Flair Writing Industries (NSE:FLAIR) Q1 2027 Earnings Call

0:00 Ladies and gentlemen, good day, and welcome to the Flair Writing Industries Limited q one FY twenty seven earnings conference call. As a reminder, all participant lines will be in the listen only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then 0 on your touch tone phone. Please note that this call is being recorded. I now hand the conference over to miss from MUFG. Thank you, and over to you, ma'am. Thank you. Good afternoon, everyone. Welcome to the Flair Writing Industries Limited Q1 FY twenty seven Earnings Conference Call. Today on the call, we have Mr. Vimalchan Prathod, the Managing Director Mr. Mohit Rathod, the Hold Time Director Mr. Sumit Rathod, Hold Time Director and Mr. Alpesh Porvah, the Chief Financial Officer.

0:57 A short disclaimer before we start this call. First, this call will contain some forward looking statements, which may be based upon our beliefs, opinions and expectations of the company. As of today, these statements are not a guarantee of future performance and will involve unforeseen risks and uncertainties. With that, I would now like to hand over the conference call to Mr. Vimal Chandrathod, the Managing Director for his opening remarks. Thank you and over to you sir. Good afternoon and welcome to everyone. Thank you for joining Q1 FY twenty twenty seven earnings call. I hope everyone had the opportunity to go through our investor presentation and press release that has been uploaded on the exchange. We are pleased to present our Q1 FY 'twenty one performance with 11% year on year revenue growth and a 23% year on year increase in EBITDA.

1:55 We are seeing increase in demand of our products in the domestic market with growth across key categories despite challenging arises from the prevailing geopolitical situation, which impacted our Q on Q gross profit margin and affected our certain market and supply chains. Our overall business remains in resilient and continue to deliver growth. Coming to our segment performance. Our core Pen segment delivered 9% year on year growth. With demand remaining positive during the back to school season, our Creative Products and Steel Bottles and Housewear business also recorded double digit growth. Together, those categories now contributes approximately 31% of our overall revenue, the growth the progress we are making towards diversifying our product portfolio.

2:49 Flair Carousel Industries Limited, limited subsidiary of Flair currently operates three stainless steel bottle manufacturing lines. The order for the fourth next generation manufacturing line has recently been placed and its commissioning is expected by Q4 twenty seven. The new line is expected to increase our manufacturing capacity by approximately 35%, enabling us to cater the growing demand, domestic and international demand. Looking ahead, our focus remains on maintaining our leadership in Writing Instruments while increasing our market share in our Creative Products and Steel Wortel and Houseware business. At the same time, we are continuing to improve capacity utilization, better throughput in our distribution network and drive products capacity utilization, better throughput.

3:45 Innovative and strength of our presence in our own brands and international markets. I now hand over to Mr. Alpesh Forwal, our CFO, to discuss in detail about our Q1 FY 'twenty one financial performance results. Thank you. Thank you, MD sir. A warm welcome to everyone. Let me take you through our financial performance for Q1 FY 'twenty seven. Revenue from operations stood at INR 319.2 crores, registering a 10.6% year on year growth. Gross profit stood at INR 158.6 crores, up 10% year on year, with gross margin at 50%, broadly in line with historical levels, with a modest 31 basis point year on year decline, which is driven by geopolitical uncertainties and an elevated cost environment across the industry.

4:43 We have also taken proactive measures to protect margins, including rationalizing schemes and discounts and implementing selective price increases across all our three segments of businesses, Writing Instruments, Creatives and Steel, Water and Houseware business. EBITDA stood at INR 53.3 crores, growing 7.7% year on year, while EBITDA margin stood at 16.7%, a 46 bps decline year on year. The moderation in margins reflects elevated and volatile raw material costs driven by geopolitical uncertainties.

5:30 As capacity utilization improves and newer businesses gain scale, the company expects operating leverage benefits to support margin expansion and remains confident of progressively moving towards its EBITDA margin target of 17.5% to 18%. Patch stood at INR 29.1 crores, increasing 0.5 year on year, with PAT margin at 9.1%. The relatively slower PAT growth was primarily due to lower other income and increased raw material cost during the quarter. Despite the prevailing geopolitical uncertainty and the challenges arising from West Asia situation, we remain confident in the underlying demand environment and reiterate our FY 'twenty seven revenue growth guidance of 15%.

6:27 The above comparison is on Y o Y basis. And if you see Q on Q performance, the revenue shows a decline of 1.1% with gross profit margin declining by 151 bps and EBITDA declined by 116 bps and PAT margin declining by two twenty bps. All these were primarily due to geopolitical situation in West Asia with sharp increase in raw material prices. We took prudent steps to mitigate and minimize impact through targeted price increases across key steel bottle and houseware categories, rationalized trade schemes and discounts and intensified its focus on premiumization and product mix enhancement.

7:18 Coming to our segment performance. Our core Pen business grew 9% year on year, reaching INR $2.20 crores compared to INR $20.02 crore in the previous year. The segment continues to be a consistent growth driver, supported by healthy demand in the domestic market and ongoing product innovation. Importantly, growth during the quarter was largely volume driven. We launched 18 new pens across different price segments, further expanding our product offering and catering to a wider range of consumer needs. The Creative segment witnessed a growth of 23% Y o Y to INR 80 crores as compared to INR 65 crores in Q4 sorry, as compared to INR 65 crores in Q4 Q1 FY twenty twenty six.

8:18 However, growth could have been higher, but the impact of sharp increases in raw material costs amid geopolitical uncertainties in certain categories, where we consciously prioritize a balance between volume led growth and prediction of margins. This growth was supported by the existing portfolio as well as new product launches. During the quarter, we introduced 10 new products in the creative range. Going forward, we will continue to expand the portfolio through new product development while progressively building our in house manufacturing capabilities. We will maintain prudent balance of volume led growth and margin protection to achieve our previous guidance. Our Steel Bottles and Houseware business grew by 54.3% year on year to INR 19 crores compared to INR 13 crores in Q1 FY twenty twenty six.

9:16 The segment continues to see increasing traction as we expand our presence in these newer categories. It currently contributes around 6% of our overall revenue and our focus will be on broadening the product portfolio and expanding distribution. Over time, we expect the revenue mix to progressively shift towards creative products and steel bottle and houseware, with these businesses contributing a larger share of our overall portfolio. During the quarter, we introduced 32 new products across categories, further expanding our portfolio product portfolio. For FY 2027, we have a pipeline of launches across pens, creative products and steel bottles and houseware.

10:09 We will continue to deepen our pencil portfolio, introduce higher value formats in pens and expand our steel bottles and houseware portfolio across channels. To support the growth of our steel bottle and houseware business, Flair Chyrosyl Industries Limited has placed an order for a fourth of our business. Progress made approximately 30 to 35 percentage. With Creative the products and steel bottle and houseware remain key growth engines for us.

10:54 Together, these businesses contributed approximately 31% of the company's total revenue in FY twenty twenty six and both continue to witness strong momentum. With the planned capacity expansion in steel bottles and continued scaling up of the creative product business, we expect their combined contribution to increase to approximately 35% to 38% of overall company revenue in FY twenty twenty seven. Coming to our domestic and export performance. Domestic sales grew 13% Y o Y to INR277 crores compared to INR245 crores in Q1 FY twenty twenty six, reflecting continued demand for our brands in the domestic market.

11:45 Exports stood at INR43 crore and remained broadly flat year on year, primarily due to disruptions in the West Asia, resulting in longer transit times and higher freight costs during the quarter. While the near term environment in West Asian region remains challenging, we have started focusing on increasing sales in other geographies and expanding our brand presence across international markets. In the current quarter, we have started seeing a positive growth in the export in various markets. Exports will continue to be an important area of focus and growth for the company. During Q1, the company incurred a total capital expenditure of INR43.42 crores, of which INR33.25 crores was capitalized towards the factory building in Valsar facility.

12:43 This investment is aligned with our long term strategy of strengthening manufacturing infrastructure. This also includes a CapEx of INR 38.7 lakhs recorded at Surat facility comprising investments and more. We are a zero debt company and all the internal accruals are for future expansion and for the shareholders. Overall, we remain focused on building a stronger and more diversified FLAIR. We continue to drive premiumization across our product portfolio, strengthen our integrated manufacturing capabilities, expand our distribution and market presence and improve our working capital efficiency. We are confident in delivering consistent growth and creating long term value for our stakeholders.

13:36 Thank you, everyone. I would now like to hand over to the moderator to open the floor for questions. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on their touch tone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use answers while asking a question. The first question is from the line of Neha from Nuvama. Congratulations on good margins for tenants here. The first question is related to margins itself. We have seen your gross margins falling just about 150 bps Q o Q and remaining actually flattish Y o Y.

14:34 While you said on the opening remarks that, you know, reduced schemes and, you know, discounts there, is that a sustainable level of margin? I understand polymer price are, you know, moving too swiftly. But can we actually look at these kind of gross margins continuing over the next two to three quarters? Thank you, Nishnaya. Let me just give you a background of the entire calculation in the margins which you are posing which are seen. So Q4 FY 'twenty six margins remain largely protected due to lower cost inventory procured earlier. However, the impact of elevated raw material costs started flowing through from Q1 FY 'twenty seven, resulting in margin compression. To mitigate this impact, the company has already implemented targeted price increases across key steel, waters and housewares categories, rationalized trade schemes and discounts and intensified its focus on premiumization and product mix enhancement.

15:34 As a result, despite the inflationary environment due to geopolitical uncertainties, the sequential gross margin decline has been limited to 150 bps. It basically demonstrates the effectiveness of these corrective actions, which we undertook during the quarter. EBITDA margin declined to 16.7 from 17.9% in Q4 FY 'twenty six and seventeen point two percent in Q1 FY 'twenty six, while gross margin softened to 49.7% from 51.250% in corresponding period last year. See, the raw material prices across key inputs have increased, Sneha, as we speak, you are aware of that, which creates significant near term cost pressure.

16:27 Management had previously also indicated a potential 100 to 200 bps impact on margins that was in the last quarter call. And the Q1 performance reflects approximately reflects about 1.5% impact due to these higher input costs. To answer your question, looking ahead, how do we see it is that as a geopolitical situation stabilizes, the management expects the cost pressures to gradually ease over the next three quarters as a full benefit of pricing interventions intervention measures, including rationalization of schemes and discount shall flow through the P and L. And we expect to target an EBITDA margin of 17% to 18% for the year. Understood. That was quite helpful, sir. The second question was more on your segmental revenues.

17:18 Now in last quarter, we gave the guidance that Pence will actually we are looking at around 5% CAGR sort of growth, but this quarter, we actually saw 9%. On the other hand, creatives, which we were very positive about about 50% guidance out of the numbers, we were at 23%, while steel bottle was largely in line with our estimate and, in fact, higher. Could you actually tell us what is happening in pins and what went wrong in creatives on the other hand? Rajneha, just to answer about the Creative, nothing went wrong as of in Creative. We witnessed a growth of 23% Y o Y, primarily impacted by the nominal prices in due to West Asia crisis. There were certain categories wherein we took a conscious decision of going for balancing of volume led growth and protection of margins.

18:10 This impact were on categories such as geometry boxes, pencils and certain subcategories within coloring portfolio. So it was a very conscious call that we took to protect the margins. Overall, if you look at the pen category as a whole, we have seen a decent growth of 9% in Q1, which always we used to consider, like whenever we had a call earlier, we would always say that it will be higher single digit. So it's mainly due to our strong brand pull for riding instruments of FLAIR and HOZZER brand in domestic market. Was quite normal, Mohit. Any change in guidance with the overall revenue numbers?

19:00 No. I think looking at Q1 and the way things are progressing in Q2, we are positive that we'll be sticking for original guidance of 15% year on year. Understood. And team, great that you announced steel bottle business expansion here. Just wanted to understand a few numbers. What will be the key utilization currently that we are operating at? Potential revenues from the current line, and when is the new line expected, and what sort of offerings are we bringing in in potential revenue there? Currently, if you look at the sorry. So if you look at steel bottles, currently, the capacity utilization is about 65%.

19:47 And going forward, as historically, also, whenever we cross 65%, 75%, we tend to invest in the new expansion. And given the positivity and the signs from our buyers, mainly in general trade and e commerce and QuickCom, we have taken a call that to increase the capacity by 35%, where we will be investing in one more state of the art automatic line of steel bottles, where we would be investing about INR 15 crores. And the expected revenue generation would be around INR 30 to INR 35 crores because it all depends on the product mix, what we make on that line.

20:36 And to answer one more question about the existing line revenue. The existing line, looking at the product mix, what we have been giving in the last two, three quarters to our customers, it looks like we would be doing about INR 100 odd crores with the current capacity. That was helpful. One last one, if at all, I can ask a bookkeeping question here. What would be the split of OEM business this quarter on both domestic and So when we talk about OEM business, overall OEM business business has subdued demand during the period. As highlighted earlier, also our domestic OEM business hasn't fully phased out. With our legacy OEM relationship reduced to zero. When we talk about export OEM business, of course, because of the crisis, there was a demand issue and also because of the logistics issue.

21:39 The it impacted the demand and the consumer operations. I would say, overall, if you look at the OEM business, it is hardly contributing to about 5% of our overall business. So it's it's a... Yes. It's it's... It will be looked at as a regular business. It's nothing to be... We are not focusing on on OEM. We we are rather... For last two years, we have been focusing on our own brand sales. Understood, Mohit. Thanks to our team and all the very best. Thank you. Thank you. The next question is from the line of Aradhana Jain from three sixty one Capital. Please proceed. Hi. Thank you for the opportunity.

22:27 Couple of questions. First, I wanted a little more understanding on TEN's business. So one is we've seen a good growth, 9% growth this quarter. Wanted a little more understanding of how are you looking at this growth, what led to it, was there any one off sort of demand that we saw in this quarter, and can we expect this kind of growth to sustain over the next few quarters? Because like the previous participant also said, for the full year, we were expecting, you know, low to mid single digit kind of growth in. But given we've already done 9% this quarter, can we expect the run rate to continue in the rest of the year as well? That's my first question. Yes. So when we look at the overall pen business, I think we have grown we have grown by 9% year on year, and it was mainly driven by the volume growth.

23:20 So if you look at the overall volumes, we are increasing our market share in the domestic market as well as the export market. So going forward in Q2, Q3, Q4 also, we are hoping to continue with the same guidance of high single digit growth in Pendal Region. And this was also led by the new product launches, what we have done in back to school season. Okay. And any sense if you could give us as to what could be our market share today in Pence? And the reason I'm wanting to understand that is that recently, one of your competitors has also taken over Reynolds as a brand. So wanted to get your sense also on how you're looking at the competitive intensity to change your henceforth?

24:10 And what is our strategy going to be? Are we changing any strategy there with respect to Penn? So to answer that, Reynolds was always there in the market earlier, too. And as the leaders in writing instrument industry, we have a strong brand portfolio with Flair and Hauser. And we will continue with our high growth strategy in this segment. So I don't see any impact at all due to this takeover, Yes. And any sense on what would be our market share today in the Penn segment? So currently, the market share as for the crystal report, large crystal report, in Writing Instruments, we have a market share of 18%.

24:58 18%? Yes. Understood. And is it fair to assume that going forward also, the growth will be driven by our own brand rather than the OEM business for us? Understood. Yes. It will be our own brand growth. Understood. And what would be the mix of mass, mid premium and premium? Any change in that mix in for this quarter? You said it was volume led, but still wanting to understand was there any change in the mix or it's mostly fifty fifty for us, 50% coming from March and 50%? No. I would say March and mid has increased because, of course, because of the volumes. The March and mid has increased. Understood. And in the Pence segment, to interrupt, you ma'am, may we request you to join the question queue for a follow-up question?

25:51 Sure, sure. I'll do that. Thank you. Thank you. The next question is from the line of Shivi Gupta from Prinetra Asset Management. Please proceed. Good afternoon, sir. Thank you for the opportunity. My first question is that the new unit that we have... We are putting in Gujarat for Writing Instruments, sir, how much is the, you know, total revenue potential for the maximum utilization? And my second question is on working capital. So for inventory, if you could just share some thoughts like how we are doing inventory wise. Well, yes, that would be good. So the new unit that Valsar which are putting is basically it will suffice our growth projections for the next one point five years, which we have.

26:45 So and it is not only for Writing Instrument, it is for Writing Instrument and Creative, both. We have historically also we you would have seen that our CapEx to revenue ratio has been around 3x. And we have projected our calculation also says that it is going be 3x this time also. Sure. And on your working capital? So I'll share with you some, I would say, the working capital here. Working capital has, in fact, year on year, if you see, my working capital has gone down by six days, has improved.

27:32 And so has improved by six days year on year, if I would say previous quarter one to quarter one. It has broadly remained stable during the quarter, this quarter compared to the previous quarter, that's Q4 FY 'twenty six, with inventory, receivers and payables remaining largely in line with the previous quarter. So we got the advantage of keeping you would have seen in our numbers, we got the advantage of keeping higher raw material stocks, especially in the time of the uncertain geopolitical situation. But going forward, we expect to streamline inventory levels as the West Asia crisis stabilizes with an anticipated improvement of approximately ten days in our entire working capital cycle levels.

28:18 We should be doing this by the end of this year. And also on working capital, just to add to this that inventory heightened inventory levels. One major thing which one thing which I said majorly because of the crisis where the uncertainty of supply of raw material and the pricing issues which we face, but we also have new product launches across creative and steel bottles, which require somewhat higher inventory, particularly as these categories are still establishing distribution relationships. This is expected to normalize as the business these businesses gain traction. Given our experience in the pen business, inventory levels can be managed more effectively, while the newer categories will see a gradual optimization as demand visibility improves.

29:11 So overall, we expect a continued gradual improvement in both inventory and receivable days, which will support a higher working capital healthier working capital cycle in FY 'twenty seven. Thank you so much. This was very helpful. Thank you. Thank you. The next question is from the line of Atul Mehra from Motilal Oswal. Please proceed. Yes. Hi, there. Good afternoon and thanks for the opportunity. So my question is on the revenue guidance. So basically, sir, if you have to meet our 15% guidance, we have to do 18% growth for the rest of the year. So in the current environment, what gives us the confidence of 18% growth for the rest of the year, if you can maybe break it up in business or segment wise, will drive the growth? And are you already seeing acceleration in top line growth now that, say, half the quarter already passed back?

30:12 Yes. So overall, if you look at the numbers and going forward in next 0.75, we would like to stick to our guidance looking at the kind of demand, what we are generating in domestic market as well as export marketers from our customers. So based on that, we would like to stick to our guidance. As far as category wise is concerned, as we had always mentioned that it's going to be high single digit in Writing Instruments for us, the growth. Creative and steel bottles is, of course, higher number digits, like about almost 40%. So I think we would like to stick to the guidance. Got it. And then other than maybe the near term guidance, maybe if you were to think about it from a three year perspective, would we be confident of similar 15% plus top line bottom line over the next three years as well, given the growth and expansion plans?

31:13 Right, Atul. So all the projections which we are sharing with you, this is for the current year, about three years, I 15% CAGR is easily would not like to kind of give you a higher number at this point of time, but we are sure about it and confident about the plans which we have in place. Got it. One final question, Alpaj, is on operating leverage you spoke about in opening comments. So given obviously the current environment where cost pressures on the raw material side are on the higher side, If you can highlight a little bit more like what is the potential for building leverage, which can unlock some of the margin loss from gross margin, if you can maybe specify?

32:00 So currently, if I like I shared, we have taken few measures here, mitigating measures to kind of counter the increase in the raw material prices. And we there are certain products in one or two of these segments where we have also taken a conscious decision to kind of market them in a different way to maintain a balance between margins and that. So a combination of volume led growth and targeted price increases what we have what has worked in our favor. So Q3, Q4 are always better, Atul, if you were to see Q1 and Q2. Now Q1, obviously, just marred or whatever is influenced a little by the ongoing crisis in the raw material price increase and exports have been affected.

32:47 But as we move forward, based on the measures which we've already taken in terms of reducing discounts, rationalizing discounts and schemes and also increase in prices. The combination of this should not be an issue for achieving the projected numbers. Got it. Got it. Thank you very much, sir. Thank you and all the best time. The next question is from the line of Nilesh Doshi from Prospero three AMC. Congratulations for encouraging result in the light of the sharp increase in raw material price, sir. Thank you. Congratulations. Sir, my question is regarding the creative segment.

33:35 Sir, creative segment is our one of the fastest growing segment. And you have given the guidance of 15% on overall revenue basis. And... But our present as an indicator that we have a 75% production capacity now. So is the company thinking to expand the capacity for the creative segment in the near future? Yes, yes. So as we mentioned earlier also, Nilesh sir, that we are expanding our production base for creative. And whatever infrastructure we build on new buildings for the factories, it is always fungible where we will make pens as well as stationery creative division.

34:22 Will that capacity cater to the future demand also because the creative is the fastest growing and we are something anticipate that there will be a much more growth than the segment. So our capacity must be ready for the future demand also. Is it like that? Yes, yes. For future demand, everything is planned accordingly to meet the future And so when that capacity will be ready, sir? By end of next quarter is when we have the entire capacity in place. The building has been capitalized so far. It is built, but the machineries and mold, etcetera, are yet to kind of be installed. So by end of this quarter is where we see it should start commissioning.

35:07 And Nileshi, you would realize that once we kind of it's not a switch on, switch off. So we will over the next two quarters is where we'll see the capacity being the optimum utilization of the capacity there where we start. And just to add to this, this new Valsar plant where we plan to kind of manufacture pens, writing instruments as well as creative products. Simultaneously, our capacity at Surat has also begun its operation in 100% operations in the new property or new factory, which we kind of capitalized in the previous year. So these put together should be shall be, in fact, sufficient to kind of power our growth.

35:59 Okay. Okay. And sir, my next question is to the earlier participant, you mentioned that the renewal was already in the market, so not too much worry to us. But now it is is on by the some strong competitor. So we we must be ready with our strategy to maintain and increase our good market share. You mentioned that 18% market share in the pen segment, and now the Renault is acquired by the Dom. So are we ready or what is our future plan to maintain our growth? Because Penn is already a single digit growth trajectory. So we should not lose the market share and maintain at least our growth trajectory. Yes. So Neelet, sir, if you see in Q1 as well, we have seen a growth of 9%.

36:48 So when I talk about domestic market alone, we have seen a growth of almost in terms of revenue, it's almost about 13%. In domestic... In domestic So I would say and it is all volume driven. So there's no way we are losing market share to anybody. And of course, we have to be over aggressive. We have been always aggressive in writing instruments to protect our leadership, and we will be aggressive in the future as well. In short, we are ready to fight any competition. Yes, we are. Fact, all the new product pipelines are already ready for next two years.

37:35 Thank you. Thank you, Moishkar, and all the best. You are maintaining the good trajectory, sir. Thank you. Thank you. Thank The next question is from the line of Nirmam from Unix PMS. Please proceed. Yes. Thank you for the opportunity. Great work on the margins. So my first question is, so we were implementing an inventory management system, right? So one, is that complete? And secondly, how does that impact our working capital, especially inventory days going forward? So while we speak, the implementation is underway. And within two, three or three months, we'll see proper optimization of the new ERP and all the benefits will start flowing in.

38:24 Answer your specific question regarding the inventory management, the software has a very robust integrated platform for handling the materials, the goods, finished goods, raw materials, semi finished goods. So what happens out there is the timing of the reorder quantity level, etcetera, and the utilization of the machines, per machine utilization. All these calculations will come into play once we have this fully operational ERP. And that happens, then this will bring about economies in a much larger way. So what we see at inventories also shall come down. So the production cycle shall also be calculated within the software.

39:17 So we will procure inventory at the right time. The pricing will be another factor, which will show up on the software. And hence, the it will have a positive impact on maintaining the inventory. So overall, capital cycle shall also improve in a big way. Okay. Just secondly on the steel bottle, so can you comment on the profitability now that we're operating on a very good utilization level, what kind of margins do we make in this segment? And how do you see these going forward? See, when we talk about steel bottles, yes, the profitability is going to improve further.

40:03 Currently, we are still working on the product mix. And as the product mix changes as per the season, the profitability also varies. But more or less, we are in line with our original target of having an EBITDA of 1718% in that segment as well. Okay. And last question on the creative. So you mentioned we had some raw material challenges. So now that we are increasing prices in some categories, do you think we'll be able to pass on the price increases and grow as well because we'll also have to improve our growth rate sequentially, right? Yes. So as I mentioned earlier, also I'll reiterate the same thing that we took a conscious decision of going of balancing a volume led growth and protecting the margins as well.

41:02 So there are a few categories, as I mentioned earlier, like geo boxes, pencils and some categories of coloring where we had the issue of pricing, passing it on to the consumers. But most of the categories, we have reduced the schemes and increased the prices. What kind of price hikes would we have taken across the board if a ballpark number? See, a total of... The price hike has been price increase in the raw materials have been to the tune of 10% to 15%. But our price hike here, we're talking of 10% plusminus is where we have that. Okay.

41:47 Yes. Thank you and all the best. That is from my side. Thank you. The next question is from the line of Manpreet Singh Arora from Arora Wealth Advisors. Please proceed. Yeah. Thank you. Sir, my first question is on the ChiroCell subsidiary. Now we did 86 crores of revenue in the last financial year on steel bottles. Now does it all get booked under the Kyrosyl subsidiary? The reason I'm asking is, you know, the annual report shows Kyrosyl doing 41 crores last year, but we have reported INR 86 crores of steel bottle revenue. We quarter we understand We look at steel bottle and houseware as one division.

42:45 So the steel related ones are manufactured in Kyocyl. And there's also a big quantity of bottles, which we are also trading. We are buying from a vendor and selling it, which we are not manufacturing. So that is also part of it. So that's one. Which we will be, you know, manufacturing of the the current line, what we are setting it up, we will be doing that. Okay. So just to understand this then, in order of 86 crores that we did last year, 41 crores was done in house, and the rest was done using trading? So No. No. So that was... The balance was a combination of in house plus trading.

43:39 Okay. And that revenue doesn't get booked under the ChiroSil subsidiary? Gets booked under the payroll? It's booked with another legal entity. Kyrosyl subsidiary has only the in house manufacturing, which we do. So the trading, etcetera, is kind of booked in the other legal entity. I see. Okay. So this INR100 crore potential of you know, revenue that you're talking about is out of the Chirofel subsidiary or including Chirofel manufacturing plus trading? No. It is about the Chirofel subsidiary. Okay. Yeah. So so just to follow-up on this because, you know, I want... There's some discrepancy. So you said we have reached 65% capacity utilization here. So does that mean that Kyros will probably doing Yeah. So as I mentioned, we will reach 65% in next next quarter, next couple of quarters.

44:42 So if we plan to expand our capacity now, in next three quarters, we will be able to commission the fourth line, and then we will start producing it after a subsequent quarter. Yes. So the expansion takes time. So we have to plan before. Okay. Thank you. The other question was on the distribution reach. Now we had limited our creative distribution to 68,000 outlets last year. Do we intend to increase that in the current year or still limit to 60 I eight think current year also we are focusing mainly to have to cater to those 68,000 only and to increase the throughput and increase the sales in the existing outlets only.

45:39 Okay. The reason I'm asking, sir, is, you know, so I'm from I may have done a bit of going around the modern trade stores here in South India and some of East India just to look at our product. And while I see that our fans are present everywhere, we are very good present in the. The the creative segment, especially here in Bangalore and Chennai, you know, it has it has been a mixed bag where some of these products are present, but are not there. The the the steel bottles are still seen in some of the tier two sounds as well. So just want to understand, you know, which reasons are you targeting? Are the micro is covered? Because the creative, you know, while I see that some of these products are very innovative, your Disney branded sensors, etcetera, But the availability has not I'm not seeing the availability.

46:38 That's what we mentioned earlier also that we are focusing these 68,000 outlets are those which are the main stationary counters in India. And we when we look at our field assets report, when we analyze the reports and we break shop wise, we feel that there is a huge scope to cater to these existing outlets rather than increasing the number of outlets because the increase in the number of outlets can be done once we achieve a reasonable first store value of what we have targeted. Yeah. And also to answer that, if you as you said that you visited a few modern trade stores and there were a few products in our creative category.

47:27 So from last year until last year, we were seen as a writing instrument player in Warren Bates. But since last year, they have accepted our creative categories as well, be it mechanical pencils or wooden pencils. So now slowly, slowly, we are making inroads in these stores as well. All right. So the next question is on the employee expenses. Now between '25 and '26, our employee expenses almost increased by 25%. Now where has this employee expense increase mostly gone to? Is it on the sales force side or on the manufacturing employee manufacturing side employees?

48:19 Just trying to understand what has caused this drastic increases and then also what is the sustainable run rate? Nawan, I don't know where are you seeing these numbers of increase of 25%, 30% over here. If I were to kind of share with you my employee expenses, which would include the job work and other charges, which are shown in other expenses. This has historically been plusminus 0.5%. So plusminus 21% is what we see if I were to take up all the job work charges, etcetera. And if I were to talk only of employee, which you are seeing over there, which has been in the range of 16.5 to 17.5%, that's the maximum range which we see.

49:10 Okay. So what I meant was that between FY 2025 and we had INR171 crores in employee expenses and then in FY '26 we had INR214 crores in employee benefits expense. The the same percentage to the employee expenditure, the percentage to the revenue, you will get a stable number which is going on. But yes, sir. It will be always between yes, sorry. Yes, what I was saying was if we have to see operating leverage play out, so at some point of time, some of these expenses have to remain constant or not increase in proportion to our revenue, right? And that's where... You're right. But also if you see that over the last two years, we have forayed into major expansion.

50:00 And the new categories which we have got into, the new segments, which is Creative and Steel Bottles also require a lot of focus there. So the employee expenses here yes, sorry. Yes. The question is, was it more on the sales side that we have to increase headcount? Or is it on the manufacturing side? So it is both. Manufacturing also, since we have increased our manufacturing capacities, we have increased the headcounts in factories and as well as sales side also, we have increased around two fifty people in sales in last two years. Okay. And so this current run rate of INR 55 crores, is that going to stabilize now or we are expecting more?

50:49 No, it's more or less stabilized now. So we bring about we are anyways working towards having economies of scale and which will impact our lower growth in the employee expenses. But this is all said and done that this is what we feel today. But tomorrow, if we go for another expansion or another segment, which we'll get into, obviously, the numbers will change. The range has always been between 16.7% or 16.7% to 17.5%. That's the range of the percentage of employee expenses over revenue. Okay. And sir, on the Valsar operationalization, has there been some delays? Because, you know, we've been... In the last two quarters, we've been saying it will operationalize.

51:40 But now I think you mentioned that only the building has been capitalized and will probably start operational. No, this quarter, we will have it completely by end of this quarter, we'll be completely operationalized. So when we say, when we commissioned, 100% commissioning is what we are talking about. But as we discussed earlier also, there was a little delay, but not so much that these are normal delays, which we've seen having the building and stuff. Okay. Thank you, sir. Thank you and all the best. Thanks. Thank you. Thank you. The next question is from the line of Saloni from ValueQ Investment Advisors. Please proceed.

52:27 Hello. Hi. Am I audible? Hello? Yeah. Yeah. Yeah. Yes. Sir, I only have one question, and that is, with the current creative and the steel bottle revenue that we are generating, what would be the ratio of outsourcedlashed rated revenue and the in house one? So you mean to say the revenue mix of trading and in house capacity? Right. So it remains broadly similar. It's about 75%, 80% is our in house capacity and balance 20% is what we source we outsourced.

53:23 Due to time constraints, that was the last question. I now hand the conference over to the management for the closing comments. Over to you, Thank you. Thank you, everyone, for taking time out for this conference call today. If you have any queries, please feel free to contact our IR team MUFG InTime India Private Limited. Thank you all and have a good day. Thank you. On behalf of MEFG In Time, that concludes this conference. Thank you for joining us and you may now disconnect your lines.