FY '20, '21, '22 broadly?

--------------------------------------------------------------------------------

T. T. Jagannathan, TTK Prestige Limited - Non-Executive Chairman [158]

--------------------------------------------------------------------------------

Now I believe only maintenance CapEx, maybe INR 5 crores, INR 10 crores a year.

--------------------------------------------------------------------------------

Operator [159]

--------------------------------------------------------------------------------

The next question is from the line of Amar Kalkundrikar from HDFC Mutual Fund.

--------------------------------------------------------------------------------

Amar Kalkundrikar, HDFC Asset Management Company Limited - Senior Equity Analyst [160]

--------------------------------------------------------------------------------

Can you speak a little bit about this new range of Svachh pressure cookers that you have launched? What is the key proposition here?

--------------------------------------------------------------------------------

M. Chandru Kalro, TTK Prestige Limited - MD, CEO & Executive Director [161]

--------------------------------------------------------------------------------

Okay. We did an extensive market research with consumers. And one of the things they came up with was that when the cooker whistles, there's a lot of froth and liquid that comes out of the cooker and leaks all over the place. It makes the gas stove dirty and everything else. And sometimes we have safety hazard because the liquid gets flowing into the gas burners and switch them off.

What the Svachh platform proposition is, is that because the design of the lid, it holds in the lid all the froth or most of the froth the -- on the lid itself, not allowing it to drip out, helping the customers keep the gas stove and kitchen clean and easy to maintain the cooker and also clean the cooker and keep a very safe situation with respect to the gas stove.

--------------------------------------------------------------------------------

T. T. Jagannathan, TTK Prestige Limited - Non-Executive Chairman [162]

--------------------------------------------------------------------------------

Which is why it costs such?

--------------------------------------------------------------------------------

Amar Kalkundrikar, HDFC Asset Management Company Limited - Senior Equity Analyst [163]

--------------------------------------------------------------------------------

Is this going to be a sort of standard feature you will put in all your products? Or is this a completely different range?

--------------------------------------------------------------------------------

M. Chandru Kalro, TTK Prestige Limited - MD, CEO & Executive Director [164]

--------------------------------------------------------------------------------

So what we are doing is we are trying to incorporate this feature across the entire spectrum of pressure cooker that we have in the market. So that's why we're calling it the Svachh platform and not a Svachh range. The whole feature -- the feature is going to be across pressure cookers. And we have applied for a patent. Hopefully, that will stand us in good stead as we go along and give us an edge over competition.

--------------------------------------------------------------------------------

Amar Kalkundrikar, HDFC Asset Management Company Limited - Senior Equity Analyst [165]

--------------------------------------------------------------------------------

Sure. And what kind of price change is happening in the SKUs for this additional feature being added on top of it [we think]?

--------------------------------------------------------------------------------

M. Chandru Kalro, TTK Prestige Limited - MD, CEO & Executive Director [166]

--------------------------------------------------------------------------------

We have not charged any premium for this additional feature.

--------------------------------------------------------------------------------

Operator [167]

--------------------------------------------------------------------------------

(Operator Instructions) The next question is from the line of [Ekta Mehta] from Vallum Capital.

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Unidentified Analyst, [168]

--------------------------------------------------------------------------------

I have a few questions. Sir, firstly, on -- you mentioned that you are going to go ahead with an aggressive product launch plan. So how much will it affect the marketing spend as a percentage of sales?

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T. T. Jagannathan, TTK Prestige Limited - Non-Executive Chairman [169]

--------------------------------------------------------------------------------

Like I mentioned, marketing spends are fixed at 6.5% of top line. What we will do, we will divert (inaudible) something else into this platform. We are going to be very aggressive. We've already conducted distributor conferences across the country. We're in the process of conducting dealer conferences, and we had advertised in almost 1,000 spots a week. So it's a significant launch.

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Unidentified Analyst, [170]

--------------------------------------------------------------------------------

Sorry. So -- also like so, could you give a number to that? I mean is it going to impact it majorly?

--------------------------------------------------------------------------------

M. Chandru Kalro, TTK Prestige Limited - MD, CEO & Executive Director [171]

--------------------------------------------------------------------------------

So we -- just to take over from where Chairman's talked about, the advertising spend being a percentage of top line, which he mentioned. So what we normally do when we have a major product launch, we divert money from some other product line to this line so that we can focus on this launch at that point in time. Our idea is to be present right through the year in terms of advertising. What we advertise at different core points in time is depending on what we are launching and what we are having in the market. And that kind of approach is what we will have. The advertising spend don't go up and down as a percentage of top line growth.

--------------------------------------------------------------------------------

Unidentified Analyst, [172]

--------------------------------------------------------------------------------

Okay. So one more thing. Sir, you had mentioned that though demand from Kerala had reduced substantially. So have you seen any revival in that?

--------------------------------------------------------------------------------

M. Chandru Kalro, TTK Prestige Limited - MD, CEO & Executive Director [173]

--------------------------------------------------------------------------------

Yes. It's bouncing back now.

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Unidentified Analyst, [174]

--------------------------------------------------------------------------------

So -- I mean, is it back to the normal levels? Or like...

--------------------------------------------------------------------------------

M. Chandru Kalro, TTK Prestige Limited - MD, CEO & Executive Director [175]

--------------------------------------------------------------------------------

Not yet. Not yet. Not yet.

--------------------------------------------------------------------------------

Unidentified Analyst, [176]

--------------------------------------------------------------------------------

Okay. And so do you see that coming back in the next like 2 quarters or something?

--------------------------------------------------------------------------------

M. Chandru Kalro, TTK Prestige Limited - MD, CEO & Executive Director [177]

--------------------------------------------------------------------------------

Yes. Yes.

--------------------------------------------------------------------------------

Unidentified Analyst, [178]

--------------------------------------------------------------------------------

In the next 2 quarters?

--------------------------------------------------------------------------------

M. Chandru Kalro, TTK Prestige Limited - MD, CEO & Executive Director [179]

--------------------------------------------------------------------------------

By the time we come to the next Onam season, we're hoping that everything is stable.

--------------------------------------------------------------------------------

Unidentified Analyst, [180]

--------------------------------------------------------------------------------

Okay. And also, just wanted to know some update on the new tie-up with a few NBFCs. So like -- so how is it? Like what is your feedback on this tie-up?

--------------------------------------------------------------------------------

M. Chandru Kalro, TTK Prestige Limited - MD, CEO & Executive Director [181]

--------------------------------------------------------------------------------

So that's going as per plan. There's nothing new in that. And we always try to keep broad-basing the number of people we deal with. It's not NBFCs really. It's micro finance organizations.

--------------------------------------------------------------------------------

Unidentified Analyst, [182]

--------------------------------------------------------------------------------

Okay. So sir, so how -- you think it -- is it [going to] contribute substantially or to double revenue in the fourth quarter?

--------------------------------------------------------------------------------

M. Chandru Kalro, TTK Prestige Limited - MD, CEO & Executive Director [183]

--------------------------------------------------------------------------------

No. This quarter, we're probably hoping to do as much as we did last year instead of having a drop. And now that the base is more realistic, next quarter or next year onward, you're going to start seeing growth back in the rural area.

--------------------------------------------------------------------------------

Operator [184]

--------------------------------------------------------------------------------

The next question is from the line of Sonali Salgaonkar from Jefferies.

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Sonali Salgaonkar, Jefferies LLC, Research Division - Equity Analyst [185]

--------------------------------------------------------------------------------

Sir, my first question is could you help us with the number of SKUs you have across each of the categories as of December ending.

--------------------------------------------------------------------------------

M. Chandru Kalro, TTK Prestige Limited - MD, CEO & Executive Director [186]

--------------------------------------------------------------------------------

So we need to count. Well, the range -- a very wide range that we have. We -- in each category, we probably have the maximum number of SKUs in the market.

--------------------------------------------------------------------------------

Sonali Salgaonkar, Jefferies LLC, Research Division - Equity Analyst [187]

--------------------------------------------------------------------------------

All right. Sir, my second question is your dealer distributor count of retailer footprint as of December?

--------------------------------------------------------------------------------

M. Chandru Kalro, TTK Prestige Limited - MD, CEO & Executive Director [188]

--------------------------------------------------------------------------------

So we were close to between 18,000 and 20,000 retailers across the country, either directly or indirectly. I'm only talking about the general trade. I'm not talking about the modern format.

--------------------------------------------------------------------------------

Sonali Salgaonkar, Jefferies LLC, Research Division - Equity Analyst [189]

--------------------------------------------------------------------------------

Right. Sir, anything on the distributor?

--------------------------------------------------------------------------------

M. Chandru Kalro, TTK Prestige Limited - MD, CEO & Executive Director [190]

--------------------------------------------------------------------------------

We have 400-plus distributors.

--------------------------------------------------------------------------------

Sonali Salgaonkar, Jefferies LLC, Research Division - Equity Analyst [191]

--------------------------------------------------------------------------------

Okay. And lastly, I missed the number. Ad spend to net sales, how much is it for this [year]?

--------------------------------------------------------------------------------

M. Chandru Kalro, TTK Prestige Limited - MD, CEO & Executive Director [192]

--------------------------------------------------------------------------------

About 6.5%.

--------------------------------------------------------------------------------

Sonali Salgaonkar, Jefferies LLC, Research Division - Equity Analyst [193]

--------------------------------------------------------------------------------

6.5%. All right.

--------------------------------------------------------------------------------

M. Chandru Kalro, TTK Prestige Limited - MD, CEO & Executive Director [194]

--------------------------------------------------------------------------------

Yes.

--------------------------------------------------------------------------------

Operator [195]

--------------------------------------------------------------------------------

The next question is from the line of Rita Tahilramani from Invesco Mutual Fund.

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Rita Tahilramanil;Invesco Mutual Fund;Analyst, [196]

--------------------------------------------------------------------------------

Sir, could you please harp on the Capex, which has incurred currently in terms of amount and in case of what could be the maximum revenue which you could fetch from this CapEx?

--------------------------------------------------------------------------------

Unidentified Company Representative, [197]

--------------------------------------------------------------------------------

Sorry. Can you repeat the question, please?

--------------------------------------------------------------------------------

M. Chandru Kalro, TTK Prestige Limited - MD, CEO & Executive Director [198]

--------------------------------------------------------------------------------

CapEx.

--------------------------------------------------------------------------------

Rita Tahilramanil;Invesco Mutual Fund;Analyst, [199]

--------------------------------------------------------------------------------

CapEx, in corporate you said that we will be…

--------------------------------------------------------------------------------

Unidentified Company Representative, [200]

--------------------------------------------------------------------------------

In the region of INR 60 crores. In the region of INR 60 crores.

--------------------------------------------------------------------------------

M. Chandru Kalro, TTK Prestige Limited - MD, CEO & Executive Director [201]

--------------------------------------------------------------------------------

About INR 60 crores this year.

--------------------------------------------------------------------------------

Rita Tahilramanil;Invesco Mutual Fund;Analyst, [202]

--------------------------------------------------------------------------------

Okay. And sir, with this incremental CapEx, what could be the max potential peak revenue which you could generate from this particular CapEx?

--------------------------------------------------------------------------------

T. T. Jagannathan, TTK Prestige Limited - Non-Executive Chairman [203]

--------------------------------------------------------------------------------

At least INR 300 crores.

--------------------------------------------------------------------------------

Rita Tahilramanil;Invesco Mutual Fund;Analyst, [204]

--------------------------------------------------------------------------------

Okay. Sir, and one more thing, which -- at the start of comments, you mentioned that you're looking at derisking your channel. Could you highlight more on that front? Like what is your current channel mix? And how do you plan to look at it maybe 3 years, 5 years hence?

--------------------------------------------------------------------------------

M. Chandru Kalro, TTK Prestige Limited - MD, CEO & Executive Director [205]

--------------------------------------------------------------------------------

Look, the channel churn is something that we don't dictate.

--------------------------------------------------------------------------------

T. T. Jagannathan, TTK Prestige Limited - Non-Executive Chairman [206]

--------------------------------------------------------------------------------

We want to be where the customer goes. If the customer tomorrow decides only to go online, we will sell only online. If the customer tomorrow decides that he'll go only to mom and pop store, we'll open a mom and pop store. We don't determine where the customer goes.

--------------------------------------------------------------------------------

M. Chandru Kalro, TTK Prestige Limited - MD, CEO & Executive Director [207]

--------------------------------------------------------------------------------

Where we said derisking was in the context of the modern format, where we had one large player with whom we had a large amount of sale, which is now more broad-based. That was the context to which we spoke about on that.

--------------------------------------------------------------------------------

Rita Tahilramanil;Invesco Mutual Fund;Analyst, [208]

--------------------------------------------------------------------------------

Okay. Okay. So how much will the modern format currently to your overall sales?

--------------------------------------------------------------------------------

M. Chandru Kalro, TTK Prestige Limited - MD, CEO & Executive Director [209]

--------------------------------------------------------------------------------

Around 17%.

--------------------------------------------------------------------------------

Rita Tahilramanil;Invesco Mutual Fund;Analyst, [210]

--------------------------------------------------------------------------------

Around 17%. Okay.

--------------------------------------------------------------------------------

Operator [211]

--------------------------------------------------------------------------------

The next question is from the line of Mohit Khanna from Future Generali India Life Insurance.

--------------------------------------------------------------------------------

Mohit Khanna, Future Generali India Life Insurance Company Limited - Sr. Manager of Equity Research [212]

--------------------------------------------------------------------------------

Yes. Yes. I just wanted to know what is your expectations for the export business for the first quarter? Could you -- as you have mentioned in the press release. And also on the performance of Horwood, when you say that the Brexit uncertainty is over, what exactly would you mean by that, exporting from U.K. to outside or importing stuff into U.K. would be a bigger tailwind for you?

--------------------------------------------------------------------------------

T. T. Jagannathan, TTK Prestige Limited - Non-Executive Chairman [213]

--------------------------------------------------------------------------------

No. No. It's the fact that U.K. market was very depressed and the pound was lost a lot of value. So the U.K. market were having lot of trouble because of Brexit. After the announcement that the Brexit is now final, the pound had bounced back. U.K. market has also bounced back. So we have positive, the progress for next year.

--------------------------------------------------------------------------------

Mohit Khanna, Future Generali India Life Insurance Company Limited - Sr. Manager of Equity Research [214]

--------------------------------------------------------------------------------

And in general, the export business that you have said, is it only related to the U.K. business?

--------------------------------------------------------------------------------

T. T. Jagannathan, TTK Prestige Limited - Non-Executive Chairman [215]

--------------------------------------------------------------------------------

No. No. No. U.K. business only accounts of 5% of our export.

--------------------------------------------------------------------------------

Operator [216]

--------------------------------------------------------------------------------

The next question is from the line of Sreemant Dudhoria from Unifi Capital.

--------------------------------------------------------------------------------

Sreemant Dudhoria, Unifi Capital Pvt. Ltd. - Manager [217]

--------------------------------------------------------------------------------

Just a single question. I wanted to know your thoughts on how is the cash that is in our balance sheet, INR 320 crores that you have mentioned in the press release. How are we planning to utilize that cash? Are we looking to pay higher dividends, buyback? Or would you preserve that for any inorganic opportunity?

--------------------------------------------------------------------------------

M. Chandru Kalro, TTK Prestige Limited - MD, CEO & Executive Director [218]

--------------------------------------------------------------------------------

Yes. We are going to get inorganic, you know what I mean, opportunity. But the idea is to be on the lookout to buy something if there's something available worthwhile and synergistic to what we want to do, the money is kept for that. I mean how long we're going to keep it and what we want to do, I think we can't say now. It's in a nice position to be if we have the cash ready, if we have something to buy.

--------------------------------------------------------------------------------

T. T. Jagannathan, TTK Prestige Limited - Non-Executive Chairman [219]

--------------------------------------------------------------------------------

We don't want to borrow and then -- and get an inorganic acquisition.

--------------------------------------------------------------------------------

Sreemant Dudhoria, Unifi Capital Pvt. Ltd. - Manager [220]

--------------------------------------------------------------------------------

Yes, sir. I was checking, what metrics, what parameters, what kind of qualities are you looking at for the inorganic opportunity?

--------------------------------------------------------------------------------

T. T. Jagannathan, TTK Prestige Limited - Non-Executive Chairman [221]

--------------------------------------------------------------------------------

I guess you come over to Bangalore and we'll discuss it over 5 or 6 hours.

--------------------------------------------------------------------------------

Operator [222]

--------------------------------------------------------------------------------

The next question is from the line of Mr. Amar Kalkundrikar from HDFC Mutual Fund.

--------------------------------------------------------------------------------

Amar Kalkundrikar, HDFC Asset Management Company Limited - Senior Equity Analyst [223]

--------------------------------------------------------------------------------

Yes. You mentioned that modern trade is about 17%, 18% of sales, e-commerce is 15% and then you have PSK channel. That's about 17% of your sales. So these 3 sort of formats are roughly 50% of sales. What's really happening on GT? That's -- 50% of sales come there. I mean has that been under pressure for last 3, 4 years?

--------------------------------------------------------------------------------

M. Chandru Kalro, TTK Prestige Limited - MD, CEO & Executive Director [224]

--------------------------------------------------------------------------------

GT has been under pressure for the last so many years because the modern format has been taking share away. Online has been taking share away. That is something that is a normal phenomenon that we are seeing. And over a period of time, we managed to keep our margins intact in spite of this, and that's what we want to do going forward as well.

--------------------------------------------------------------------------------

Amar Kalkundrikar, HDFC Asset Management Company Limited - Senior Equity Analyst [225]

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And which channel has your market shares at the highest?

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T. T. Jagannathan, TTK Prestige Limited - Non-Executive Chairman [226]

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Well, obviously, GT and online, we would say, we are at the highest.

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Operator [227]

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The next question is from the line of [Nidhi Agarwal] from Sunidhi Securities.

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Unidentified Analyst, [228]

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My question on EcoSouLife. Are we going to produce this product in India also?

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T. T. Jagannathan, TTK Prestige Limited - Non-Executive Chairman [229]

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Some of the products already produced in India, not by us but by the small scale and cottage scale in India. And that will remain.

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M. Chandru Kalro, TTK Prestige Limited - MD, CEO & Executive Director [230]

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And yes, we are exploring opportunities to launch these products in India also.

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Unidentified Analyst, [231]

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So how big is this opportunity?

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M. Chandru Kalro, TTK Prestige Limited - MD, CEO & Executive Director [232]

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We are studying that market right now. We won't be able to tell you that.

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Unidentified Analyst, [233]

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Okay. And sir -- I mean some of the competitors are seeing a very good growth in the last few quarters, like Hawkins Cookers, Butterfly Gandhimathi Appliances. So can you share that what we are doing and what -- where we are lacking in, what they are doing right, something we have done (inaudible).

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M. Chandru Kalro, TTK Prestige Limited - MD, CEO & Executive Director [234]

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They are catching up with what we did last year when it comes to the channels where we were last year, and they're kind of getting their growth because of that. Look at the base at which they are there and look at the base at which we are there. So even a small number can look a high percentage on their base.

And also, in the case of Butterfly, since you mentioned it, they are giving well-extended credits in the market. And you can see that ballooning in terms of their receivables.

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Unidentified Analyst, [235]

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Okay. So what will be our receivables there currently?

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M. Chandru Kalro, TTK Prestige Limited - MD, CEO & Executive Director [236]

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Whose receivables?

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Unidentified Analyst, [237]

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Ours.

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M. Chandru Kalro, TTK Prestige Limited - MD, CEO & Executive Director [238]

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Our receivables are stable between 45 and to 47 days.

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Unidentified Analyst, [239]

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Okay. And inventories?

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M. Chandru Kalro, TTK Prestige Limited - MD, CEO & Executive Director [240]

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Inventory, actually, we have managed to reduce this quarter and keep it at a comfortable level.

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Operator [241]

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The next question is from the line of [Agam Shah], an individual investor.

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Unidentified Participant, [242]

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I just wanted to confirm on the number. So what did you see on the -- how many distributors we have? And how much is the retail reach we have?

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M. Chandru Kalro, TTK Prestige Limited - MD, CEO & Executive Director [243]

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Look, if you're talking about the distributor, we have 400-plus distributors. The retailers we deal with directly are between 18,000 and 20,000. But we are present in over 65,000 outlets because the wholesaling takes us to so many more outlets.

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Unidentified Participant, [244]

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Okay. So 400 is the distributor, right? 400-plus?

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M. Chandru Kalro, TTK Prestige Limited - MD, CEO & Executive Director [245]

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400-plus. And more importantly, we have a national footprint. There is no under-presented markets.

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Unidentified Participant, [246]

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Do you expect to grow in double digits from next year onwards? Or is the demand and all the…?

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T. T. Jagannathan, TTK Prestige Limited - Non-Executive Chairman [247]

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Please consult Nirmala Sitharaman and come back to me.

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Operator [248]

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The next question is from the line of [Kunal Bhatia], an individual investor.

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Unidentified Participant, [249]

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Just wanted to understand if there's any thinking around entering into the tableware or the crockery segment?

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M. Chandru Kalro, TTK Prestige Limited - MD, CEO & Executive Director [250]

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No.

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Operator [251]

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(Operator Instructions) The next question is from the line of Janakiraman from Franklin Templeton.

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Janakiraman Rengaraju, Franklin Templeton Asset Management (India) Private Limited - Assistant VP, Senior Research Analyst – Equities and Portfolio Manager [252]

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Sir, in one of the answers, you mentioned that the GT has been facing pressure for a few years, and GT still accounts for half of your revenue. So how do you handle such a channel which has been under pressure for a reasonably long time?

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T. T. Jagannathan, TTK Prestige Limited - Non-Executive Chairman [253]

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Well, actually, they have (inaudible). We go where the customer goes. If they want more customers to come, they must find (inaudible).

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M. Chandru Kalro, TTK Prestige Limited - MD, CEO & Executive Director [254]

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But there are things that we are doing on ground like helping them merchandise better, helping them with their assortments, helping them -- promoting them in our advertising, for example. If you noticed any of our ads in the newspapers, definitely carries the GT's names. So those are things that we do. I mean it's not good for us if the entire GT goes down. We'll be trying to -- trying our best to keep that going as much as possible.

But like Chairman said, if the customer wants to go somewhere else, we'll have to be present somewhere else.

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Janakiraman Rengaraju, Franklin Templeton Asset Management (India) Private Limited - Assistant VP, Senior Research Analyst – Equities and Portfolio Manager [255]

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Right. Right. And this ongoing slowdown, if you view your product categories as, let's say, premium and value, just for simplicity sake, so is there any meaningful difference in the sales traction across these 2 categories?

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M. Chandru Kalro, TTK Prestige Limited - MD, CEO & Executive Director [256]

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Clearly, the overall sentiment, once it improves, I think we, overall, also get a better sale. That's how the [overall] impacts us, nothing else.

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Janakiraman Rengaraju, Franklin Templeton Asset Management (India) Private Limited - Assistant VP, Senior Research Analyst – Equities and Portfolio Manager [257]

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And in general, the manner in which the company approaches different channels and partners, has that approached change during a slowdown, do you tweak your approach during such time periods?

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M. Chandru Kalro, TTK Prestige Limited - MD, CEO & Executive Director [258]

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We try our best to be consistent, and I try our best to go ahead with the win-win philosophy. Everybody should win in the game. We advise our dealers not to take very, very cheap product because, overall, it tends to depress their top line and, therefore, bottom lines. And that is something we keep telling them. Our own focus is on innovations to get them more and more business opportunities, which is why we launched so many new products, and the trade respects us for that.

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Janakiraman Rengaraju, Franklin Templeton Asset Management (India) Private Limited - Assistant VP, Senior Research Analyst – Equities and Portfolio Manager [259]

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Right. Right. And you've launched 2 reasonably new categories in the last, let's say, 2 years, these cleaning solutions and the purifiers. What is the company's bandwidth in terms of launching new products? And now these 2 will remain new products for a while. Or do you plan to launch more such lines?

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M. Chandru Kalro, TTK Prestige Limited - MD, CEO & Executive Director [260]

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So we have built a separate vertical in terms of sales staffing [with this particular business headquarters.] We are slowly bringing distribution so that we can expand our footprint. We don't want to go everywhere in -- immediately because it means a marketing expenditure that has to go behind it, which may not be well priced efficiently. So that's why we're taking it step by step.

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Janakiraman Rengaraju, Franklin Templeton Asset Management (India) Private Limited - Assistant VP, Senior Research Analyst – Equities and Portfolio Manager [261]

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And when you're talking about the coverage, so you did mention that this wholesale has also play a role. What is it that part of your revenue, the one done by the wholesalers?

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M. Chandru Kalro, TTK Prestige Limited - MD, CEO & Executive Director [262]

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Difficult to factor.

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T. T. Jagannathan, TTK Prestige Limited - Non-Executive Chairman [263]

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The fact is that wholesalers [win] we don't know what they're doing. If they're [articulate], we know what they're doing.

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Janakiraman Rengaraju, Franklin Templeton Asset Management (India) Private Limited - Assistant VP, Senior Research Analyst – Equities and Portfolio Manager [264]

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Right. But what percentage of your revenue gets billed to the wholesalers?

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T. T. Jagannathan, TTK Prestige Limited - Non-Executive Chairman [265]

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Again, we don't know. We sell it to the dealer. How much he wholesale, only he knows.

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Janakiraman Rengaraju, Franklin Templeton Asset Management (India) Private Limited - Assistant VP, Senior Research Analyst – Equities and Portfolio Manager [266]

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Okay. So the wholesale is procured from the dealer, that's it.

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T. T. Jagannathan, TTK Prestige Limited - Non-Executive Chairman [267]

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That's correct. We don't separate any wholesalers directly. Our distributor can go ahead give it to a wholesaler. Wholesaler gives the wholesale on to geographies and smaller -- which we will not know about. So that's what wholesale is all about. It's largely opaque. That's why you try to build a distribution system that allows you transparency to the extent possible.

But for a brand like ours, it's not unusual for wholesaling to happen and, therefore, have a much higher presence because there's a natural port for the brand.

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Operator [268]

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(Operator Instructions) As there are no further questions from the participants, I would now like to hand the conference over to the management for closing comments.

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M. Chandru Kalro, TTK Prestige Limited - MD, CEO & Executive Director [269]

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Well, thank you, everybody for quite an energy I must say. We've had a flattish quarter, but that represents a very high base of the previous year, as we said. We've had some impact of the slowdown in the economy, which we're hoping that it turns around in the couple of quarters. We've had a very exciting launch on pressure cookers that we hope will give us more market share as we go along. We are equipping ourselves in the cookware market also quite aggressively as we go along. The appliances have grown cumulatively and looking at having a good performance. And the most important thing is we maintained EBITDA margin even on a flat turnover. So I think, overall, we're quite happy with what we've done.

Thank you very much.

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Operator [270]

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Thank you very much, sir. Ladies and gentlemen, on behalf of AMBIT Capital, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.