Monte Carlo’s annual CapEx plan stands at Rs 15-20 crore; Margins will remain stable at 18-19% in FY22: Sandeep Jain, ED

Sandeep Jain, Executive Director at Monte Carlo Fashions Ltd., talks about Q1FY21 growth, expectations from the festive & winter season, online sales and digital operations, segment-wise performance, current debt structure of the company and CapEx plans among others during a candid chat with Swati Khandelwal, Zee Business. Edited Excerpts:

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Q: The revenues in Q1FY22 have increased by around 270% YoY from Rs 11 crore to Rs 42 crore. What led to this growth in the numbers and is this sustainable growth for the future?

A: As you talked about the Q1FY22 numbers then you may remember that last year due to the COVID and lock down all the showrooms and shops were closed due to which sales did not happen. It was impacted a lot this year as well but retails were able to run towards the end of June due to which growth in sales was seen. Now, as we are seeing that COVID cases have decreased and the speed of vaccination is catching up, so the ongoing trend, like in July and August, sales are nearing the pre-COVID levels.

Q: Ahead of the festive season, if we take region wise and channel-wise break up then what will be the revenue break up and which region and the channel is performing at its best?

A: The Diwali festival and winter season are about to begin, so the regions that will perform the best are the Northern and Eastern regions, where winter remains good. As far as channel is concerned, almost every channel is growing well like EBO channel, MBO channel, online channel and large formal stores and we are seeing equal growth in every channel. So, I think, this quarter will easily cross the pre-COVID sales.  

Q: Online sales have increased too. How are you handling your digital operations and what focus you will have in this space vs brick & mortar and do you think that it will reach to 50:50 mark?

A: Due to COVID, there was a spectral change last year, when people were not able to go to shops in malls or the shops due to which a lot of people were pursuing online sales. This led to a 50% growth in online sales last year. A trend is emerging in which people have turned digitally focused and I feel that this year the online growth will be around 40-50% because many people are preferring buying things online instead of offline. So, the year is going to be good for online sales. 

Q: Cotton, woollen, home textile and kids are your major segments. How you are performing in each of these segments and what is the levels that you can see in each of these segments by the end of FY22?

A: As far as home textile and kids’ segments are concerned, these segments have started in the last few years and have a small base but we have seen good growth in these two segments. If I will talk about the kids, then I expect a 25-30% growth this year. Similarly, when it comes to home furnishing then we are seeing growth in this segment as well as the segment is establishing well. As far as woollen and cotton, our major segments are concerned like the woollen sweater is our main segment and we are expecting good growth in this segment as retail has restarted after the COVID and the economy has moved up due to which there is an increase in the demand. Similarly, our cotton products, like shirts, trousers, denim and tracksuits, are looked upon together then a good demand was seen in each of these segments in July and August. I believe the demand that was seen in July and August will continue further because the economy has surprised well in moving upward and good growth is visible. We recently saw the figures of the economy in the first quarter where a decent growth was seen. So, I feel that if the third wave will not hit then the year will stay quite good. 

Q: What is the current debt structure of the company? Also, the company has managed robust growth without any major CapEx, are you planning any CapEx plans now? What is your capacity utilization situation and do you have any expansion plans?

A: The company is a cash-rich company and we have around Rs 220 crore of cash as of March 31 of the last year. The long-term debt of the company stands around Rs 18 crore and we are a net cash company. As far as CapEx is concerned, we have a CapEx plan of around Rs 15-20 crore for this year and the CapEx plan for the next couple of years also stands between Rs 15-20 crore. 

Q: The government has a special focus on the textile apparel industry and has also announced the PLI scheme. What does it mean for your company and where would you like to participate and on a medium to long-term basis how you will be benefitted from it?

A: We believe in the asset-lite model, so, our woollen sweaters are in-house and a little bit of the t-shirts segment is also in-house and the rest of the products are outsourced. The PLI scheme that we saw in the recent past focuses mainly on manmade fibre, while cotton is a good area for us, so, the PLI Scheme for textile is not going to benefit us. Anyway, our outsourcing model does not fit into the PLI Scheme. So, we will focus majorly on the outsourcing model 

Q: Winer season will be arriving in few months. Is there any specific product plans and which segment seems to be promising to you and you will focus majorly on that in terms of margins?

A: I think, last year, at the retail level, the stocks of the woollen sweaters, jackets and sweatshirts were quite low and we were able to see a good sale. Availability of fewer stocks led to good bookings in these products. So, I feel that in the coming quarters, sales for sweaters and jackets will be good because stock levels are down and economy has picked up and demand is visible, which was not present earlier, as well as the purchasing power has increased and these things will definitely benefit to Monte Carlo. 

Q: What is your growth guidance for the company in terms of the top line, bottom line and margins for FY22? What will be your margin band and is there any scope of improvement in it in future? 

A: Even in our Conference Call, we said that we will grow by around 15-20% as compared to the last year and surpass the pre-COVID sales level. As far as the margin is concerned, our historical margin if I will talk about the pre-COVID era stood at around 18-19% and I believe that this level of margin will be sustained this year as well.