Ladies and gentlemen, good day, and welcome to Fourth Quarter and Full Year Earnings Conference Call of Aditya Birla Fashion and Retail Limited. The call will begin with a brief discussion by the company's management on the Q4 FY 2024 and full year FY 2024 performance, followed by a question and answer session. Should you need assistance during this conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. We have with us today Mr. Ashish Dikshit, Managing Director, Mr. Jagdish Bajaj, CFO, Mr. Vishak Kumar, Director and CEO, Lifestyle Business, Mrs. Sangeeta Tanwani , Director and CEO, Pantaloons. I want to thank the management team on behalf of all the participants for taking valuable time to be with us.
I must remind you that today's discussion may include certain forward-looking statements and must be viewed therefore, in conjunction with the risk that the company faces. Please restrict your questions to the quarter and full yearly performance and to strategic questions only. Housekeeping questions can be dealt separately with the IR team. With this, I hand the conference over to Mr. Jagdish Bajaj. Thank you, and over to you, sir.
Thank you. Good evening, and welcome to the Q4 and Full Y ear FY 2024 Earnings Call of our company. Let me start with an overview of the operating environment. The market conditions remained largely unchanged from previous quarters, with continued sluggishness in discretionary spending. The months of January and February were particularly affected, primarily due to a reduction in the number of weddings and a delay in the onset of winter. These factors contributed to a notable decline in consumer spending during this period. Throughout these challenging times, where sales remained sluggish, we remained focused on prioritizing the right channels and structurally look at controlling costs by taking necessary actions to ensure the long-term financial health of the business and the strength of our distribution network.
Over the last few quarters, we have been pulling multiple strategic levers to optimize efficiency and reduce costs without compromising the quality of our operations. Our commitment to delivering exceptional products and experiences to our customers remain unwavering, and we shall continue to prioritize innovation and customer satisfaction as key drivers of our success. New businesses, that is Ethnic, TMRW and Reebok, drove large part of our growth this year. Pretty much in line with how we had seen the market evolving versus which we had laid down our long-term portfolio strategy. The changing dynamics within varied categories, price points and occasions is now addressed well through a comprehensive and diverse portfolio that we have built over the last few years. This fiscal, we enhanced our ethnic portfolio by acquiring TCNS to complete the gap in premium ethnic space that the portfolio had.
Additionally, we strengthened our TMRW business with a strong portfolio of digital first brands. These were key additions to make our portfolio more comprehensive, in line with the long-term strategy of the company. As you are already aware, that on nineteenth April 2024, the board of ABFRL has approved the proposal of vertical demerger of Madura Fashion & Lifestyle business from ABFRL into company named as Aditya Birla Lifestyle Brands Limited, which will be listed separately post the demerger. Pursuant to that, we have also reclassified our segmental reporting this quarter and will continue to share the financials in similar way till the demerger becomes effective.
The two proposed entities now are Aditya Birla Lifestyle Brands Limited, consisting of Lifestyle Brands, Youth Western Wear, Inner wear, and Sportswear, while Aditya Birla Fashion and Retail Limited consists of Masstige and Value retail, Ethnic, Super Premium, and Digital First Brands. This strategic demerger of ABFRL is paving the way for the creation of two separate growth engines, each with a clear capital allocation strategy and unique path for value creation. Both entities will focus on specific growth areas aligned with their individual business models, with a clear focus on maximizing stakeholder returns. Post demerger, ABFRL will raise fresh capital of INR 2,500 crore to strengthen its balance sheet and support the growth needs of its constituent businesses. Now I will talk about financial performance of our company for this quarter.
The company delivered revenue of INR 3,407 crore, a growth of 18% over same quarter last year, primarily driven by new lines of businesses. Excluding TCNS, growth was around 12%. Our standalone sales stood at INR 2,852 crore, growing 8% over last year. Both our Ethnic and D2C businesses, driven by a combination of organic growth and strategic acquisitions, more than doubled their revenue this quarter. The company achieved a consolidated EBITDA of INR 377 crore, with margin expansion of 300 basis points to reach 11.1% versus 8% last year. Powered by profitability, enhancement measures by our large established Lifestyle and Pantaloons businesses, our standalone business EBITDA grew by 59% Y-o-Y.
Our total store network now stands at 4,664 stores, spanning 11.9 million sq ft. This quarter, we have pruned our store network by closing stores, mostly due to slow recovery in certain markets and changing retail landscape. For full year FY 2024, company posted revenue of INR 13,996 crore, reflecting growth of 13% over same period last year. The standalone sales grew 5% over last year, despite challenging market environment throughout the year. As already mentioned, new businesses remain key drivers of our growth. Specifically, the contribution to overall sales from businesses other than Lifestyle and Pantaloons increased from approximately 16% last year to 25% this year. EBITDA for FY 2024 was INR 1,703 crore, with margin of 12.2%.
Year two, EBITDA for standalone business, led by profitability enhancement initiatives, grew by, grew 10% with margin expansion expanding by 60 basis points. Our consolidated EBITDA grew by 5% Y-o-Y, factoring TCNS losses, post acquisition and investment in ethnic businesses and TMRW. For TCNS, six-month financials were consolidated, where TCNS sales was INR 490 crore, EBITDA around INR -41 crore, and our PAT at loss of INR 115 crore. The company's consolidated PAT stood at a loss of INR 736 crore for the year. It was impacted on account of high depreciation and increased interest costs due to higher borrowing versus last year. We reported a higher depreciation expense this fiscal year on account of TCNS consolidation, incremental amortization of new brand which we have acquired, TCNS and TIGC, and accelerated depreciation due to closure of stores.
Our net debt at consolidated level stood at INR 2,862 crore, which is in line with guidance shared earlier. I will now take you through the performance of individual businesses, starting with first ABFRL segment. This segment posted revenue of INR 7,794 crore, with EBITDA of INR 1,276 crore in FY 2024. EBITDA margin expanded 270 basis points to reach 16.4% in FY 2024. The share of emerging businesses portfolio, which were 13% in FY 2023, increased to 16% in FY 2024. For Lifestyle brand, over the past few years, our brands have experienced strong growth, maintaining their market leadership position through brand, category and product extensions, along with nurturing new channels of growth.
As we have been guiding for the last few quarters, in a challenging demand environment, we prioritize our focus on growing profitably, and hence through slew of measures such as product premiumization, markdown management, and tapering down low profitability channels, Lifestyle brands have been consistently working towards enhancing profitability. Focused intervention around other operating cost items is also structurally enabling the brands to move towards a more profitable model in the long run. Revenue for the quarter was INR 1,564 crore, 2% higher than last year. EBITDA stood at INR 305 crore, growing 36% versus last year, led by gross margin improvement. EBITDA margin was 19.5% versus last year.
For FY 2024, sales remained flat at INR 6,560 crore, though it is important to note that this was cycling a large growth of 46% Y-o-Y last year. Despite this, led by all the profitability measures, as explained before, Lifestyle brands posted highest ever EBITDA at INR 1,284 crore, growing 17% Y-o-Y. Margin expanded by 300 basis points to reach 19.6% this fiscal. Now, about youth western wear, which consists of American Eagle and Forever 21. American Eagle experienced another year of impressive performance as it posted its highest ever yearly sales and EBITDA. Brand in FY 2024 achieved 36% revenue growth compared to last year. American Eagle expanded its network to 65 stores and 120+ department stores.
Forever 21 continues to face headwinds in a challenging competitive environment, but kept a razor-sharp focus on growing through a profitable mode. Now about Reebok. The first full year of operations for Reebok with us has been very encouraging. The brand is on a path to double its revenue in next three, four years, led by rapid expansion of distribution across channels. Reebok currently is now available at 160+ stores and 900+ points of sale across departmental stores and multi-brand outlets. Reebok also has significantly scaled up its e-com business, driven by deeper partnerships with all major e-com players. Let me now speak about innerwear business. The stress in this category has sustained, as the athleisure part of the market is still declining. The overall business remained flat this quarter, while the I nnerwear category posted a 12% growth over last year.
The brand is consistently driving trade outlets at additions by adding 3,000 trade outlets in last 12 months, with a total network of 35,000 trade outlets. Now, the remaining ABFRL segment. To start with, this segment posted revenue of INR 6,518 crore, with EBITDA of INR 460 crore in fiscal year FY 2024. Margin for the segment stood at 7.1%, considering the inclusion of TCNS and investment in new businesses. Now, Pantaloons business. Pantaloons business continued to make concerted efforts towards addressing market challenges and strengthening its business model for the future. As the year progressed, series of interventions around improving consumer proposition, enhancing product value equation, and driving efficiencies in back-end operations led to improvement in sales and margins. Business intends to keep making progress on this path going forward as well.
Pantaloons recorded quarterly sales of INR 895 crore, a growth of 10%. L2L for the quarter stood at 1%. EBITDA margin for the business grew by 270 basis points to reach 10.4. For FY 2024, revenue stood at INR 4,328 crore, a growth of 5% Y-o-Y. With the changing market landscape...... Over the last few years, the business decided to rationalize its store net, store network to improve the health of its distribution. This fiscal, private label mix improved by 140 basis points, led by significant improvement in design aesthetics and additions of new labels and categories. Ethnic portfolio consists of designer wear brands and premium ethnic wear brands.
This portfolio now has an annual run rate, revenue rate of INR 2,000 crore plus, and continues to grow rapidly, led by network expansion, same store sales growth, and category extensions. This quarter, our ethnic portfolio achieved revenue of INR 474 crore, as the portfolio, excluding TCNS, posted a Y-o-Y growth of 51%, with TCNS portfolio revenue more than doubled. In designer-led brands, Sabyasachi grew 56% Y-o-Y in Q4, led by strong growth in jewelry segment. The brand recorded second consecutive quarter of INR 150 crore plus sales. Shantanu & Nikhil posted 6% growth Y-o-Y this quarter, as its private label S&N grew 25% over last year. The brand continued to add stores, as its total network expanded to 21 stores. House of Masaba recorded 86% revenue growth over last year in Q4, as the beauty business continued to grow from strength to strength.
In premium segment, to start with, the men's premium ethnic wear brand, Tasva, doubled its revenue over last year. What has been encouraging is the amount of love the brand has gained in the last two years, mainly driven by enhanced product proposition and superior retail experience. Jaypore grew 18% Y-o-Y this quarter, as the brand expanded its network to 25 stores. TCNS revenue in Q4 stood at 79% of last year due to rationalization of its distribution, with a clear focus on growing in profitable channels only. The business has continued to refine its product offering based on consumer insights and feedback. SS 2024 has begun on a strong note, and we are observing consistent gains across various channels. Now the Super Premium portfolio, consisting of The Collective and Mono brands, delivered a solid performance in Q4, with Y-o-Y revenue growth of 16%.
E-com channel for the business surpassed INR 100 crore this fiscal year, continuing its strong organic growth. The total network, including mono brands, spans 39 stores for this business. For digital native brand, housed under TMWR , revenue grew to 4x of last year. This quarter, with the addition of TIGC, business has continued to build on tech and data science capabilities and build an even more agile supply chain to create a moat for the portfolio. To conclude, FY 2024 presented challenges with overall consumption slowdown and factors affecting discretionary consumer spending. Hence, operating with agility, we took necessary and stringent actions throughout the year to align our operations in line with the long-term strategy. The fashion apparel market remains one of the most significant segments in the discretionary consumer space.
With our already robust portfolio of brands spanning various categories, segments, and channels, we are confident about our ability to propel both the businesses, ABFRL and ABLBL, into substantial scale and size. The vast headroom for growth in the apparel space further strengthens our conviction. Our endeavors are towards ensuring that we play a meaningful role within this large space. Thank you, and we are now open to questions.
Thank you very much. Thank you very much, Mr. Bajaj. We'll now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we'll wait for a moment while the question queue assembles. Participants, you may press star and one to ask a question. The first question is on the line of Garima from Kotak Securities. Please go ahead.
Yeah, thank you so much for the opportunity. First question is on Pantaloons. Now, you seem to have taken up a network recalibration in this format in FY 2024. Is this calibration done, and what is the store addition expectation, going forward?
Yeah, Garima, this is Sangeeta . So, as Jagdish mentioned in his speech, I think the network of stores that we revisited, these are largely stores. If you recall, we told you in our previous calls that Pantaloons has been on a journey of premiumization. It's a conscious call we took about four, five years back. And, as is the case, every year, we review stores that are either not profitable or not doing well, or there is a change in terms of the market conditions. I think this year we've taken a very bold step and a conscious step to take a call on certain stores which don't fit our proposition, and these stores that we have closed are across the network.
It's a one-time action that we have taken, and we stay very confident of our strategy in terms of our growth for future. Therefore, as we have mentioned before, we will continue to open stores in the future, but those stores which are of the right size and which befit the proposition and the strategy of Pantaloons. So we will open, again, about 25,30 stores this year, as we have committed in the past.
Thanks for that. So, what was the gross store addition in FY 2024, if you could help me with that number?
...So we opened about 29 stores during the course of the year, and overall, we shut about 43 stores during the year.
Understood. That's helpful. Second question is on the value format, which is Style Up. Any numbers you could share with us as to what is the revenue this format had in FY 2024? And again, any growth plans here, and what is the initial feedback that you have for this format?
Yeah, sure. So we've been working on this format for the last couple of years. We've been in the market. This year was the first full year of this format. We have about, somewhere between 25,28 stores, as we close the year. These stores have been opened across 8-10 cities of the country. We feel confident today as we exited the financial year, that we have a model, which is economically viable, and, this is a, a space that we think we will, certainly invest in in the future and continue to accelerate our growth in this segment.
I think, Garima, just to add on here, we feel now more confident having got, as Sangeeta mentioned, about 25+ stores in limited geographies. You will see a more accelerated expansion in this format as we are beginning to get more and more comfortable with the format and its viability. The second half of this year will see more accelerated expansion and perhaps an even faster one next year.
Got it. Got it, and just for understanding, this will be a part of the demerged ABFRL?
Yes, it will be part of the ABFRL, along with Pantaloons.
Got it. Got it. Thank you. Our next question that I had was really on Tasva. So of course, heartening to know that it has crossed INR 100 crore in sales. What is the sort of growth trajectory here that you are looking for? I, I believe earlier there was a you know, the expansion plan called for very, very large store addition pipelines. Does that pipeline still exist?
Yeah, certainly. We are very... As you know, this is the first full year with the network that we have had. We've crossed INR 100 crore with this. In the immediate short term, we look to double it, in terms of revenue. The pipeline of stores is also aligned with that. It's a long-term play in the men's ethnic wear segment. We feel the brand has got strong, good initial footing, the business model, the stores, the consumer proposition, the product value all seems to be coming together. And therefore, I think the pipeline will obviously continue to grow. We have about 60-odd stores as we speak today, and, we'll add about 30+ stores this year, and we'll expand further similarly.
Understood. Last question really is on timelines of full consolidation for TCNS, where are we? And, hence, post that, what all is pending for the demerger really to happen?
So, Garima, we already started consolidating the results with us because it is our subsidiary. As far as merger is concerned, our merger, you know, the court-convened AGM will be held on 5th of June. On another three months' time, we will be able to merge TCNS with us. On demerger, it may be, as you know, we are progressing as per our timeline. We plan to complete this exercise by, you know, end of fiscal, end of Q3 or in first, you know, last quarter of FY 2024, 2025.
Understood. And Jagdish, since we have you here, you know, appreciate the financials, the EBITDA, the revenue and EBITDA breakup that you shared for ABLBL and ABFRL. Any possibility of giving us some indication of pro forma profits of these two verticals also for FY 2024?
You mean I... should I drag it to PAT?
Yes.
It is difficult.
Ultimately, that's what-
I don't have readily available. Yeah.
All right. Understood. I'll take it up offline. Thank you so much for answering my questions.
Thank you. Next question is from the line of Nihal Jham from Ambit Capital. Please go ahead.
Yes, thank you so much. Am I audible?
Yes, Nihal
Yes, Niall.
My first question was, for this quarter, you've mentioned about cost reduction initiatives, both across, Madura as well as for Pantaloons. If you could just detail what these are, is it mainly, say, moderation in sales and marketing spends, given the muted, demand outlook, or there were other aspects also?
No, I think the material part, it's. And it's not really only specific to this quarter. This is more a trend as we saw the demand side of the business coming down, was on store expenses, you saw the rationalization network, so that reduces the fixed costs of less profitable stores or unprofitable stores. The second part really is discounting. As we saw, markets where elasticity to perhaps discounting would have been lower and also in line with the overall strategy that our premium brands, either lifestyle brands or the journey of Pantaloons and premiumization, so therefore there's gain on account of lower discounting. The third part really is choosing the more profitable channel and focusing our energies on that, which means giving up a certain part of growth, which is a less profitable or less remunerative growth, so letting go of-...
Some of the volume and value in those channels. These are the more important parts or choices that we made.
Got that. And a related question was, in the presentation you mentioned about enhancement of the operating model for Pantaloons. Anything specific about what that is supposed to help with?
I think Sangeeta had talked about in first response one part is really about what we are doing, which is premiumizing the proposition, making our stores look better, increase the level of private, the private label share. But there are several other operational measures, which is the entire planning process, the markdown management, improved gross margin. So series of steps which are across the operations of the company, right from design all the way to consumer end, including the rationalization of network. So it's, it's a very comprehensive supply side.
Just one final question. Do you understand you're in the middle of, you know, the demerger between the two businesses. But our debt currently stands at around INR 2,800 crore. Is there a possibility of say, giving a sense of what that number-
Nihal, sorry to interrupt you. Can you speak a little louder, please?
I'm so sorry. Am I audible?
Yeah.
Yeah. Yes, I was just asking that, I do understand that we are targeting to demerge, by the end of Q3 or Q4, but is there a possibility to, say, give a sense of what the blended debt could be next year? We are currently at, say, INR 2,850 crores.
So I think, Nihal, as you know, the Lifestyle brands opening debt number for 1st April is about INR 900 crores. We expect that to come down during the course of this year, and with the shape of the profitability of that business, that is pretty much under the manageable levels. As far as the ABFRL, which is the demerged entity, is concerned, we have mentioned that we'll start with a debt of about INR 1,951 crores, and we'll raise capital, and therefore we expect to be net positive at the end of this year or thereabout, depending on how the year goes. But that's really the intention at this point in time. Yeah.
Final thing, is any growth aspects on either of these businesses separately that you are targeting?
Sorry, Nihal, what are you saying?
Nihal, you are... You will have to speak louder, please.
Very, very sorry about that. I was just asking, is there any growth targets for the two businesses also that you want to separately lay out?
No, I think I don't want to comment on one quarter, one year growth. You know the growth trajectories of these businesses. Lifestyle, the brand company, not just has the four mega Lifestyle brands, it also has growth engines in Reebok, the innerwear, as well as the American Eagle Forever 21 segment. The demerged entity has multiple growth levers. We just talked about Pantaloons now getting its act together and beginning to grow back again with the renewed proposition. Style Up is something that we are now feeling more and more confident about, so that will get acceleration. Most of our ethnic subsidiaries, I think the hard work has happened in terms of growing them from very small subscale to coming to a meaningful scale, and you'll see very rapid acceleration on that.
TMRW is again a new business where many of the acquired brands are in early stage, so you'll see very rapid growth as far as that part of the business is concerned. So really speaking, both the platforms have multiple growth drivers, and we feel very confident about medium- to long-term growth stories in this.
Got that. Thank you so much, Ashish. Best wishes.
Thank you very much. I request all the participants, kindly use handsets while asking a question. Next question is on the line of Tejas Shah from Avendus Spark. Please go ahead.
Hi, team. Thanks for the opportunity. First, on Pantaloons, can you elaborate on strategic reasons on why we have chosen to shut down such a large number of stores now? Is it more to respond to economic scenario that we have, or is more of a structural call that we are taking? A. B. Second, any common thread among this store shutdown, where was any regional concentration or aging concentration that we have noticed? And third, any learnings that from this shutdown that we will kind of carry forward in store expansion on Pantaloons, as Ashish mentioned, that the Pantaloons is getting its act together, so which will be different from literally what we have done in last few years?
So I think it's Tejas, as Sangeeta has explained, we've been on a journey on Pantaloons in terms of positioning, premiumization, refreshing stores, improving retail experience, retail identity, new category loans, design aesthetics. So a series of measures to make it and improve the overall proposition, make it more distinctive from large number of value players that flood the market. In line with that strategy, when we started to look at our network, we found that strategically there was dissonance versus some of the stores, either in terms of size or location or some of the markets. And that's the one-time correction that we took, which is aligning our distribution strategy with the brand proposition. And therefore, we'll continue to operate with, the shift in distribution would be perhaps our focus would be on larger towns. Sizes of our stores are more standardized.
We had opened a large number of small stores and smaller towns. Both those we will shun at this point of time because our new strategy requires a store to be a certain size and a certain consumption gravity, and therefore it'll be more focused towards larger counts and definitely not addressing the lower end of the market, for which the Style Up as a separate vehicle has got its own momentum and.
Very clear. One associated question. Usually in this phase of recalibration, we have seen in some other retailers that you have a pressure to clear the inventory, and hence there's some margin pressure which comes along. But we managed it very well in this quarter in Pantaloons margin. So, is this pressure done, or should we expect some pressure on margin in coming quarters?
To some extent, Tejas, the shift in strategy has its own, sort of cost and time, which you have to go through, and which is what Pantaloons has been through last year. We did, some of our explanation of lower margin last year was the fact that we had to clear some of the older inventory, which, we built up in our earlier plan of expansion. All that has been put behind. I think more fundamentally also, Pantaloons business has a far more refined, planning process now, and, as it's coming more and more in line with this proposition, we are much better placed than we were one and a half years back.
Perfect. And last one on Tasva. Was in-store shutdown on Tasva A, and B, how should we think about expansion from here on? And how many focal stores we have today, or are we planning to go on that route for Tasva?
So we, when we expanded Tasva in the first year, we realized that there are markets, because we were looking at an all India launch, and therefore, there was some markets where we perhaps got in a bit too early. While the brand performance is exceptionally strong in big cities and bigger markets, it's been relatively soft when we entered the small markets too early. And therefore, a part of that was correcting so that we didn't want to carry some of the burden of smaller markets, and therefore, some of the store expansion has happened either in outskirts or smaller markets that we perhaps entered too early. At this stage, we would continue to focus on our own stores because we want to build a very strong operating model.
That's, you know, Tejas, better than in others, that we run a very large franchise network. We have more than 600,700 partners, more than 2,500 stores, franchisees. We don't want to pass untested, unproven models with risk to our partners too early, and therefore, every new business that we may approach for 20,25 years, and that's what has kept our partners with us over a period of time. We don't want to hurry. There are a few franchise partners that have come in as part of Tasva towards the end of this year. We'll continue to grow that, but that's really not our focus right now.
Very clear. Thanks and all the best for FY 2025.
Thank you.
Thank you. Next question is from the line of Devanshu Bansal from Emkay Global. Please go ahead.
Yes, sir. Hi, thanks for the opportunity, and, congratulations on a good margin execution in the quarter. First, set of question is on, lifestyle brands. Just wanted to check if you could, call out the, LTL growth for, retail segment in Q4 and for full year FY 2024.
Devanshu, hi, this is Vishak here.
Yes.
We were about flat if you were to look at LTL. But what you should look at it is in light of significant discount reductions in H2, especially in Q4, where we were able to bring down discounts by, in fact, in retail by almost about 5 percentage points.
Right.
Said earlier, was to be able to drive profitable growth, full price growth, et cetera. And we also realized that we were quite all right on inventory, and we didn't see much of elasticity in discounting. So, we kept that tight, and that was part of the cost reduction efforts also that we spoke about earlier. So that was broadly the story.
Got it. And, Vishak, this inelasticity is expected to continue or, with more improved footfalls, we can sort of opt for more discounting? So just your views on that.
I don't think you will have a permanent answer on this, yeah. This will keep going through context. Okay?
Right.
You will have to read the market closely to see what needs to be done. It will depend on inventory situation. It will also depend on the kind of merchandise that you've got, seasonal merchandise, et cetera.
Right.
So, you know, we'll have to be close to market to be able to evaluate what kind of discounts. But at a broader trend, yes, more and more analytics-driven discounting, sharper discounting, et cetera, does help. Also, more profitable channels, less discounting channels in your sales mix also helps.
Got it.
But can I, can I say that is this a forever trend? No, we'll have to watch the pitch and respond accordingly.
All right. And, Vishak, your views on wholesale, because there have been indications of moving away from less profitable channel, and this quarter also, there was some degrowth in that channel. So how should we look at the trajectory for that particular channel?
Wholesale is a very important part of our overall mix. Department stores, multi-brand trade, extremely important part of... You know, and, sometimes in, in wholesale, there is also the impact of primary versus secondary, so we need to consider that. Also, need to recognize that Centro is going through a rebuilding phase, and it will take them some time before they can scale up again. It was another of our large networks.
Right.
So I think all of this together, but directionally, very important part of our overall mix. We've done strong business with department stores and with multi-brand trade, and that'll continue. And it's a profitable channel. Yeah. This is not the channel that I was mentioning when you were talking about less profitable.
Okay. Okay. Jagdish, last question from my end. I noticed that TCNS' working capital is closer to INR 300 crore, and in the PPT, we have mentioned that overall de-merged entity, it's about INR 137 crore of working capital. So just want you to check, is the working capital negative for rest of the business, like Pantaloons, other ethnic businesses, super premium D2C? So what's your view on that?
No, I don't think it's negative. You're saying the full Net Working Capital? Yeah.
No, no. So for proposed demerged entity on page number 45 or 46.
No. Understood. Understood. So in demerging, INR 137 crore, because, see, this is the only row available to me. So generally, when we calculate NWC, it is inventories, debtors, and payables. So in the remaining company, my net working capital in Pantaloons is very low, but, you know, like, TMRW also has debtors. So to that extent, I have a matching payables.
Okay.
Yeah.
Still, sir, this would include INR 300 crore of TCNS' working capital as well, right?
True, true, true. So to that extent, my payables are more.
Okay.
See, as you know, we run our business on Net Working Capital-
Right.
Cycle being large part of our overall, sort of KPI for the businesses, especially the established business. New businesses, we allow them to sort of express first, build a format before we start to look for efficiencies. Our Pantaloons business runs with a very low, if not zero, NWC. Even Madura is, single digit to early double digits.
Yeah.
Therefore, both the businesses have very efficient Net Working Capital management.
Got it. Got it, sir. Thanks for taking my questions.
Thank you. Next question is from the line of Sameer Gupta from IIFL Securities. Please go ahead.
Hi, good afternoon, sir, and thanks for taking my question. Firstly, just a clarification on Pantaloons. We have seen a shrinkage in store footprint, and LTL growth is around 1% for this quarter, but revenue growth is 10%, so this is not reconciling. Just wanted to get your comments. Is it including Style Up, and if so, then is Style Up actually driving a large part of the growth this quarter?
No, no. Style Up is too small to affect Pantaloons' numbers. See, the store network reduction has happened during the course of the year.
Yeah.
And also, there were... This is with respect to last year. So while this quarter may have seen store rationalization, the previous nine months, which is Q4 of last year to Q4 of this year, there's been store addition.
Annualization.
And therefore, this is the annualization impact of some of the stores which didn't exist at that point in time. So this is a combination of that. Both the numbers standalone are correct, like to like of 1% and total growth of 10%.
I didn't catch the Style Up revenue number for FY 2024. I think some participant had asked that. Is it available?
No, we have not given separate numbers for Style Up yet.
Okay. No worries. Secondly, sir, on the CapEx part, so I noticed that there is a INR 750 crore CapEx in FY 2024 on a consolidated basis and a INR 550 crore even on a standalone basis. Now, considering that Pantaloons has not seen a large expansion in terms of stores and rest of the business in the standalone is relatively CapEx light, just wondering or can you just provide a reconciliation of this CapEx number? And what is the guidance for coming year for the whole entity? As in, not considering the de-merger is happening, as an overall entity, what would be the CapEx number likely?
So, you know, CapEx number for FY 2024 is right because, you know, we are building up a new factory in ABLBL, which is, you know, under PLI scheme and few expenditure we have, you know, and some expenditure we have done for our GL store, which is under work in progress. FY 2025, my own estimate is that CapEx should be in a range of around INR 600-INR 650 crore in both the entities put together.
So there is a hundred and twenty-odd crores, manufacturing CapEx, which is a one-time thing we did last year.
Okay, but INR 600 crore-INR 650 crore is still a sizable number. Do you expect this net debt number, INR 2,800 crore, that you have given, to remain steady, or do you expect this to come down?
We have said, you know, in our call earlier that it will come down primarily because there is a fundraise plan towards the end of this year, and therefore, the net debt of independent two entities, for, lifestyle brand entity, it will be closer to INR 600 crore-INR 700 crore, and for ABFRL, post, equity infusion, we should possibly be, neutral or net debt, positive.
If we exclude the fundraise plan, sir, it will remain steady, is what you mean, right?
Yes. Yes, that's right. That's right.
Got it. Cool, sir. Thanks. That's all from me. I'll come back in the queue if any follow-up.
Thank you. Next question is from the line of Gaurav Jogani from Axis Capital. Please go ahead.
Thank you for the opportunity, sir. My first question is, you know, with regards to the focus now on both the profitability as well as, you know, maintaining the balance sheet. Now, we can very well see that the working capital in the standalone balance sheet has also come down sharply. So just want to know your views in terms of the prioritizing between profitability and growth, which will be, which one we'll be choosing, you know, between the two? And in that context, what could be the, you know, margin guidance going ahead, given that is the margin that we have done in this particular year across formats, would that could, could that be considered as the bottom, and then margins could grow it from here on?
So I think, you know, while we talk about shifts of choices between profitability and growth, I think overall level, depending on the position, we have a wide portfolio of the business. A large part of that portfolio consists of brands which are premium, and by definition need to stand out, and therefore, the level of discounting will continue to remain lower than perhaps they have experienced in past. If that means letting go of some of the growth, I think that's a choice we'll continue to make, at least for part of the year. And as Vishak said, these are not things that we decide for perpetuity. I think we'll have to respond to the market conditions, our own inventory levels, and therefore, there are multiple factors that go into it.
But clearly, profitability is a important part of our, of our trajectory, especially for the businesses which are sort of in stable state or have, or, or large mature businesses. For smaller businesses, sometimes growth is critical to get them to a level where they get to a self-sustaining zone, and to that extent, we'll have to let go of profitability in that. But having said that, I think over the last 3, 3.5, 4 years, we have been in a journey of transforming our company by expanding into segments with large addressable markets, categories where our early play was small, but we see large potential opportunity, both through organic, new brand launches, as well as series of inorganic, acquisitions that we have done. I think two points I would make. One, that now we have a portfolio which is well settled.
The two companies which, with the series of corporate actions that we have already laid down, will be well capitalized. A portfolio which doesn't need any significant new addition, and therefore, focus will be on stabilization and growth of these. I would also say that for most new businesses, perhaps of all of them, we have bottomed out in terms of the losses that we have, we are incurring. It doesn't mean we will not make losses in those business, but I think the peak losses in practically all our businesses have, have, are behind us, with the exception here and there in quarter-wise. I think on an annual basis, we'll only see improved profitability and improvement in trajectory, even for those businesses.
So thank you for the elaborate explanation on this. My third question, next question is with regards to the Innerwear business. You know, given, one, if you can highlight, you know, what could be the possible growth for the Innerwear segment as a whole for you for the FY 2024? And, b, you know, in terms of profitability, where are we, is it still, a bit of breakeven or we are making losses in this particular segment?
So this year we've still not managed to break even at that level. There have been some quarters were positive, some quarters were marginally negative. But this is a business which has faced very strong headwinds, primarily in the athleisure part of the business. The I nnerwear segment continues to grow in strong double digits, but the athleisure part is equally suffering on the other side, and which makes the business little bit more complex for the short term. I think here again, the balance is sort of coming back, where most of the decline that is happening in athleisure hopefully will start reversing from here onwards, and innerwear, which is anyway growing, will continue to grow more rapidly.
For FY 2024, what will be the possible overall growth or it's flattish on a Y-o-Y basis?
No, no. It's a business which would have grown in innerwear and declined in athleisure.
Okay. Okay. And so the last question is with regards to the ROC for the Lifestyle Business. I mean, the ABL AB business that is. If you can, you know, guide, you know, what could be the now ROC for the business, excluding the goodwill numbers there?
I think I can give you a range right now. Maybe a more considered response can be given later. We do believe this business over a long period of time has operated at ROCE without goodwill, anything between 35%,40% to 60%, depending on the year, and we expect that trajectory to remain at that level.
Thank you for answering my question and all that.
Thank you. Next question is from the line of Ankit Kedia from PhillipCapital. Please go ahead.
So first question is regarding the discounting. What's changed in the market in this quarter that the discounting was lower? Last quarter, we had early EOSS as well in December. Is that the reason why all, we are seeing online channel, the discounting reduced with, you know, AJIO, Flipkart, others moving towards profitability and hence lower discounting?
No, I think, see, I, I have to first start by saying our discounting choices are solely ours, so you can blame us or credit us for doing more or less of it. It's not affected by. It's not these are decisions not taken only by us. As far as lower discounting is concerned, remember, this is in context of same quarter last year, so it's not... and in isolation, it's a relative number that we're talking about. And those are the choices that we have made at this point of time, as our inventory level was healthy, although market is still going through a tough situation, but we are better prepared for it, and therefore, we made those choices. As we go forward, we may have to reverse it at some point of time or change it for a short period.
All that are tactical decisions that we'll take, but this is the current state of affairs.
Sure. This year, are you looking at early EOSS this season also? Or, the inventory for the industry is healthy now, and even going forward, you know, for this season, the EOSS will be muted and discounting will be more.
So I really can't comment on everybody else, but by and large, since the overall conditions have been muted for much of last, second half of last year, I would expect that there are a lot of players who probably been sitting on higher inventory. Now, individual players take their decisions on discounting closer to it, so we'll get it closer to the middle of June on how people are responding to it. Very early to say. As far as we are concerned, we will obviously stay with the policy that we have, and respond to market if there is a competitive action which requires us to move.
Sure. So my second question is regarding, you know, Peter England versus some of the premium formats. Are you seeing a lower growth in Peter England, given that the lower strata is still struggling? Or you are seeing some growth revive in Peter England, while at the same time, you know, Louis Philippe of the world, the growth is tapering at, or you're seeing pressure build up there as well, and the premium is, you know, struggling now?
You know, those are some of the advantages of having a portfolio, and Peter England has a tremendous role to play in that portfolio. It, it creates a branded experience at sharp price points, and that is, hugely valued by consumers. It's also been our beachhead into a whole lot of new markets, small towns, et cetera. We have a format called Peter England Red, which goes right up to Tier four towns. It also gives us penetration into a whole lot of markets, even in big cities, which, which, you know, might not be able to take very expensive brands, but can take on a value for money brand. It's a brand which has been very strongly built around international quality. You know, this whole, Gentlemen's League cricket story was, was a huge success. It's continued to build strength to strength.
So, you know, it has its own role with the, you know, it's got a very different role to play vis-à-vis the other premium brands in our portfolio.
But in this quarter or in this year, given that there was slowdown in discretionary and the bottom strata was struggling, is it fair to assume Peter England was impacted more than some of the premium brands?
Yes and no, in the sense that some of the initiatives towards discount reduction applied as much to Peter England, and it helped to strengthen further the profitability. To some extent, small towns were more affected, and Peter England has a larger bias towards smaller towns. So to that extent, what you're saying is right as well.
Sure. My last question is regarding trade payables. Now, there's INR 4,000 crore of trade payables. While I understand, at the portfolio level, you guys look at net working capital, but this is indirect debt, right? Industry works in 45 days-55 days, and then there's bill discounting, which you guys do. Given that there'll be cash flow generation over the next three years in lifestyle and even the Pantaloons business would be net debt positive, you know, next year after the fundraise. Do you think, it's prudent to have gross margin expansion instead of 2% paying through gross margins and slowly, slowly reverse the trade payables, which we have built over the last three years?
No, fundamentally, I think you should understand why we have this. As you know, retail industry, increasingly, most of our business is retail. And in retail, you keep inventory, and depending on the productivity of the place, you could have a 90-day, 120-day inventory, or you could have a 150 days-180 days inventory, depending on the state of evolution of that market. And therefore, on an average, a pure play retailer who has end-to-end, sort of ownership of merchandise, needs to have an inventory of that level, increasingly more so if you are a retailer. On top of it, we are, for a part of our business, are also a manufacturer. We also want to control quality, which means a lot of raw material inventory we keep with ourselves.
If that's the state of the front end of the business, it is structurally, therefore, prudent for us to balance our front-end inventory and match it with our back-end payables. It is precisely for this reason that we have done this thing. We have done it over six,seven years. It's a consistent policy. It's something which has stood us over a long period of time. It's something that everybody understands, and its rationale is not really to take gross margin or lead gross margin, et cetera. It's really to balance the front-end inventory with the back-end payables, so that your business is relatively low on Net Working Capital, and your growth doesn't require more capital.
Because remember, we are talking of a business where we still believe, while this year we have ended with close to INR 14,000 crore, we still believe as a company, we are very early stage of exploiting the opportunity that this country offers to an apparel, fashion apparel play. Therefore, for a long-term, large growth runway available to us, it's the most sustainable model that we've carefully built and practiced over seven, eight years. It's not happened in one shot.
Understood. Thank you so much.
Thank you. Next question is from the line of Aditya Suman from CLSA India. Please go ahead. So the line for the participant dropped. We move on to the next participant. Next question is from the line of Rajit Aggarwal from Nilgiri Investment Managers. Please go ahead.
Good afternoon, sir. I had a question regarding an announcement which appeared in some of the news articles, that the group plans to invest INR 5,000 crore on the jewelry business. So is that correct? And if that investment is going to come into ABF, ABFRL demerged entity, and so if you can throw more light as to the time span and the source of funding, etc.
No, if you read that news announcement, you would know it has nothing to do with ABFRL, any of the two entities that we're talking about. It's a separate group, investment, which has nothing to do with the listed combined firm, ABFRL, nor with any of the two entities which are proposed. It's outside this business.
So it could be a competitor to Sabyasachi Jewelry vertical?
That's for you to decide. This is a separate group, group for business.
All right. Okay, thank you, sir. Regarding the Digital First Brands, so what's the strategy going forward? Are they just digital first, or are they digital-only brands? Are they going to be on the shelves of some of the stores? Or will they continue to be only digitally sold?
So I think, as the name says, they're digital first. It doesn't mean they're digital only. See, the reason to have this portfolio and curate it separately is basically to build on three large trends that we are noticing. One is a whole generation of new young consumers, millennials, walking into the consumption space, and their requirements, their tastes, their habits, their channel choices are very, very different. Second, and partly arising from that, is the fact that they're increasingly digitally native, and therefore, their search, their engagement, and their interactions with the brand is Digital First. Having said that, the fulfillment of these brands, as you've seen over a period of time, will mix, will move to a more mixed model, which is omni-channel.
You shop somewhere, you look, search somewhere, get it delivered somewhere else, or you go shop offline, but search online. So these brands will have to play this, but their starting position is Digital First, and their target customer is much younger than the target consumers of our brands. What is common is the fact that these are fundamentally fashion brands, exactly the kind that we have built over a period of time, and that will remain our focus.
Right. Thank you. And if I may, add a very quick question. Given that the demerged entities will have, will still have businesses targeting different customer segments, would you rule out any further demerger going forward?
I think at this point of time, it may be too early even to respond to that. We've just got into a shape where many of these businesses, whether it's Pantaloons and Style Up, which is in our mind very early stage of what is possible, ethnic businesses which have just got together TMRW, which is the first year. I think our focus right now is to support these businesses to get to their steady state or next level of scale and size, and more importantly, profitability that we want to get out of them. And therefore, there is no such plan at this point in time.
Okay. Thank you, sir. Thanks a lot.
Thank you very much. Ladies and gentlemen, on behalf of management, we thank all the participants for joining us. In case of any further queries, you may please get in touch with Mr. Amit Dwivedi. You may now disconnect your lines. Thank you.