DOMS Industries Limited — Q2 FY26

Doms Industries Ltd Q2 FY2025-26 Earnings Conference Call https://www.youtube.com/watch?v=YZ6vTcXoOKI Published: 6 months ago

0:00 Ladies and gentlemen, good day and welcome to Dom's Industries Q2 FYI26 earnings conference call. Before we 0:07 7 seconds begin, a brief disclaimer. The presentation which Dom Industries Limited has uploaded on the stock 0:14 14 seconds exchange and their website and the discussion during the call contains or may contain certain forward-looking 0:23 23 seconds statements concerning Dom's industry's limited business prospects and profitability which are sub subject to 0:30 30 seconds several risks and uncertainties and the actual results could materially different from those in such 0:38 38 seconds forward-looking As a reminder, all participant lines will be in listenonly mode and there will be an opportunity for you to ask 0:46 46 seconds questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then 0:54 54 seconds zero on your touchstone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. 1:02 1 minute, 2 seconds Anerod Jooshi. Thank you and over to you sir. 1:06 1 minute, 6 seconds Yeah, thanks Shrani. On behalf of ICICI securities, we welcome you all to Q2 and 1:13 1 minute, 13 seconds H1 FI26 results conference call of Dom's Industries Limited. We have with us today senior management represented by 1:22 1 minute, 22 seconds Mr. Rahul Shaha, Chief Financial Officer. Now I hand over the call to Rahul Bay for his initial comments on 1:29 1 minute, 29 seconds the quarterly performance and then we will open the floor for question and answer session. Thanks and over to you Rahul Bay. 1:38 1 minute, 38 seconds Thank you Anelai. Uh good afternoon and a very warm welcome to everyone to the conference call for Q2 and H1 FY26. 1:48 1 minute, 48 seconds We hope you all had a wonderful time celebrating Diwali with your loved ones and take this opportunity to extend our 1:55 1 minute, 55 seconds best wishes to all for a prosperous new year. 2:00 2 minutes Joining me on this call is the team from Marathon Capital, our investor relations advisors. I hope everyone had an 2:07 2 minutes, 7 seconds opportunity to go through the investor presentation and the results release that have been uploaded on the uh exchanges and our company's website. 2:18 2 minutes, 18 seconds I'm happy to share that despite the impact of GST 2.0 zero transition we continued our growth momentum in Q2 FY26 2:28 2 minutes, 28 seconds with an increase in sales of over 24% marking yet another milestone in our journey showcasing the resilence of our 2:36 2 minutes, 36 seconds business model and reflecting the strength in demand of our products. 2:42 2 minutes, 42 seconds A notable highlight for the quarter was the government's announcement of GST 2.0 zero reforms slashing rates across some of our key product categories. 2:52 2 minutes, 52 seconds Although we believe GST reduction is structurally positive, it led to temporary disruptions in September, 2:59 2 minutes, 59 seconds including inventory clearance and order postponement by trade partners. 3:05 3 minutes, 5 seconds Despite this, we achieved positive sales growth, demonstrating our strategic agility and the ability to navigate 3:12 3 minutes, 12 seconds transitional challenges while capitalizing on market opportunities. 3:18 3 minutes, 18 seconds We believe these reforms coupled with the income tax reductions introduced in budget 2025 3:24 3 minutes, 24 seconds will have a long-term positive impact by increasing the disposable income and uplifting consumer sentiments thereby 3:33 3 minutes, 33 seconds creating a favorable environment for business growth and boosting demand. 3:38 3 minutes, 38 seconds Coincidentally aligning well with the planned commercialization of our flagship 44 acre expansion project. 3:47 3 minutes, 47 seconds Furthermore, the GST rate reduction on some of our core products creates a level playing field between organized 3:53 3 minutes, 53 seconds and unorganized players, providing better market penetration opportunities and shift in demand towards branded products. 4:04 4 minutes, 4 seconds In terms of operational highlights, we continue to leverage our widespread product portfolio to enable us to 4:11 4 minutes, 11 seconds effectively service consumer demand and deepening our presence and market share. 4:17 4 minutes, 17 seconds We continue to expand our product portfolio with introduction of new products across all our product segments 4:25 4 minutes, 25 seconds with additions in categories such as scholastic art material, kits and combo packs, office supplies and scholastic 4:33 4 minutes, 33 seconds stationary like the launch of a vibrant new range of beautifully designed mechanical pencils in exciting colors and features. 4:42 4 minutes, 42 seconds Furthermore, the performance of Unigland Healthcare, our baby hygiene business, also yielded positive results, 4:49 4 minutes, 49 seconds contributing to our overall growth, reflecting market acceptance and validity of the baby hygiene products. 5:00 5 minutes As a part of our consumer connect uh initiatives for enhancing the brand aspirational value, we continued our 5:08 5 minutes, 8 seconds marketing uh campaign including digital connect initiatives to event sponsorship among others. We are also entered into a 5:17 5 minutes, 17 seconds strategic partnership with Kon Banega Karodati as an official partner for the show which we believe has helped the 5:24 5 minutes, 24 seconds brand reach out and connect further with millions of consumers across age that are spread across the country and overseas. 5:33 5 minutes, 33 seconds Coming to our expansion initiatives, we are progressing steadily on our expansion trajectory with a 44 uh acre 5:41 5 minutes, 41 seconds project elit with slight construction delays on account of prolonged and intense monsoon conditions. But we are 5:49 5 minutes, 49 seconds confident of getting the possession of the first building in Q4 FY26 and start commercial production from Q1 FY27. 5:58 5 minutes, 58 seconds This capacity expansion along with ongoing brownfield initiatives has been strategically planned to support our 6:05 6 minutes, 5 seconds growth objectives in our core stationary and art material segment. 6:11 6 minutes, 11 seconds Coming to the details of our financial performance, consolidated operating revenues for Q2 6:17 6 minutes, 17 seconds FY26 stood at 567.9 crores, a growth of 24.1% compared to the same quarter last 6:25 6 minutes, 25 seconds financial year. This increase in sales was predominantly on account of impressive performance in domestic markets backed by volume growth as well 6:35 6 minutes, 35 seconds as marginal increase in average selling prices. 6:38 6 minutes, 38 seconds Our international business continued a steady growth trajectory recording a 18.5% in growth in gross product sales 6:47 6 minutes, 47 seconds year on year and during the quart during the quarter. During this period, the domestic gross product sales grew by 28%. 6:57 6 minutes, 57 seconds The consolidated AITA for Q2 FY26 grew by 15.8% to 99.5 crores as compared to 85.9 crores in Q2 FY25. 7:09 7 minutes, 9 seconds The AITA margin for the quarter stood at 17 12%. 7:14 7 minutes, 14 seconds This consistent maintenance of EITA margins towards the upper end of our guided range of 16 12 to 17 12% 7:22 7 minutes, 22 seconds demonstrates our operational efficiencies and a robust business model of balancing growthled approach with prudence execution. 7:32 7 minutes, 32 seconds The profit after tax for the quarter stood at 60.9 crores with growth of 13.4% over the same period in the 7:40 7 minutes, 40 seconds previous financial year. The pack margin for the quarter stood at 10.7%. 7:46 7 minutes, 46 seconds As mentioned earlier, we continued aggressively with our expansion initiatives. For the 6-month period, we have done a consolidated capex of 7:55 7 minutes, 55 seconds approximately 150 crores, including capital advances and are on track for our guided fullear capeex estimates in the range of rupees 210 to 225 crores. 8:09 8 minutes, 9 seconds Looking ahead, we continue to remain optimistic about the second half of the year, backed by continuous product introduction, strategic expansion 8:18 8 minutes, 18 seconds initiatives, and increasing market penetration, positioning us well for sustained growth. This optimism is 8:25 8 minutes, 25 seconds poised to receive further boost from supportive government initiatives including GST and income tax cuts and 8:33 8 minutes, 33 seconds doms remain strategically positioned to capitalize on this emerging demand opportunities. 8:40 8 minutes, 40 seconds With this I would now request to open the floor for question and answers. Thank you. 8:47 8 minutes, 47 seconds Thank you. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchstone phone. If 8:56 8 minutes, 56 seconds you wish to remove yourself from the question, you may press star and two. 9:01 9 minutes, 1 second Participants are requested to use handset while asking a question. Ladies and gentlemen, we will wait for a moment while the question cue assembles. 9:25 9 minutes, 25 seconds The first question is from the line of Nihhata from Noama. Please go ahead. 9:32 9 minutes, 32 seconds Congratulations on great numbers once again. Um just two questions from my end. First of you I think in the opening remark you were mentioning that of course there was GST impact of few days 9:40 9 minutes, 40 seconds because in a lot of your products GSC going down to you know zero% just wanted to understand would we be able to quantify where exactly in which 9:48 9 minutes, 48 seconds particular segment that would have been higher and more importantly if that was not the issue of deto where we would have landed off with respect to both. 10:00 10 minutes Uh hi mayor thank you. uh so uh in terms of uh you know the product categories uh 10:07 10 minutes, 7 seconds where GST uh has come down from 12 and 5% earlier to 0% it currently 10:14 10 minutes, 14 seconds contributes uh you know about 45% of our overall uh sales if you look at FY25 10:22 10 minutes, 22 seconds uh and then there is baby hygiene segment which in FY25 was about uh 6% of our total sales where the GST rate reduction has come down from 12% to 5%. 10:36 10 minutes, 36 seconds So overall between 45 to 50% of our total products uh have been uh impacted 10:43 10 minutes, 43 seconds by this GST transition. Um you know it's really difficult to quantify as such you know how much we would have uh done 10:52 10 minutes, 52 seconds better if this transition impact was not there but uh you know we believe that uh if this transition impact would not be 11:01 11 minutes, 1 second there our sales could have been about 3 to 4% higher than what we've uh reported for the quarter. 11:10 11 minutes, 10 seconds That was quite helpful Rahul and I'm sure by now you would have also done the backward analysis of the GS input credit 11:17 11 minutes, 17 seconds that you were getting any meaningful impass or based on that itself you've just passed on the pricing so what I want to impact is the understanding on 11:25 11 minutes, 25 seconds your profits the way they would move with GST so uh like uh a lot of our products move 11:34 11 minutes, 34 seconds down to about 0% and therefore you know ITC becomes ineligible on these products 11:40 11 minutes, 40 seconds and therefore the it becomes a part of the cost and the cost will rise but as similarly the selling prices will also 11:49 11 minutes, 49 seconds rise. So you know when this uh GST transition was happening we reworked all our cost sheets uh after uh figuring out 11:57 11 minutes, 57 seconds how much the cost would increase because of ITC we came up with the revised MRPs and uh those MRPs were then introduced 12:05 12 minutes, 5 seconds in the market. So overall uh I don't see a significant impact of this on the 12:11 12 minutes, 11 seconds margins of the company in they would have seen approx 12:21 12 minutes, 21 seconds level I understand it would be different from product to product but on a range basis pricing of a product so in fact all our 12:29 12 minutes, 29 seconds MRPs have come down so a p of pencil which were earlier selling at 60 rupees MRP is now sold in the market at 58 rupees. 12:39 12 minutes, 39 seconds Uh in terms of the company sales at the primary level if you are asking me uh the sales would have uh you know 12:48 12 minutes, 48 seconds increased by about 3 to 4 not more than that 3 to 4%. 12:56 12 minutes, 56 seconds Understood. Understood. Thanks. Thanks a lot. All the very best. Okay. 13:04 13 minutes, 4 seconds Thank you. The next question is from the line of Kunal Mura from BNP Pariba. Please go ahead. 13:13 13 minutes, 13 seconds Yeah, thanks uh thanks for the opportunity. Uh clinical quarter. Uh first question is you not advertised in the past but are now advertising on KBC. 13:23 13 minutes, 23 seconds What is the change in thought? Which product would you look to push through marketing and what is the incremental cost which you're looking at and how has 13:31 13 minutes, 31 seconds the response been to your marketing campaign? 13:35 13 minutes, 35 seconds Uh so pun uh you know uh so KBC was not specifically for any particular product but it was more for the overall brand. 13:45 13 minutes, 45 seconds So uh it was just that uh you know the entire uh Dom's brand and our entire 13:52 13 minutes, 52 seconds range of scholastic stationary scholastic art office supplies uh were uh you know distributed uh to the kids 14:00 14 minutes who were uh coming to that show for a specific period of time. So it was just an opportunity we got uh through our 14:08 14 minutes, 8 seconds marketing references and uh you know uh there are nothing like a planned thing 14:15 14 minutes, 15 seconds or something uh in terms of how it helps is uh you know something which we'll come to know in uh the mid to near term 14:23 14 minutes, 23 seconds but overall it uh adds value to the brand's aspirational value. 14:31 14 minutes, 31 seconds Okay. 14:34 14 minutes, 34 seconds No, no, no, no. In addition to KBC, before KBC, we also, you know, did some partnership with a leading cinema chain 14:41 14 minutes, 41 seconds in India where, you know, this childcentric movie Sitar Zamipar was released. Uh there we advertised one of our friends in the chats. 14:55 14 minutes, 55 seconds So these are now small initiatives that we are taking. Again it's very specific to you know where to our consumer 15:02 15 minutes, 2 seconds towards our target audience of uh children uh even in this KBC partnership was for you know uh uh it not for the 15:12 15 minutes, 12 seconds entire season but for a few weeks where uh children were called as participants. 15:20 15 minutes, 20 seconds Understood. Okay. Second one is can you talk about some uh like successful product launches which you had uh mechanical pencils glue marker bag games 15:29 15 minutes, 29 seconds like what's really uh doing well right now? Anything which you can highlight in terms of what's done well? 15:36 15 minutes, 36 seconds So uh I see across the products where we've added capacities they've done well. you would have seen you know from 15:43 15 minutes, 43 seconds an uh from the presentation uh in office supplies the growth has been significant because that's where capacity has added 15:51 15 minutes, 51 seconds mechanical pencils we just launched uh towards the end of the last quarter uh the initial response has been positive 16:01 16 minutes, 1 second uh adessives also though there have been no new SKU additions in the segment but there are uh you know the brownfield 16:08 16 minutes, 8 seconds expansion that were do that we were doing in the adessive segment they are slowly coming on board. So that segment's doing well. 16:17 16 minutes, 17 seconds Uh across categories there are new uh products being added. Uh so you know even in Scholastic Stationary in our 16:25 16 minutes, 25 seconds core category of pencils you remember we have a partnership with Warner Brothers. 16:30 16 minutes, 30 seconds So there we introduced a Superman themed uh pencil pack. Again very different from what otherwise you get in the 16:38 16 minutes, 38 seconds market like O branded pencil. This is packed also differently. 16:43 16 minutes, 43 seconds So across products no specific as such kunal that I would want to highlight or something like that. 16:51 16 minutes, 51 seconds Understood. Uh third is on US tariffs. 16:54 16 minutes, 54 seconds Uh you like you had mentioned last time that it could have an adverse impact on the business. Uh I still see exports having seen a healthy growth. So how did 17:03 17 minutes, 3 seconds the US market US sales tick? Did you find other markets or US trend US sales have held up well despite tariffs? 17:11 17 minutes, 11 seconds So US sales you know uh because in the month of September it was during the quarter that uh US tariffs were 17:20 17 minutes, 20 seconds introduced. So all the open orders that we had were fulfilled by our consumer. 17:25 17 minutes, 25 seconds So in the last quarter specifically we did not see any significant impact of US tariffs on our sales. Uh but going 17:33 17 minutes, 33 seconds forward certain orders have been uh postponed and uh that have you know the capacities for that have been diverted 17:41 17 minutes, 41 seconds to other growing markets uh you know both where doms was already significantly present and you know the 17:49 17 minutes, 49 seconds distribution partnership with Fela that we started like for example in Chile uh where we uh you know initiated this Fela 17:57 17 minutes, 57 seconds distribution arrangement there we are seeing good repeat orders also coming So we we believe that while from a US 18:06 18 minutes, 6 seconds perspective uh in the current quarter and going forward there will be an impact until the uh tariff issue is not 18:14 18 minutes, 14 seconds resolved. uh but um you know there have been alternative strong demand from markets like I said uh Chile is one 18:22 18 minutes, 22 seconds Middle East uh we are seeing good demand uh you know our core uh uh uh neighboring countries of Sri Lanka, Nepal where also the demand is positive. 18:33 18 minutes, 33 seconds So because of these regions we don't see overall there would be any impact on uh export sales. 18:41 18 minutes, 41 seconds Understood. And lastly, how are you doing on quickcommerce? Are your products available across all firms? Are you supplying directly to quickcommerce or through distributors? 18:51 18 minutes, 51 seconds So now we are present across quickcommerce channels uh blink and you know uh uh Instamart and all channels uh 19:00 19 minutes we are present uh again the focus there is to be available from a convenience perspective. You know it's not a major 19:07 19 minutes, 7 seconds push or a focus area. uh the consumers who want that convenience of being present you know of getting goods very 19:14 19 minutes, 14 seconds fast for there we are present on quick commerce uh focus continues to remain general trades uh again with a lot of 19:23 19 minutes, 23 seconds our new product launches happening you know uh the first priority is definitely towards general trade because they are 19:30 19 minutes, 30 seconds the ones who help us in you know getting the products reached to our consumers but yes quickcommerce as a business 19:37 19 minutes, 37 seconds segment is also growing uh and uh uh our presence there is also increasing 19:45 19 minutes, 45 seconds but how are you ensuring that I mean like are you doing it directly or like say what kind of contribution what kind of growth you are seeing there because many of your products look very 19:54 19 minutes, 54 seconds interesting from a big commerce perspective how are you ensuring that you're getting the right deal with so we partner with these quickcommerce 20:01 20 minutes, 1 second operators on a direct uh directly so you know uh so we'll sell to them uh to their dark source and from there they uh distribute. 20:12 20 minutes, 12 seconds So uh we service them directly. 20:15 20 minutes, 15 seconds Understood. Okay. Okay. That's it for me. Thank you. 20:23 20 minutes, 23 seconds Thank you. The next question is from the line of Jesi from PL Capital. Please go ahead. 20:33 20 minutes, 33 seconds Yeah. Uh thanks for the opportunity. Uh sir, my question is on pen. I mean uh if 20:39 20 minutes, 39 seconds if I remember right uh ideally we do not have the feasibility to manufacture uh nibs and uh the full backward 20:48 20 minutes, 48 seconds integration advantage in this category is uh missing uh so just wanted to know I mean has it sorry 20:57 20 minutes, 57 seconds uh which category I mean pens yeah nibs nibs we don't manufacture rights okay nibs right so so just wanted to know I mean 21:06 21 minutes, 6 seconds has it got to do with the technical capability or uh or is it related to the missing speed advantage and once we 21:14 21 minutes, 14 seconds achieve a desired production level perhaps we can we can consider exploring uh in-house manufacturing. So that is 21:21 21 minutes, 21 seconds one and and secondly also if you can share uh how much typically does the nib cost in the overall uh cost structure of a pen. 21:32 21 minutes, 32 seconds Okay. Uh so uh uh to answer your first question uh definitely it is nothing to 21:41 21 minutes, 41 seconds do with uh capabilities or as you know that for doms you know our uh constraint 21:48 21 minutes, 48 seconds has always been in terms of uh capacities right today whatever infrastructure we have for us it is like 21:56 21 minutes, 56 seconds taking a decision that how do we utilize that infrastructure right now do we utilize it for manufacturing tips or 22:03 22 minutes, 3 seconds manufacturing the pens and you know if you look at the tip manufacturing infrastructure in India there are lot of 22:10 22 minutes, 10 seconds players who are focused on this uh manufacturing segment only you know they manufacture only tips and uh they are 22:18 22 minutes, 18 seconds reasonably large and cater to all our requirements uh so therefore we've not prioritized 22:26 22 minutes, 26 seconds manufacturing tips right now because we are constrained in terms of the uh you know capacity that we have in terms of 22:34 22 minutes, 34 seconds physical infrastructure. So now with the new 44 acre plant soon coming into production, we definitely intend to get 22:42 22 minutes, 42 seconds into manufacturing of tips. This is uh not a very uh technical technically 22:50 22 minutes, 50 seconds superior sort of a process. you get uh good uh imported uh automatic 22:57 22 minutes, 57 seconds manufacturing lines uh and the process once it is set it can do mass production. So we've already uh you know 23:06 23 minutes, 6 seconds placed orders also for these machines and uh soon we will have some new machines for tips also coming in and 23:14 23 minutes, 14 seconds starting production of our own tips. But given the size and the scale at which we are growing our pen business, we'll 23:22 23 minutes, 22 seconds continue to uh purchase tips from these third party partners uh and the quality uh that we want and the type of tips 23:31 23 minutes, 31 seconds that we want are available from these partners. 23:35 23 minutes, 35 seconds And in terms of cost uh you know tip manufacturing uh tip cost to the overall cost is not a very large component you 23:45 23 minutes, 45 seconds know polymers and ink is higher than tips. 23:51 23 minutes, 51 seconds Understood. Understood. And sir uh secondly I just wanted one small uh clarification. uh the channel mix data 24:00 24 minutes that we have given on slide uh 22 of the PPT uh does it include uh revenues from 24:08 24 minutes, 8 seconds the hygiene business? Uh I just thought of asking because if I look at uh 2 of FY25 24:14 24 minutes, 14 seconds our GP contribution was 77% and now it has declined to about 71%. And I believe 24:22 24 minutes, 22 seconds some of the other channels like ecom and np have a higher share in the hygiene business. If you can just clarify that 24:30 24 minutes, 30 seconds part. So yes uh on slide uh you know uh 22 that you referring to the gross product sales 24:37 24 minutes, 37 seconds of 593.7 crores includes the hygiene segment also. Uh in terms of general 24:44 24 minutes, 44 seconds trade contribution that you see that has uh sequentially decreased is uh because of two reason. One, the overall 24:52 24 minutes, 52 seconds contribution of baby hygiene products to the sale in the current quarter has increased and in the baby hygiene 24:59 24 minutes, 59 seconds segment almost 35% of sales come from uh e-commerce. Uh you know therefore you'll see the modern trade and e-commerce 25:07 25 minutes, 7 seconds segment on a overall console basis increasing and GT coming a little low and also because of this GST 2.0 zero 25:15 25 minutes, 15 seconds transition impact you know uh the sales to the GT segment were a little uh 25:21 25 minutes, 21 seconds affected and plus also this becoming this being an onset of the festive season where generally GT sales come a 25:30 25 minutes, 30 seconds little low because you know stationary shops start selling a little more of your gifting and your decorative and 25:37 25 minutes, 37 seconds such items. So because of both these factors you will see uh the presence uh the percentage contribution of GP coming 25:45 25 minutes, 45 seconds down a little in this quarter but going forward GP will continue to be close to about 75% of our overall sales 25:55 25 minutes, 55 seconds one last question from my side uh sir is it possible to share uh what is the contribution of rupees 10 price point in 26:03 26 minutes, 3 seconds our pen portfolio and also on the pencil expansion side I believe additional capacity was supposed to come on screen in full Q. Uh so where are we on that? 26:16 26 minutes, 16 seconds So uh for to answer your question on the pencil capacity addition uh the first building that you know we'll get uh in 26:25 26 minutes, 25 seconds the 44 acre complex would be dedicated for expanding our capacity for uh 26:32 26 minutes, 32 seconds pencils. uh like we highlighted in the previous call also the uh you know those uh uh earlier or the backward processes 26:41 26 minutes, 41 seconds before finishing of pencil has already been uh capacity increase there has already happened so we are just waiting 26:48 26 minutes, 48 seconds for the uh possession of the building from the 45 acre complex once we uh get that we'll see capacity addition in 26:56 26 minutes, 56 seconds pencil coming in and to answer your question on the pen honestly my friend right now I really don't have a data on 27:05 27 minutes, 5 seconds you know how much is the contribution of 10 rupee pens on the uh overall segment but what I can say is the five rupees uh 27:13 27 minutes, 13 seconds price point pens continue uh continue to be the largest uh uh contributor to our uh overall business of pens and office supplies. 27:24 27 minutes, 24 seconds Sure. Uh thank you and all the best. Thank you. 27:31 27 minutes, 31 seconds Thank you. The next question is from the line of Arajan from 361 capital. Please go ahead. 27:38 27 minutes, 38 seconds Hi, thank you for the opportunity. Uh just to continue with the previous participant question on the pen segment. 27:46 27 minutes, 46 seconds Uh so what was the capacity of pens a year back versus where are we right now as on one edge? uh given that you said 27:54 27 minutes, 54 seconds that the increase in the office supply uh sales has primarily been on the back of pens and that has happened because of 28:01 28 minutes, 1 second the capacity expansion. So uh could you just highlight how much capacity has expanded on the pen side in the last one year? That's my first question. 28:13 28 minutes, 13 seconds So uh hi Arana Ar on the pens. So if we just talk about the ballpoint pens where we've added a significant capacity I 28:22 28 minutes, 22 seconds think about a capacity increase of 1 million pens a day has been added but this has been through the uh period. So 28:30 28 minutes, 30 seconds you know it's not that on day one 1 million was added. So in incrementally as soon as you know the infrastructure is ready we install like five machines 28:38 28 minutes, 38 seconds then another five five and that's how uh the capacity built up has happened. So today uh we should be close to about uh 28:47 28 minutes, 47 seconds 3 to 3.25 million pens a day in terms of our pen manufacturing capacity and uh going forward where do we see 28:56 28 minutes, 56 seconds that uh you know increasing too uh in the near term or is this these the levels at which we'll be operating? 29:05 29 minutes, 5 seconds So now see right now like I said you know the next large chunk of infrastructure that we uh will have is 29:11 29 minutes, 11 seconds from the 45 acre project where uh you know the first building we going to use it for expanding our uh capacity for uh 29:20 29 minutes, 20 seconds pencils and after that we'll again start increasing capacities for other writing instruments like pens, highlighters, 29:27 29 minutes, 27 seconds markers, sketch pens. So uh overall definitely this capacity is likely to increase but it will uh you know when it 29:36 29 minutes, 36 seconds will happen will depend upon how the buildup of the 40 if the complex comes on and uh on the like the sort of growth 29:45 29 minutes, 45 seconds that we've seen in this space. Is it fair to assume that this momentum will sustain in the second half as well given that uh you know fourth quarter is a 29:54 29 minutes, 54 seconds quarter where back to school starts happening and examination based or you know sales also start picking up. So 30:01 30 minutes, 1 second fair to assume that this sort of 80% growth that we've seen in this quarter or you know high double digit growth that we've seen in the first half could 30:10 30 minutes, 10 seconds sustain in the second half 80% growth in the pen business. She was talking about office supplies. Office supplies has grown as I think. 30:18 30 minutes, 18 seconds So it will always Yeah. So it will be linked to capacity. So you know uh it's not something which will be sustainable 30:26 30 minutes, 26 seconds because capacity will become a constraint you know but yes this segment will continue. So you see healthy growth but that will all be backed on capacity addition. 30:36 30 minutes, 36 seconds So you know by the end of this year our combined capacity for pens you know 30:43 30 minutes, 43 seconds which includes our uh the regular ballpoint pens and one time use examination pens all put together to be close to 5 million pens a day. 30:54 30 minutes, 54 seconds Understood. And uh second I wanted to understand on your core stationary categories if I see say the scholastic stationary scholastic art and kits and 31:04 31 minutes, 4 seconds combos if I com you know combine all three the growth has remained largely flat year on year in the second quarter and it was up like 3% in the first half. 31:15 31 minutes, 15 seconds So is it fair to assume that it was largely uh driven by the capacity constraints or are you also seeing some 31:22 31 minutes, 22 seconds sort of moderation in the underlying demand or you know channel inventory levels or is it purely because of the capacity constraints and uh going 31:31 31 minutes, 31 seconds forward if it's purely because of capacity constraints then from which quarter can we expect a more visible 31:39 31 minutes, 39 seconds pick up in the four colastic uh categories? 31:44 31 minutes, 44 seconds Uh so Ar if you uh you know uh combine Scholastic Stationary, Scholastic Art and Kitsen combination pack uh you know 31:53 31 minutes, 53 seconds year on year uh quarterly growth was about 4% and H1 growth was about 5.5%. 32:00 32 minutes Uh you know like you said this is growth has been lower purely because there has been no significant capacity additions 32:08 32 minutes, 8 seconds that have happened in this segment. it's purely been growth due to change in product mix and uh slight increase in uh 32:16 32 minutes, 16 seconds ASPs. uh in terms of uh you know actual pick up in revenue in this segment like 32:23 32 minutes, 23 seconds I said we uh are hopeful that uh from Q1 FY27 we'll have uh our uh you know additional 32:33 32 minutes, 33 seconds pen capacity uh u uh sorry additional pencil capacity being coming in production over a period of time. So I 32:42 32 minutes, 42 seconds think Q2 uh FI27 you'll see uh decent amount of uh uh contribution coming from new capacity in the scholastic segment. 32:53 32 minutes, 53 seconds Uh also uh you know um like we recently launched mechanical pencils uh which 33:00 33 minutes also gets categorized in scholastic stationary. So that ramp up in production is also underway. So going 33:07 33 minutes, 7 seconds forward I think incrementally you'll see some growth coming in the next couple of quarters and then major growth coming 33:14 33 minutes, 14 seconds from Q2 FY27 understood just two more questions if I can squeeze in one was uh we've seen 25% 33:24 33 minutes, 24 seconds of growth in the first half of the year right so do you feel that you need to up your guidance from the current 18 20% 33:32 33 minutes, 32 seconds that you've highlighted in your press release that you know for for the entire year we are expecting 20%. Do you think 33:38 33 minutes, 38 seconds that that could be closer to say a 25% number for the uh entire year given that fourth quarter for us is expected to be 33:47 33 minutes, 47 seconds uh good compared to say our second quarter? 33:52 33 minutes, 52 seconds And I see if you look at first half of the year and compare it with the first half of the previous year uh a 34:00 34 minutes significant growth in the first half in the current year was due to the consolidation of impact of unique lend. 34:07 34 minutes, 7 seconds uh in the last financial year we consolidated unique lend only for 15 days of the first half while in this 34:14 34 minutes, 14 seconds current year we could uh unique lend was consolidated for the full period and therefore the growth has been uh higher 34:21 34 minutes, 21 seconds close to about 24 25%. But if you see in the second half in the base period unicland was already consolidated. So 34:30 34 minutes, 30 seconds there we'll see the growth in line with our 18 to 20% targeted uh range. 34:38 34 minutes, 38 seconds Understood. Just last thing on the regional performance uh there's some bit of divergence seen with respect to you know south India has grown at say 60% 34:47 34 minutes, 47 seconds plus versus east India hasn't grown or like it's 10%. So what is the reasons for such a sharp rise? Is it purely 34:56 34 minutes, 56 seconds because of uh Duja Puja being in East India and demand not picking up or? 35:01 35 minutes, 1 second Absolutely. So uh Ar I think this metricis is something if you look on a full year basis will give you the 35:08 35 minutes, 8 seconds correct picture. uh looking at quarters uh sometimes distorts the uh you know data because like you said in East India 35:16 35 minutes, 16 seconds uh in the month of September there was Dura Puja and practically uh the entire eastern region comes to a 35:24 35 minutes, 24 seconds standstill during those uh 10 odd days and the channel starts uh like I said you know stationary shops uh starts 35:32 35 minutes, 32 seconds selling a lot of uh decoration and gifting and such related items and therefore uh there is always in during I 35:41 35 minutes, 41 seconds wouldn't say Q2 but whenever there is dura puja months you see impact on sales in uh east India so I think this is a 35:50 35 minutes, 50 seconds metric you should always look from a uh you know uh fullear basis that gives a correct picture 35:59 35 minutes, 59 seconds understood this was really helpful thank you and all the best thanks thank you a reminder to all the 36:07 36 minutes, 7 seconds participants that you You may press star and one to ask a question. A reminder to all the participants that you may press 36:15 36 minutes, 15 seconds star and one to ask a question. The next question is from the line of Priyanka from Capital. Please go ahead. 36:25 36 minutes, 25 seconds Uh hi Ra. Uh my question is on uh the employee cost it had it it has gone up significantly and in general uh of 36:34 36 minutes, 34 seconds course with the uni sales consolidating I'm aware uh with the sales growing even extra of unicorn uh sales growing at 20% 36:42 36 minutes, 42 seconds we don't find that operating leverage playing out in our margins uh why would why would that so and and also on the 36:51 36 minutes, 51 seconds question on employee cost quarter on quarter inching Hi Brian. Uh so Brian the employee cost 36:59 36 minutes, 59 seconds as a percentage of sales uh you know increased by over 1% sequentially and uh 85% yearonear 37:07 37 minutes, 7 seconds uh during Q2 FYI 26. Uh the key reason for this increase uh you know in 37:15 37 minutes, 15 seconds employee expense was due to the overall increase in workforce both in our sales and production team. uh as we you know 37:23 37 minutes, 23 seconds plan to ramp up our uh production activities you know the hiring has to happen a little in advance and similarly 37:30 37 minutes, 30 seconds for the sales team because there's a lot of uh training and all they have to go in go through uh and also you know 37:37 37 minutes, 37 seconds because of this disruption in sales due to this GST transition uh which happened in the month of 37:44 37 minutes, 44 seconds September when I see specifically my month of September and compare it to employee expense and the percentage wise 37:51 37 minutes, 51 seconds it went higher because you know like I said our sales were impacted during this month. So because of these two reasons 37:59 37 minutes, 59 seconds you see our employee expense uh you know increasing as a percentage of sales 38:07 38 minutes, 7 seconds and then sorry if you could repeat your second question. Second question was on uh the operating leverage uh kicking in. 38:15 38 minutes, 15 seconds Uh, of course I now I understand that there is a cost which has been loaded up of the new plant, right? Uh, would it would it be would it be possible to 38:23 38 minutes, 23 seconds quantify over last 6 months uh what kind of a cost uh would have got loaded up uh 38:30 38 minutes, 30 seconds in the expectation of the new plant starting up. 38:35 38 minutes, 35 seconds So uh it's very difficult to quantify because see something like I said we've had a significant increase in our sales 38:41 38 minutes, 41 seconds team also if you see over the last few quarters you know our sales team now is more than 900 people and if I remember 38:49 38 minutes, 49 seconds correctly last year same time we were close to about 800 people so this all is happening in in anticipation of the 38:56 38 minutes, 56 seconds increased volume and sales that we'll have and uh you know this is not only for the new plant but for other expansion like you know office supply 39:05 39 minutes, 5 seconds sorry adhessives uh a new category that we got into mechanical pencils and for this we need to ramp up the teams well 39:13 39 minutes, 13 seconds in advance so becomes a little difficult to quantify as such and uh other in terms of operating leverage you know 39:20 39 minutes, 20 seconds like I said even last time and when we gave this entire guidance of aa guidance of 16 and a half and 7 to 17 and a half% 39:28 39 minutes, 28 seconds was keeping in mind you know one unique plan and second uh you Also the higher 39:35 39 minutes, 35 seconds employee cost that we'll have will have both because of one esops and second ramp up in the uh uh team size. 39:47 39 minutes, 47 seconds Sure I got it. Now on the office supplier uh what would be the uh mix roughly between pens, highlighters and markers? 39:58 39 minutes, 58 seconds So honestly we are at uh you know within the category we'll not have a lot of details uh ready on this uh so right now 40:08 40 minutes, 8 seconds majority I could say would come from pens followed by markers and then highlighters but I wouldn't have uh 40:17 40 minutes, 17 seconds exact data on uh how much comes uh from each of these categories. 40:23 40 minutes, 23 seconds Got it. Uh one last thing uh on the discount incentives and rebates if I have to corate the data from the annual report uh for the full year last year 40:31 40 minutes, 31 seconds gone by uh it it was roughly 3 and 3.7% of the sales which is neted of course 40:38 40 minutes, 38 seconds from the sales but it went up y uh almost the percentage of sales from 2 and a half to 3.7 40:46 40 minutes, 46 seconds what what was this because uh in the current quarter no I'm I'm asking for the full year of 40:53 40 minutes, 53 seconds F525 I was asking for the previous year uh the discount incentives and rebates which got which gets netted off from the 41:01 41 minutes, 1 second sales uh almost doubled from 37 crores to 71 crores uh 41:09 41 minutes, 9 seconds was it basically uh see discount rebates and all includes all schemes and uh product 41:18 41 minutes, 18 seconds cross product schemes also that we run you know so it is generally it is a factor of more a factor of the price 41:26 41 minutes, 26 seconds list rather than actually giving certain cash or kind discounts in the market. So typically what happens is let's say I'm introducing or I want to push product A. 41:37 41 minutes, 37 seconds So I'll start giving product B uh you know as a part of the scheme. You buy so much of product A you'll get so much of product B. So this all but the value is all in incorporate inside the costing. 41:50 41 minutes, 50 seconds So it's not that uh uh you know we've given more schemes and discounts which is actually bringing down your AIA but 41:56 41 minutes, 56 seconds that's more in terms of how the sales and how the priceless metric uh metrics is working in the market. In this 42:05 42 minutes, 5 seconds quarter we've had a slight impact a little more uh schemes discount rebates given uh because again because of the 42:12 42 minutes, 12 seconds GST transition for whatever stock the channel had and you know the reduction in MRP that we did we had to give a 42:20 42 minutes, 20 seconds little uh you know we had to issue credit notes for that. So therefore in this quarter there was an impact which was uh you know more from a transition 42:28 42 minutes, 28 seconds thing rather than any product specific schemes and discounts. Sure. One last thing, sorry. Uh on the on the new plant 42:38 42 minutes, 38 seconds on for the first full year, say even if we were to ramp up, we would say ramp up say at around 35% or 40% of the 42:45 42 minutes, 45 seconds utilization and then Y keep scaling up that uh of course till certain 42:53 42 minutes, 53 seconds percentage of utilization the cost would get loaded up on the on the for the full plant. So, so would you would you would 43:00 43 minutes you guide that for the first year of the operational of the plant because it would be suboptimal the AITA margins and the other expenses would take uh a hit 43:09 43 minutes, 9 seconds to the AITA margins for the first year, second year and then gradually it would again recover it. Would it would that be the fair assumption in the trend analysis for the margins? 43:18 43 minutes, 18 seconds So Priyank see this is like a ongoing cycle right? So today already for the ramp up that is happening in the other 43:26 43 minutes, 26 seconds brownfield investments you know like last quarter we' informed all that we added a few we purchased few more land and building close to our existing 43:35 43 minutes, 35 seconds facilities where the ramp up in production is happening as we speak. So this is like a continuous process to uh 43:43 43 minutes, 43 seconds today's numbers already include the impact of the ramp up of the brownfield investments. uh the numbers of next year 43:50 43 minutes, 50 seconds will include the ramp up of the uh 44 acre but this current period ramp up will have a full impact. So I don't see 43:58 43 minutes, 58 seconds a major uh problem. See it's a continuous cycle because we've been in this kex cycle continuously. 44:07 44 minutes, 7 seconds Sure. So the so the message that you're trying to give out is that because I don't see that because of the ramp up there would be any significant impact on the margins. 44:18 44 minutes, 18 seconds So, so you continue with that 17 and a half or 18% kind of a margin that is 16 and 12 to 17 and a half. 16 and 1/2 44:25 44 minutes, 25 seconds to 17 and a half is a decent range that we'll be comfortable operating in. 44:33 44 minutes, 33 seconds Sure. Thank you. 44:38 44 minutes, 38 seconds Thank you. A reminder to all the participants that you may press start and one to ask a question. A reminder to 44:46 44 minutes, 46 seconds all the participants that you may press star and want to ask a question. 44:51 44 minutes, 51 seconds The next question is from the line of man from Dom's Industries. Please go ahead. 44:58 44 minutes, 58 seconds Hi sir, good afternoon. Congratulations on the good side of numbers. So I just have one question. Uh the revenue grew 45:05 45 minutes, 5 seconds by 24% year on year. Uh can you give a break up about how much is this volume and value growth? 45:13 45 minutes, 13 seconds Hi man. Uh so man uh it is majorly uh volume growth again uh in key categories 45:20 45 minutes, 20 seconds of office supplies, paper stationary, adessives and kits and combination packs. Uh and only uh a very small 45:29 45 minutes, 29 seconds portion about 2 3% of this growth comes from uh ASP increase. 45:35 45 minutes, 35 seconds Oh got it. So and another question is like uh what the AITA margin does the company expect from this 44 acre project 45:44 45 minutes, 44 seconds expansion? Is this the same margin the company's operating or the company expect from another higher margin from this capacity? 45:54 45 minutes, 54 seconds The company margin philosophy for doms has always been same you know for every product it's like cost sheet driven. We 46:01 46 minutes, 1 second draw up our cost sheets and you know work with our target targeted margin of 15 16% which because of operational 46:08 46 minutes, 8 seconds efficiencies then results in uh reported margins of 16 and 12 to 17 and 1.5%. 46:14 46 minutes, 14 seconds We'll continue with the same philosophy for the 45 acre expansion also because there actually we are not uh you know 46:23 46 minutes, 23 seconds going to add new product categories more of increasing capacities for the same product categories where margins are already defined and well set. 46:33 46 minutes, 33 seconds Understood. Thank you so much. That's it from would like to clarify that Mr. Manan was 46:44 46 minutes, 44 seconds from the company ICIS securities. 46:53 46 minutes, 53 seconds The next question is from the line of An from An Capital Advisor. Please go ahead. 47:02 47 minutes, 2 seconds I just hi uh congratulations on a decent set of numbers. I just wanted to know that because of uh the GSC 2.0 Uh earlier you mentioned there had been 47:11 47 minutes, 11 seconds some postponement in the orders. So do you think that influx will be uh uh what do you say shown in the next quarter in 47:20 47 minutes, 20 seconds the sale or what is your opinion on that? 47:23 47 minutes, 23 seconds So and you know uh coincidentally this GST reforms was clubed with the onset of the festively season also. So typically 47:33 47 minutes, 33 seconds otherwise also you know during the Diwali period and all which was in the Q3 uh the sales get impacted a little. 47:41 47 minutes, 41 seconds So uh you know the channel clearance that happened was that happened a little faster in the month of September which 47:48 47 minutes, 48 seconds otherwise we'd anticipated would happen in October and the uh restocking at the uh dis you know distributor and the uh 47:58 47 minutes, 58 seconds retail level will be an ongoing process and coincide with the uh back to school uh period which will start from 48:05 48 minutes, 5 seconds December. So you not see something significant in the third quarter. Third quarter as it is because of uh Diwali 48:12 48 minutes, 12 seconds period gets a little slower. Uh and you know even at the plant level manufacturing level we are on a short 48:19 48 minutes, 19 seconds Diwali break or four to 5 days. So the production also gets impacted a little. 48:24 48 minutes, 24 seconds Uh so you'll not see any significant like you know uh impact in the third quarter. It will be a slow process 48:32 48 minutes, 32 seconds moving into third and fourth quarter. uh both. 48:36 48 minutes, 36 seconds Uh so but there will be some gradual growth, right? Yeah, there will be some gradual growth. Yeah. 48:43 48 minutes, 43 seconds Okay. And uh the second question is what's the current capacity utilization you're running at? 48:51 48 minutes, 51 seconds So it be very difficult for us to you know uh give for uh because all of our products have different capacities. Some 48:58 48 minutes, 58 seconds products have interchangeable capacities especially those which are manufactured using polymers and in our molding 49:05 49 minutes, 5 seconds infrastructure. So for us at a product level having uh capacities defined is a little difficult and challenging. Uh but 49:14 49 minutes, 14 seconds having said that you know across all our core products uh like scholastic stationary scholastic art material our 49:21 49 minutes, 21 seconds capacity utilization is uh upwards of 95%. 49:26 49 minutes, 26 seconds uh in products like uh office supplies and uh hobby and craft uh there is continuous uh capacity addition ramp up 49:35 49 minutes, 35 seconds happening. Uh so for already which we've installed we would have reached about 75% plus but again new capacities are 49:42 49 minutes, 42 seconds coming as we speak and during the next uh quarter quarter and a half. So uh there we will have uh growth coming in 49:50 49 minutes, 50 seconds from uh okay and uh the capeex that you all are planning uh on doing when that is 49:58 49 minutes, 58 seconds fully finalized and that's in production what do you think uh that will like how long do you think that will last me for? 50:07 50 minutes, 7 seconds Oh right hopefully wouldn't in the sense of uh no in the sense that uh how much capacity in that run will 50:15 50 minutes, 15 seconds like do you like you all must have some projections on that. 50:20 50 minutes, 20 seconds So as basically you know for us whenever we are investing one rupee uh in uh building capacities we target to achieve 50:29 50 minutes, 29 seconds revenues of 3 rupee and uh as soon as we believe that for a particular product or 50:36 50 minutes, 36 seconds a category uh where demand also is still strong and we believe a lot of uh value doms can add as soon as we reach about 50:45 50 minutes, 45 seconds 50 60% utilization we plan for other capacity enhancements. 50:50 50 minutes, 50 seconds And this at least for the next 3 to 5 years we uh believe considering the total market environment both in 50:57 50 minutes, 57 seconds domestic market and the opportunity in exports is something which will be a continuous process. So we uh will keep 51:05 51 minutes, 5 seconds investing in building our capacities at least for the next 3 to four years uh to drive uh growth in the business. 51:14 51 minutes, 14 seconds Got it. Got it. Thank you so much. Thank you. 51:21 51 minutes, 21 seconds Thank you ladies and gentlemen. That was the last question for today. 51:30 51 minutes, 30 seconds Hello ladies and gentlemen. Uh we will take one last question. 51:36 51 minutes, 36 seconds The last question is from the line of Priyam from Epic Stock Broking Limited. Please go ahead. 51:43 51 minutes, 43 seconds Hi Ra. Uh Pri. So am I audible? Yes, I'm loud and clear. 51:49 51 minutes, 49 seconds Yeah. So I just wanted to ask uh more clarity on the GST side, right? So most of the scholastic uh stationary product 51:58 51 minutes, 58 seconds has seen uh 0% GST rate, right? If I'm assuming pencils and scales and stuff like that. But if you sell this product 52:06 52 minutes, 6 seconds in kits, uh do we have a GST rate on uh kits as a basket? 52:14 52 minutes, 14 seconds So uh see basically what the GST law uh yeah PM can you hear me? Yeah yeah yeah I can hear you. 52:21 52 minutes, 21 seconds Yeah. So basically what the GST law says is when you bundle products uh you need to first check whether it's a mixed 52:28 52 minutes, 28 seconds supply or composite supply most of our kits fall under the category of mixed supplies. Uh and in mixed supplies 52:35 52 minutes, 35 seconds whatever is the highest uh GST rate in that mixed supply needs to be applied. 52:41 52 minutes, 41 seconds So for most of our kits and combination packs uh you know uh are sold at a GST 52:47 52 minutes, 47 seconds rate of 18%. Uh and for the 0 percentage items that go in that kit and 52:54 52 minutes, 54 seconds combination pack where you are actually charging 18% you become eligible for input tax credit. So uh it complexes the 53:03 53 minutes, 3 seconds entire process having different uh GST rates and with a lot of products being mil but yes that's something that we'll 53:10 53 minutes, 10 seconds have to live with and so this means that we will yeah sorry yeah go on 53:18 53 minutes, 18 seconds so this means that we'll focus more on the kids or something like that to you know get the input tax credit on the 53:28 53 minutes, 28 seconds absolutely not there will be some dynamics there MRP dynamics change in the product portfolio in the case versus the standalone products. 53:38 53 minutes, 38 seconds So both are not comparable. So somebody who wants to buy pencils only will buy pencil pack only which will be still 53:44 53 minutes, 44 seconds sold at 0%. And there uh you know we've passed on the benefit to the consumers by reducing the MRPs of the product and 53:54 53 minutes, 54 seconds somebody who is buying a gift and combination pack either for gifting purpose or consumption purpose or uh for 54:00 54 minutes any reason will buy. So you know uh it's not kids does not replace the requirement for a pack of pencil or vice versa 54:09 54 minutes, 9 seconds right so uh people will not consumers will not starting start buying or we will not start pushing more sales of kit or combination pack that ways. 54:22 54 minutes, 22 seconds Sure. Okay. Thanks. 54:28 54 minutes, 28 seconds Thank you ladies and gentlemen. That was the last question for today. I would now like to hand the conference over to the management for the Colossusian 54:36 54 minutes, 36 seconds government. Thank you and over to you sir. 54:40 54 minutes, 40 seconds Uh thank you everyone. Thank you once again for joining us. Uh we appreciate your continued support and uh confidence 54:47 54 minutes, 47 seconds in our journey uh should you have any further questions, clarifications, uh please reach out to our uh investor 54:55 54 minutes, 55 seconds relations teams. Uh thank you and have a a great day ahead. 55:03 55 minutes, 3 seconds Thank you on behalf of Dom's Industries. 55:07 55 minutes, 7 seconds That concludes this conference. Thank you for joining us and you may not disconnect your