KDDL Ltd — Investor Presentation 2019

Aug 14, 2019

KDDL Limited

Kamla Centre, SCO 88-89, Sector 8-C, Chandigarh - 160 009, INDIA. Tel: +91 172 2548223/24, 2544378/79 Fax: +91 172 2548302, Website:www.kddl.com CIN-L33302HP1981PLC008123

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Ref : KDDL/CS/2019-20/39 Date : 14[th] August, 2019

National Stock Exchange of India Limited Exchange Plaza, C-1, Block G, Bandra Kurla Complex, Bandra, Mumbai - 400 051

BSE Limited, Phiroze Jeejeebhoy Towers, Dalal Street, Mumbai - 400001

Trading Symbol : KDDL

Scrip Code : 532054

Subject: Results Update Presentation

Dear Sir / Madam,

Please find enclosed Results Update Presentation for Q1FY20.

Kindly take the same on record.

Thanking you,

Yours truly

For KDDL Limited

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Brahm Prakash Kumar Company Secretary

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KDDL Limited & ETHOS Limited

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Result Update Presentation August 2019 Q1FY20

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Safe Harbor

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This presentation and the accompanying slides (the “Presentation”), which has been prepared b Kddl Ltd and Ethos Limited, a material subsidiary of KDDL Limited, (the “Company”), solely for information purposes and do 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 whatsoever. 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 forwardlooking 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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Q1FY20 Performance Overview

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Q1FY20 Performance

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Standalone Performance

Revenue (Rs. Cr)

EBITDA (Rs. Cr)

PAT (Rs. Cr)

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48.0
44.3
Q1FY19 Q1FY20
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8.2 8.3
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Q1FY19

Q1FY20

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3.8
2.9
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Q1FY19 Q1FY20

Ethos Performance (Consolidated)

Revenue (Rs. Cr)

Normalized EBITDA (Rs. Cr)

PAT (Rs. Cr)

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100.8 102.1
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Q1FY19

Q1FY20

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12.5
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6.8
Q1FY19 Q1FY20
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1.5
0.0
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Q1FY19 Q1FY20
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Q1FY20 Financials are with applicability of IND AS 116

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Standalone P&L

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Rs. Crs	Standalone	Standalone	Standalone	Standalone
	Q1FY20	Q1FY19	YoY%	FY19
Revenue	48.0	44.3	9%	175.2
Cost of Goods Sold	12.5	10.8		44.6
Gross Profit	35.6	33.4	6%	130.6
Employee Expenses	14.1	12.8		49.1
Other Expenses	13.1	12.5		49.1
EBITDA	8.3	8.2	1%	32.5
Margin (%)	17.3%	18.6%		18.5%
Other Income	0.9	0.6		3.9
Interest	2.1	1.4		6.3
Depreciation	3.0	1.9		7.8
PBT	4.1	5.5	-25%	22.3
Tax	1.3	1.7		6.5
PAT	2.9	3.8		15.8
Cash PAT	5.7	5.7	1%	23.5

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Q1FY20 Financials are with applicability of IND AS 116

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Consolidated P&L

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Rs. Crs	Consolidated	Consolidated	Consolidated	Consolidated
	Q1FY20	Q1FY19	YoY%	FY19
Revenue	152.7	146.2	4%	624.2
Cost of Goods Sold	84.9	84.9		360.9
Gross Profit	67.8	61.3	11%	263.3
Employee Expenses	25.8	20.0		86.4
Other Expenses	24.0	27.9		111.5
EBITDA	18.1	13.4	35%	65.5
Margin (%)	11.8%	9.1%		10.5%
Other Income	0.8	1.0		3.0
Interest	6.5	3.7		14.9
Depreciation	10.9	3.2		13.2
PBT	1.5	7.5		40.3
Tax	1.5	2.5		15.2
PAT	0.1	5.0		25.1
Minority Interest	-0.4	0.4		3.0
PAT After Minority Interest	0.4	4.6	-91%	22.1
Cash PAT	11.3	8.2	38%	35.3

Commentary

• PAT was impacted by INDAS 116 accounting standards

• IND AS 116 has resulted in increase in Depreciation and Interest by Rs. 9.4 Crs

• CASH PAT has increased by 38% on YoY basis in Q1FY20

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Q1FY20 Financials are with applicability of IND AS 116

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Adjusted Consolidated Profit & Loss

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Particulars (Rs. Crores)*	Q1FY20 As Reported	Adjusted for INDAS 116	Adjusted for INDAS 116	YoY%
		Q1FY20	Q1FY19
Revenue	152.7	152.7	146.2	4%
Cost of Goods Sold	84.9	84.9	84.9
Gross Profit	67.8	67.8	61.3	11%
Employee Expenses	25.8	25.8	20.0
Other Expenses	24.0	31.8	27.9
Normalized EBITDA	18.1	10.3	13.4	-23%
Normalized Margin (%)	11.8%	6.8%	9.1%
Other Income	0.8	0.8	1.0
Interest	4.1	4.1	3.7
INDAS 116 Interest	2.4	-	-
Depreciation	3.8	3.8	3.2
INDAS 116 Depreciation	7.0	-	-
PBT	1.5	3.2	7.5	-58%

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Q1FY20 Financials are with applicability of IND AS 116

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Ind AS 116: Impact on Financials

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• On 1 April 2019, the Group has adopted Ind AS 116 “leases”, using the modified retrospective approach. Accordingly, the comparatives have not been retrospectively adjusted

• The adoption of Ind AS 116 has resulted in recognizing a Right-of-Use Assets of Rs. 88.6 Cr. and Rs. 2.61 lakhs as net Investment in Sub Lease of ROU Assets equivalent to the lease liability of Rs. 88.6 Cr. as at 1st April 2019

• Overall balance sheet will increase by the amount of asset created for Leases. This will have an impact on Profitability as under:

Profit & Loss Impacts	Profit & Loss Impacts	For Q1FY20 (Rs. Cr.)	Financial impact
Other expenses (Rent)	Decrease in Rent expense	-7.7	This affects other expenses, depreciation and finance cost in the Profit & loss statement & consequently impacts EBITDA and PBT of the company
Finance costs	Increase in Finance cost	2.4
Depreciation	Increase in Depreciation	7.0
Profit before tax	Decrease in PBT	-1.7

There would be no change in the cash flow of the company due to applicability of INDAS 116

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Balance Sheet

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Rs. Crs	Consolidated	Consolidated	Standalone	Standalone
	Mar-19	Mar-18	Mar-19	Mar-18
Equity	235.0	161.7	167.1	130.3
(a)Equityshare capital	11.7	11.0	11.7	11.0
(b)Other equity	179.1	121.0	155.4	119.3
Non ControllingInterest	44.2	29.7	-	-
Non-current liabilities	73.9	53.2	41.0	39.2
(a)Financial Liabilities
(i)Borrowings	65.1	46.0	34.5	33.4
(ii)Other financial liabilities	0.1	0.1	0.1	0.1
(b)Provisions	4.6	3.4	2.2	1.9
(c)Deferred tax liability (net)	4.2	3.8	4.2	3.8
Current liabilities	207.4	215.2	54.6	68.2
(a)Financial Liabilities
(i)Borrowings	62.0	63.6	7.4	22.6
(ii)Trade payables	82.6	86.3	15.7	15.0
(iii)Other financial liabilities	48.7	47.8	26.9	23.6
(b) Othercurrent liabilities	9.1	12.5	2.8	2.8
(c)Provisions	0.7	0.8	0.6	0.8
(d)Current tax liabilities(net)	4.3	4.2	1.3	3.6
Total Liabilities	516.3	430.0	262.8	237.8
Non-current assets	184.1	140.4	185.2	160.6
(a)Property, plant and equipment	143.2	83.6	94.1	60.4
(b) Capital work-in-progress	6.8	24.2	2.4	23.6
(c) Other intangible assets	0.9	0.8	0.7	0.6
(c)Intangible assets underdevelopment	0.4	0.0	-	-
(e)Equity accountedinvestees	0.3	0.3	-	-
(f)Financialassets
(i)Investments	0.5	0.5	79.7	67.6
(ii)Loans	12.4	10.6	2.2	1.7
(iii) Other financialassets	1.4	2.2	-	-
(g) CurrentTax Asset	6.3	6.2	5.0	5.0
(h)Deferred taxassets (net)	6.3	5.0	-	-
(i) Other NonCurrentAssets	5.6	7.0	1.0	1.8
Current assets	332.2	289.6	77.6	77.2
(a)Inventories	240.0	201.2	30.7	27.1
(b)Financialassets
(i) Trade receivables	30.4	32.6	23.7	28.6
(ii) Cashand cashequivalents	17.0	11.3	2.5	1.8
(iii) Other bank balances	6.1	6.7	6.1	6.7
(iv)Loans	4.8	4.4	1.8	1.8
(v) Other financial assets	2.5	0.4	5.0	0.9
(c) Other current assets	31.6	32.9	7.8	10.3
Total Assets	516.3	430.0	262.8	237.8

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Manufacturing Business Overview

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Introduction - Watch Dials and Hands Business

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▪ Commercial operations began in 1983 ▪ Leading Global supplier of Watch Dial serving many well-known brands all over the world ▪ Manufacturing facilities located at Parwanoo & Derabassi, near Chandigarh in India ▪ Capability to manufacture dials with high & complex features Watch Dials		▪ Commercial operations began in 1996 ▪ Only supplier in India and one of 5 independent manufacturers globally; facilities located at Bengaluru ▪ Recently acquired Estima AG in Switzerland; to enhance presence in mid-priced segment European Brands Watch Hands		▪ Deep Understanding of the Global Watch Industry ▪ Established relationships with Swiss Watch makers as well as Indian Watch makers ▪ Consistent Manufacturing on basis International Quality norms Value Proposition

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Acquired “Estima AG” in Switzerland

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About Estima AG

• Estima was established as a maker of watch hands in Switzerland in 1924

• It was a leading supplier to Swiss and other European watch brands in the mid-priced segment and enjoyed an excellent reputation

• However, over last 10 years, it was unable to keep up with market changes and lost market share leading to declining turnover and mounting losses

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Strategic Rationale

• Estima was a competitor of the Company in the business of watch hands manufacturing

• Has a well established name, valuable production infrastructure and will be serve as a good platform to establish a foothold in Swiss 01

• watch component manufacturing

• Will help capture additional market share of customers in European market serviced by Estima

Acquisition of “Estima AG”

Deal Structure

03

• Acquiring 100% holding of Estima

Financials 02 ▪ Current Turnover : CHF 1.8 – 2.0 million

• Cash – CHF 4,00,000 for 100 % Shares

• The cut-off date for acquisition by new management was 7th January, 2019

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Introduction - Precision Engineering Business

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Value Proposition

Eigen offers a full package of services, ranging from design and development to full scale production, providing customers with optimized supply chain solutions

Capabilities

We address various segments such as Electrical, Electronics, Automobile, Telecommunications, medical equipment, Aerospace, Consumer Durables etc

Customers

Enabling our customers to meet their design and production needs for over 12 years. We have some of the most wellknown names in their industry as our esteemed customers

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Stable Manufacturing Performance*

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Revenue (Rs. Crs)

EBITDA (Rs. Crs)

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175 32
+11%
+15%
146 27
127 125
22
21
FY16 FY17 FY18 FY19 FY16 FY17 FY18 FY19
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*Excludes the Financial Performance of Estima AG, Switzerland

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Ethos: Q1FY20 Snapshot

Q1FY20 Performance

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Q1FY20 vs Q1FY19 (Consolidated*)

Billings (Rs. Cr)

Revenue (Rs. Cr)

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116.8 118.1
Q1FY19 Q1FY20
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100.8 102.1
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Q1FY19

Q1FY20

Normalized EBITDA (Rs. Cr)

PBT (Rs. Cr)

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12.5
6.8
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Q1FY19

Q1FY20

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2.3
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Q1FY19

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0.1
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Q1FY20

*Consolidated Financials include Watch Retailing Business and Digital Marketing business Q1FY20 Financials are with applicability of IND AS 116

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Consolidated Profit & Loss

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Particulars (Rs. Crores)*	Q1FY20	Q1FY19	YoY %	FY19
Revenue	102.1	100.8	1%	445.1
Cost of Goods Sold	71.6	73.3		315.9
Gross Profit	30.5	27.5	11%	129.2
Employee Expenses	8.7	6.9		33.4
Other Expenses	9.6	15.2		61.8
Reported EBITDA	12.1	5.4	125%	34.0
Margin (%)	11.9%	5.4%		7.6%
Interest	4.2	1.9		7.7
Depreciation	7.8	1.2		4.8
PBT	0.1	2.3	-95%	21.5
Tax	0.1	0.8		8.4
PAT	0.0	1.5	-97%	13.2
Cash PAT	7.8	2.6	197%	18.0

*Consolidated Financials include Watch Retailing Business and Digital Marketing business Q1FY20 Financials are with applicability of IND AS 116

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Adjusted Consolidated Profit & Loss

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Particulars (Rs. Crores)*	Q1FY20 As Reported	Adjusted for INDAS 116 & other items	Adjusted for INDAS 116 & other items	YoY%
		Q1FY20	Q1FY19
Revenue	102.1	102.1	100.8	1%
Cost of Goods Sold	71.6	71.6	73.3
Gross Profit	30.5	30.5	27.5	11%
Employee Expenses	8.7	8.7	6.9
Other Expenses	9.3	16.4	13.8
Normalized EBITDA	12.5	5.3	6.8	-22%
Normalized Margin (%)	12.2%	5.2%	6.8%
Interest	2.1	2.1	1.9
INDAS 116 Interest	2.1	-	-
Depreciation	1.4	1.4	1.2
INDAS 116 Depreciation	6.4	-	-
Forex Items	0.4	0.4	0.4
Provision for Legal case	-	-	1.0
PBT	0.1	1.5	2.3	-37%

*Consolidated Financials include Watch Retailing Business and Digital Marketing business Q1FY20 Financials are with applicability of IND AS 116

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Ind AS 116: Impact on Financials

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• On 1 April 2019, the Group has adopted Ind AS 116 “leases”, using the modified retrospective approach. Accordingly, the comparatives have not been retrospectively adjusted

• The adoption of Ind AS 116 has resulted in recognizing a Right-of-Use Assets of Rs.79.8 Cr. equivalent to the lease liability as at 1 April 2019

• Overall balance sheet will increase by the amount of asset created for Leases. This will have an impact on Profitability as under:

Profit & Loss Impact	Profit & Loss Impact	For Q1FY20 (Rs. Cr.)	Financial impact
Other expenses (Rent)	Decrease in Rent expense	-7.2	This affects other expenses, depreciation and finance cost in the Profit & loss statement & consequently impacts EBITDA and PBT of the company
Finance costs	Increase in Finance cost	2.1
Depreciation	Increase in Depreciation	6.4
Profit before tax	Decrease in PBT	-1.3

There would be no change in the cash flow of the company due to applicability of INDAS 116

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Consolidated Balance Sheet

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Particulars (Rs. Crores)*	Mar-19	Mar-18
Shareholder’s Fund	134	92
Share Capital	17	16
Other Equity	117	76
Non-current liabilities	16	13
LongTerm borrowings	14	11
LongTerm Provisions	2	1
Current liabilities	148	146
Short Term Borrowings	53	41
Trade Payables	67	77
Other Current liabilities	29	27
Short Term Provisions	0	0
Total Liabilities	299	250
Non-current assets	50	40
Fixed Assets	27	17
LongTerm loans and Advances	11	10
Other Non Current Assets	6	7
Deferred Tax Asset	6	5
Current assets	249	210
Inventories	206	171
Trade Receivables	8	6
Cash and Bank Balances	9	7
Short Term Loans and Advances	4	4
Other Current Assets	22	21
Total Assets	299	250

*Consolidated Financials include Watch Retailing Business and Digital Marketing business

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Largest Pan India retailer of Luxury Watches

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Stores as of Mar-19
47
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Additions
Total Stores
50
Ethos Flagship Store,
Roxana Fortune
Building, Hyderabad
5250 Sq. Ft.
Ethos Boutique,
City Centre Mall,
Guwahati
1089 Sq. Ft.
Ethos Summit,
Phoenix Market City,
Pune
2255 Sq. Ft.
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With 50 pan India stores, Ethos offers the widest variety of Luxury watches in India

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Fund Raise strengthens Balance Sheet

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Rs. 50cr 73.56 %
Rs. 480cr
Shareholding of
Ethos Limited raises
Funds raised at a pre KDDL Ltd (directly
Rs. 29 crores equity
money valuation of and indirectly) in
funds in FY19 & Rs.
Rs. 480 crores Ethos Ltd on fully
21 Crores YTD FY20
diluted basis
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Equity Funds will primarily be utilized towards New Store rollouts and working capital

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New Initiatives

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Repair and Service

Pre-Owned Watches

Repair and services over 60 of the World’s top Luxury watch Brands Strap and Bracelet replacement Servicing of Movements Bracelet link removal and adjustment Ultrasonic Cleaning	Repair and services over 60 of the World’s top Luxury watch Brands Strap and Bracelet replacement Servicing of Movements Bracelet link removal and adjustment Ultrasonic Cleaning
Bracelet link removal and adjustment	Ultrasonic Cleaning

Pre-Owned Watches has the potential to expand the volume and customer base

Ethos has the expertise to check the authenticity and to ensure that each time piece is in great condition for its new owner to enjoy

The prices we quote for each pre-owned watch is based on a thorough assessment of its current market value, and its years of use. This makes it a fair price

Financial consultancy Kepler Cheuvreux estimates the current global market for pre-owned watches alone to be worth upward of USD $15 billion annually

Ethos Watches is the #1 destination for Luxury Watch shoppers in India

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Operational Snapshot

Ethos - Performance Trend

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Revenue (Rs. Cr)

Front-end Rent & Manpower Cost as % of Revenue

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99.1 100.8 102.1
69.1 71.1
Q1FY16 Q1FY17 Q1FY18 Q1FY19 Q1FY20
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13.5% 13.5%
11.8%
11.3%
9.4%
Q1FY16 Q1FY17 Q1FY18 Q1FY19 Q1FY20
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EBITDA (Rs. Cr)
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EBITDA Margin
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12.1
5.4
2.0
0.2
-1.1
Q1FY16 Q1FY17 Q1FY18 Q1FY19 Q1FY20
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11.9%
5.3%
2.9%
0.2%
-1.6%
Q1FY16 Q1FY17 Q1FY18 Q1FY19 Q1FY20
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Q1FY20 Financials are with applicability of IND AS 116

Ethos - Online Sales Trend

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Online Billings (Rs. Cr)

Online Billing as % of Total Billing

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39.5 32.9% 33.8%
31.2%
34.6
32.7 28.5% 27.7%
26.3
22.2
Q1FY16 Q1FY17 Q1FY18 Q1FY19 Q1FY20 Q1FY16 Q1FY17 Q1FY18 Q1FY19 Q1FY20
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Visitors (‘000)

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3,873
3,424
2,894
2,181
1,812
Q1FY16 Q1FY17 Q1FY18 Q1FY19 Q1FY20
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Q1FY20 Financials are with applicability of IND AS 116

Ethos - Repeat Sales Trend

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Club ECHO Member Base
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Repeat Billings (Rs. Cr)

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224,069
216,704
184,891
154,357
Mar’17 Mar’18 Mar’19 Jun’19
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39.6 39.3
29.9
14.2
Q1FY17 Q1FY18 Q1FY19 Q1FY20
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Q1FY20 Financials are with applicability of IND AS 116

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Ethos is India’s Largest Luxury Watch Retailer

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Pan-India Presence with Offline Store Network

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India’s Largest retail chain of Luxury
Watches with 50 stores
Ludhiana Presence across Metros, Tier I, Tier II
Chandigarh
cities
New Delhi
Gurugra m Noida
Jaipur Guwahati
Lucknow
1 Duty Paid Retail Outlet at Domestic
Terminals
Bhopal
Ahmedabad
Indore
Nagpur
Pune 2 Duty Free Retail Outlets at
Mumbai International Terminals
Thane
Hyderabad
Store Selection Criteria :
Reputed /Pedigree Mall at
Bengaluru Chennai Premium location where other
Premium brands present and
having better facility
management
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Maps not to scale. All data, information, and maps are provided "as is" without warranty or any representation of accuracy, timeliness or completeness

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Strong Business Strategy

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Exclusive New Store Digital Right Mix
Brands Strategy
Higher share of ▪ Targeting to open new ▪ Leverage on our Digital ▪ Targeting to have a
Business from stores in Tier 2 cities platform to drive sales right mix of Brands at
Exclusive Brands and customers
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• Higher share of ▪ Targeting to open new Business from stores in Tier 2 cities Exclusive Brands

• Leverage on our Digital ▪ Targeting to have a platform to drive sales right mix of Brands at and customers all price points leading to faster churn in

• ▪ Digital strategy to lead Inventory and to cost optimization increasing profitability and margin growth

• Ethos stores will be a 1 stop destination for watches

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Ethos is India’s Preferred Destination for Luxury Watches…

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Knowledge

One-stop shop

Mind Share

Ethos’ access to Swiss Watch Brands will make it a ‘1 Stop Shop’ for Luxury Watches In India

Ethos has well trained Knowledgeable staff to ensure highest customer satisfaction and increasing repeat buying.

Ethos to be synonymous with Luxury watches retailing in India thus gaining ‘Customer Mind Share ‘

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Online

Trust

Ethos makes Swiss Watches ‘Available Online’ in a confluence of Online-Offline model helping us to leverage the strength of Swiss Watch Brands and our wide Distribution Reach

Ethos DNA is all about Authenticity increasing the ‘Trust factor’ in a large Unorganized market.

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With an Asset Light Model…

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Improve Return On Capital Employed

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Operating Leverage Playing Out

Reduce Front-End Cost like Manpower and Rental expenses

Maximize Reach

Expand catchment area of offline store, leading to higher revenue

Minimize Investment

Focus on Online Presence & Rationalize Store Presence

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and Continued Investments in Advertising…

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Print Ads in leading newspapers…

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… with ETHOS co-branding

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Offering the best Watch Brands under one roof

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The Brand Names mentioned are the property of their respective owners and are used here for identification purposes only

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For further information, please contact:

Company : Investor Relations Advisors : Ethos Ltd. CIN : U52300HP2007PLC030800 CIN : U74140MH2010PTC204285 Mr. C. Raja Sekhar Mr. Shogun Jain/ Mr. Shrenik Shah +91 7738377756 / +91 9664764465 rajasekhar@ethoswatches.com shogun.jain@sgapl.net / Shrenik.shah@sgapl.net www.ethoswatches.com www.sgapl.net

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