Q1 21/22

Jul 30, 2021

Ladies and gentlemen, good day, and welcome to the Q1 of FY 'twenty two Earnings Conference Call of Aditha Birla Fashion and Retail Limited. The call will begin with a brief discussion of the company's management on Q1 FY 'twenty two performance followed by question and answer session. We have with us today Mr. Ashish Dixit, Managing Director Mr. Jabresh Bajaj, CFO Mr. Vishak Kumar, Director and CEO, Lifestyle Business. I want to thank the management team on behalf of all I must remind you that the discussion on today's earnings call may include certain forward looking statements and must be reviewed. Therefore, in conjunction with risks that the uncertainty company faces, please restrict your questions to the quarter and yearly performance and to strategic questions only. Housekeeping questions can be dealt with separately with the IR team. With this, I hand the conference over to Mr. Jagdish Bajaj. Thank you, and over to you, sir. Company due to the widespread lockdowns in most parts of the country due to the 2nd wave. The business which is Sir, we missed on the beginning of the call. Got it. Yes. Good evening, and welcome to the earnings call for the company. The quarter under review has been a difficult quarter for the company due to widespread lockdowns in most part of the company linked to 2nd wave. The business witnessed severe disruption in the quarter as the bulk of our network was closed. The latter part of the June saw a substantial part of the network restarting operations. Despite loss of 1 full month of operations in this quarter, Business was able to recover to 40% of pre COVID levels that is of Q1 FY 2020. With the momentum picking up strongly by the day, We are seeing our July sales coming back to 85% of pre COVID levels of FY 2020. This is despite partial lockdowns that we are still witnessing in many parts of the country, aged on 26 July, out of Our 2,150 stores close to 65% of our total retail network resumed partial operations with more states Visually opening up, as we heard Maharashtra announcing opening today, we are very confident of an even faster recovery in the coming months. We expect this quarter to be better than the Q2 of the previous year. We believe the pace of Vectren Essent will also improve the coming months, which will help rebound consumer optimism strongly. Now let me give you a snapshot of the financial performance of our company. The revenues of the Sorry, we are unable to hear you. Hello? The revenues of the quarter are not comparable with the previous Q1 of FY 2021 due to the more severe shutdown in Q1 last year. Consolidated revenue for this quarter are INR 8.12 crores compared to INR 323 crores in Q1 FY 2021. Due to our extensive focus on our digital initiatives, the e commerce channel grew to more than 2.5 times over Q1 last year. While our partners' e commerce has grown tremendously, our own brand.com have also scaled rapidly. The company has decided to make substantial investment in building its digital and e commerce capabilities in a bid to strongly pivot its business model around digital. This will be the significant driver of company's growth in coming years in tandem with its strategy of network expansion and product innovation. Let me take you through some of the initiatives which will help the company leapfrog into a more digital company. Roll out a new multi brand e commerce website and app To leverage combined equity of our brands digitally by Q4 this year, enhance digital customer engagement through social media, expand omni channel coverage from 1300 to 2000 stores and strengthen our digital back end capabilities. On cost initiatives, With our consistent focus in aligning our rental cost with the scale of the business, we are happy to report that we have been able to achieve lower rent at percentage to sales in this quarter versus the same quarter last year. This is due to continued and proportional rent reduction that we managed to get from our landlords for the quarter. We continue to engage in discussions with our landlords for further rent concessions going forward. The company continues to focus on cost optimization at its first priority. Our other expenses Comprising mainly of store operating expenses, warehousing, logistics and other operating costs were higher. In this sector, they are higher by INR 70 crores compared to last year and most of them are variable and they grew in line with growth in sales this year. Apart from this, we spent 24 more on advertisement and a one time additional ECL I will now take you through the performance of individual business starting with our lifestyle brands. Livestell business continues to focus on taking its brand to more customers across markets, channels and product categories. We have made significant shift in our product portfolio last year in line with consumer demand because of which our casualwear portfolio has grown to 59%. The strength of these brands has been visible right through the pandemic as reported in last two quarters. Even this year, Lifestyle Brands continue to march ahead of its competitive shape by recording rapid recovery in sales post May. The revenue trajectory in July is expected to cross 85% of pre COVID levels of July 2020. This strong performance is on back of a versatile product portfolio, agile go to market and a deep multichannel distribution strategy. In line with its continuous focus on delighting customers' business to eclipse and transforming itself digitally, E commerce revenue of business grew by 3 times over last year levels. The business is India's largest omnichannel branded fashion network with more than 1,000 stores now enabled for omni channel retail. The business continues to place home its advantage and plans to open 400 plus stores during this financial year. Nearly 90% of these stores build around franchisee based asset light model. Out of the total expansion, nearly 100 of new additions will happen in Q2 itself. In line with its product innovation and premiumization strategy, Business will enhance its portfolio during this year with the launch of versatile premium product offerings such as Venizan Flex Denims and a new premium casualwear line in Louisville. During the quarter, revenue of the business were INR435 crores and EBITDA loss were INR 57 crores. Moving on to Pantalone business, being a large format store, Pantalone took longer to resume operations as a large chunk of the network is in malls, which took longer to open. However, that did not deter Pentaloons in reaching out to its consumers through various digital modes serving their fashion needs. Pentaloons accelerated e commerce presence with average daily doubling on pentaloons.com, which was launched this year. Before I Moving to the various initiatives, the revenues for the quarter for Pantalone business was INR 220 crores and EBITDA loss was INR 55 crores. This year marks a landmark year As Pentaloons embarked on executing key elements of its growth strategy, Pentaloons used last year to refresh all aspects of the consumer facing assets. In line with this, Pantalone has launched a refreshed and contemporary new retail identity, which significantly elevates brand imagery and consumer experience. In line with its strategic to expand consumer wallet share through extensions into newer categories, Pentaloons will build on its newly launched Categories such as home, saris, infant wear and bolster the offering through introduction of new brands in premium ethnic wear and street loungewear. Pental Rooms will execute one of its largest ever expansion by opening more than 60 new stores this year. Nearly 20 stores are ready for launch in next 30 days. Finally, in line with emerging consumer habits, the business is launching a new website and app for its capital digital the captive digital channel, centraloans.com. In summary, business is well positioned to leverage its strong operational operating model, which had already started to show strong profitability an incremental return on capital by expanding consumer product categories and channels. Innerwear, an international brand. The Innerwear, Activewear and Aquisure business drove the strong demand for such contextual products during last year. Consistently building on the momentum, the business this quarter grew more than twice of last year levels. The products are now available across 23,000 plus trade outlets 10 over 50 EBOs. E Commerce posted significant growth over last year with the scale of business growing fourfold. The business is looking to aggressively expand its EBO footprint, we're doubling the EBO count by end of this year. Youth Western Fashion and Super Premium Brands They have continued to do well and have now established their profitability. Revenues have grown to 4 times of last year sales and collective. In has performed exceptionally well gaining 5 times of last year's sales on website. Ethnic Business, We have executed our comprehensive strategy to build a complete portfolio of strong ethnicwear brands across multiple occasions and price points. Apart from growing the existing brands in collaboration with designer partners, we are all set to launch 2 premium ethnicwear brands in coming quarters: 1, men's premium ethnic brand and number 2, premium women's ethnicwear brand in next few quarter in next quarter or so. The ethnic business partnership with Sabyasachi and Tarun Taliani has just begun. The jackpot business continues to do well online. In parallel, we will build our offline presence by opening 10 stores during the year. Coming to the debt, the net debt of the company as of 30th June 2020 1, increased to INR1200 crores due to losses incurred in Q1 and rise in working capital requirement in line with sales recovery last year. As sales recovered in coming months and business operations assume normalcy, we expect the debt situation to improve over current level. Finally, to conclude, through the slew of initiatives and strategic interventions last year, we believe the company has come out much stronger and is well positioned to leverage from large opportunity that Indian Fashion sector offers. Thanks, and we are open to question and answers. Thank you very much. We will now begin the question and answer while asking your question. Ladies and gentlemen, we'll wait for a moment while the question queue assembles. The first question is from the line of Adithya Soman from Goldman Sachs. Please go ahead. Hi, good evening. Couple of questions from my end. Can you throw some more light on Gross margins in the quarter and why they are sort of lower sequentially? And second question on the last point you made on debt. We see it's gone up because of obviously operations being shut and working capital. But when do you expect Debt to say come back to 4Q levels in sort of time line assuming there's no further lockdown of course. Hi, Aditya. Can you hear me? This is Ashish here. Yes. Hi, Ashish. I can hear you well. On the gross margin, Aditha, the business has been pretty stable and strong because this quarter doesn't have too much markdown, which is the Q1. The lower gross margin is primarily due to absorption of manufacturing cost because manufacturing operations were Shut for about 40, 45 days in the month of May and parts of April June. And that's the reason why the manufacturing Cost had to be absorbed in that and that's why it's appearing in the gross margin. There's no other reason other than that. Understood. So there's no further discounting, right? Because I mean No, no, no, no. In fact, it's much lower discounting across businesses Because there's no reason to really create leverage discounting. I think consumer football was what it was. No discounting in the industry. Some of our gross margin is a mix of channel mix also. Different channels operate at different level of sales realization and therefore There is an element of gross margin movement, which happens depending on the channel movement, but not from the discounting itself. On the debt level, Adithya, I think if recoveries remains What is this showing early signs? And if there is no 3rd wave, then I think we should be able to sort of So we record strong recovery by Q3. It's hard to put a number to it and I wouldn't want to give numbers right now. But clearly, I think as the recovery comes back and if the cash flows remain strong, if the Normalcy is just stored and stays till Q3. I think it will come back. Yes, Yes, understand. And since we're seeing already, I mean, July, you said it's back to sort of 85%. Are we already seeing an improvement in cash levels or it's probably So, Aditha, that comment on 85 there's a lot of echo. So can you hear me now? Yes, I can. The comment on 85% was regarding Lifestyle Brands. The Pantooms business is relatively lower. It's about 70 odd percent. But definitely, I think As retail opens up, you know large part of this business is retail, which is where the cash flows immediately come in, your receivables is practically 0 days. So cash flows have started to come in strongly in July itself. Thanks, Ashish and Jagdish. I will come back and let you. Yes. Thank you. Thank you. The next question is from the line of Ali Azarashakil from Madhiragoshwal. Please go ahead. Yes. Can you hear me? Yes. Yes. Ali, we can hear you. Yes. Yes. Hi. Thanks for the opportunity. Just first of all, a quick follow-up on this debt. Can you just share what is your inventory level today? And I was just trying to see That the debt is quite significantly. Correct. I just wanted to understand So Ali, if I could get your question, there was a lot of noise. It's regarding the inventory levels right now? Yes. Basically, I was trying to see the reconciliation of the debt increase from the last quarter. So how much has gone into inventory and how much has gone Jagdish, do you have the exact number for inventory? Ashish, the net working capital has gone by INR 200 crores and another INR 350 Crore has gone into No, how much is the inventory? Is that the inventory? Inventory and the NWC. It's mostly the losses for the quarter, And the NWC has gone up by INR 200. Okay. Got it. This is helpful. Second thing, I was just wanting to understand your strategy on planting. We are looking to add 60 stores. How are we seeing that franchising these stores? Are we looking to do large portions of franchisee? Or are we still Looking to live largely in Swaddell Home Stores. Terry, large format stores are not amenable to franchising beyond a point. We are perhaps one of the few retailers which has 15% to 20% of a mix which goes through franchising. We'll keep the same level. I don't think we would want to increase the level of advertising. But we have missed coming from the background that some of our peers have a very reasonable portion of now Larger stores also coming through franchisee. So is there an operational issue that we face that makes you kind of restrict your Because obviously, lifestyle already is significantly on franchisee. Or what else do you think is hurdle that restriction? So I think it's I think at 20% with the size of the network, Pantaloons It's one of the largest franchise business. We believe fundamentally retail is about running stores And to unlike brand business where there are many other drivers on what you bring to the table, To that extent, we don't want to run the only skill that sort of only core part of retailer is to manage and run stores well. I think beyond 15%, 20%, we don't think it's healthy. Also from return on capital point of view, as we have shown in our presentation, if you recall, and you can go back and look at it. The ROC on Pantrym stores is extremely good at So level. And therefore, it also deserves the capital. We feel in terms of managing consumer experience, Standards of operations, which are important pieces for a retailer, we wouldn't want to go too much on the other side on this issue. Understood. And just last question on the ethnicwear. You mentioned that there are 2 new launches in the ethnicwear. Can you just show some more color? Are they largely in house? Or are they through some of our partnerships with some of the acquisition that we have done? What price point, what category and what kind of investments and growth we are building here? Okay. So in Jagdish's speech, he had called out 2 new launches that we are talking about. The first one is Premium Men's Ethnique Wear, which is through a partnership, but this is the company in which we hold 80 Since take and Tarun Teliani holds a 20% stake, the purpose of that partnership is to take a Ziryansky but launch it in affordable premium segment, a menswear brand. That is due to be launched in October, and we expect to open between 6 to 10 stores in the next 6 to 8 months, which is by the end of this year. That's as we said in our announcement of the partnership, We plan to open about 150 stores over next 3 to 4 years In that business, so it will be 5 years in that business. So that will be a very large play in the affordable premium men's segment, largely built around wedding and such occasions festivals. So that's number 1. The number 2 brand that Jitdish had mentioned in his speech was a premium ethnicwear line. As you know, inside Pantheon stores, we sell a huge amount of ethnic wear at the premium end largely through external brands. We have therefore decided to launch 1 premium brand, which will start in Pantaloons with probably 40, 50 stores of Pantaloons and we're getting launched this September. So we are just a couple of months away from that. And we will also take it out and launch 10 to 15 stores this year to test out its external format. So these are 2 brands which will play in a very affordable segment of menswear and the womenswear. The womenswear line will be More daily wear and office wear and other such occasions, not meant for bridal or very premium occasions, while the menswear line is created more around Wedding and festivals, but again, it's an affordable range. Both these are scalable opportunities in Ethicwear. Got it. And how much investments are we expecting here over the next 2, 3 years? So Ali, we'll have to see. I think at this stage, we have put in capital of around INR 70 odd crores in that business when we invested in that business. But as we scale up, we'll have to figure out we feel both these models are very unlike Our previous discussion on Pantone Stores, both these models once established are very, very franchisable Because this is store format which we do in lifestyle brands. And once we track this format, these will be franchisable. So I suspect once we establish the model, I think the capital need will come down significantly. The next question is from the line of Richard Liu from GM Financial. Please go ahead. Richard Sorgen, from here. May I request her to speak a little louder, please? Hi. Is this better? You'll have to speak a little bit louder, Richard. Okay. Ashish, can you hear me now? Yes, yes, much better. Okay. Thank you. Ashish, I've got a couple of interrelated questions. But before that, if I can make a request to To reconsider telling us what are the 3 in the AS-one hundred and sixteen numbers because I personally, for one time, it's very, very difficult to fathom what is really going on in the business from a margin perspective with these numbers. And also considering that your FY 'twenty six target that you had stated on the Investor Day, That is really based on pre NDA numbers, right? So I guess that we have to track the progress of that. I think a reverse to a BRL1 billion number would be very, very helpful. So I would request you to consider that. So that's one bit, if I can put on the card. Now coming to the question, if I look at your The drop in your turnover versus the losses that happened this particular quarter, right? And if I look at Slide 11, You're really talking about a turnover of about INR435 crores for the lifestyle business and Pantaloons is about INR 220 crores. But with half the turnover, both these businesses have actually made the same amount of losses, which is INR 57 crores for Life Style and 55 for Pantaloons. Can you put some perspective into this? Because I would think that the Pantaloons would be a more higher operating leverage Is it a comparison lifestyle brand? Yes, Richard. So you can therefore see how the losses in Pantoons Much higher as a percentage of revenue if you were to see compared to INR 220 crores of revenue, the loss percentage is much higher simply because of the fixed cost structure that a retailer has, More prominent despite all the savings and rent concessions, it remains a fundamental fixed cost structure. And that's why the losses numbers are much higher as the percentage of sales. In lifestyle brands, also To certain extent, 55%, 60% of our business is retail, but the share of retail is not entirely fixed cost. It's a part of variable cost through franchise network, and that's a significant part of our business. To that extent, the losses are less compared to it. But if you were to look at our overall overhead and I presume you're talking of with respect to Q1 FY 2021 or are you talking Q4, Q1 FY 'twenty two. Right now, I'm just talking about Q1 FY 'twenty two and absolute terms, Ashish, because with 2x the turnover in lifestyle, You still incurred as much loss as Pantalone did with half the turnover. My question is on the line. Are you talking about comparing profits or losses between the two businesses or Between the 2 businesses in the same quarter. So let me just repeat, Right. I mean pantaloons has about INR 220 crores of turnover for this quarter, Q1 FY 2022 and made a loss of about INR 55 crores. Lifestyle has 2x the turnover of bank loans, which is INR435 crores and still landed up making as higher loss as bank loans. Michael, if the level of revenue was significantly higher, should probably losses have been much lower than Fashion and Retail Limited? So there are 2, 3 elements. 1 is Lifestyle Brands runs a large manufacturing operation. As you know, close to 40%, 50% of our products we manufacture ourselves. We have 9 factories, Which have a large cost in that. So that cost absorption is unique to lifestyle brands in their comparison with Pantheon has no Fixed costs on that. So when we go through and this has just happened maybe second time in last 20 years when we had to shut our factories because of COVID related reasons. So there is a one time large impact of 40, 45 days of factory overheads, which have So I've taken away this quarter performance as far as Lifestyle Brands is considered, if you were to compare the 2 operating models. Barring that, the number would have been much lower, but we had to take that cost in Lifestyle Brands. And that's sort of exaggerated the losses Of Lifestyle Brands, it has no impact in Pantoons because they are purely variable in buy and sell model. There are few other factors, which is advertising, which also because Lifestyle Brands revenues have been strong simply because there is a lot of support, e commerce revenue has been strong. So there is, As Jagdish mentioned, about INR 20 crores more additional advertising, a large part of it is lifestyle versus Pantalone. So some of the fixed cost, Whether it's factory overheads or advertising are differentially laid out for this quarter specifically between lifestyle brands and pantaloons, and that's showing up in the difference performance. Okay. And now if I compare it why on why, Ashish, so you did about INR 190 crores of turnover in Q1 last year in the Lifestyle brand. And this year, it is about INR435 crores, right? So it is more than double. But yet, if I look at the EBITDA losses that we reported, that has come down by only INR 10 crores, right, INR 68 crores last year, INR 57 crores this year. I mean, why would it be so, especially since, If I remember correctly, last year Q1, you had a very, very low gross margin of about 41% at the blended level. And this year, it is much higher at about 50%. So I think, again, you need to look at as a percentage Of that and there is a fixed cost impact that's happened. There is increase in advertising that's got played out. As I've said, last year, we had cut the cost Completely because we were very uncertain. This year, if you look at it, we are talking already about 80%, 85% of revenues. A lot of our investments are back, Whether it is in advertising, whether it is scale of operations, so some of the costs are variable costs that have gone up, The investments in e commerce or even in terms of the fixed over under absorption, Which was quite severe. It was I think I don't know the number for last year's similar quarter. It must have been probably slightly lower than that. But that's the reason. We can give you probably a closer tally maybe separately. Jagdish can take you through On the two numbers. Hiddish, is there anything you want to add to that? No, it's okay. Actually, it is unabsorbed fixed overhead and we That's a large part. I mean, unabsorbed fixed overheads are very large part for this quarter. Sure. Okay, Ashish, I'll take that as Satish. Thank you for that. I will just once again request you to So there are the pre and post India change, just to help us understand this better because it's absolutely difficult to pattern what's really going on with the numbers You're all based on these post India numbers. Thank you very much. Wish you all the best. Richard, we'll come back to it. I mean, we thought that we should Consistently follow what gets reported and explain that and rest of the industry. We were the only company we continue to show post India A year after, but we realized that most people in the industry has moved on. So we recorded your request. Let's see, it's always difficult to keep 2 accounts and Talling between them, but let's see if there is a smart way to be able to explain both numbers. I think we will try and do that. Sure. Thank you very much. Yes. Thank you. The next question is from the line of Nehal Jams from Edelweiss. Please go ahead. Yes. Thank you so much. I'm leaning to the internal management. So three questions from my end. First on the 400 store target that we build out for The lifestyle brands, how many of them would approximately be retail and then red and new Okay. Should I speak that, Ashish? Yes. Go ahead. Yes. So roughly about 150 stores will be featuring and read And about 50 stores would be Allan's, I would say. That's helpful. The second part was on the new ethnic Where brand we are launching, I'm talking about the second one. It is clear on the first part that the premium wins were at me. The second one that we are launching Initially inside Pantom, is that targeted only towards women to be sure of that aspect first? Ashish, you want to take that? Sorry, I missed that question. Can you repeat it? Yes. I was asking that for the second ethnicwear brand that we are planning to launch in October, Which is going to start off with Pantheon's 4050 store format pilot. Is that only meant for women's ethnic wear to Yes, yes. That's meant for only Birla, I think. And you said that it will be more of regular wear rather than it being Closer to bridal or the high end fall marketing aspect? Yes. It will be at the meat of the market, at the largest segment of the market, which is mid premium to premium. And that's where Pantaloons has strong customer franchise right now. Most of that business is currently being serviced by external brands and we feel Panjol's has the design and merchandise capability to fill that space. Absolutely. The only thought or understanding was that maybe Pantooms had a high share of collections of Women's ethnic, which was targeted at this price point, maybe starting at 500. So is it that this is going to be more premium regular wear in addition to what we are already serving? No, you'll be surprised the amount of premium ethnic wear that Pantalone sells between INR1200, INR1200, INR2,000. It's largely done through external brands. And it's a part of increasing share of private label. And therefore, This brand is a premium brand, not competing at INR 500,000, but more at INR 1500, INR 2,000 INR 2,000 INR 2,500 INR 2,500 INR 2,500 INR 2,500 INR 2,500 INR 2,500 INR 2,500 INR 2,500 INR 2,500 INR 2,500 INR 2,500 INR 2,500 INR 2,500 INR 2,500 INR 2,500 INR 2,500 INR 2,500 INR 2,500 INR Understood. That's helpful. Just one last question on the Innerwear side. What I noticed is that last year when we ended, we had around 28,000 outlets So in Innovair, I don't know the presentation says currently we are having a reach of 23,000. So I just wanted to understand is that a reduction in the number So touch points you're having on the email side? No, no. What had happened is earlier we used to report Men's and women's separately and the team used to add up those numbers. This year, we did a reconciliation of common outlets, And we realized actually we should report one number where one outlet appears once. Earlier, we were reporting separately for men and women and So as we used to add up that number, very often these outlets were common. That is helpful. And exclusively for women, what would be the touch base out of these 23 Don't have the number, but it will be definitely north of 5,000, 6,000. Sure, Ashish. Thank you so much. I wish all the best. Thank you. Thank you. The next question is from the line of Tejas Shah from Spark Capital. Please go ahead. Hi, team. Thanks for the opportunity. My first question pertains to debt. I missed a number. Debt of INR 12,000,000 crores was as on June or as on today? June. So this is before the last tranche of rights Money would have come in. Yes, yes. Okay. 2nd, Ashish, aspirationally and philosophically, just wanted to understand Our view on debt from here on because we have just come out from a very bad cycle pandemic and the debt also when we entered, The cycle was very high. And obviously, the dilution and intervention that we made of strategic investments, we brought it down to a very good level. Now as we again come into growth phase, incrementally, would you like to deploy more capital to chase growth first? Or would you like to settle the debt at certain level and then chase growth? So debt number will be a goal seek function or it will be a residual number for us? I think we'll have to stay balanced on that, Tejas. I wouldn't take one position or the other. I think we need to stay balanced on our remember, we have now a portfolio where there are multiple opportunities that we're chasing. You look at The opportunities for lifestyle brands, pantaloons, Innerwear, the new ethnic business that we are building, there is an acceleration of digital play that's Going on, we feel very well positioned. In fact, probably the only company in the industry which has such a wide portfolio and such a large canvas to play on. So we are very confident of future and therefore we don't want to also start with debt as an operating constraint, But we also understand the level of limits at which we need to operate. We feel very comfortable in our current sense of projection On where, let's say, debt to EBITDA will play a year from now. This year is hard to predict, But whichever way it goes, even if it gets a little worse, we will still be in a reasonably good debt to EBITDA position as far as FY 'twenty three So I wouldn't say that we don't care about that. I think it's important we need to keep a ratio and that in mind. But Really, we will be missing we are very well positioned to accelerate. We are Well positioned competitively, the portfolio for brands, the opportunity in front of us. So that remains sort of North Star for us. Sure. But if you can give an objective number there on debt to EBITDA, where would you like to stop that Number 3. So see, in past, we've gone up to 2.73, But we would be more comfortable between 1 to 2 at best, and that's really the maximum range that we should look at. Sure. Again, on demand, you mentioned in the PPT that recovery we are expecting full recovery by festive season. But hypothetically, if this quarter has to open up and as Mr. Bajaj also said that today Maharashtra has also given some good news on opening up, Hypothetically, if we have to open up from today or next week onwards, do you think that pent up element can actually bring back recovery faster than the festive quarter? Or do you Believe that the underlying economic environment needs us to push to go back to normal? No, there is certain element of pent up demand which will show up In this quarter also. But like every year, I think the real boost and trigger to demand uplift happens during So period, this time it's got pushed a little bit in terms of closer to October than September. And therefore, to that extent, maybe it will month wise it may Sort of move over more to Q3. But I do believe that even Quarter 2, if there is no 3rd wave, I think we'll have a reasonably good recovery. But for a full recovery with the combination of all stores operating fully because even today, if you look at it, they just A lot of stores are operating on weekdays. There are stores which need to shut early in the evening. So we are operating with extremely Sort of difficult retail environment in that sense. Sure. And the last one on Lifestyle brand, recovery in Wholesale is slower than the system recovery there. So any insights there to share? Yes. It is I think it's always been a slight lag between Smaller formats of retail recovering and then larger formats of retail recovering. So there is that bit of a lag. In fact, if I were to tell you in July, it's a lot more significant recovery in the wholesale part as well, okay? So there is Just that little bit in the Q1 piece, which in the end of Q1 period. But maybe I would say the lag is about a month between wholesale and retail. That's all from my side and thanks and all the best. Thank you, Jason. Thank you. The next question is from the line of Ankit Khedia from Philip Capital. Please go ahead. Thank you. So my first question is on your new e commerce strategy. In the presentation, you have alluded on the multi brand app. Couple of quarters back, we were talking of launching individual brand ads for the Madura brand. So now we have separate loyalty programs for the 4 brands as well. So how does the change in strategy come about now? And will it also include Pantalone on all the other international brands as well? So first part, we remain focused on individual brands. So we are not planning to launch a firm where all brands sell across each other. But we are looking for an architecture where Consumer can easily shop from one brand to another and switch over to that. But within each, he will have very unique and deep Experience of that brand because at the end of the day, we are a branded company and our biggest strength is the brand. So the experience will be rich And unique and distinctive for each brand, but it will allow consumers to swap across brands as we move forward. At this stage, the idea is to take Lifestyle brands and similar brands next stage will get extended where some of the international brands can get added. The current intent is to build that and have a second platform for Panteludes because that's more transaction heavy business, While the nature of the brands is more content driven, engagement driven. So there's slight nature in the way Picture plays out. Therefore, at this stage, two points I would make, separate pantaloons.com and a separate brand.com. Brand.com, although multiple brands is what you can access, but it's not that you can shop, Let's say, trousers of all 1 brand together. This is not a multi brand site in that sense. It's a combination of single brand sites coming together where we get synergy of data, consumer traffic. Consumer also gets option to switch across that. Some of the details are still to be worked around loyalty and other pieces. I think that will unfold as we go forward. So my second was on launching e commerce only brand. So could you talk a bit on that as well? Which category, What price points are we looking at? And will it also be on our own app or purely from a marketplace perspective? So first of all, in terms of where it will be, while it can be on our own app and it will eventually be, I I think the opportunity that we are seeing is our ability to create, drop create consumer facing merchandise design is our strength. And in partnership with large platforms who have consumers, we find many white spaces where this can be done. We look at it in women's fashion, in some of the casual segments of the market. But the list of where such white spaces is larger And we are in constant engagement. We will build a reasonably large business, which will be digitally heavy. So The proposition, the price structure, the cost structure, gross margin structure, etcetera, will be designed for pure e commerce. And that's really the thought. I think there are multiple white spaces. We are starting to look at 1 or 2 of them now. I think by end of the year, we'll start to see the impact of these. And so my last question is on the pantaloons. In last 2 years, we have Taken people to pantaloons, home, side, kids and now we're talking about a 3,000,000 women's wear brand. So we would have also removed Some other low throughput brands out of Pantelon. So the question is, during the pilot phase in certain 40, 50 loads, How is the response of these new categories? How many months do you see the throughput coming back to the normalized levels or the company averages, If you can share some highlights. Okay. So many of these categories, homes, sarees, Well, launched just before COVID, and therefore, we haven't seen even one full season of stable performance because pantaloons has been more Infected right through last 15, 16 months. So I would say at this stage, while we have launched many of these categories and we are also launching some brands and replace, we are doing both things. We are And we are also launching some brands and replace. We are doing both things. We are rationalizing our internal brand architecture to simplify for customers. And we are of course replacing the lower throughput, low productivity, lower profitable external brands. So both these are getting played out at this point of time. I don't think today we are in a position to definitively comment on How they are performing? Because we need to give them at least one season. And hopefully, this coming season will be a good place where you would have sarees in 50, 60 stores, home in 50, 60 stores, if not more. As far as new premium brand is concerned, again, It is going to over a period of time take share from existing external brands that we have because Pantaleo is a large franchise and a very large business of premium women that's required. But we don't we have not created our own brand. This is Primarily a step to increase the private label share. That's helpful, sir. Thank you so much and all the best. Thank you. The next question is from the line of Priyank Kimawat from Infinity Alternatives. Please go ahead. Yes. Hi, team. Thanks for the opportunity. Firstly, on our EBITDA margin at the company level going forward, so if I look at the last 4, six We've almost closed out 30 days 55 loss making panty loans and 150 odd loss making stores. So with these stores not being a drag on profitability anymore and with the cost which we would have done on account of the pandemic, So, did the pre invest EBITDA margin at the company level structurally improved by say 100 and 150 basis points and reached to that 10% level mark whenever we Achieved full recovery? What is your take on that? So I think it's a very broad question. I wouldn't want to speculate Right now because there are multiple elements in this, you're absolutely right. What we have done in last 15 months is pushed very hard to structurally correct the cost of unviable stores. Some places we have got a deal which keeps us going and not just for this period but going forward. In some cases, we couldn't get that, and therefore, we've been quite sharp in terms of shutting or pruning that part of the network. As we emerge from the whole situation going forward, obviously, we are looking at intrinsically both some of the structural costs at an operating level coming down as well as the health of network improving. Well, I think because it's so phased and differentially sort of timed, it's hard for me to put the number right now on that. But you have seen if you look at our businesses, our lifestyle brands have been reasonably consistent in the margin profile. Pantlons for last pre COVID for every single year for previous 3 year was delivering between 100 basis point to 150 basis point improvements in margin, And we were close to about 8% when we ended December of FY 2020. And we were Quite hopeful that, that performance will get us to 10% there. Lifestyle Brands is already above that and fairly consistent and robust on that. I think among the loss making businesses, if you know go back, Forever 21, which used to lose at its peak about 35 crores to 40 crores has become breakeven business. Where losses were initially high continues to be At this point of time, it hasn't reached breakeven, but that's primarily because of COVID effect. I think a year from now, that will also come back. So if you look at therefore the various elements of individual businesses, the profit profile was improving sharply and I think it will continue to improve As soon as recovery comes back. Now it's hard for us to put a number right now on when that could happen. Okay. So, yes, exactly what you said. So, when I do a basic backup Would it be postponed to 11 and the first 3 years? Is that what you're working towards? No, definitely. Our aspiration is because we think For a company with our profile, with our portfolio of businesses, INR 1,000 crores EBITDA is not a number which is outside and this is pre index It's a number I presume you're referring to. It's not out of reach and that's something that when normalcy restores will definitely be one of the immediate targets that we will have. Okay. And my second question is on the size of our Innerwear and Adhesive business right now. With unorganized Players still taking the lead especially in this segment. Our growth needs to be a little tad underwhelming. So what do you see like How when we look at the 2 year perspective on this, what is the size of the current Innovative business and how do you see it going forward from here? So I think we have because of COVID, our momentum sort of Got stopped at the peak of where the journey was beginning. As I have said, Our first target was to get to INR 500 crores. Realistically, we would have got there by now if things were normal. But I think that The underlying size of the business, although it's not showing up in numbers at that level, our immediate next goal in next 2 years would be to target closer to 1,000 crores because that's the next number that we have. We know how to get there as in we know what it would take to get there. And I think we'll have to execute on that. So that's our immediate INR 500 crores and I think 2 years from now about INR 1,000 crores is the goal that we have for that business. Okay, got it. Thanks a lot. I'll come back in the queue for further questions. We'll take them up separately. Thank you. Thank you. The next question is from the line of Vikram Jain from Ikura Securities. Please go ahead. Hi, sir. Thanks for the opportunity. So my first question is with respect to our dental costs. So of course, we have received few concessions in this quarter And also we will receive some in the next latest Q2 of FY 'twenty two. I just wanted to understand from a normalized basis, Given that we don't receive any concessions and the demand is normal, what would be our quarterly run rate for our rental cost that we Ankurin, this year, probably doing that again. So I think on a base and these are slightly rounded numbers, we are a network of about INR 300 crores rental, Yes, for a quarter. So it's about INR 1100 crores, INR 12 100 crores is the rental that comes in. It comes largely as fixed, but there are variable components of that. But if you were to put one number, it will be around that. This is without any debate and base level of number. Despite increasing 2 and 4 times of revenue, we could reduce No, it's wanted to know the rent number. Is that the question or you want to know rent as a stage of sales? No, no, sir. You answered my question with respect to that. So my second question also with respect to our finance costs. So this quarter, we did INR85 crores. Out of that, can you split over the actual interest cost? Or was there some element of the lease into it? It includes the lease impact also. Otherwise, the effective interest rate in the business is around 7.75%. So the cost And what would be the absolute amount this quarter? This quarter I have to split up again, I have to go into detail. But I have given you the number, INR 61200 crores is my debt, which has built up in this quarter month on month. Sure, Sure. Okay. Okay. All right. Thank you. Thank you. The next question is from the line of the Aanshu Bansal from MK Global. Please go ahead. Yes. Hi, sir. Thanks for the opportunity. Just a small clarification first. This 85% recovery that you have indicated for July, Is it for stores that are open or a system wide recovery? No, this is for the full business, not stores, nothing. This is for full lifestyle business. So you are saying that since 65% network is open and with that 35%, we have seen 85% recurrence. No, no, no, no, no, you're wrong. 85% of network more than 85% of network is open. But the number that we have indicated is the total growth total number across all channels. So obviously, the share of e commerce, Retail, all channels put together, that's the number. Okay. And secondly, for ethnicwear, Currently based on industry performance, the recovery in this category has been relatively slower. So in terms of consumer Since where in terms in women category where ethnic has a larger share at about 70%, what according to you are the drivers For this category to maintain this higher share and continue growing faster? So I think the underlying reason is like most categories, but let me specifically talk about women's ethnic wear. But let me specifically talk about women's ethnic wear. What are the usage? There is a regular daily usage that women does at home Or for casual occasions, there is an office wear usage in ethnic wear and there is a festival going out those kind of usage. As you can make out in last 12 to 15 months, both festivity has been subdued And going out has been constrained. And therefore, there are strong reasons why from demand point of view, this category has suffered in the medium term. I think as normalcy comes back all the three elements of it, which is women going to work, women Buying clothes for festivals and special occasions or for going out will come back In a strong way. So we think it's quite directly linked to how last 15 months have played out in Life of women are generally more comfortable in absence of occasions. Sir, do we maintain that industry percentage of 70% This category can retain this much and even grow this year? Sorry, I didn't get your question. What's the point? I'm saying ethnic wear is currently 70% in women's wear. So with these growth drivers, this amount of market share is sustainable? So two parts. 1 is, there is undeniable Rapid growth of women's Westernwear, but it's happening at the lowest end of the market. Women are buying cheap The young girls buying cheap tops and skirts and so on. So there is a large growth of women's Westernwear at the bottom end of the market. On the ethnic side, however, the value equation is changing. People are paying more to buy ethnic wear and less for Westernwear. And therefore, while there might be a so there are basically counterfactors. There is a share of women's wear that will grow in Western, but will happen at lower price points. Probably the value share may not grow as much. Although organically, I think over a longer period of time that will grow from the current levels. But what it has done, therefore, because of increasing value in ethnic wear. As more and more better brands, better products, designer led products, special occasions, lot of Interest in design and merchandising in this category has grown. Women are finding that it is that they pay a lot more for Ethincwear today than Westernwear. And I think there is therefore a value migration upward which is happening and that perhaps may allow that share to drop much slower than what was anticipated earlier. Thank you. Ladies and gentlemen, we'll take the final question from the line of Nikesh Shah from Moti Raulosol Mutual Fund. Please go ahead. Yes. Thanks for the opportunity. Just a couple of questions. You mentioned about ethnic side launched women as well. Is it going to be in a price point of INR 1,000 to INR 3,000, somewhere where the likes of PC and SOPEC? That's the first question. And the second question is when you mentioned 85% of the ECOVID revenue being achieved in July. Are you referring to the July bill of last year when you said 85% of ECOVID revenue? Okay. So two questions. The first question, what would be the price point of the premium and thin wear line? This will be more between $1500,000 to $300,000 $2,500,000 $300,000 maybe some entry price point products maybe $1200,000 $300,000 So it's right at the heart of the business. The second question on when I mentioned 85% business recovery in lifestyle brands, That is with reference to pre COVID times, which means July 2020, not July 2020. 2019, 2019,000, sorry, not the 19,000. Yes, yes. Just pre COVID. Thanks. Okay, perfect. And my final question is Given the fact that more e commerce you will be able to have a lot of data on online as well as online now coming through, what is the strategy on cross selling Some of your products to multiple customers because you have a very rich base of database now in terms of their preference and so on and so forth. So I think you will hear more about it as we sort of progress on our multi brand But most of this consumer data is consolidated at the central server. So our customer knowledge is very deep. We know if somebody has bought across our brands, product categories, which he or she buys from 1 brand and how many brands does she have in her portfolio and so on. So there's a lot of opportunity in that. I think because our share of e commerce and our overall revenue in e commerce@brand.com was too Small, we were not leveraging some of these things. In last 12 to 15 months, we have picked up both capability, IT architecture and ways of actually understanding this data better, When we have our websites and apps fully in place where a lot of these Cross selling and cross sort of upgrading opportunities will come up. I think that's when it'll get played out fully. We're still doing it. Each of our brands have access to the full data. It's consolidated and centralized, but I think the real effect of it will start playing out in 6 to 12 months from now when There is an enabling technology infrastructure behind it. Got it. And Samir, just squeeze in one more question on HMEA. Would it be possible Could you please give us some sense on medium term guidance on what margins can we make either pre invest, post invest, whichever number you want to give it, at some reasonable scale because what we generally saw that this would be a reasonably reasonable business Obviously, because of COVID, it's not coming that way. So some sense on that would be helpful. Which business? I missed your Ethnic Business. Ethnic business. So see, we have a wide profile of ethnic businesses. There are established ethnic business at Super premium level, which is Sabyasachi and Tarun and all that. They are already I mean, pre COVID, they were very profitable businesses, though very, very small. So I will leave that aside. I think they will come back to where they are, which is a reasonably healthy profitability, but they wouldn't sort of swing the needle for a company of our size. So it will come down to these two brands that I talked about. In terms of Our men's ethnicwear brand, we expect we should get to double digit number in 3 years from now Because we'll be investing to build scale and sort of build equity for that brand. And that's what it will take. I think we'll get to healthy double digit in this business because in many ways, this business has some of the It's less susceptible to fashion and therefore obsolescence is much lower. We'll still need to invest to build the brand, build Smart franchise, etcetera. It's a one player market in which we'll have to create presence. We are quite confident that this will be a profitable business. On the women's side, we will we are playing both sides, which is to build the brand inside Pantoons and improve gross margins of Pantoons So increased share of private label. That, of course, is a sort of a clear strategy. As we go out, we will See how profitable is it and the retail expansion on the physical side as exclusive stores will be managed depending on the profitability that plays out in that. So that we will have to evaluate more closely as we go along. And depending on how well we find Intrinsic profitability will scale that business. Otherwise, it can always remain as a Pantalone's led brand. Sure. But on an overall basis, on a consolidated ethnic revenue, we wouldn't have any negative EBITDA because the reason I'm asking is every so if you look at historically, guys, we had some of the other way where we had some drag coming from some business, whether it is Inazver in the past and now when Inazver is likely to break even or move to The territory we now have ethnic. So safe to assume that everything will become profitable, depends on margin and income that we can get 2% to 3% margin starts and then over a period of time moving to Double digit in next few years as you guided, but everything will be profitable. There will not be any drag from any businesses over the medium term. So I would hesitate to make that Point for immediate term, I think even as we recover, let's say, FY 2023, I think our new ethnic business, whether it's menswear brand Or the existing business, which is Jaipur. And I would just call out these 2, I think others will be profitable. These 2 will probably take a year or 2 to turn around. Got it. Got it. So we'll have losses for 2 years in these business. Understood, sir. Perfect. That's all commented. Thank you. Best of luck. Thank you very much. Ladies and gentlemen, on behalf of the management, we We thank all the participants for joining us. In case of any further queries, you may please connect and get in touch with Mr. Rahul Desai or Mr. Amit Deweri. You may now disconnect your lines. Thank you.