V.I.P. Industries Limited (507880) Earnings Call Transcript

Ladies and gentlemen, good day, and welcome to VIP Industries Q2 FY '21 Earnings Conference Call, hosted by Edelweiss Securities Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Shradha Sheth from Edelweiss Securities. Thank you, and over to you, ma'am.

Thanks, Aman. On behalf of Edelweiss, let me welcome you all to the Q2 FY '21 earnings call of VIP Industries. From the management today, we have Mr. Dilip Piramal, the Chairman; Ms. Radhika Piramal, the Executive Vice Chairman; Mr. Sudip Ghose, the Managing Director; and Ms. Neetu Kashiramka, the CFO. Without any further ado, I'll hand over the call to Mr. Piramal for his initial comments, post which we'll open the floor for Q&A. Thank you, and over to you, sir.

Good afternoon, everyone. Thanks for taking out time and joining our conference call. I would like to reiterate to all our esteemed panelists of participants that our company is among the worst affected sector being part of the travel industry, and our operations have been severely impacted due to this pandemic. Beginning of quarter 3 is showing good pickup as we enter the festive season. Hopefully, demand should revive in the remaining part of the year due to the festive season, school starting and some pent-up demand on account of marriages. And a little bit of the travel industry also is gaining from revival in the domestic sector. International travel is still not opened at all. Of course, there are a few flights, but very little. During the second quarter -- quarter 2 FY '21, income from operations was at INR 108 crores against INR 415 crores in the corresponding quarter of the previous year. Loss for this period was INR 33 crores as against INR 33 crores of profit last year. However, if we look at sequential quarter-on-quarter, revenue from operations, which was only 7% of pre-COVID levels in quarter 1 FY '21, was at 25% in quarter 2 FY '21. So from 7% of pre-COVID levels, we did 25% of pre-COVID levels in the second quarter. As mentioned earlier, also, during quarter 1, focus of our company was on cost control and cost rationalization. Fixed costs, which used to be INR 40 crores per month at a consolidated level last year, will be at INR 24 crores per month in this year. Let me also brief you about our liquidity situation to take care of this tough time. We had plans to borrow around INR 300 crores to have a war chest for these tough times. Current borrowings stand at INR 204 crores. However, net debt is nil, which means we have borrowed but not utilized these amounts. We have actually drawn these amounts and invested them in our -- we made investments, so that it should not happen. We are worried that if in bad times the banks have given us the limits, but they then might cancel it later on. So to play safe, we borrowed these money, dew it and invested it. And later on, our CFO, Neetu, will give you details about these. Update on the VIP Bangladesh operations. These operations started only with producing masks. We took on since we have these sewing machines, and it's a tailoring operation in soft luggage in Bangladesh. We started producing masks. And we have -- we are selling now about 2 crores, 3 crores of masks per month. So that is quite good. We say towers are over it to Bangladesh by about INR 1 crore, and there is a good margin on the sale in India. Luggage manufacturing will start only in the third quarter. We already started in October in a very small manner, making luggage, and they will go up gradually because we still are quite well stocked up. As you might remember that April to June is our largest quarter. And virtually, we will have what we are planning to do in the April to June quarter originally, I don't think we will do that INR 750 crores in the entire year of this year. And income from operations from VIP Bangladesh was -- in the second quarter was INR 18.2 crores. And profit after tax was negative of INR 2.4 crores as compared to INR 10 crores loss during the first quarter. With that, I hand over the floor for questions, please.

[Operator Instructions] The first question is from the line of Shanti Patel from Shanti Patel Investment Advisors.

My simple question is, how much time it will take approximately to go back to our original level? That is the normal level sales, profit, et cetera? And secondly -- and yes, okay, fine. This much will do.

Okay. This time, I'm proposing that our MD answers most of the questions. So Sudip, please -- and -- but I will direct for each question who should answer it. Sudip kindly take over.

Yes. So it's a very difficult question to answer, if you ask me. As Chairman said, that we're definitely better off from the last quarter to this quarter. But pre-COVID levels, I think, will take at least a year, 1.5 years to reach there if we are in a -- if we do well. It all depends on how quarter 3, quarter 4 pans out. And so definitely, COVID has taken this industry back by between 3 to -- 2 to 3 years, depending upon how the organizations fare in the coming time.

So implying that means the minimum -- I mean the approximate figure I'm talking about. It will take 1 to 1.5 years if everything is moving in the way they are moving? .

Top line, yes, but also what has happened in COVID is we have become far leaner and far -- we have ensured that all the flab is gone. So profitability-wise, we'll probably come back faster. But yes, top line level, it'll take anything between 2 to 3 years.

See, I also want to say that, as a company, what we are planning now is that we will try and get some more international business. So far, our international business is predicated on -- basically on our Bangladesh operations. And what we sell from Bangladesh to India is much more profitable than what we can sell from Bangladesh to abroad. So until now, all our Bangladesh operations were only for India. And in fact, we are not even meeting 50% of our requirements from Bangladesh. Now that the markets have gone down, we will try and see that we get more operations from -- we get more sales from abroad, which are not very much at the moment, but we have to build that market. But because of our Bangladesh operations, we feel we can do that. It might take us a year or so. So overall, our volumes will go up. So we are not only depending on Indian operations, and then it's very easy for us to expand our Bangladesh operation. So prior to pre-COVID, we were planning to -- we had great paths to increase our Bangladesh operations, even for the domestic market. Because even the domestic market, we -- as I said, we are not even producing 50% of our requirement, and the domestic market was growing. So now I'm looking forward to a time that within a year, we can start expanding our Bangladesh operation also for the international market. So as a company, we will have much higher growth -- we can also have higher growth than just depending on the domestic market.

The next question is from the line of [ Dev Shah from AMA Growth Advisors ].

Wanted to know specifically around VIP's online strategy. I've been following and seeing that there are several new age e-commerce brands have come up who are selling direct to consumer. So what is VIP's direct-to-consumer strategy? And what is its reliance on third-party e-commerce moving forward?

Sudip?

Yes. So the thing that has happened is COVID has taught all of us that e-comm is going to become big. And in fact, e-comm growth overall if you see has been 40%. To give you an understanding, our initial mix of e-comm at our sales was about anything between 7% to 10%. Currently, we are at 27%. We have started growing in absolute terms in e-comm from September onwards. And we've seen that e-comm is definitely going to be 1 of our mainstay and 1 of our mainstay channels going forward. And we are fully prepared for it. It's a new industry, but we have learned very fast. We have also taken some senior people from the industry to join our team. And that has really helped. And therefore, we are very confident that that's 1 channel that we will ride this time this year and the years to come. So in an average, if you see our -- my understanding is our mix with e-comm going forward would be anything between 20% to 25%.

Mr. Sudip, my question was more around whether you're going to be relying more on your Amazon and Flipkart for your e-commerce strategy? Or are you going to be building out your own direct-to-consumer brand from your website?

See, it is like this. Imagine Amazon and Flipkart being the departmental stores and our own store being the exclusive stores, okay? It has to be both. You cannot say 1 to another because consumers are going to go both. To start with, definitely, if there is a departmental store, which is selling luggage, we would like to go in there, and we will build our own capabilities also. But if you ask me...

See, I would like to just share something that e-commerce is also like 1 more channel of trade.

Yes.

Yes. So as Sudip said, that it's like -- it's a retail channel. Like we have -- earlier on, we had only these high street stores. Now you have our own retail shops, then we have department stores, hypermarket. So e-commerce is 1 more channel of trade. So -- and we also can have that -- our own channel. And there are various brands, which come in, in the e-comm. Like sometimes, people get confused also that e-comm -- I mean, the brand has no value. Brand has all the value because if you are selling a branded product on e-comm or, let's say, on Amazon and a nonbranded product on Amazon, it is not going to get the same price. So the brand always has the value.

And how is it going to impact your margins moving forward? Because if you're saying that it's going to be a dominant source of your revenue, then what's going to be the margin impact because you're going to be relying on...

See, that is the biggest challenge in e-comm because the margins definitely are lower, but then your costs also are lower. But what happens is how the challenge is, how do you manage the rest of the trade, because where the costs are higher and we cannot offer the same price. So that is the challenge. Sudip, would you like to add anything?

Yes. Yes. And what we will also do is understand is we're going to make for e-comm, okay? So currently, when you make for e-comm, you make products, which are -- so selling cheap doesn't mean that you will lose gross margin. I keep saying this. I've said this earlier in many of the calls. Selling cheap is to make products which are low-cost products and yet get a percentage gross margin that you desire. Now that we are planning to sell for e-comm, we'll produce for e-comm. And therefore, the gross margins will get protected. In the current scenario, if you have to -- if I have to tell you, that's because we have stocks and we are liquidating, we would have very temporary impact on the gross margin, but that we will make it up as we reduce stocks and start making products from it.

The next question is from the line of Jinesh Joshi from Prabhudas Lilladher.

I just have one question. Sir, we have a debt of approximately INR 200 crores, and you highlighted that we have plans to borrow INR 300 crores. I just want to know whether we will really kind of require additional INR 100 crores because we also have some INR 50 crores coming in from the insurance claim this year? So will the additional money be really required in terms of debt?

Neetu, please answer this.

Yes. So Chairman said that we had plans. But as of now, we don't intend to draw. So these are limits which we have kept ready, but we don't intend to borrow anything further immediately. Because we have...

Let me tell you that when we -- in March, it was a sort of panic sort of situation because -- let's say, in April. And we didn't know what is happening. Sales got absolutely stopped. There was lockdown. So we wanted to play safe. Our experience so far in these 6, 7 -- 7 months have been much better than what we thought. Like our receipts have been slightly more than our payment. And we are still in a debt-free position -- net debt-free position. So we are quite happy about that. We were prepared for a more difficult situation. And so far, we are carrying out quite -- doing quite well. But we had to -- it was very difficult to see what -- how things will go out the 6 months in April. So we had to take some precautionary measures. What has also happened that there's a lot of liquidity with the banks. At that time, we thought that maybe, by December, if things are bad, banks might give us limits and not -- then cancel it also at the last moment. So we grew these limits also. So INR 200 crores we borrowed and invested. Today, Neetu, our investments are more by about INR 30 crores than our borrowing?

As on October, yes.

Yes, as on October. So actually INR 30 crore surplus we have. So this is the overall situation.

Okay. Sir, 1 last follow-up. Sir, this top line of INR 100 crores odd that we have achieved in this quarter, is the average selling price materially different than pre-COVID because we have also offered some discounts, if I'm not mistaken?

Yes. Sudip, I think prices are lower.

Yes, absolutely, absolutely. See, with all companies having very high stocks across all categories, I must say, there is a plethora of discount, which is there because everybody is trying to liquidate the stock that they have built up. Remember, we were getting into the most highest season, like Chairman said, this is April, May, June. And therefore, we are carrying quite a bit of stock, which we need to liquidate as fast as we can. So yes, there is a drop in ASP, if that's what you're asking.

Possible to share the extent of discount?

No, I don't think -- it's a very dynamic one. It's then...

Yes, it varies from sector to-sector, product-to-product.

Varies from sector-to-sector, product-to-product. Time -- sometimes somebody is -- so we have to also react to certain market share protection. So it's very difficult to say that.

I'd say even until now, I mean, our overall sales have been, what, INR 140 crores in the 6 months. So it's not a very large figure. The overall sales also are not very large.

The next question is from the line of Tejash Shah from Spark Capital.

Sir, first question pertains to, in the opening remark you spoke about permanent resets on the cost. Last quarter, you had given a detail some on what initiatives you are taking on that count. So any incremental steps that you can share that you would have taken this quarter as well on the permanent resets on cost?

I don't remember exactly what we said in last year. Sudip, can you answer this?

Yes. So the couple of...

And Radhika, whenever you want to come in, you please come in.

Yes, sure.

Yes. So the major cost initiatives have happened on the manpower, fixed EVO operations. Those are the actions -- were action in quarter 1 and the biggest -- their impact is actually being seen in quarter 2. We are also trying to find out any more efficiency, which is there in our organization in terms of operations, and we are taking adequate steps to it. There are 1 or 2 of them which I would not like to discuss currently, but we are working on it. Maybe in quarter 3 call, we might be able to discuss. But yes, I mean, whatever we have taken, whatever we said we will do, we have actually done, and those are flowing in.

Okay. Second question, Mr. Ghose, pertains to your observation that it might take 21 to 18 months or 2 to 3 years for us to bounce back or go back to the earlier levels. But if I see some of the allied industries commentary like hotels, airlines, they are much more hopeful of a sharper recovery if COVID is not around next year. So any reason why we are expecting slightly longer or -- for full recovery versus the allied industry part? Or is it just a rough estimate?

Listen, I don't know from -- let me answer this. I don't know which airline industry you are talking. Airline is very badly affected.

Sir allied industry I meant, hotels and others. So they are running...

Airlines -- these are the 2 major industries in the travel business, airline and hotels. And in fact, for our Board meeting, we even had a present -- we presented them the accounts of IndiGo; East India Hotel, that is Oberoi Hotels; and Taj group of hotels, and they are in a worse situation than us. Sales are more or less similar. Revenues are similar to our proportionately. But because their costs -- overhead cost structures are slightly higher than us. Hotel industry has very little variable cost. We have a lot of variable cost and all that. So their overheads are the main expenses. We cannot do anything about the hotel cost and all that, cost of the building and all that. So in fact, I was seeing one program on travel on CNN, and they were entering Airbus and Boeing separately. And Airbus said that they're going to take 5 years to come back to the level because if we -- what happens in any industry, the capital investment goes down. So if the airlines take about 3, 4 years to come -- even 2 years to come back to their old capacity utilization, they're not going to buy new aircraft. So I don't think airline industry is going to get or hotel industry is going to get normal in 1 year. Because international -- domestic travel is starting, but international travel has not started.

I would like to add 1 perspective here. It's early to say in India. There have been -- we have seen that the U.K., Europe and North America is having a different sort of recovery than, let's say, China and the Southeast Asian countries. At this stage, with India, just, I will say, meaningfully coming out of lockdown, say, September onwards. It's too early for us to judge in mid-November will India follow the Asia model or the Western model. And we can be hopeful it will follow the Asia model, then the recovery can happen faster. But if it follows your Western model, where it is repeated lockdowns, then it can be slower, and it's very difficult to judge sitting here today, which of these things will work out.

And why I'm a little bit more optimistic about VIP Industries, only my company, is because we are in a unique position where we can get some market share from international markets. It is not possible, for example, for Samsonite because they're already very large in international markets. They are the only multinational. Similarly, I don't think it is possible for any of the other Indian companies, which are very small in any case. And they don't have operations -- manufacturing operations in Bangladesh or in a low-cost center. And similarly, all these things are not applicable for, let's say, for an airline industry because all these -- I mean, today -- or a hotel industry. They're not going to in 2, 3 years get any market share abroad. They have to set up hotels and buy hotels and all that, and there's added surplus capacity there. So the sort of unique situation is there only for us. And that can make a big difference for our company.

Sure. [Technical Difficulty]

We are not able to hear you.

Yes. Is this better? Hello?

Yes, now it's better, yes.

Yes. Sir, last quarter, we spoke about that to diversify single category we might enter into a few more categories to leverage the brand and distribution that we have. So any update on any plan of rolling out those initiatives in this fiscal or we'll wait for FY '22 to roll out?

Yes. I'll tell you, we have already started making masks, and we have reached a level of about INR 3 crores a month. And that is giving us net contribution means, that is reducing our losses by about nearly 50%, I mean, on INR 3 crores, we save about INR 1.5 crores or even slightly more because we have -- they are manufacturing these masks in Bangladesh. So our fixed overheads of workers and all that, which otherwise we would have had to pay, that is getting covered. So that is helping us by about INR 18 crores a year, if this business sustains. And I think for some time, it will remain. We had 1 or 2 -- 1 other item, category, but now we are not in a rush to do it because this is -- we don't feel that this is the right time to enter a much bigger business. The mask was okay. We didn't have to make any investments at all in manufacturing. And it was giving us good revenue, and there is instant demand. In some other sectors, we thought that we have to make investments. So it's a totally new business. So we are not in a rush to do that. And today, even our management bandwidth is not so strong that we can start a new business. I mean, there are better opportunities. I would rather -- we are not -- we are also -- as you might be aware, we are in a ladies handbags business. And so far, we are buying all these handbags from China, mainly from China. Radhika, are we buying anything from India?

Yes. But the majority is from China.

Yes. So it is much better for us to make these in Bangladesh. So rather than getting into other new businesses, we thought we can concentrate in Bangladesh. We were not having the bandwidth earlier in pre-COVID period because Bangladesh would be very busy in expanding our activities for the Indian market, products produced in Bangladesh for our Indian market. And we thought we will do the handbags a little bit later on. But now that things are more difficult and there is not so much demand, we have to work a little bit harder and start manufacturing handbags in Bangladesh. So that will also give a good boost to the handbags market.

Fair enough. And sir, last 1 from my side. Any update on insurance claim release?

Neetu?

Yes. So things are moving ahead, but I think it might take another 2, 3, 4 months to get a clear picture. But yes, things look positive now as we move along.

I think the insurance companies are also sort of -- COVID is a genuine reason. I mean everybody has slowed down.

Yes. They have also...

And they are also -- I mean not...

Yes. They have a lot of people who are not working like. But now things have started to move. I think by next quarter, we should be able to give you a concrete answer on this as to when do we get.

The next question is from the line of Nisarg Vakharia from Lucky Investment Managers.

I heard a statement that we have cut a lot of flab in the organization and a lot of organizations have done the same in COVID. My question was, can you quantify the absolute amount of cost saving that we have done? Or if you could answer in a way that in a hypothetical scenario, if we go back to the INR 1,700 crores, INR 1,800 crores top lines, previously, we were at about 14% EBITDA margins pre-Ind AS. So the margins would look higher by how many basis points?

So no, margins are not going to be higher. Margins are going to be lower only because overall sales come down. So when sales come down, margins also come down. And -- but, Neetu, just give some more details of how much we have cut.

Yes. So basically, for this year, the fixed cost saving is going to be INR 180 crores. And 50% of this is sustainable and 50% of this will come back once the business is back. So I think 100%.

So INR 100 crores of the cost is now a sustainable saving whenever the sales ramp up, that INR 100 crores of cost is not going to come back into our company, right?

Correct.

Not for a while. I mean, maybe after 2, 3 years, they will come back. Fixed overheads also are fixed only for, let's say, 2, 3 years. If business grows very much, then even fixed overheads go up. And did you understand this whole thing about EBITDA margins and all? See, what happens is that...

Yes, sir, I understood. My point was slightly different.

No, you said how much will the EBITDA margins...

That they can -- he can calculate. He will get...

Yes, sir. I think actually that INR 90 crores is the cost saving that you are saying you'll do regardless of the sales at some point of time in the future?

Immediate future.

The next question is from the line of Karan Khanna from AMBIT Capital.

Sir, my first question is to Sudip sir. Sir, when you say that you expect the company to reach pre-COVID levels in the next 1.5 years and this is a very difficult number to project given the challenging times. But internally, do you track how much of your sales are driven by domestic travel, international travel, institutional and, say, other avenues like wedding, et cetera? Because from what we understand, the international travel is still far different away before we start seeing any meaningful signs of recovery.

Yes. So if you see, we, as an organization, is very strong in the heartland and in areas where marriage is a very important -- so I'll give you an example. Most of our business, if we were to divide between travel and wedding, it's kind of 50-50. The year in history and in past years, in the year the marriage dates are less, our growth really gets impacted. Now there is a pent-up demand of marriages. The marriages have not happened in last 6 months, and I don't think it's going to happen in the next 6 months either because where VIP -- strong marriages happen during summer. The reason being marriages -- to have marriage in winter is very expensive. So that...

Sudip, let me butt in. I have a very interesting information to give you. In April -- we operate all over India. So virtually every state, we have a branch. In April and May, our highest-selling branch is Bihar. And I think Bihar does 70% of its annual sales in these 2 months. Am I right, Sudip?

Yes, Bihar, UP...

I mean, it's a phenomenon you have to see, I mean. And this is only specific to VIP. So our market pull is so strong in Bihar and Eastern UP that...

There is no marriage without VIP. That's what they say.

Yes, yes, yes. Even there, I believe something we make -- earlier on, Aristocrat used to be a competitor. It used to be a separate company prior to '88 -- 1988. And we make similar products. And later on, when we merged the 2 companies, we started making the same product. Only the label is different. Means 1 has a VIP label and some products have Aristocrat label. The VIP product sells at about 20% higher price. And it has a much, much larger market share. The same product -- exactly the same product, the 1 which sells another VIP brand has a higher price and a higher market share. So that is the pull of the brand. So we are very strong in the Eastern region in this marriage market. And the reason also that the Eastern region is the poorer region of India, right, from Bengal, Bihar, UP. And the international markets and all are much stronger, let's say, in Delhi, Bombay, even in the South, like Samsonite and all. So our market share in the East is very large. And a lot of it is this marriage segment. I mean in Bihar, it is phenomenal.

So to answer the question, is this pent-up demand that is there? We presume that next year, April, May, June, should be very, very good. That is one. And the domestic travel also would come back. So international travel will take time. But if you see, I hopefully -- somebody in the call also said. So basis these 2 and what Chairman has been saying that there is a big opportunity for us to go after the international market, which, as of now, we didn't go because we didn't have the capacity, which now that we have, these are the 3 factors which will push ourselves faster than anybody else in this sector, definitely among the 3 competition that we have.

Sure. Second question was on CSD imposing a ban on import of finished goods. Now in the last call, you did mention that you've started procuring soft luggage from domestic vendors in India. In a more normal year, how would this impact your margins -- blended margins for the company? Or do you think that CSD as a channel will lose its relevance in the next 1 to 2 years and hence wouldn't have a meaningful impact on your margins?

No. Definitely, it will not -- CSD will remain an important part of our sales, but its percentage in our sales is coming -- definitely coming down. At 1 time, it used to be nearly in excess of 25%. And now it's come down to about 15%. But we will make up. We can even manufacture our own in India. We don't have to rely on outside vendors. There's nothing which prevents us from -- and in fact, this whole Make in India and all process is going to be useful to us also. And probably we'll -- in some states like Jharkhand and all, they are offering good opportunities. So far we have gone with this. So we did not consider that, but we will start manufacturing somewhere in the East. The costs are not so bad there. But prior to this, I mean, Bangladesh was much better, but it's -- there's nothing which prevents us from setting up an operation in India.

Okay. Okay. And Neetu, on -- with the Future Retail, Amazon -- sorry, Future Retail and Reliance deal coming under the legal scanner, how do you see this impacting your recoveries from Big Bazaar?

So we'll have to wait and watch because, currently, we don't know, right, what is happening. But we understand that this might take 3 more months to close the deal. So once that happens, I think, this will be in the...

Yes. And -- but the silver lining is that there are other, which is Central and Brand Factory, they have started paying. So we have started getting monies from there. So in case of Big Bazaar piece, which is where it is there, but indication is by the end of quarter 3 or maybe early quarter 4 -- we have uploaded the -- so 1 of the good things that has happened is on their website they've uploaded the outstanding of each of the vendors, okay, which is -- therefore, there's no discrepancy that would be there. So whatever is our outstanding has been shown and we have kind of seen it kind of roughly matching to a very large extent. So the money in that way is safe in terms of whoever takes over has to pay because it's already uploaded...

This website is only for the suppliers? Or is it open?

It's for suppliers.

Suppliers. Sir, just for everybody. So therefore the money is there. It's just that the deal should have been done, but it's got into its own...

Okay. It is for each individual supplier, like they have put in how much they owe us. They won't tell us how much they owe Safari or anybody else.

No. So it's there. You can actually see there. So it's available.

See what?

And therefore the -- the vendor-wise outstanding, which is there. We have -- and therefore...

No, no, no. So we can see only what is owing to us.

Which is ours. Which is ours.

Not to the others.

No, no. So therefore, the money is safe for us. And it's just that -- but the other 2 entities, which is Brand Factory and Central have started paying slowly.

The next question is from the line of Aditya Bapat from Equentis PMS.

So when you said that you would not be investing in a particular line of business for now, so did you mean that the new line of business that you had entered at in the last quarter, that has been delayed or postponed for now? Is that the consensus?

Yes, yes. That is right.

Okay. Okay. So that is one. And second...

We added -- we have not done much. We were said there are some little bit of research on the market and all. So it's not -- and that was all internal. I mean, we have not spent anything extra in that.

Okay. And that's delayed, right? I mean it's not canceled?

Let's see. I mean it's yes, delayed, canceled. I mean, nothing -- it wasn't so concrete or anything. It wasn't something a little bit.

Okay. Okay. Got it, sir. And my second question is on -- when you say -- like earlier on, 1 of the participant asked, you said that there are certain products which we will be making differently for e-commerce. So what exactly do you mean by that, making differently for e-commerce?

Okay. So I'll take this question. See, there are various kinds of material available, right? It's like when you go to buy a -- when you go to make a suit, there is material, which is INR 2,000 meter, there is material -- so for e-commerce, we don't use expensive material. We use the lower material. And therefore, the cost of the material comes down, the kind of wheels that you use, the kind of -- though there will be all quality. It's not like we'll compromise on quality, but there are various kinds of products that can be created where the cost, which is the bomb of the product, is far lower than what we actually do. And therefore, even if the cost comes down because -- even if the price comes down because your cost is lower, you can still make a decent margin. Therefore, you make for the channel. You don't make for -- and that's what's key to success because for e-comm we need to make for e-comm. For CSD we need to make for CSD and sell those products. That's all have to work.

See, can I explain to you a little bit broadly? What is happening basically in e-comm that it can become a very large volume business for the lower end, yes. So, so far, we are not really concentrating too much on that lower end and all because it was also the unorganized sector. So now e-comm cannot -- the unorganized sector cannot cope with e-comm so much because they need good volumes. They need much more organized and the unorganized sector is very small. The luggage industry by itself is a very small category. So the unorganized sectors are even smaller. So they cannot really deal with all these e-comms and all. So we will get a bigger market share of that, but that's a totally different -- it's a lower end product. So obviously, the costs also are lower. It's not the same product. As we explained very well, there is a INR 2,000 fabric and there is INR 300 fabric also. This is like a very cheap shirt, you can say. But again I want to reiterate because it's a very common feeling amongst a lot of people, including many consumers and important business people also sometimes make a mistake that the brand always remains. Amazon and all are not sort of conflicting with the brand, and they're not really conflicting. They're in other channels. So it's not that there is a -- it's a totally different type of business. But it has its own peculiarities. So we have to adjust to that.

Got it. Got it, sir. Yes. Sir, lastly, my question is on, like, say -- like the demand for luggage would obviously take some more time to come back probably with some help from weddings and all that. But then apart from that, what is the kind of trajectory that you're seeing in handbags or backpacks now that some people have started working from offices and all that? Is there any strength over there?