CREATIVE NEWTECH LIMITED — Interim / Quarterly Report 2020

Jun 25, 2020

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Creative Peripherals and Distribution Limited Result Update Presentation Q4 & FY20

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Disclaimer
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This presentation has been prepared by Creative Peripherals and Distribution Limited (the “Company”) solely for information purposes and does not constitute any offer, recommendation or invitation to purchase or subscribe for any securities, and shall not form the basis or be relied on in connection with any contract or binding commitment what so ever. No offering of securities of the Company will be made except by means of a statutory offering document containing detailed information about the Company.

This Presentation has been prepared by the Company based on information and data which the Company considers reliable, but the Company makes no representation or warranty, express or implied, whatsoever, and no reliance shall be placed on, the truth, accuracy, completeness, fairness and reasonableness of the contents of this Presentation. This Presentation may not be all inclusive and may not contain all of the information that you may consider material. Any liability in respect of the contents of, or any omission from, this Presentation is expressly excluded.

Certain matters discussed in this Presentation may contain statements regarding the Company’s market opportunity and business prospects that are individually and collectively forward-looking statements. Such forward-looking statements are not guarantees of future performance and are subject to known and unknown risks, uncertainties and assumptions that are difficult to predict. These risks and uncertainties include, but are not limited to, the performance of the Indian economy and of the economies of various international markets, the performance of the industry in India and world-wide, competition, the company’s ability to successfully implement its strategy, the Company’s future levels of growth and expansion, technological implementation, changes and advancements, changes in revenue, income or cash flows, the Company’s market preferences and its exposure to market risks, as well as other risks. The Company’s actual results, levels of activity, performance or achievements could differ materially and adversely from results expressed in or implied by this Presentation. The Company assumes no obligation to update any forward-looking information contained in this Presentation. Any forward-looking statements and projections made by third parties included in this Presentation are not adopted by the Company and the Company is not responsible for such third party statements and projections.

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Table of Contents

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Chairman’s Message & Key Developments
Consolidated Financial Highlights
Company Overview
Business Overview
Way Forward
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Chairman’s Message & Key Developments

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Management Comment

“Our financial performance for Q4 & FY20 has been in line with our expectations. We reported 12.29% growth in topline Y-o-Y, with EBITDA and PAT of Rs. 2.85 cr and Rs. 0.64 cr, respectively, in Q4 FY20. Moreover, our full year performance represents our growth trajectory, with year-on-year improvement in revenue (23.83%), EBITDA (26.28%) and PAT (~33%). This is primarily driven by our growing product portfolio, and more contribution of higher-margin value-added products in the imaging and IT segments such as GoPro, Samsung and Viewsonic, as well as emerging sectors such as gaming – Cooler Master & PNY. We have witnessed unprecedented demand for Cooler Master products as well as for the new GoPro 8, since its launch in October 2019.

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This financial year has been quite eventful and fruitful for us. We crossed several milestones in our growth trajectory, including our migration to the NSE main board from the NSE-Emerge board. As our international presence grows, we established subsidiaries in Hong Kong to cater to our overseas operations in the Middle East and SAARC. We also enhanced our brand portfolio with some niche and high-margin products which have huge growth potential, such as Cooler Master, BaByliss, PNY and most recently, Panasonic. Our association with Honeywell was also strengthened during this quarter as we expanded our distribution agreement to include passive networking & cabling solutions.

In March 2020, we witnessed an unprecedented and unforeseeable adversity in the form of the Covid-19 virus outbreak. This pandemic has resulted in a significant slowdown in the overall economy, impacting all businesses across the nation as well as the world. We have been complying with the Central and State Governments’ directives and had temporarily shut all operations. The entire impact of this business lockdown remains to be seen in the coming months.

Commenting on the Company performance , Mr. Ketan Patel, Chairman & Managing Director of Creative Peripherals & Distribution said:

On a brighter note, as businesses resume operations and the economy regains momentum, we foresee an opportune time for growth. We are very excited about our latest endeavour – an online digital B2B platform. We will host our entire client-base to showcase and trade their products on our platform. This would not only increase visibility and availability of products, but also facilitate clients to trade in products which are otherwise not on our portfolio, thereby expanding our domain. The platform is a win-win solution for everyone in the supply chain and would translate into higher profitability for Creative Peripherals.

We strive to be the go-to market entry specialist for experiential brands seeking entry into the Indian markets. I would like to thank our team and all our stakeholders for their invaluable support and belief in us which drives us to set & achieve higher benchmarks.”

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Key Developments (1/2)

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• ➢ Signed several new distribution agreements with global niche brands across sectors:

• PNY Technologies – niche US-based brand that offers high-performance graphics cards and solid-state drives (SSDs). Product portfolio would include NVIDIA® GeForce® cards, NVIDIA® Quadro® cards and PNY SSDs used in gaming equipment

• BaByliss – niche French brand in women’s personal grooming segment. Product portfolio would cover range of hair styling products

• –

• Panasonic global consumer electronics brand. Creative would distribute premium audio products (e.g. range of earphones) across Madhya Pradesh, Rajasthan, Chhattisgarh and Western India

• ➢ Expanded distribution agreement with Honeywell to include networking passive cabling solutions, used in smart buildings, Wi-Fi applications, networking, surveillance and CCTVs. This adds to our existing portfolio of Honeywell products

• –

• ➢ Launched latest generation of GoPro cameras across India GoPro 8 high-end outdoor video capture and content sharing device

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Key Developments (2/2)

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• ➢ Excited about launching new online B2B digital platform for customers

• Online B2B platform will host all existing and new customers – integrated with Company’s ERP system

• Customers will be able to discover, share and transact their products

• Value added services include drop-shipment and invoicing capabilities

• Aimed to be a one-stop-shop for all customers’ requirements

• Planned commercial launch in July 2020

• ➢ Temporary Suspension in Operations Company had temporarily shut down all operations as per the Government directive, in light of outbreak of Covid-19 pandemic during March-April 2020. After due approvals and permissions from the authorities, partial operations were resumed from 20[th] April, 2020

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Consolidated Financial Highlights

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Key Quarterly Financial Highlights

Rs. Cr	Q4 FY20			Q4 FY19	YoY%	Q3 FY20
Revenue from Operations	128.19			112.41		129.34
Other Income		0.04		1.79		0.16
Total Income		128.23		114.20	12.29%	129.50
Raw material		113.83		103.23		113.88
Employee Cost		2.47		2.00		2.27
OperatingExpenses		9.07		4.89		7.40
Total Expenditure		125.38		110.11		123.54
EBITDA		2.85		4.08	(30.21%)	5.95
EBITDA Margin(%)		2.22%		3.57%	(135 bps)	4.60%
Interest		1.21		1.40		1.39
Depreciation		0.27		0.18		0.22
Profit Before Tax		1.37		2.50		4.34
Tax		0.74		0.37		1.22
PAT		0.64		2.13	(70.13%)	3.12
Share of P/L in Associates		0.00		0.00		0.00
OtherComprehensiveIncome		0.01		(0.04)		0.00
Net Profit		0.65		2.10	(69.16%)	3.12
Net Profit Margin(%)		0.50%		1.84%	(134 bps)	2.41%
Basic EPS in Rs.	0.56			1.81	(69.06%)	2.69

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• Rise in total income driven by higher demand for existing as well as newly added Imaging and gaming brands – GoPro, Cooler Master & PNY • Impact of high-margin brands like GoPro and Cooler Master offset by higher advertising, sales promotion & employee costs incurred from strengthening sales & marketing teams • Nationwide lockdown adversely impacted inventory levels and working capital

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Annual Performance Highlights – FY20

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23.83%

Total Income Rs 459.06 Cr

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33.49%

Net Profit Rs 7.76 Cr

26.28%

EBITDA Rs 16.82 Cr

33.53%

Basic EPS Rs 6.69

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Dividend recommended at 5%, subject to approval of shareholders

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Annual Financial Highlights

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Revenue (Rs. Cr)
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459.06
370.72
250.96
212.01
198.58
FY16 FY17 FY18 FY19 FY20
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EBITDA (Rs. Cr)

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16.82
13.32
7.51
5.17 5.17
FY16 FY17 FY18 FY19 FY20
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PAT (Rs. Cr)

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7.78
5.85
2.89
1.34
1.13
FY16 FY17 FY18 FY19 FY20
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Annual Financial Highlights

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Rs. Cr		FY20		FY19	YoY%
Income from Operations		457.72		367.65
Other OperatingIncome		1.34		3.06
Total Income from Operations		459.06		370.72	23.83%
Raw material		407.03		335.66
Employee Cost		8.99		6.96
OperatingCost		26.22		14.77
Total Expenditure		442.24		357.40
EBITDA		16.82		13.32	26.28%
EBITDA Margin%		3.66%		3.59%	7 bps
Interest		4.80		4.52
Depreciation		0.86		0.53
Other Income		0.00		0.00
Exceptional Item		0.00		0.00
Profit Before Tax		11.16		8.27
Tax		3.39		2.43
PAT		7.78		5.85	32.97%
PAT Margin%		1.69%		1.58%	11 bps
EPS in Rs.		6.69		5.01	33.53%

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Balance Sheet Highlights – As on 31[st] March

Rs. Cr	As on 31stMarch 2020	As on 31st March 2019		Rs. Cr	As on 31st March 2020	As on 31st March 2019
Equity	41.24	33.31		Non-current assets	10.08	10.30
EquityShare capital	11.60	5.80		Property, Plant and Equipment	8.89	8.93
Other Equity	29.75	27.51
				Non-current Investments	1.06	1.24
MinorityInterest	-0.11	0.00
				Net Deferred Tax Asset	0.12	0.13
Share Application Money Pending Allotment	10.60	0.00
				Long-term loans & advances	0.00	0.00
Non-current liabilities	5.49	6.75
				Other non-current assets	0.01	0.00
Longterm borrowings	4.81	6.18
				Current assets	144.80	108.23
Other Longterm liabilities	0.00	0.00
Other Longtermprovisions	0.69	0.57		Inventories	60.29	27.79
Current liabilities	97.54	78.46
				Trade receivables	38.58	44.05
Short Term Borrowings	27.07	29.73
				Cash & Cash equivalents	0.52	1.14
Trade Payables	29.30	26.59
				Bank Balances other than above	3.36	2.45
Other Financial liabilities	25.06	17.21
Other Current liabilities	15.35	4.38		Other Financial assets	0.02	0.00
Short-termprovisions	0.12	0.10
				Other Current Assets	42.03	32.80
Current Tax liabilities(Net)	0.63	0.47
				Total Assets	154.88	118.52
Total Equities & Liabilities	154.88	118.52

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Revenue Contribution – Business category

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FY2019 FY2020
Lifestyle &
Lifestyle &
Security
Security
4%
15%
Imaging
43%
I.T.
Peripherals
I.T. 42%
Imaging
Peripherals
43%
53%
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RoE(%)
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Consolidated Key Return Ratios

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18.81%
17.55%
11.59%
11.03%
10.33%
FY16 FY17 FY18 FY19 FY20
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RoCE(%)

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18.82% 19.31%
17.82%
14.40% 14.22%
FY16 FY17 FY18 FY19 FY20
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Focus on improving RoCE and long term value creation

*RoE = Net Profit/Net Worth | RoCE = EBIT/(Shareholders Fund+Long-term Borrowing+Short-term Borrowing-Non Current Investment)

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Company Overview

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Who we are

Market Specialists for Experiential Products in IT, Imaging, Lifestyle and Retail Security domains

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▪ Industry leader specialising in market entry for global niche brands in India ▪ 20+ Brands ▪ 3,200+ Products

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▪ Unique business model – well-placed to capitalise on market opportunities ▪ Right skill sets for execution ▪ Contract manufacturing capabilities

▪ Robust distribution ▪ Provide end-to-end network built over two solutions from contract decades manufacturing to retail ▪ ▪ Omni-channel network 5,000+ Partners distribution & brand ▪ 150+ Employees encompassing Online, Retail licensing and General Trade

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Journey so far…

• Expansion into gaming products segment in India - through agreement with Thermaltake Technology Co. Ltd.

• 2012 - Foray into Imaging business by signing Olympus

• 2013 - Exclusive Photo Distribution

• Entered into exclusive agreement with “ iball” for all their products in Madhya Pradesh and Vidarbha

• from Vitec Group of Italy for Manfrotto

• Listed on NSE - SME stock

• 2013 - Exclusive distribution for 5 new global IT vendors

• exchange

  • Migrated to NSE Main Board

• Forayed into gaming products under lifestyle segment

• Started as trading

  • Expanded IT, Gaming & Lifestyle segments via agreements with PNY, Cooler Master & BaByliss

• 2015 - Reliance Digital ‘ Best Fulfillment Partner ’

• concern with 2

• Agreement with TPV Technology India for Philips Digital Signage in India

• employees

  • Signed distribution agreement with Panasonic for premium audio products

• 2015 - Exclusive distribution for 8 new global brands including ViewSonic & Samsung

• Epson Dot-matrix Printer aggregator

• Expanded agreement with Honeywell for Passive Cabling solutions

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Cabling solutions
1990s 2000-10 2012-15 2016 2017 2018 2019-20
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• Microsoft sub-distribution in Maharashtra

• Forayed into retail security business

• Expand Trademark Licensing agreement with Honeywell - geographic expansion to Middle East countries & added new products

• & Gujarat

• Exclusive license for Honeywell

• Changed name to Creative Peripherals & Distribution Pvt. Ltd.

• Distribution license received for GoPro

• Forayed into Retail Security segment - Signed Exclusive Agreement with InVue Security Products Corp.

• Opened branches in Pune, Bangalore and Ahmedabad

• Agreement with Future Tech Electronics - LED TV’s for DAEWOO, MEPL & INDICOOL brands in India

• Epson Business Partner

• Foray into Lifestyle business

• Launched GoPro Hero 7 series Products – HERO 7 Black, HERO 7 Silver, HERO 7 White

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Key Team

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Mr. Ketan Patel

Chairman & Managing Director

• IIM - B Alumnus with Engineering in Computer Technology from Mumbai University

• Over three decades of experience - has built expertise in business strategy, planning, product marketing and people management

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Mrs. Purvi Patel

Whole Time Director

• Holds Diploma in Pharmacy with rich experience in Computer Programming

• Responsible for execution of business strategies and planning

• In-charge of all key business functions

• Responsible for maintaining vendor relations & new product development

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Vijay Advani

Whole Time Director

• Bachelor of Commerce from Mumbai University, with over 32 years of experience

• Expertise lies in business planning, execution and key account management

• Over three decades’ experience in Value Added Distributors Industry, including companies like General Electronics

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Abhijit Kanvinde

Chief Financial Officer

• Chartered Accountant with over 20 years of strong and multi-industry experience

• Worked in companies like Garnier India, Novartis Consumer Health, Shringar Cinemas, etc

• Was CFO of listed company for over 8 years, also successfully completed IPO 2x in his career

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Upendra Singh

National Sales Head

• Bachelor of Commerce from Ranchi

• University, with nearly 30 years experience in Sales & Marketing

• Expertise lies in vendor management, sales generation & market penetration With over 11 years’ experience in IT hardware industry, he drives national channel & corporate sales

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Amol Patil

National Product Head

• MBA in Marketing with Engineering in Electronics and Telecom, with over 20 years’ experience in IT industry

• Expertise lies in identifying latest market opportunities with excellent team management and execution skills. He is responsible for profitable management of products portfolio

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Business Overview

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Niche & Experiential Product Offerings

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Information Technology Imaging Lifestyle
Thermaltake
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Security
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Driving digital transformation…

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Our Value Addition

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Information
Price
Access to
Network
Partnership
Product
Scale and
Content & What is
Skills
needed?
Community
Customer
Brand
Service
Experience
Strategy
Customer
experience Omni- Channel
Marketing
2000 2022 Contract
manufacturing
Customer
By 2022, Customer Experience would overtake Price & Product
Intimacy
as the key brand differentiator
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Integrated Business Model

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▪ Identification of ideal distribution channel ▪ Identify and acquire required skill sets / man power ▪ Regional planning and strategy to market brand Strategic ▪ Resource allocation and strengthening of ▪ Planning Executing marketing strategy operations ▪ Creating brand awareness ▪ Training and events Pre-Sales ▪ Customer Engagement ▪ Digital Cataloguing ▪ On-field research and in-house Market usage and checking Research ▪ Location-wise market demand analysis ▪ Price waterfall analysis ▪ ▪ Detailed product comparison Point-of-sales (POS) activity Differentiated ▪ Competition Analysis Sales Processes ▪ Relationships with channel partners : E- Commerce, Large Format and Specialized Retailers ▪ Reseller workshop & demos ▪ Online-to-Offline channel

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Integrated Business Model contd…

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• Product to product comparison with similar products from peer brands in industry – for competitive benchmarking

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Market Research

• On-field research & in-house usage & checking – Checking product’s usability, viability and features internally as well as in real-world scenario across markets. Conducting brainstorming sessions and Price Waterfall analysis.

• Location-wise market demand – Gaining insight on consumer trends & demand of various demographics for product

• Market analysis – Research to support ramp-up of brands in multiple countries with cost effective scalable process

• Competition Analysis – Ascertain products and strategy of peer brands, and vetting overall technology landscape

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Strategic Planning

• Identification of ideal distribution channel for specific product/brand, based on the target market Channels - mix of online & offline modes

• Identify and acquire required skill sets / man power – Conducting necessary training to equip personnel with required knowledge and skills to perform demo’s etc. at POS

• Regional planning and strategy including target-setting – formulating strategy specific to region, product and channel

• Strategy to market brand

• Resource allocation and strengthening of operations

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Integrated Business Model contd…

• Executing marketing strategy

• Creating brand awareness

• Training and events

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Pre-

• Customer Engagement

Sales

• Digital Cataloguing

• ▪ POP Displays ▪ 100+ Trained, professional sales staff ▪ 1,200+ Trainings conducted at shop level annually

• Point-of-sales (POS) activity

▪ Relationships with channel partners : E- Differentiated Sales Commerce, large format and specialized Processes retailers

• Reseller workshop & demos

• Online-to-offline channel

• ▪ 20 branches across India

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Case Study – Honeywell

End to end services from factory to consumer

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Honeywell : Fortune 50 multinational conglomerate offers various commercial and consumer products, engineering services and aerospace systems. Active across aerospace, automation & control systems and performance materials & technologies.

Our Involvement: Started association in September 2016 to capitalize opportunities seen in Indian market. Creative has been crucial support and channel for Honeywell to expand their product distribution in India, and eventually across other Asian markets, and recreate “Power of Connect” among consumers

Product Designing and ▪ Contract manufacturing – products manufactured at Honeywell certified factories ▪ Design and casts – owned by Creative Manufacturing

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www.honeywell.com
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• Exclusive rights across multiple product segments

Exclusive Distribution, Premium Pricing

• Soon to launch new product category – Wi-Fi networking - Home segment

• Omni-channel supplying platforms – modern retail, e-commerce and traditional channel stores

• Rights to assign premium pricing for certain products

▪ Distribution agreement in SAARC and Middle East countries (Expect to launch products in Middle International Markets East in Mid-2019)

• Designing and packing of products as per Honeywell global packing guidelines

Value Added Services

• Offers higher/longer warranty and better after sales services

• Demand generation and marketing activities as per Honeywell global guidelines

Scalability

• Plan to manufacture in India under ‘Make in India’ initiative

• Plans to scale up operations in international markets and expand product portfolio

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Case Study – Go Pro

Market entry, Brand awareness, Consumer engagement

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GoPro : Global brand offering broad range of imaging devices and accessories for professional as well as amateur users

Our Involvement: Started association in 2016-17 to enter Indian market. Creative has been a key enabler for brand to penetrate market and establish its presence here. GoPro has grown from barely-known foreign brand to a well-recognized premium imaging brand in urban India

Marketing Strategy

• Market research & expertise to formulate customized, ideal marketing strategy

• Launched ‘GoPro Hero’ two days prior to global release, to make it available in time for Diwali sales in 2016

• Arrange and manage POP setups and kiosks for the brand at various malls

• Specialized training to 1,200 on-ground staff (ISD – In-Store-Demonstrators)

Exclusive Distribution

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• Exclusive distribution rights across India

• Leverage strong nation-wide network

• From introduction of ‘GoPro Hero’ in 2016-17, current portfolio spans several new variants of cameras, e.g. “GoPro 7”

On-Field Activities

• Brand awareness & promotion

• Content creation & influencers

www.gopro.com

• Over ~36 events and workshop per year – e.g. 7th India HOG Rally by Harley Davidson at Goa, Times Green Wheels bike festival

• Pre-sales activities

Scalability

• Witnessed growing sales in India: Share of revenue grew from $1 mn in FY2016-17 to $14 mn in FY2018-19

• India offers high growth potential among Asian markets, compared to mature markets like Japan and China

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Geographical Presence

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Kuwait Bahrain
Qatar
India
Saudi Arabia
UAE
Oman
Strong network of 5,000+ partners across India
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Domestic

▪ Pan India presence ▪ 20 branches across India ▪ Over 150-strong highly skilled workforce across India – mix of young and experienced talent International

▪ Strong distribution tie-up in Middle East ▪ Expanding network across SAARC countries

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Smart Sourcing Capabilities

Central Warehouse @ Bhiwandi, Maharashtra

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Dispatch all over India from Central warehouse

• Warehousing and Transportation services

• 40,000 Sq. ft. area

• Semi-automatic warehousing

• Advanced systems for inward & outward, packing and stock keeping (Bar Code system for outward)

• Technology enabled supply chain

• Transactions handled: 3,500 tonnes per annum

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Key features

• State-of-art inventory management and warehousing equipment

• Fast and on-time delivery

• Can arrange dispatch from single unit to container

• Tie-ups with reputed logistics service providers

• Trained and experienced staff

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Way Forward

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Future-ready business growth

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New markets

01 Expansion in new markets

• Domestic market : Smart Cities and Make in India boosting demand from OEMs & service providers; Smart Homes, Vehicles; Big Data and Analytics, Intelligent technology & hardware to drive future growth

• International market : Expanding in Middle East and SAARC Countries

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Future-ready business with focus on niche products

02

Primed for new-age customer behavior

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High growth from key business category

03

Key growth drivers

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• Internet of Things & Artificial Intelligence : APAC investment projected over $2.5tr by 2020; smart connected machines, augmented reality, cloud connectivity in enterprise markets. Machine learning solutions & applications used across institutions ; advanced robotics, wearables market size currently over $35bn

• Experiential products focused on the younger demographic – bring niche brands into India

• Focus on high margin & high-value brands such as GoPro, Honeywell, Manfrotto, Olympus

• Expand omni-channel network covering online, retail and general trade

• Utilize digital platform to expand customer and product-base

• Honeywell : High-margin products for connectivity, which are secure and energy-efficient

• ▪ GoPro Cameras : Next-gen technology, premium pricing, target high-end users

• Lifestyle Products / Consumer Durables : Expected to grow 22%, as smartphone market stabilizes

• Security Products : Estimated market size over $350 bn; exclusive distribution of premium brands

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Thank You

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CREATIVE CREATIVE:IN
For further information, please contact:
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Company :

Investor Relations Advisors :

Creative Peripherals and Distribution Ltd. Bridge Investor Relations Pvt. Ltd. Mr. Abhijit Kanvinde Mr. Rahul Trivedi Chief Financial Officer Ms. Anviksha Konnure Abhijit@ecreativeindia.com rahul@bridge-ir.com / anviksha@bridge-ir.com www.ecreativeindia.com www.bridge-ir.com

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Thank you!