Aiming for 15% topline growth in FY16: Lovable Lingerie

Increased marketing expenses weighed on the June quarter earnings of Lovable Lingerie, the company’s promoter, Vinay Reddy told CNBC-TV18.The company’s revenue grew 10.5 percent to Rs 65.5 crore and net profit rose 18.4 percent to Rs 12.2 crore. Margins contracted 180 basis points (bps). Currently, the company’s market share is 20 percent in the premium segment. Reddy said the company is aiming for a 15 percent revenue growth in the current year. Margins will improve by 100-150 basis points by the year end, he said.For current year, marketing expenses are between 9-10 percent of revenues, he said, adding that the company has adequate cash reserve and liquidity. Below is the transcript of Vinay Reddy’s interview with Mangalam Maloo & Reema Tendulkar on CNBC-TV18.Mangalam: What is with the topline growth for Lovable growing at about 10.6 percent in this quarter, an average growth of about 9.5 percent in an industry which is growing at a CAGR of 16 percent? Your competitors, Page and all of them are growing at anywhere between 25 and 33 percent. Any particular reason why the topline of lovable is not growing?A: The first quarters compound annual growth rate (CAGR) is not up to our expectations. Demand conditions did not support us right through the quarter, but we have held market share reasonably well. We are seeing good consumer demand coming back this year. We can quite well guide for about a 15 percent growth this year.Reema: What about the margins? Most of the companies have reported an improvement in margins but Lovable Lingerie on the other hand has seen their margins come down by 180 basis points to 18 percent versus an earlier almost 20 percent. What was the reason for that and what can you guide in terms of margins for the whole year?A: Margins in the first quarter were slightly lower because it is not strictly comparable with previous years last quarter. There was an increased investment in marketing this year and which should level off during the year.Also from June onwards, we are seeing some softening in input prices which should post inventory overhang should play out well during the rest of the year. So, the full year’s margin should be at least 100-150 basis points higher.Mangalam: If I look at our balance sheet quarter-on-quarter, your receivables have increased while your payables have remained the same because of which your short-term borrowings have nearly quadrupled. Any particular payment problem that you are facing? A: As consumer demand has not been so good, there has been some stress with our trade partners. However, those trends are also now slowly reversing and we should also see this getting back into much more earlier ground now. Reema: Your other income is also gone up quite a bit at Rs 5.7 crore versus Rs 3.3 crore. What is the reason for that?A: Those were certain gains for investments which we saw nearing maturity and which we felt were on the table post some interest rate correction that cannot be taken on an annual basis, but those were simply maturing investments.