KDDL Ltd — Investor Presentation 2020

Jun 27, 2020

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

Ref : KDDL/CS/2020-21/18 Date : 27th June,2020

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: Result Update Presentation

Dear Sir/ Madam,

Please find enclosed Result Update Presentation for Q4 & FY20.

Kindly take the same on record.

Thanking you,

Yours truly

For KDDL Limited

Brahm Prakash Kumar Company Secretary

Result Update Presentation June 2020

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.

Q4 & FY20 Performance Overview

4

Standalone Performance (Rs. Crs)

Q4FY20 Financials are with applicability of IND AS 116

FY20 Performance

Standalone Performance (Rs. Crs) 176.0 180.6 FY19 FY20 131.4 135.5 FY19 FY20 Revenue Gross Profit Ethos Performance (Consolidated) (Rs. Crs.) Revenue Gross Profit 445.1 460.2 FY19 FY20 129.2 130.0 FY19 FY20

FY20 Financials are with applicability of IND AS 116

BusinessOperations	•TheoutburstofPandemicCOVID-19hasthreatenedeverybusinessyoucanthinkof.KDDLwasalsoaffectedwithCOVID-19fromMarchonwardsasallfactories,retailstoresandofficeswereclosedduetostrictlockdownandcurfewacrossthecountry.
	•Mostofthemanufacturingoperationsareoperationalnow,howeveratlowercapacityutilizationduetocomplianceofMHAguidelinesrelatedtosocialdistancing,transportation,restrictionsonpermittedstrengthetc.•About26ofourtotal50EthosretailStoresarenowoperational.Storesarebeingopenforlimitedtimeandwithlimitedstaffensuringstrictsocialdistancingmeasures.Wearewitnessinggradualimprovementinvisitorfootfallsweekonweekandhopetobebacktopre-COVIDlevelsbyQ4FY21
FinancialImpact	•FY20wasimpactedascompanycouldnotrecogniseanysalesinthesecondhalfofMarchduetothestrictlockdownimposed.Asaresult,profitabilityofthecompanywasaffectedduetodeclineinrevenueshoweverexpenseswhicharefixedinnaturecontinuetooccur.
	•ForFY20-21,weexpectthatQ1willbeseverelyaffectedandtherevenuede-growthwillbesignificantwithgradualrecoverieshappeninginthecomingquarters.
Steps Taken ForSmooth operations	•Wehavepartiallycommencedtheoperationsinallfactoriesandofficesaftercompletesanitisationofthefacilities.
	•Wehavealsoimplementedstrictguidelinesandundertakennecessaryprecautionarymeasuresforsocialdistancing,limitedmanpower,staggeredworking,workfromhome,regularscreeningandsanitisation,preventivehealthcheck-upsandnecessaryguidanceandadvisoryforprovidingasafeworkingenvironmenttoallemployees.

Optimising Costs	•Wearetakingallnecessaryactionsandavailableoptionsforreducingcosts,overheadsanddeferringthelong-termcommitmentsofexpenditures.
	•Inaddition,allavenuesandeffortsarebeinginitiatedforenhancingtherevenueandincomeofthecompanytominimisetheimpactofCOVID-19ontheprofitabilityofthecompany.

Comfortable

Liquidity Position • We will be able to meet all our liabilities and cater to the requirements of the customers as our financial position and balance sheet is strong. Our liquidity position is adequate to meet all our commitments. We remain committed to raising need based additional debt or equity for the business sustenance and development.

Demand

• Assessment Till date very few customers have cancelled orders. Postponement and rescheduling of orders is widely expected; revised lifting plan will be available after lock-down conditions are released and manufacturing operations are fully permitted.
  • Based on the prevailing situation and assessment of the market, we expect the markets to approach some kind of normalcy by the second half of the financial year.
  • Chinese markets were the first to open up which is the biggest market for Swiss brands and now Swiss watch industry has also commenced operations which should improve demand further.
  • We also foresee new opportunities for us in the field of precision engineering business as we are also witnessing increase in flow of enquires from very reputed overseas customers.

Profit & Loss (Rs. Crs.)	Q4FY20	Q4FY19	YoY%	FY20	FY19	YoY%
Revenue	40.7	44.8	-9.0%	180.6	176.0	2.6%
Cost of Goods Sold	10.3	13.5		45.1	44.6
Gross Profit	30.4	31.3	-2.8%	135.5	131.4	3.1%
Employee Expenses	12.8	10.7		55.3	49.1
Other Expenses	11.9	12.1		50.8	50.5
EBITDA	5.7	8.6	-33.8%	29.4	31.8	-7.6%
Margin (%)	13.9%	19.1%		16.3%	18.1%
Other Income	1.1	0.9		5.3	3.9
Interest	2.3	1.9		8.8	5.7
Depreciation	3.1	2.0		11.9	7.8
PBT	1.4	5.6	-74.3%	13.9	22.3	-37.7%
Tax	0.9	1.4		4.8	6.5
PAT	0.5	4.2	-88.0%	9.1	15.7	-41.9%

Profit & Loss (Rs. Crs.)	Q4FY20	Q4FY19	YoY%	FY20	FY19	YoY%
Revenue	137.3	150.4	-8.7%	652.3	625.0	4.4%
Cost of Goods Sold	78.0	82.5		377.6	360.9
Gross Profit	59.2	67.9	-12.8%	274.7	264.1	4.0%
Employee Expenses	24.8	24.7		102.3	86.4
Other Expenses	21.7	30.7		96.4	112.9
EBITDA	12.7	12.5	2.2%	76.0	64.8	17.2%
Margin (%)	9.3%	8.3%		11.6%	10.4%
Other Income	1.7	0.4		6.1	3.0
Interest	7.0	4.1		28.5	14.2
Depreciation	12.2	3.3		48.1	13.1
Share of Loss of equityaccounted investees	0.2	0.0		0.3
PBT	-5.0	5.5	-	5.1	40.4	-87.3%
Tax	0.1	2.7		7.1	15.2
PAT	-5.1	2.7	-	-2.0	25.2	-
Minority Interest	-1.8	0.3		-1.4	3.0
PAT After Minority Interest	-3.3	2.5	-	-0.6	22.1	-

Adjusted Consolidated Profit & Loss

	FY20	Adjusted for INDAS 116
Particulars (Rs. Crs.)*	As Reported	FY20	FY19
Revenue	652.3	652.3	625.0
Cost of Goods Sold	377.6	377.6	360.9
Gross Profit	274.7	274.7	264.1
Employee Expenses	102.3	102.3	86.4
Other Expenses	96.4	130.4	112.9
Normalized EBITDA	76.0	42.0	64.8
Normalized Margin (%)	11.6%	6.4%	10.4%
Other Income	6.1	6.1	3.0
Interest	17.0	17.0	14.2
INDAS 116 Interest	11.6	-
Depreciation	17.5	17.5	13.1
INDAS 116 Depreciation	30.6	-	-
Share of Loss of equity accountedinvestees	0.3	0.3	0.0
PBT	5.1	13.3	40.4

• 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. 128.7 Crores and equivalent to the lease liability of Rs. 128.7 Crores as at 1 April 2019 & reclassification of Leasehold Land and Current & non Current Assets to Right of Use Assets for Rs. 10.9 Crores
• 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	For FY20 (Rs. Cr.)	Financial impact
Other expenses (Rent)	Decrease in Rent expense	-34.0
Finance costs	Increase in Finance cost	11.6	This affects other expenses,depreciation and finance cost in
Depreciation	Increase in Depreciation	30.6	the Profit & loss statement &consequently impacts EBITDAand PBT of the company
Profit before tax	Decrease in PBT	-8.2

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

Assets (Rs. Crs.)	Mar-20	Mar-19	Liabilities (Rs. Crs.)	Mar-20	Mar-19
Non-current assets	216.0	185.2	Equity	169.5	167.1
Property, plant and equipment	93.8	94.1	Equity share capital	11.7	11.7
Capital work-in-progress	2.2	2.4	Other equity	157.8	155.4
Right-of-use asset	12.7	-
Investment Property	0.5	-	Non-current liabilities	58.5	39.5
Other intangible assets	0.4	0.7	Financial Liabilities
Financial assets			(i) Borrowings	45.2	34.5
(i) Investments	100.7	79.7	(ii) Lease Liabilities	5.9	-
(ii) Loans	2.2	2.2	(iii) Other financial liabilities	1.2	0.7
Income Tax Asset	2.3	5.0	Provisions	1.1	0.1
Other Non Current Assets	1.3	1.0	Deferred tax liability (net)	5.1	4.2
Current assets	84.1	77.5	Current liabilities	72.1	56.1
Inventories	32.1	30.7	Financial Liabilities
Financial assets			(i) Borrowings	19.3	7.4
(i) Trade receivables	24.6	23.7	(ii) Lease Liabilities	2.0	-
(ii) Cash and cash equivalents	9.5	2.5	(iii) Trade payables	13.5	15.7
(iii) Other bank balances	5.4	6.1	(iv) Other financial liabilities	31.1	26.3
(iv) Loans	1.9	1.8	Other current liabilities	3.2	2.8
(v) Other financial assets	2.1	5.7	Provisions	2.7	2.7
Other current assets	8.4	7.1	Current tax liabilities(net)	0.3	1.3
Total Assets	300.1	262.8	Total Liabilities	300.1	262.8

Consolidated Balance Sheet

Assets (Rs. Crs.)	Mar-20	Mar-19	Liabilities (Rs. Crs.)		Mar-19
Non-current assets	299.2	183.9	Equity	227.4	235.0
Property, plant and equipment	158.6	143.2	Equity share capital	11.7	11.7
Capital work-in-progress	2.9	6.8	Other equity	174.0	179.1
Right-of-use asset	109.6	-	Non Controlling Interest	41.7	44.1
Other intangible assets	0.8	0.8
Intangible assets under development	0.1	0.4	Non-current liabilities	174.0	73.7
Equity accounted investees	1.0	0.3	Financial Liabilities
Financial assets			(i) Borrowings	80.1	67.2
(i) Investments	0.5	0.5	(ii) Lease Liabilities	85.4	-
(ii) Loans	10.2	12.4	(iii) Other financial liabilities	2.1	1.1
(iii) Other financial assets	1.3	1.2	Provisions	1.3	1.2
Income Tax Asset	3.7	6.3	Deferred tax liability (net)	5.1	4.2
Deferred tax assets (net)	7.2	6.3
Other Non Current Assets	3.4	5.6
			Current liabilities	255.8	210.1
Current assets	358.0	335.0	Financial Liabilities
Inventories	252.7	239.9	(i) Borrowings	74.3	61.9
Financial assets			(ii) Lease Liabilities	20.9	-
(i) Trade receivables	28.5	31.1	(iii) Trade payables	87.3	84.6
(ii) Cash and cash equivalents	22.8	16.0	(iv) Other financial liabilities	52.6	45.8
(iii) Other bank balances	5.7	6.4	Other current liabilities	13.8	9.4
(iv) Loans	8.0	4.8	Provisions	6.2	4.0
(v) Other financial assets	6.6	5.9	Current tax liabilities(net)	0.7	4.3
Other current assets	33.7	30.9
Total Assets	657.2	518.9	Total Liabilities	657.2	518.9

Manufacturing Business Overview

features

About "Estima AG"

Acquired in 2019

Estima AG's 2020 Turnover – CHF 1.9 Million

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

03 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

Ethos Q4 & FY20 Snapshot

Renewed Strategy for ETHOS

Stores Optimization

In depth assessment of each store's performance across India . Accelerated Closure of Stores which fails our cost vs. benefits assessment. Focus towards Bigger Flagship Stores that attracts more footfalls. Already closed 5 stores recently

Uniquely Positioned to Grow

Post Pandemic, Swiss brands may focus more on developed markets and less on developing like India. Ethos is uniquely positioned to partner with them and grow these swiss brands with its network & reach without them having to deploy their own resources and has a proven track record for the same

Uniquely Positioned

Costs Optimization

Costs Stores

Ongoing Rental Negotiation with Mall Owners for rent reduction or part waiver of rentals or a combination of both to optimize rental costs. Deferment of all unproductive expenses & capex in the medium term to conserve cash while ensuring that spend on 'good costs' imperative for business recovery is not compromised

Leveraging Digital Capabilities

Digital

We have the most advanced digital communication and e-commerce capabilities in the country for any luxury product. With the change in customer behaviour, we will be best positioned to leverage these capabilities and increase market share substantially

Fit & Lean ETHOS 2.0

Revenue Impact ETHOS was severely impacted due to the lockdown imposed by Government to prevent the spread of COVID-19. All the stores were shutdown during the later part of March which adversely impacted the business. We continued to witness strong momentum from January to mid-March growing at 6% on YoY basis. However March was severely impacted with last fortnight of March witnessing revenue drop of 79% on YoY basis.

Operational Stores

About 26 of our total 50 Ethos retail Stores are now operational. Stores are being open for limited time and with limited staff ensuring strict social distancing measures. We are witnessing gradual improvement in visitor footfalls week on week and hope to be back to pre-COVID levels by Q4FY21

Optimism The optimism is based on similar experience in demand shocks witnessed by us due to series of decisions taken by the government with the intention to curb black money like requirement of Pan Card details for high value transactions, TCS requirements and prohibition of large cash transactions. We have always witnessed strong bounce back in sales post these demand shocks. While the severity of COVID-19 is much higher than those, but eventually we expect the business to recover

FY20 vs FY19 (Consolidated*)

*Consolidated Financials include Watch Retailing Business and Digital Marketing business FY20 Financials are with applicability of IND AS 116

Particulars (Rs. Crores)*	Q4FY20	Q4FY19	YoY %	FY20	FY19	YoY %
Revenue	91.0	102.9	-11.6%	460.2	445.1	3.4%
Cost of Goods Sold	66.3	68.1		330.1	315.9
Gross Profit	24.7	34.8	-29.0%	130.0	129.2	0.6%
Employee Expenses	7.7	11.3		33.2	33.4
Other Expenses	8.4	18.2		42.7	61.8
Reported EBITDA	8.6	5.3	62.4%	54.2	34.0	59.2%
Margin (%)	9.5%	5.1%		11.8%	7.6%
Interest	4.9	2.0		19.5	7.7
Depreciation	8.6	1.3		34.6	4.8
Profit before share of JV	-5.0	2.0	-	0.1	21.5	-
Share of loss of JV	-0.2	0.0		-0.3	0.0
PBT	-5.2	2.0	-	-0.3	21.5	-
Tax	-0.8	1.0		2.2	8.4
PAT	-4.4	0.9	-	-2.5	13.2	-

*Consolidated Financials include Watch Retailing Business and Digital Marketing business Q4 & FY20 Financials are with applicability of IND AS 116

Adjusted Consolidated Profit & Loss

Particulars (Rs. Crores)*	FY20As Reported	Adjusted for INDAS 116 & other items
		FY20	FY19
Revenue	460.2	460.2	445.1
Cost of Goods Sold	330.1	330.1	315.9
Gross Profit	130.0	130.0	129.2
Employee Expenses	33.2	33.2	33.4
Other Expenses	38.5	69.7	59.5
Normalized EBITDA	58.3	27.2	36.3
Normalized Margin (%)	12.7%	5.9%	8.2%
Interest	8.9	8.9	7.7
INDAS 116 Interest	10.6	-	-
Depreciation	6.5	6.5	4.8
INDAS 116 Depreciation	28.1	-	-
Forex Items -Loss	1.7	1.7	1.3
One-time Items#	2.5	2.5	1.0
Share of loss of JV	0.3	0.3	-
PBT	-0.3	7.3	21.5

#One-time items include cenvat credit written off & provision for legal cases *Consolidated Financials include Watch Retailing Business and Digital Marketing business FY20 Financials are with applicability of IND AS 116

• On 1 April 2019, the Company 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. 96.9 Crores and lease liability of Rs. 98.9 Crores, as on 31st March, 2020
• 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		For FY20 (Rs. Cr.)	Financial impact
Other expenses (Rent)	Decrease in Rent expense	-31.1	This affects other expenses,depreciation and finance cost inthe Profit & loss statement &consequently impacts EBITDAand PBT of the company
Finance costs	Increase in Finance cost	10.6
Depreciation	Increase in Depreciation	28.1
Profit before tax	Decrease in PBT	-7.5

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

Consolidated Balance Sheet

Assets (Rs. Crores)*	Mar-20	Mar-19	Equity & Liabilities (Rs. Crores)*	Mar-20	Mar-19
Non-current assets	142.7	43.6	Shareholder's Fund	152.2	133.9
Fixed Assets	32.2	26.6	Share Capital	18.2	16.9
Right of Use	96.9	-	Other Equity	134.0	117.0
Financial Assets	10.0	11.2
Other Non Current Assets	3.6	5.8	Non-current liabilities	97.8	17.8
			Borrowings	15.8	16.2
			Lease Liabilities	79.8	0.0
Deferred Tax asset	7.3	6.3	Others Financial Liabilities	0.9	0.5
			Other Liabilities	1.3	1.1
Current assets	274.7	251.4	Current liabilities	174.6	149.7
Inventories	218.6	205.6	Current Borrowings	53.6	53.0
Trade Receivables	9.4	8.9	Lease Liabilities	19.1	-
Cash and Bank Balances	10.0	7.8	Trade Payables	72.4	69.0
Other Financial Assets	12.7	6.7	Other Financial Liabilities	16.2	17.0
Other Current Assets	24.0	22.5	Current provisions	2.4	1.4
			Other Current liabilities	11.0	9.3
Total Assets	424.7	301.4	Total Equity & Liabilities	424.7	301.4

*Consolidated Financials include Watch Retailing Business and Digital Marketing business

Largest Pan India retailer of Luxury Watches

In line with our strategy, non-performing stores & stores with higher rental cost & lower sales will be closed down; Focus to be on profitability of stores rather than expansion

New Initiatives

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

Operational Snapshot

Ethos - Performance Trend

Ethos - Online Sales Trend

Visitors ('000)

Ethos is India's Largest Luxury Watch Retailer

Pan-India Presence with Offline Store Network

India's Largest retail chain of Luxury Watches with 50 stores

Presence across Metros, Tier I, Tier II cities

1 Duty Paid Retail Outlet at Domestic Terminals

1 Duty Free Retail Outlets at International Terminals

Store Selection Criteria :

Reputed /Pedigree Mall at Premium location where other Premium brands present and having better facility management

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.

and Continued Investments in Advertising…

Offering the best Watch Brands under one roof

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

For further information, please contact:

Company : Investor Relations Advisors :

Ethos Ltd. CIN : U52300HP2007PLC030800

Mr. C. Raja Sekhar

rajasekhar@ethoswatches.com

www.ethoswatches.com

CIN : U74140MH2010PTC204285

Mr. Shogun Jain/ Mr. Shrenik Shah +91 7738377756 / +91 9664764465 shogun.jain@sgapl.net / Shrenik.shah@sgapl.net

www.sgapl.net