Companies

Lux Industries upbeat on biz prospects; eyes double-digit growth in FY22

Abhishek Law Kolkata | Updated on July 29, 2021

A debt-free company plans a pre-approved capex of ₹110 crore.

Lux Industries, one of the largest knit-wear players in the country, is eyeing a double-digit growth in FY22, along with improvement in EBITDA margins. The company is confident of maintaining margins in the 20-21 per cent range, banking on improved product mix, higher realisations, cutting back costs, and advertising and promotion expenses continuing to be lower than normal years.

In FY21, Lux cut back advertising spends to 4-5 per cent of turnover because of the pandemic; against the general average of 7-9 per cent of sales in pre-Covid years. In FY22, advertising and promotion costs are expected to hover around the 6-6.5 per cent range (of sales).

According to Udit Todi, President (Strategy), Lux Industries, administrative cost rationalisation and pay-cuts by the top brass also saw a substantial reduction in total expenses in Q1FY22 and EBITDA margins improved by 400 basis points.

Market share for the premium wears categories improved from 8 per cent to 14 per cent, indicating better realisations. Going ahead, the percentage contribution of premium wear should increase further. In the premium segment, it competes with the likes of Jockey.

“Year-on-year advertisement costs are up 2-odd percentage points. But yes they are still lower than pre-Covid years. As normalization happens and the full effect of the product mix changes takes place, the costs will be up like any normal year. For FY22, we are confident of a double-digit turnover growth and 20 per cent plus EBITDA margin,” he told BusinessLine.

Lux Industries remains debt-free, and its cash balance of ₹205 crore will be partly used towards a pre-approved capex of ₹110 crore and dividend payout, Todi added.

Outlook

Rural markets continue to have a faster turnaround than urban ones, with slower than usual offtake for ladies knitwear offerings. However, as opening-up happens, the outlook remains positive. With the second-wave induced regional lockdown, channel partners, including the retail end, decided to liquidate stocks rather than add inventories.

“While there will be pent-up demand, we are also expecting good winter wear sales, that of thermals, to happen (at the primary and secondary end),” Todi said.

Typically companies start producing winter wear in Q1 so that stocks are available with retailers from Q2 onwards and well into Q3 (July to December). Consumer-end purchases happen primarily in Q3 and Q4 (October to January months).

“Production was on in Q1, and across the coming quarters, you will see realization of the inventory in the top-line,” he added.

The company will also focus on South India markets as it sees greater presence there with a direct distribution model from January next year.

Published on July 29, 2021

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