RUPA - RUPA & COMPANY LIMITED Share Price

Management's outlook for Rupa & Company Limited focuses on a recovery in volume and growth, despite facing significant challenges in Q1 FY '26, including heightened competition and pricing pressures. Key forward-looking points from management include:

1. Volume Recovery: Management anticipates regaining the volume deficit experienced in Q1 during Q2, driven by strategic initiatives to enhance channel efficiency and product mix.

2. Margin Expectations: Due to ongoing pricing competition, management forecasts EBITDA margins could range between 8% to 9% for the upcoming quarter, compared to the current quarter's margin of 6.6%.

3. Focus on Costs: The company plans to continue its disciplined approach to pricing and cost management to sustain brand equity and overall profitability.

4. Strategic Investments: Focused investments in high potential areas, particularly in the Athleisure category, which accounted for 15% of total revenue and boasts gross margins of 35% to 40%, are a key part of their growth strategy.

5. Marketing Expenses: Marketing expenditures are expected to remain around 6% to 7% of revenues on an annual basis.

6. Export Performance: The export business showed a robust year-on-year growth of 10%, indicating strong international demand.

7. Working Capital Management: The company reported net cash and cash equivalent of INR 53 crores, reflecting effective working capital management despite tough market conditions.

8. Production and Subcontracting: As production ramps in response to seasonal demands, subcontracting expenses will be monitored closely, ensuring they are aligned with inventory levels.

In summary, management remains cautiously optimistic about navigating the competitive landscape while focusing on sustainability and growth in key segments.

Q&A Section Summary

Question 1: Vrudhi Vora from SAS Capital asked, "Since you have heavily invested in the marketing expenses in Q1 FY '26, what is your yearly guidance on marketing expenses?"

Answer: I expect our marketing expenses to be around 6% to 7% of the top line for the year.

Question 2: Darshan Jain from RJ Investments inquired, "Would you take any price hike this year?"

Answer: For now, we do not foresee a price hike in the next two quarters due to raw material pressures and competitive market conditions. We might consider it if raw materials increase significantly.

Question 3: Esha Murthy from M&A Ventures asked, "What is your capex plan for the coming year, the current financial year '26?"

Answer: Our capital expenditure plans are modest, targeting between INR 15 crores and INR 20 crores for the year.

Question 4: Raj Patel from RK Securities wondered, "What will be the thermal order book size for this year?"

Answer: We anticipate a growth of 5% to 10% in our thermal segment for Q2 compared to last year.

Question 5: Shubhankar Gupta from Equitree Capital asked about Modern Trade performance and brand development costs, saying, "why has Modern Trade not picked up despite high expenses?"

Answer: Modern Trade performed stably, and we expect a turnover of INR 80-90 crores. The INR 21 crores expense includes celebrity endorsements and will be rationalized moving forward.

Question 6: Shubham from Equitree asked, "How are you looking to increase market share of the women category?"

Answer: We are introducing various new products and laying a solid foundation for the women's category, although it may take some time to show results.

Question 7: Anik Mitra from Finnomics Solutions asked about the cyclical raw material costs, particularly, "Do you consume more in the June quarter?"

Answer: Yes, we increase inventory in the June quarter to prepare for winter wear, which leads to higher raw material costs, affecting gross margins.

Question 8: Anik Mitra also inquired about the licensing surrender mentioned in the notes.

Answer: We surrendered our licenses for the FCUK and FOTL brands. The exceptional item refers to settling creditors from this business which has now been ceased.