Kaya Limited (KAYA) Q4 2023 Earnings Con Call Transcript

Kaya Limited ( ?????? : KAYA) Q4 2023 Earnings Con Call dated May. 25, 2023

Corporate participants:

Rajiv Nair — Chief Executive Officer

Saurabh Shah — Chief Financial Officer

Analysts:

Sachin Bobade — Dolat Capital — Analyst

Sakshi Chhabra — Swan Investment — Analyst

Yogesh Tiwari — Arihant Capital Markets Limited — Analyst

Dhananjai Bagrodia — ASK Group — Analyst

Ajay Vora — Nuvama — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to the Kaya Limited Q4 FY ’23 Results Conference Call, hosted by Dolat Capital. [Operator Instructions]

I now hand the conference over to Mr. Sachin Bobade from Dolat Capital. Thank you, and over to you, sir.

Sachin Bobade — Dolat Capital — Analyst

Thank you, Zeko. On behalf of Dolat Capital, I welcome you all to the Q4 FY ’23 earnings conference call of Kaya Limited. Hope you all and your families are staying safe and healthy. From the management side, we have with us, Mr. Rajiv Suri, Global Chief Executive Officer; Mr. Rajiv Nair, our Chief Executive Officer, Kaya Group; and Mr. Saurabh Shah, Chief Financial Officer.

Now, I hand the floor to the management for their opening remarks, and then we would have question-and-answer session. Over to you, sir.

Rajiv Nair — Chief Executive Officer

Yeah. Hi. This is Raji Nair here. Hi, thank you. Good afternoon, everybody. I welcome you to the conference call on Company’s behalf. Let me begin the conference call with a short update on our Q4 performance of Kaya Limited, which is already in the public domain and uploaded on our website www.kaya.in.

Kaya Limited posted consolidated revenue from operations of INR92.6 crores for Q4 FY ’23, a growth of 11% over corresponding quarter. Consolidated loss after tax and before exceptional item for Q4 FY ’23 is INR58 crores, which includes one-time impact of impairment of goodwill of INR28.4 crores and towards interest on PF liability INR10.6 crores as compared to loss of INR42.6 crores in Q4 FY ’22.

Kaya India posted a revenue from operations of INR43.9 crores for Q4 FY ’23, a growth of 12% over corresponding quarter. Kaya India loss after tax and before exceptional items for the Q4 FY ’23 is INR23.9 crores, which includes one-time impact of provision for impairment of assets of INR10.7 crores and towards interest on PF liability, INR10.6 crores as compared to a loss of INR8.7 crores in Q4 FY ’22.

Collection in India at Clinic grew by 13% over last year. Collection in Middle East region grew by 5% over last year at constant-currency. Business has been driven by increase in average ticket size by 20% in Kaya India and 7% in Kaya Middle East. India saw a launch of two more clinics in Q4 FY ’23 in Bengaluru and Siliguri. From a customer experience perspective, both regions showed strong positives with NPS reaching over 82. Innovations in the quarter contributed 8% of Kaya India Clinic business and 6% of Kaya Middle East business.

E-commerce showed a slowdown due to limited primary sales with our partner and growing competitive pressure with strong marketing investments from many brands on this channel. Kaya India is now a Great Place to Work certified company in 2023. We have commissioned a marketing automation project to digitize our customer journey, which includes setting up automated appointment booking, customized nudges through WhatsApp and web bots.

The detailed information update is already with you. I would open the session for questions and my colleagues and I will be glad to answer them. Thank you.

Questions and Answers:

Operator

Thank you very much. [Operator Instructions]

Sachin Bobade — Dolat Capital — Analyst

Zeko, participants start asking the question, before that I finish one or two questions which I have [Technical Issues]. So, sir, just wanted to understand, if I look at other discretionary categories performance during the quarter, everyone has shown some sort of improvement [Technical Issues] if I go past two quarters, then there was a significant inflation in the commodity prices and that had impacted overall discretionary spends. Now, Kaya being one of the known — Kaya seems to known as one of the [Technical Issues] how can you spend the outlook? So I’m talking about the care business — cure business, but the care business, the care part which we are talking about and the products business. So any significant improvement you are expecting going ahead in this business?

Rajiv Nair — Chief Executive Officer

Yeah. So if you look at the India business, like you rightly said, there was inflationary pressures in the market and obviously there is a little bit of a slowdown to that extent in terms of customer sentiment in the Feb-March period of this last quarter. What we have seen over the last one year post-COVID is that people spending per transaction actually has increased, the frequency of visits have reduced a bit. So we actually look at it in terms of ATS for this quarter as well. The average transaction for this quarter itself, we have seen almost a 20% increase over last year. So that’s one thing that has happened.

There are certain categories that you mentioned, like for example, a product as a business. Yes, there has been an increase, it’s not disproportionate. It is a 12.19% growth for us in product for the quarter and another area where customers did come out very strongly post-COVID was laser hair removal, which as a category, grew in terms of collection. I mean, we had a slowdown a bit in that category versus last year. Post a fairly large surge for the year in the first three quarters.

But if you look at certain other areas, which you can call it high discretionary spending, which is where people really spend a lot of money per transaction, like for example, anti-ageing, we actually saw an increase of about 38.89%, so quite a strong growth there. Fairness pigmentation category, which is again an important category for us at about 14.5% and beauty facial, which again is a care category as you mentioned, had a growth of almost 33% over last year.

So I think the major push-down, I would say, why the growth has slowed down a bit is that we have seen laser hair removal in the last quarter come down a bit in terms of numbers. Otherwise, quite a few other categories has shown good growth and ATS has shown good growth.

Sachin Bobade — Dolat Capital — Analyst

Sure. Next question —

Rajiv Nair — Chief Executive Officer

New segment last quarter, which was basically the body contouring segment over the last three, four quarters, we’ve been consistently pushing this category. I think this category is something that has also contributed to significant growth over last year, but we will continue to invest on this category for future growth.

Sachin Bobade — Dolat Capital — Analyst

Sure. Sure. Sir, second question is on this INR2,000 denomination. So if I look at the package [Technical Issues] look at the other companies like Mahindra Holidays or other companies, what I believe is that this INR2,000 denomination should help — the ban on INR2,000 denomination should ban the companies which are basically into this package kind of business. So is there any significant growth that we have seen post that announcement.

Rajiv Nair — Chief Executive Officer

So, this has been just over the last one weekend, right. So it’s not a very long duration that we can talk about. Some set of consumers that used cash to pay, but we have done — we haven’t done major campaigns around it. But of course, wherever customer chooses to pay by cash as denomination, we are encouraging that and clinics have been informed to ask the customers in case they would like to pay through these denominations, they are acceptable to us. Some tactical social media campaigns were done over the weekend to actually talk about this delisting of this particular currency, but I would say early days for us to judge.

Sachin Bobade — Dolat Capital — Analyst

And sir, again, coming back to the products business, any increase in penetration in terms of your availability of presence that has happened during the quarter?

Rajiv Nair — Chief Executive Officer

Yeah. So one good thing that has happened is that we’ve been trying to expand our sales into the nutraceuticals space and we have actually been doing currently on more of a pilot mode launch of collagen supplements in powdered form and also butefam [Phonetic] and biotin in tablet form inside the clinic. And now that category has already taken up 25% to 30% of the product sales in Clinic in the last quarter has actually come through nutraceuticals as a category. So what is actually happening is alongside topical application and cosmeceuticals, we do believe that people are looking to ingest certain parts of these things as collagen supplements, so beauty from inside is something that people are kind of promoting and it could be a very large opportunity category going forward.

Sachin Bobade — Dolat Capital — Analyst

Sure, sir. Zeko, now you can take further questions. I’ll come back in the queue.

Operator

[Operator Instructions] Our next question is from the line of Sakshi Chhabra from Swan Investment. Please go ahead.

Sakshi Chhabra — Swan Investment — Analyst

Yeah. Sir, so I wanted to just understand this for the coming year what are our capex plans, like we see that you have increased debt also on the books. So what are our plans going forward. I wanted to understand on opening new clinics, as well as on the product side.

Rajiv Nair — Chief Executive Officer

Yeah. So couple of things. I won’t give you long-term indications, but I’ll tell you which are the areas of focus for us. Post-COVID, we are trying to refurbish our clinics to some extent and improve the infrastructure of certain clinics that we have. In some cases, we are trying to expand capacity by relocation of the clinics from smaller clinics to slightly larger clinics tactically where there is an opportunity and the clinics are sustainable and profitable. That’s one part that we’re doing.

And the bigger focus for us is actually investment on technology, which is machines, where we are doing a complete upgrade of some of our old technology in the clinics and largely these are going to impact categories like fairness pigmentation, laser hair removal, and a few innovations that we bring over the next few years — a few couple of years.

Expansion, we have already done about four clinics, out of which two were launched in the last quarter. So we opportunistically will look at expansion now into Tier 2, Tier 3 cities. And because some of the cities while we are present in more than 20 cities right now, there are certain cities that we have not expanded into, we are looking at that. And in some cases, we are going into more than one clinic in the same geography. For example, we now have two clinics in Surat, we have two clinics in Lucknow. So we are looking at that as the thing, but of course, profitability will drive all of this. So as long as the market shows potential and there is a feasibility, only then we will go for those opportunities.

Sakshi Chhabra — Swan Investment — Analyst

And sir, do you see a lot of difference in the average ticket size between a Tier 1 and Tier 2 city?

Rajiv Nair — Chief Executive Officer

In our case, not really. Actually what we do believe that because the penetration in smaller cities is, say, maybe one clinic in a city, we are still not completely saturated some of these markets. So in terms of pricing, we don’t see major difference. There may be certain categories, maybe a little bit more elastic to pricing and we are seeing some differences in those categories. So for example, laser pricing between one market to another could be different. But when it comes to high discretionary spends like anti-ageing, we don’t see much of a difference between Tier 1, Tier 2 cities.

Sakshi Chhabra — Swan Investment — Analyst

Okay. All right. Can you quantify the amount that you will be spending in FY ’24 on your capex plans?

Saurabh Shah — Chief Financial Officer

We currently we could not able to comment on this point.

Sakshi Chhabra — Swan Investment — Analyst

Okay. And around — new clinics do you plan to open?

Rajiv Nair — Chief Executive Officer

So currently we have opened four. We have identified multiple geographies for expansion. But since that will be also forward-looking, I think as we go into every quarter and we would the launching will keep you updated on the same.

Sakshi Chhabra — Swan Investment — Analyst

Okay. Sir, and also, I wanted to just understand this subsidiary on which you’ve taken an impairment. Can you just throw some light on that?

Saurabh Shah — Chief Financial Officer

Yeah. Sure. So this impairment what we have taken is based on the subsidiary performance. And as and when the scenario performance improves, it will be [Technical Issues].

Sakshi Chhabra — Swan Investment — Analyst

But this subsidiary is based in Middle East or in India, because there is some impact, which is showing on the India books and there is some impact, which is also showing in Middle East, right?

Saurabh Shah — Chief Financial Officer

So one is the investment and one is the goodwill. In India books is the investment and the consol book is the goodwill.

Sakshi Chhabra — Swan Investment — Analyst

Okay. So it’s actually we subsidiary in Middle East, which is affect?

Saurabh Shah — Chief Financial Officer

Correct.

Sakshi Chhabra — Swan Investment — Analyst

Okay. Understood. Thank you, sir.

Operator

Thank you. Our next question is from the line of Yogesh Tiwari from Arihant Capital Markets Limited. Please go ahead.

Yogesh Tiwari — Arihant Capital Markets Limited — Analyst

Thank you, sir, for taking my question. Am I audible?

Rajiv Nair — Chief Executive Officer

Yes, you are.

Yogesh Tiwari — Arihant Capital Markets Limited — Analyst

Sir, just wanted to understand on certain unit economics. So we are — we have opened about two clinics in last quarter and we will open about two to four going forward. So any thoughts from your side, how much time does it take or what is the like payback period for opening up new clinics? How much time it takes to breakeven? Anything on those lines on the unit economics.

Saurabh Shah — Chief Financial Officer

So, Yogesh. Hi. Saurabh here. On the cash-generating scenario, for a clinic to make a EBITDA positive, it depends upon facility where we are placed. It depends upon 12 months to — within 12 month at least EBITDA becomes positive. From payback and everything it takes between one-and-half year, or maybe two years on the cash perspective.

Yogesh Tiwari — Arihant Capital Markets Limited — Analyst

Sure, sir. And sir, in terms of growth, which will be the segment — main segments which will, I don’t know, if I take a three-year period, which will be the main segments which will actually drive over topline going forward?

Rajiv Nair — Chief Executive Officer

Yeah. So obviously the main skin categories will continue to grow, but one category of focus for us will be body contouring. We are making some investments in the category and we are also expanding this category to multiple cities. So over the last quarter, we have also added this category into areas like Gujarat, Hyderabad and in Tamil Nadu, which is in Chennai. So expansion will be — focus will be on body as one of the verticals that will be there, besides quite a few of our core categories in skin.

Yogesh Tiwari — Arihant Capital Markets Limited — Analyst

Okay. And sir, lastly on like the India realizations increased by about 20% approximately. So —

Rajiv Nair — Chief Executive Officer

Sorry, repeat that. What is it? When you say realization?

Yogesh Tiwari — Arihant Capital Markets Limited — Analyst

Yeah. I mean to say the spending in the India business increased by 20%, as you mentioned in the opening remark.

Rajiv Nair — Chief Executive Officer

No. One second. Just — just one second.

Saurabh Shah — Chief Financial Officer

12%, it was.

Rajiv Nair — Chief Executive Officer

No, no, the business was up 12%, so ticket size — sorry, you are talking about the ticket size, transaction value, right?

Yogesh Tiwari — Arihant Capital Markets Limited — Analyst

Yes, yes, transaction value.

Rajiv Nair — Chief Executive Officer

Understood.

Yogesh Tiwari — Arihant Capital Markets Limited — Analyst

Yes. So were there any change in mix, which led to this 20% increase? What would be the driver for this?

Rajiv Nair — Chief Executive Officer

Yeah. So, one of the main things is couple of our core categories actually gave us very high sales. For example anti-ageing as a business last quarter grew by about 40% over previous year about 38.89%, which was an increase which led us to an improvement in terms of ATS, average transaction value. Then of course fairness pigmentation, another category grew by about 14.62% and beauty facial, we reduced our discounts and we automatically realized better results. So we got about a 33.6% uplift on that category and we also launched body contouring in a larger way and body contouring average ticket sizes are much higher than that of other services.

Yogesh Tiwari — Arihant Capital Markets Limited — Analyst

Sure, sir. That is very helpful. That’s all from my side. Thank you, sir.

Rajiv Nair — Chief Executive Officer

Thank you so much. Thank you.

Operator

Thank you. [Operator Instructions] Our next question is from the line of Dhananjai Bagrodia from ASK. Please go ahead.

Dhananjai Bagrodia — ASK Group — Analyst

Hi, sir. Just wanted to know what is the path to profitability out here considering —

Operator

Mr. Dhananjai, sorry to interrupt. May we request you to use the handset?

Dhananjai Bagrodia — ASK Group — Analyst

Okay. Can you hear me now?

Operator

Yes, that’s better. Please go ahead.

Dhananjai Bagrodia — ASK Group — Analyst

So what’s the path to profitability going ahead? Now, how we see that as a company and what levers do we have or are we — yeah.

Saurabh Shah — Chief Financial Officer

Sorry, Dhananjai. Your question is regards to path to profitability and what was the second part?

Dhananjai Bagrodia — ASK Group — Analyst

That’s it. That’s it. Only that. What is the levers to that?

Rajiv Nair — Chief Executive Officer

Yeah. So, I think, one is, of course, translating to higher productivity within our clinics, basically, one of the things that is there about our business is getting more utilization of our assets. In fact, the clinics are very large part is in how to increase the net revenue based on productivity within the business. So to that end, we are also making some investments in technology to improve our time taken per service. So that’s one thing that we’re doing.

Second is to increase the count of customers inside the clinic, that’s the reason why we are going for marketing automation to ensure things like appointment bookings and all are digitized and we can increase the quantum of flow of customers inside the business.

Third is products as a vertical will continue to invest on and we will actually add more segments into that category, which is areas like nutraceuticals, as I mentioned. Body and hair vertical are two categories, which are doctor-led services and based on technology. And these are not so easily replicable services in the market, because it means expertise are areas that we will also work on.

And last but not the least, I think, optimization of cost at all ends is something that we would be looking at. So it could be labor cost, it could be cost towards rentals will be something that we’re constantly assessing and trying to do. Tier 2 expansions and looking at markets opportunistically, where the cost structures of running a business are lower is something that we are doing. So for example, when we go to smaller tier cities like Siliguri or for that matter Lucknow, the cost of rent are much lower than that of what happens in bigger cities.

So I think these are a mix of various things that we’re trying to do at the moment to build in profitability in the business.

Dhananjai Bagrodia — ASK Group — Analyst

So just along those lines, has there been [Technical Issues] like you mentioned that, okay, now let’s, for example, one thing you mentioned was —

Operator

Mr. Dhananjai, your audio is not clear.

Dhananjai Bagrodia — ASK Group — Analyst

Can you hear me now?

Operator

Yes, that’s better. Please go ahead.

Dhananjai Bagrodia — ASK Group — Analyst

Yeah. So one thing you mentioned was that, okay, now let’s say improving order flow and — has that been a hindrance during services where like people have — orders have not been able to be done or something? Because I’m just wondering now it’s been many years since this Company started and like what has been like tangible improvement [Technical Issues] five, seven years on the same aspect?

Rajiv Nair — Chief Executive Officer

No, actually, productivity in the clinics have gone up. There is still potential. So it’s not like we’re losing customer opportunity to service at the moment. So there is enough open capacity available. We have to utilize the capacity better, which means the fact that flow of customer traffic is extremely crucial. And that is what we will be focusing our energies on. So I think the whole effort of ours in the next one, one-and-a-half years would be towards improving the flow of new customer, new customer count in the clinic, that will help us increase utilization of the assets that we have. And of course, on the asset side, we are improving the quality of the assets, especially machine, so that the time taken to achieve the services reduced. And then of course, automation, in terms of customers’ ability to book appointments to be eased out, because with more technology and more control with the customer, the opportunity of taking appointments, changing appointments, managing appointments become that much more easier. So I think those are areas that we are trying to work on at the moment. And [Indecipherable] assets more actually. I mean, that’s in simple terms, we utilize our assets more is what we’re trying to do.

Dhananjai Bagrodia — ASK Group — Analyst

No. But let’s say now there’s been six, seven years since this Company’s IPOed, I mean, when you are in the same place, where revenues are still Q4 INR1,900 [Phonetic] crores, nothing much has changed and we’re still talking about the same thing. Is it inherently that the business is more doctor-led or more clinic — like specific person in a clinic where this is not letting us grow, because people prefer to go to the person who they are more comfortable with or what exactly would you say is the problem, let’s say, it’s been six, seven years since you have listed, what has been the problem that revenues not grown since then?

Rajiv Nair — Chief Executive Officer

Yeah, I think, growing customer footfall on a regular basis is something that has — that is the key requirement of the business and get customers into the clinic and footfall is very important, because if you look at it all the existing customer metrics in the business are very good. So if you see there are maybe very little, very few services businesses that you will see today with NPS scores as high as 82, 83, and customers have stayed with us — existing customers for more than five, six years as well.

So point is the fundamental model that we offer, even if it doesn’t mean that it’s the same doctor running for 10 years and 15 years, I think there is quite a good amount of trust in the brand. It’s just the fact that it is a premium service and you need to drive an X amount of feet into the clinic regularly to build more traffic for the future and that’s the place where I think we are trying to work more and more on.

Dhananjai Bagrodia — ASK Group — Analyst

So then, would it be fair to assume that this is early compared to where India’s potential could be or is it be that even after having such high NPS scores the Company is not being able to generate money. So is it that are we giving service to cheap? What do you think is the issue there?

Rajiv Nair — Chief Executive Officer

I think partly what you’re saying is correct. I wouldn’t want to say that we are at the same place where we were five years ago in terms of customer awareness of the category. Of course, there are many individual standalone clinics or dermatologists who would be there in the business, but this category is also getting more and more organized. There is more interest in the category that is coming up as of today, because there is belief in the potential of the segment for the future.

Many of the services are something that people have seen a journey from purely buying products or going for only pure salon services to get into dermatology services. So in that sense, it’s a more evolved market in comparison to what a salon business actually is. So, definitely India poses a tremendous opportunity and scale over time. Of course, things like COVID and others over the last five years have kind of put a little bit of a brake on the momentum. But I’m sure after post-COVID, this will definitely keep showing positive signs. And plus, whatever innovation that is coming internationally, we are trying to bring those innovations to the country. So as I said, the body vertical will see certain machines that we’re bringing into the market, which are best-in-class. So I would say we have to keep innovating, we have to keep giving reasons for customers to keep coming into the business, but I would say the movement towards dermatology business is definitely happening.

Dhananjai Bagrodia — ASK Group — Analyst

Okay. And thank you, sir. And sir the last one for the product business, how are you seeing that come along, because our product business, we’ve seen so many new start-ups coming without the Marico brand name, who manage to scale up much bigger than we have. What are we missing on that segment?

Rajiv Nair — Chief Executive Officer

Yeah, only difference is that we have been largely focused on our Clinic business and we have not gone into the GT MT expansion, which we did before COVID, but unfortunately during COVID, we had to shut that business down. And the other vertical that you’re talking about is e-commerce. E-commerce, we see good amount of growth as a market, but also need significant investments on scaling, right? So basically all the D2C brands that you see around ourselves, first put in tons of money towards initially burning cash, and then getting the growth happening, which we have not done. Our focus has been on clinics and we continue to focus on the clinic business. But at some point we will definitely push our business for e-commerce. And at this stage, we have started our D2C venture about one, one-and-a-half years ago, and we will continue to do that. Now, we have also started omnichannel in that respect, which means customers can buy online, offline. Are we going to put tremendous amount of money behind growing in the partner retail, partner e-commerce channels, maybe at the at the current level we won’t. So I think the business growth will largely be driven by the growth in clinics and at some point through our D2C vertical.

Dhananjai Bagrodia — ASK Group — Analyst

And how much of this would — like how much sales you all do on Nykaa just roughly?

Rajiv Nair — Chief Executive Officer

Nykaa, specific numbers, I think about 60% of our business comes between Amazon and Nykaa average per month of the e-commerce business.

Dhananjai Bagrodia — ASK Group — Analyst

Sir, if you think about this the scope is quite big in this company. I was just wondering, is it too early on this time in terms of the service part or is execution not going well, because the brand name is super-strong. We all know the Marico brand name. And you all also have a stake in the parent in Nykaa. So that also is potential we are seeing multiples of brands being created on Nykaa. So then why this one not being able to crack it yet is the multi-dollar question.

Rajiv Nair — Chief Executive Officer

Yeah. No, it’s a more complex business than a product business alone. So to that extent, there is lot of complexity of the type of business, the awareness levels of customers are growing. There are many, I would say, low-price options that are available in the market, but we are approaching it like a brand. So, of course, we are not the cheapest in the market and we don’t even claim to be or want to be the cheapest in the market. So we’ll keep sustaining on the brand story and keep building on the brand story and look at more expansion into more and more territories that we are not currently present in. So our footprint as a brand will try and increase. But beyond that, I think it’s a market which has an opportunity to grow according to us, and we’ll continue to invest on those areas.

Dhananjai Bagrodia — ASK Group — Analyst

So, I think this cheapest thing is a little myth, because we’ve seen other brands who have been in more expensive who have done well. So I think that’s not an issue.

Rajiv Nair — Chief Executive Officer

Not really. Actually, if you look at the dermatology space, it is not necessary that every brand out there is still in the super-premium space.

Dhananjai Bagrodia — ASK Group — Analyst

Yeah, yeah, exactly.

Rajiv Nair — Chief Executive Officer

Yeah. So we continue to — so but what I am talking about is the fact that there has been a mushrooming of individual clinics which are there out there in the market, which are playing maybe more the price game, which we are not in at the moment. So we are not acquiring at any cost and acquiring at the cost of maybe making the services very afford — very accessible at a lower price. We are maintaining a mid-to-premium price positioning and we’ll continue to do that.

Dhananjai Bagrodia — ASK Group — Analyst

By when do you think you’ll be able to breakeven on a consolidated basis, at least on the EBIT level?

Saurabh Shah — Chief Financial Officer

It would be too early to give us this response currently because, we are putting our effort toward that direction. So maybe gradually as and when we move based on the performance, the number should improve.

Dhananjai Bagrodia — ASK Group — Analyst

Okay. Sure. Thank you so much. I’ll get back in for more questions. Thank you.

Operator

Thank you. [Operator Instructions] Our next question is from the line of Ajay Vora from Nuvama. Please go ahead.

Ajay Vora — Nuvama — Analyst

Yeah. Hi, sir. If you can just give a sense in terms of what can be our annual run rate on both finance cost and employee cost for this year.

Saurabh Shah — Chief Financial Officer

Okay. From —

Ajay Vora — Nuvama — Analyst

Sir, I’m talking about FY ’24, the ongoing fiscal year.

Saurabh Shah — Chief Financial Officer

So, fiscal for 24, I cannot be comment, but it would be pretty much in line with what is going in ’23.

Ajay Vora — Nuvama — Analyst

Okay. So when we say pretty much meaning either single-digit or broadly flat?

Saurabh Shah — Chief Financial Officer

It may be, because in the finance cost, it comes as a consumer finance cost also. So our business 15% in India, around 15% to 16% also business comes from consumer finance, if that contribution goes up, the also the cost increases [Technical Issues] people sector is build up in the finance cost.

Ajay Vora — Nuvama — Analyst

So this year, the finance cost was the somewhere around INr36 crores. How much would that be consumer financing costs over year?

Saurabh Shah — Chief Financial Officer

Consumer finance cost would be around in India would be around INR3 crores to INR3.5 crores.

Ajay Vora — Nuvama — Analyst

For the full year?

Saurabh Shah — Chief Financial Officer

For the full yeah.

Ajay Vora — Nuvama — Analyst

Okay. So I’ll take for FY ’24. So can you also hedge that what is the gross debt right now?

Saurabh Shah — Chief Financial Officer

Gross debt is around INR150 crores considering both the entity.

Ajay Vora — Nuvama — Analyst

Okay. And what would be the cost of that?

Saurabh Shah — Chief Financial Officer

It depends on — it depends upon 8% to 11%.

Ajay Vora — Nuvama — Analyst

On the entire amount?

Saurabh Shah — Chief Financial Officer

No, it’s a split. Maybe one-third is on 11% and the balance is on 8%.

Ajay Vora — Nuvama — Analyst

Okay. Still the finance cost looks very high, right, sir?

Saurabh Shah — Chief Financial Officer

Yeah. Because there is a lease cost also comes into picture.

Ajay Vora — Nuvama — Analyst

Okay.

Saurabh Shah — Chief Financial Officer

There is one — if you look at this quarter, there is a exceptional cost also we have booked, which is for PF liability interest, which is around INR10.5 crores [Phonetic]. So if you look at on average —

Ajay Vora — Nuvama — Analyst

Yeah. I’m saying when you say that it will be the same for this year as well, because that includes the PF liability of INR10 crores [Speech Overlap]

Saurabh Shah — Chief Financial Officer

No, no, that’s why [Speech Overlap] certain cost we can remove it. And on that basis, you can take it.

Ajay Vora — Nuvama — Analyst

So, next year, the overall interest cost should be lower quite —

Saurabh Shah — Chief Financial Officer

Yeah, yeah. So if you remove the exceptional cost, then it will be low.

Ajay Vora — Nuvama — Analyst

Yes. And similarly for employee cost also you think it will be same or it should be lower next year?

Saurabh Shah — Chief Financial Officer

So the cost would be — there would be escalations which comes into picture from the employee front, which deems into 5% to 8%, because of that can the cost go up.

Ajay Vora — Nuvama — Analyst

And just lastly, are we almost done with the whole impairment of the international assets, so there is more to come in couple of next quarters as well?

Saurabh Shah — Chief Financial Officer

So, currently, I would not be able to comment on that part, because it depends upon how we relate the scenario on the performance.

Ajay Vora — Nuvama — Analyst

So what would be the gross block right now on the international assets?

Rajiv Nair — Chief Executive Officer

Gross block on international.

Saurabh Shah — Chief Financial Officer

Can you give me two minutes?

Ajay Vora — Nuvama — Analyst

Yeah.

Rajiv Nair — Chief Executive Officer

Just one moment, please.

Ajay Vora — Nuvama — Analyst

Yeah.

Saurabh Shah — Chief Financial Officer

It is around AD126 million, including the lease assets. And if you look at it — if you look without that, it would be around AD80 million. Around INR160 crores roughly.

Ajay Vora — Nuvama — Analyst

INR160 crores. Okay. And just lastly I just want to understand in terms of a long-term though process, is the management comfortable with the current pace of expansion, meaning like two to four clinics per quarter? And we are more or less dependent on how the cash flows are and considering the debt also what we have, is there any alternative plan where the Company is really gunning for higher growth through expansion and look for alternatives for overall funding of that growth? What is the overall thought process over here?

Saurabh Shah — Chief Financial Officer

So, basically, currently, the funding which is, in India, is basically towards expansion, but for futuristic scenario currently I can’t comment. But the objective is to do brand refresh, technology, Rajiv Nair already briefed the strategy towards the businesses brand refresh new clinics, investment in infrastructure, that’s obviously what we’re looking at.

Ajay Vora — Nuvama — Analyst

Yeah, but that would be dependent on the internal cash flows, which has its own limitations. So in case, if we are looking at a much bigger opportunity, is there a thought process to grow through alternative funding and grow aggressively, expand aggressively.

Saurabh Shah — Chief Financial Officer

So, currently I would not be able to comment what would be that strategy. Maybe as and when during the course of the financial year in case something turns up on profitability domain, we’ll just announce it.

Ajay Vora — Nuvama — Analyst

Okay. But internally that definitely is something on the mind, right?

Saurabh Shah — Chief Financial Officer

So we acknowledge your point. We have the thought process in mind. What you are trying to tell, but currently we don’t have anything concrete in place. So I would not be able to comment. We are currently focusing on the current cash flow what we have and how we are going to expand, we are concentrating currently on that part to generate the cash flow.

Ajay Vora — Nuvama — Analyst

Okay. Thank you very much. Thanks a lot and all the best.

Operator

Thank you. That was the last question of our question-and-answer session. As there are no further questions, I would like to hand the conference over to the management for closing comments.

Rajiv Nair — Chief Executive Officer

Okay. Just one moment please. Okay. Thank you all for participating in the conference call. Thank you very much indeed. Thank you.

Operator

[Operator Closing Remarks]