IPO-Bound Stanley Lifestyles MD Shares Expansion Plans | NDTV Profit
#IPO-bound #StanleyLifestyles eyes 100 stores in two years.
Managing Director Sunil Suresh discusses expansion plans and more, in conversation with Sesa Sen.
For the latest news and updates, visit: https://ndtvprofit.com
Managing Director Sunil Suresh discusses expansion plans and more, in conversation with Sesa Sen.
For the latest news and updates, visit: https://ndtvprofit.com
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TVTranscript
00:00 Hello and welcome to NDTV Profit. We are joined by Sunil Suresh, the Chairman and Managing Director
00:05 of IPO-bound Stanley Lifestyles. Thank you so much, Mr. Sunil, for joining in.
00:09 Before I begin, let me do a quick recap of the highlights from the DRHP that has been filed with
00:16 SEBI last year. Stanley Lifestyles is looking to raise 200 crore through fresh issue of shares.
00:23 The IPO also comprises offer for sale of up to 9.13 million shares by the existing shareholders,
00:30 including the promoter group. Founders Subhash Sunil and Sunil Suresh, both of them, they plan
00:35 to sell up to 1.18 million shares in the OFS, while Oman India Joint Investment Fund plans to
00:43 offer up to 5.54 million shares. Oman India Joint Investment Fund currently holds 26.8% stake in the
00:52 company. So, to begin with, I would like to know from you, what do you plan to do with the proceeds
00:58 broadly? What kind of growth plans do you have for the company? Yeah, okay. So, essentially,
01:04 we have been strong in our home market in Bangalore. You know, basically, that is where
01:10 we have been focusing for the last decade or so. And we have expanded across the country.
01:17 We have three different formats of retail. And now, we wish to kind of expand further
01:23 into various other metros, have a stronger presence with all three formats in various metros,
01:29 and then also kind of take the store count or the experience center count to about 100 in the next
01:35 two years. So, most of the proceeds will be mainly for front-end expansion and a little bit for
01:41 back-end expansion. Back-end, we are already quite, you know, done with our expansions. We have
01:48 two facilities in Bangalore and we have capacity, not an issue. So, most of the funds will be used
01:53 for front-end expansion and growth. All right. So, you know, we have seen luxury spending in India
02:01 growing at a rapid pace. Within furniture, I would like to know from you, how does the demand
02:07 scenario look like and how do you plan to capitalize on the luxury boom? Yeah, so essentially, the
02:14 home interior, the furniture industry thrives in the tailwind of the housing industry. So,
02:21 if you really look at what is happening in India, especially, you know, in the last three,
02:25 four years, there is a massive demand that has been picking up for premium housing. So,
02:31 currently, almost 27 to 30 percent of every project that is being made is of luxury and premium
02:38 housing and there's a big demand for it and we hear they're being sold like a hot cake. So,
02:44 we are probably the only fully integrated manual retail brand capable of making bespoke furniture
02:52 for every room of the home and we have a presence in over 22 cities across the country. So, I think,
03:00 as I see, the demand is going to be exponentially growing because there's a lot of inventory that
03:06 is going to come to the market in the next one, two, three years and they say that the housing
03:12 industry is going to be a trillion dollar in probably 2029, 2030. So, I think, based on this
03:20 particular demand, we are also expanding ourselves and wanted to kind of be present in the right
03:26 markets as we go forward. Yes, there is a large premiumization happening, people want larger homes,
03:33 you know, the budget homes are not really aspired for nowadays, people are looking at
03:38 acquiring larger homes with better facilities in terms of what the builders are offering and
03:43 people are also willing to spend a lot on home interiors, they understand the importance of
03:48 living well. Right. So, I understand you operate in three segments, be it value, be it premium,
03:56 be it luxury. So, within the value segment, like what we have seen in other industries that there
04:02 is, there has been a kind of slowdown with purchasing power, you know, of people getting
04:07 impacted, they're not spending as much as they were before COVID. So, do you see a similar trend
04:14 within the furniture industry as well? Not really. So, primarily what happens is,
04:21 you know, when you look at the delivery or the sales of housing in the country today,
04:26 the segment is similar, there is almost 50% of what you can call as value line apartments and
04:34 residential dwellings being sold, about 25% of premium and about 25% of luxury. So, we are more
04:42 or less placed in the same bracket. And as I said, our business thrives in the tailwind of the
04:48 construction, housing construction industry. So, I think we are, of course, we have seen a fairly,
04:55 what you call as subdued demand this year. But I think that is primarily because of the inventory,
05:03 because of the COVID, when you look at what is happening in the construction industry,
05:07 there has been almost 12 to 15 months delay in handover of projects. So, when I look at RERA
05:13 and understand that, starting from April, the next financial year, there is a massive
05:20 lot of inventory coming into the market. So, without the inventory, the furniture business
05:25 really does not thrive so much. Despite that, we have grown year on year and we believe that
05:33 the coming years are going to be a lot more fruitful for us primarily because of a lot of
05:38 inventory coming into the market. Got it. Interestingly, the premium furniture space,
05:44 there are a lot of importers that operate in the space. Could you tell us what are the challenges
05:50 in terms of government regulations to tackle imports? And also for you, is it like 100%
05:57 made in India or there is some sort of import also that contribute to your overall business?
06:02 Okay. So, essentially, let me answer your second question. So, basically our entire
06:08 factory employing more than 1000 odd people depends on a lot of raw material being imported.
06:16 In India, we do not get very high quality raw materials. So, almost 80 to 85% of our
06:21 raw material is imported from the best known sources across the world. We get from our
06:27 leathers and fabrics from Italy, Belgium, Germany. So, we get our timbers which are all
06:31 FSC certified because we want to give a very high quality product, truly international quality
06:36 product to our customers. So, we don't use any non-FSC certified timbers that is imported from
06:42 Canada, from New Zealand and Poland. So, we are raw materially, we are import dependent.
06:50 But what we specialize in bespoke furniture in the sense we are able to customize a lot
06:56 to the customers and then give them very high quality products just in time in the sense our
07:02 lead times are between four to six weeks. Now, in terms of imports, again, we compete primarily with
07:09 European manufacturers, European brands, not typically products coming in the low end mass
07:16 production from China. So, our competition is not in that level, because we also play in the
07:22 top three segments of the business. So, we compete primarily with European brands and European
07:28 manufacturers. Now, with their prices, their power prices gone up crazily, they're jacked up
07:34 the prices almost 30-40%. So, we have a good opportunity there. The price parity has gone
07:40 very high, point number one. Point number two is that the lead times are five to six months,
07:46 whereas we are able to deliver in five to six weeks. That's a great advantage that we have.
07:51 Of course, we make in India, of course, but also the fact is that we have a lot of European
07:56 influence in our products. We have European designers sitting and designing our products.
08:02 We also have European skilled people coming in and encouraging our team to deliver better quality
08:10 that is happening for a very long time. So, we have been extreme. Stanley has been very focused
08:14 in catering to the premium and luxury segment. That's what the brand has always done. So, we
08:19 don't see ourselves moving down in terms of the value chain and we want to play in that segment.
08:24 So, does that mean that there is not enough scope for local sourcing when it comes to the
08:30 furniture industry, especially in the premium side of the business?
08:34 Exactly. So, there is, when you look at a very high quality material palette requirement,
08:40 unfortunately, in India, we do not have those resources, we do not have those sources. Yes,
08:47 it is definitely getting better. We also started localizing a lot of stuff and I think it is going
08:52 to be organic. And now with a certain scale, we are able to call for certain JV with certain
08:59 European people, they will come and set up supply chains for us here. So, that is happening, but it's
09:05 not immediately ready. The market, what I call as the ecosystem is not fully ready just yet.
09:12 Right. So, coming to my next question, this is about Stanley, at Stanley, you have one of the
09:20 highest PAT margin amongst the major Indian furniture companies, which is at 8% over the
09:25 last three years, this is according to the DRHP. Now, how do you maintain this high level of
09:30 profitability? Also, is this sustainable? Yes, very much so. Because for us, as I look
09:36 at it, I think the real opportunity is just about starting with the premiumization happening and
09:41 people are willing to spend a lot more today, point number one. Point number two is that with
09:45 scale, we're able to manage resources much better. We have been a good profitable company for over a
09:53 decade now, we have had a good track record of profitability. And also the fact that we are
09:57 debt-free and we're able to kind of use the resources better. I think it's very, very
10:02 sustainable. And it's not that we are targeting some crazy exponential growth. I think if you're
10:07 able to target 25-30% year on year, your profitability is bound to go up. And that's
10:13 exactly what we are demonstrated. And that's exactly what we want to do going forward.
10:17 So I think, from a standpoint in terms of the scale today, we are at a point where we are going
10:24 to get a lot more scale going forward. And I think the brand has been well-established and
10:30 it's also been well-received in terms of its presence in the three different segments. So
10:35 with scale, I think we'll be even more profitable as we go forward.
10:38 Got it. I understand that you can't disclose numbers, but the latest financial figures that
10:45 we have is of FY23, when you clocked revenues of 408 crore, which is again, a 43% growth year on
10:55 year. But you did mention that going forward, your growth would be in the range of 25-30.
11:01 So is there an exceptional gain that happened in FY23?
11:07 No, I think there was, as I see, there was some amount of pent-up demand because of the COVID and
11:16 we did some good growth that year. I think if you look at the last three quarters, there's been a
11:21 pent-up demand for travel. And also, like I mentioned, the inventory has not been handed over.
11:26 But then that is again going to start correcting itself going forward because the inventory is
11:31 coming and the pent-up demand for travel also is kind of now fulfilled. So I think the housing
11:36 industry is once again going to start really looking up perhaps in the next one or two
11:43 quarters. And the surge is going to be very high because the amount of inventory being delivered.
11:48 See, as I mentioned to you, 95% of our customers are new homemakers. And unless the builder or the
11:54 developer doesn't give the home, what will they do with the furniture? So that's how it is. So I
11:59 think there is going to be a massive inventory that is going to be handed over after completion.
12:03 And there has been a delay because of COVID. There's been a cascading delay in builders handing
12:08 over the projects. And when you look at the entire country and look at about almost a thousand
12:14 developers, there has been an average delay of about one to one and a half years, primarily
12:19 because of COVID. And that is all coming to now hand over in the next couple of months. So we are
12:24 expecting a massive surge in the business next year. We are fairly prepared. We also invested
12:29 in a lot of good new experience centers this year. And again, we take a little time to come of age.
12:35 So our stores start doing better after a year and much better after two years. And that's when they
12:40 kind of start growing. You have to establish the location and the products and the training
12:45 of the people. So it takes a little bit of time. Yeah. Right. So if we look at geographically,
12:51 the southern markets contribute majorly to your revenues. That is, again, as per the DRHP.
12:56 Could you shed some light on the expansion strategy going forward? Like, would you be focusing on the
13:03 large format stores? And also, would you be focusing on the non-South markets as well going
13:09 forward? Yeah, so primarily, we have our local stores or company owned operations in major cities
13:17 like Bangalore, Hyderabad, Mumbai, Delhi, and Chennai, which we will continue to have. The
13:22 other cities we have franchise in networks. So for us, how we look at this opportunity is we follow
13:28 RERA. We are able to get an understanding as to what kind of inventory is sold in each of these
13:35 large cities and what kind of inventory is going to come to the market. So based on what the data
13:41 shows, we are able to understand the catchments, the zones which is going to develop and then we
13:47 put ourselves into those markets and start expanding. Ideally, what we would like to do is
13:53 grow strongly in one market, primarily because it gives us scale. It gives us our customer acquisition
14:01 costs can be limited when we do. For example, in Bangalore, we have about 20 stores with all the
14:06 three different formats. Similarly, now we are growing in Hyderabad, we are now growing in Bombay.
14:12 So we will grow organically in these cities. We grow one city at a time and then capture the
14:17 market share there. Got it. So now we know about what your plans about in India. Now, outside India,
14:25 what are your plans in terms of your international expansion? Yeah, so when you look at luxury,
14:34 you know, home furniture, again, this is something that one cannot automate it or make it like a mass
14:40 production. So it needs a lot of craft, a lot of legacy, a lot of understanding, a lot of design
14:46 talent. So that is what we have been honing our skills for the last, you know, one and a half
14:50 decades. We have been practicing, we have been getting guest people from France, from Italy,
14:55 who are teaching us, you know, how teaching our artisans. Artisans are very, very good.
15:00 They have a fantastic understanding of craft. And so finally, I think we are getting to a position
15:07 where very soon, perhaps in the next couple of years, we want to go to select markets. Again,
15:12 our design language is not something that is going to appeal typically to, let us say,
15:18 the Western world, maybe not to America, maybe not to Scandinavia. But if you look at our design
15:23 language, which is made for the wealthy Indians or the rich HNI Indians, which has got a little bit
15:28 of, you know, what you call as, I would say, a swoosh of India in it, in the sense of flavor of
15:34 India in it, with a little bit of gold and embellishments of various fine metals and fine
15:40 material. This line can do very well in certain markets like the Middle East, because the flavor
15:46 over there is also exactly the similar, this is what they really like. And perhaps also in the
15:52 Far East. So we have a lot of data that we are doing in terms of understanding how Dubai works,
15:57 for example, or Saudi works, for example, last three, four years, we are tapping data from there.
16:02 So perhaps in the couple of years now, we will start looking at going out. But of course,
16:06 initially, the focus is going to be India to take a larger market share here and be the number one
16:12 player in the country in these segments. Right. And what about your plans in the B2B segment?
16:17 I know you are also looking at B2B segment. Yes, again, like I said, we have not kind of
16:25 gone into the mass manufacturing and we have held ourselves in a very, I would say, niche position
16:31 to be considered as a premium brand or a premium product manufacturer. So today, I think the
16:39 B2B business also is growing very well. And we have a lot of inquiries coming for high-end projects.
16:46 So we have done a couple of airports, we have done, we have done also what we call as business
16:53 class lounges. And we are now looking at certain large MNCs, which have got a good budget. So to
17:00 do B2B and also we have done some very boutique restaurants. So that is something that when
17:06 finally when the market needs something premium, they will come to us. So we are not very actively
17:12 marketing there because it is a very, I would say, low margin kind of a business and we don't want to
17:18 be diluting ourselves there when we have a better opportunity here. So, but then I see tremendous
17:24 amount of traction pick up there today. We have a lot of inquiries coming for boutique projects
17:30 or high-end projects, which have got good budgets. So we will definitely indulge in that as and when
17:35 the market matures and start premiumization starts happening there also. Right. So what is the
17:41 current share of your B2B and B2C mix? We are 20, 80, 20% of our business is B2B, 80% is B2C
17:49 brand driven business. Okay. And maybe in the three, four years down the line, where do you
17:54 see this mix? I think it would be similar because we see a tremendous amount of growth in both the
17:59 segments. And for some reason, I think, like I said, we will focus on B2C primarily because it is
18:07 a brand driven business. We have better control over the business and we have an opportunity to
18:12 directly interact with our customers, whereby word of mouth is very big in our business. And that's
18:17 how we have kind of grown so far. Right. Lastly, sir, I would like to know in terms of your offer
18:24 for sale, what would be the total size of the issue? Is there a number in mind? So we are
18:30 offloading, I think about 9.13 million shares. So in terms of value, we would not like to disclose
18:36 anything right now. And we know that we have created a good asset and let's see what happens
18:41 going forward. Yeah. All right. Thank you so much, Mr. Sunil for joining us. It was a pleasure
18:46 talking to you and wishing you all the best. Thank you so much. Thank you once again.