Ladies and gentlemen, good day and welcome to the fourth quarter 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 FY2025 and FY2025 performance, followed by a question-and-answer session. We have with us today Mr. Ashish Dikshit, Managing Director, ABFRL and ABLBL; Mr. Jagdish Bajaj, CFO, ABFRL; Mr. Vishak Kumar, Deputy Managing Director and CEO, ABLBL; 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 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 afternoon, everyone. Welcome to the Q4 FY2025 earnings call. Thank you for joining us today. We are pleased to report a strong close to what has been a transformative year for our business. With the culmination of our demerger exercise, this quarter marks the beginning of a new era for Aditya Birla Fashion and Retail's fashion business. These two powerful, independent fashion entities now commence their distinct value creation journeys. Let me begin with some key corporate updates for Q4. We successfully completed the demerger, creating two focused fashion powerhouses: Aditya Birla Lifestyle Brands Limited, ABLBL, and Aditya Birla Fashion and Retail Limited, ABFRL. Both now set on independent, high-growth trajectories. The board of ABLBL has allotted shares to all the eligible shareholders of ABFRL as per the record date.
These shares will be credited within the next two to three days, and ABLBL is on track to be listed by the end of June. We successfully raised $490 million of equity capital through QIP and preferential issuance during this quarter. With that, we have infused tremendous strength into the balance sheet of demerged ABFRL with an availability of INR 2,350 crore cash at consolidated level to pursue aggressive growth across its multiple high-growth platforms. Now, industry scenario during the quarter continues to see strong macro headwinds with sustained impact on consumer discretionary consumption. We delivered a resilient performance in this subquarter, underpinned by discipline, focus on profitable growth, and sharper execution across businesses. Both entities delivered robust profitability, ABLBL clocking 200 basis points margin expansion, while demerged ABFRL more than doubling its EBITDA.
Coming to the financial performance for this quarter, as you are aware, the demerger was approved by shareholders on 21st January 2025. Accordingly, ABFRL held ABLBL's assets as assets held for distribution. As a result, the published financial results reflect, A, continued operations of demerged ABFRL, and number two, discontinued operations pertaining to ABLBL. Starting with Aditya Birla Lifestyle Brands Limited, our premium western-wear business and home to some of India's most loved lifestyle brands, ABLBL continued to demonstrate a robust and profitable growth trajectory with a marked improvement in performance during the second half of the year. In Q4, the business delivered high single-digit like-to-like retail growth driven by consistently robust retail execution, continued product innovation, and a sharp focus on enhancing customer experience. At the same time, the company strategically rationalized low-margin channels and enhanced the overall quality of its distribution network.
Please note that for ABLBL, depreciation of INR 148 crore on discontinued operations was not charged in consolidated financials due to asset classification under the demerger. However, ABLBL's own financials reflect full depreciation. ABLBL delivered a resilient performance in Q4 2025, posting normalized revenue growth of 3% to INR 1,942 crore. Post-considering intercompany elimination adjustment, revenue reported under discontinued operations was INR 1,859 crore. EBITDA extruded INR 330 crore, reflecting an 18% YoY growth and the normalized EBITDA margin, that is, ex-demerger impact of elimination, expanded by 200 basis points to reach 17%. For the full year 2025, ABLBL reported normalized revenue of INR 7,830 crore with a normalized EBITDA margin of 16.2%, a 100 basis point improvement over the previous year. Full year revenue under discontinued operations extruded INR 7,619 crore. The normalized PAT would have been INR 250 crore, but INR 168 crore reported, highlighting the strong underlying profitability of the businesses. Below are the adjustments.
Gain of INR 109 crore on account of lower depreciation, net of deferred tax liability, and exceptional loss of INR 98 crore on account of discontinued Forever 21 operations. Hence, net gain of INR 11 crore. INR 50 crore operating losses of Forever 21 was also included in reported EBITDA. INR 50 crore higher interest in ABLBL from 1 April 2024, which will not be there next year. Net debt of ABLBL at the end of fiscal stand at INR 781 crore, with repayment targeted within next two to three years. ABLBL shall be a dividend-distributing company at the earliest appropriate opportunity. ABLBL stands today as India's most formidable premium lifestyle brand platform, built on the backbone of strong operational excellence, perfected over years and powered by strong brands, innovation-led culture, and industry-leading talent. Let me talk to you about lifestyle brands.
With one of the strongest and most versatile brand portfolios in the Indian fashion industry, spanning categories, price points, and consumer occasions, brands continue to set the benchmark and redefine industry standards. Our brands sustained their exceptional momentum, delivering an industry-leading retail like-to-like growth of 9% in Q4, following a very strong 12% L2L growth in Q3 over a network of 2,900-plus stores. This marks the third consecutive quarter of positive L2L performance, reaffirming the salience of these brands amongst Indian consumers and also highlighting the exceptional quality of retail execution. Revenue for the brands grew by 5% YoY to INR 1,639 crore this quarter, with EBITDA margins expanded by 50 basis points to 20%, underscoring the business ability to drive profitable growth despite a subdued overall consumption environment. For full year 2025, revenue for brands extruded INR 6,575 crore with EBITDA margin of 19.3%.
All our lifestyle brands have earlier surpassed the INR 1,000 crore revenue mark, with two exceeding INR 2,000 crore, making them amongst the very few brands in the Indian fashion industry to achieve such a scale. Other businesses include Reebok, American Eagle, and Venus & Innovia, posted 3% growth in Q4. Revenue performance was marginally impacted by the closure of Forever 21's offline operations. Importantly, the segment delivered positive EBITDA, highlighting the improving profitability profile. Strategic distribution expansion continues to be a critical growth driver for ABLBL businesses. Over the next 12 months, leveraging its strong cash flows, ABLBL is set to embark on a historic expansion drive with an aggressive retail rollout across its brand portfolios, adding over net 300 stores across the country to accelerate growth and deepen market presence.
Now, operating as an independent entity post-demerger, ABLBL is uniquely positioned to chart its own value creation journey, combined with a stable, high-margin core, a high-growth emerging brand portfolio, and a strong brand equity with its consumers. The company is strongly positioned to confidently invest in training, growth, innovation, and long-term leadership in the fashion and apparel space. Let me now explain to you the performance of demerged ABFRL. The demerged Aditya Birla Fashion and Retail Limited continues its strong growth trajectory in Q4 FY2025, anchored in a clear strategy of profitable scale-up across its diverse, high-potential business segment, with leadership positions across ethnic wear, mass-stage and value retail, luxury fashion, and digital-first brands. The company remains well-positioned to capture growth in India's evolving fashion landscape. ABFRL's focused execution translated into both top-line growth and significant margin expansion this quarter.
In Q4 FY2025, the company reported a robust 9% YoY revenue growth, reaching INR 1,719 crore. Comparable EBITDA more than doubled to INR 199 crore, up 103% versus last year, reflecting strong operating leverage and efficiency improvement across segments. Reported EBITDA stood at INR 295 crore, with a significant margin expansion to 17.2%. Reported EBITDA includes a gain of INR 97 crore on account of discontinuation of inter-division elimination post-demerger, as the company's financial gap resets to report on an independent and standalone basis going forward. For the full year FY2025, demerged ABFRL posted revenue of INR 7,355 crore, registering a 14% increase over the previous year. The comparable EBITDA margin expanded by 220 basis points to 10.3% amidst a challenging consumption environment. Demerged ABFRL has INR 2,350 crore cash at the consolidated level. With a sharpened brand portfolio, strong balance sheet, and margin momentum, ABFRL is evolving into one of India's most versatile, multi-format, multi-brand fashion platforms.
Let me first cover Pantaloons. Pantaloons segment continued its trajectory of margin-led growth in Q4 FY2025, reporting revenue of INR 885 crore, which were impacted due to 50-plus stores closed in the last 15 months. The business achieved a significant EBITDA margin expansion of 480 basis points, reaching 15.1%. It is the sixth consecutive quarter of margin improvement. For the full year, the segment margin extruded 16.9%. Pantaloons format delivered margin of 18% in FY2025, highlighting the consistent execution of retail operations across Pantaloons network, along with lower markdowns, improved private-label share, and disciplined cost optimization efforts. Style Up, our value retail format, maintained its strong momentum, expanding its footprint to 46 stores with seven new additions during this quarter. The format posted 70% revenue growth for the full year, showcasing growing consumer acceptance and setting the stage for further scale-up in FY2026.
The recent fundraise will be partly deployed to expand the network to over 300 stores in the next three years. Ethnic business, our ethnic wear business has firmly established itself as a powerful growth engine within ABFRL's portfolio. Today, we house the largest and most comprehensive ethnic brand portfolio in the Indian fashion industry, spanning designer-led and premium segment. This scale, combined with sharp execution and deep consumer resonance, has enabled us to consistently deliver double-digit growth across quarters. In Q4 FY2025, the ethnic wear segment reported revenue of INR 564 crore, registering a robust 90% YoY growth. Profitability also improved sharply, with EBITDA margin expanding by 700 basis points to 10.1%, supported by margin improvement across the brand portfolios. On full year level, ethnic portfolio revenue extruded INR 1,956 crore, with peak losses behind us. Further scaling of the ethnic portfolio shall drive profitability improving going forward.
Our designer-led ethnic portfolio, which includes Sabyasachi, Tarun Tahiliani, House of Masaba, and Shantnu Nikhil, delivered an exceptional 46% YoY growth in Q4, with EBITDA margin exceeding 20% in the quarter. Most of our designer brands recorded their highest-ever quarterly revenue in Q4, as they continue to strengthen their position as India's leading aspirational fashion houses, reaffirming our strategic thesis of building a distinctive and high-potential designer brand portfolio. Within the premium ethnic wear space, Tattva posted another strong quarter, leveraging the peak wedding season to drive over 50% YoY sales growth and 12% like-to-like growth. The brand continued to strengthen its presence in key wedding markets and build traction with Indian consumers. The current network of around 70 stores is expected to scale to over 200 stores over the next three years. Meanwhile, TCNS saw a revenue decline during the quarter due to ongoing distribution rationalization.
However, the brand reported 4% L2L growth for the full year, signaling improving consumer acceptance of new product lines. With the rationalization phase nearing completion and merchandise significantly refreshed, TCNS is now well-positioned to deliver sustainable and profitable growth in the medium to long term. We expect to see significant EBITDA improvement in FY 2026, with the TCNS portfolio projected to turn pre-Ind AS EBITDA positive by FY 2027. Our luxury retail business, encompassing The Collective and monobrand format, grew by 11% in Q4 FY 2025, driven by strong e-commerce performance. The portfolio has consistently delivered double-digit growth, accompanied by steadily improving profitability. Our digital-first brand portfolio under TMRW delivered 27% YoY growth in Q4, along with margin improvements.
This sustained momentum reinforced our confidence in the long-term potential of digitally native brands, as we continue to scale through innovative product offerings, curated offline presence, and focused investment in brand equity tailored for young aspirational consumers in India. To conclude, even in a tough consumption environment, our businesses have demonstrated strong resilience with consistent margin improvement across the board. With the demerger behind us, we now stand as two focused, well-capitalized entities, each poised for its own high-growth journey. ABLBL, backed by a robust portfolio, over 3,200 stores, and healthy free cash flows, is positioned to double in scale and expand margins meaningfully over the next five years, with 300-plus stores already in the pipeline for FY2026.
ABFRL, with a sharpened brand portfolio, a comprehensive diversified play across high-growth segments, and a gross cash balance of INR 2,350 crore, is set to unlock the next phase of growth, targeting a three-times revenue scale-up and two-times margin expansion over the next five years. Together, we are building two future-ready fashion platforms, resilient, profitable, and primed for long-term value creation. We are open to questions now. Thank you.
Thank you, Mr. Bajaj. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the touchstone 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 will wait for a moment while the question queue assembles. Our first question comes from the line of Ashish Kanodia with Citi.
Please go ahead.
Yeah, thank you for the opportunity. The first question is on the demerged ABFRL. Now, when I look at the guidance, you're talking about doubling the margin. Now, full year FY2025, post-India margin is 9% excluding the other income. And if you have to take it to, say, 18% in the next five years, what will drive this? Because Pantaloons at around, say, 16%-17% margin. Do you see what will be the bridge for, at a company level, going to 18% margin? The second thing on the Pantaloons is part of that is the outside view is that when we look at the margin expansion, it's also driven through a closure of these underperforming stores, almost 50 stores in the last 15 months.
Now, say in the next one and a half, two years, as you start to open new stores, what is the sustainable margins for Pantaloons? And the third question is, on this 97-crore adjustment, is it fair to say that this inter-segment, which is now not getting adjusted, this is predominantly sitting only in Pantaloons? Because within Pantaloons, you would also sell the lifestyle-branded merchandise. So is that understanding correct?
Let me take question two, three first. INR 97 crore is the elimination or writing up of the inventory in line with the purchase price of Pantaloons. This is a one-time adjustment, which was earlier knocked off as an inter-unit division. Now, it will not be there going forward because both are independent companies. On long-term margin guidance and Pantaloons margin, Ashish?
Ashish, I think we have put out a longer-term guidance for each of the business segments in the last analyst meeting that we conducted. It's in public domain, so you can look at some of those numbers to get a reference on that. Coming to demerged ABFRL entity, the primary, I would say the largest uptake in margins will come from turning the businesses which are currently negative EBITDA and taking away from the profitability, notably parts of ethnic businesses, TCNS being the largest, Tattva being the second, and TMRW being the other businesses. These are businesses which are actually suppressing the margins that other profitable businesses make. That would be the largest. Of course, there will be margin expansion from the other businesses as well. I think the significant part of this will come from turning around the businesses which are currently loss-making.
On the question of Pantaloons' margin, Ashish, I think while your observation is correct, we've shut 50 stores. The cumulative impact on EBITDA for these stores is not much. A lot of stores have not been shut because all of them are loss-making. Many of them have been shut because either they were too small, not in line with our strategy. Some of them were such that we did not feel we would be able to turn them around meaningfully enough to profitability. The large part of profit improvement in Pantaloons has come from margin expansion, which is gross margin expansion, which is a function of lower markdown, which in turn is a reflection of better product apart from better planning. It is not that we have shut the stores and therefore margins have expanded.
I think a larger part of margin expansion has come in underlying businesses through more long-term sustainable pieces. The margin for the Pantaloons segment, as we report, which includes the Style Up, as you can make out, has moved significantly. Jagdish mentioned for six consecutive quarters, we have shown margin improvement. On a full year basis, also, the margin has got for the segment closer to 17%. For Pantaloons format itself, obviously, you would know margins is even higher. I still believe there is a long runway. I think a lot of good work has happened in Pantaloons. There is a long runway currently from where we are for Pantaloons also to expand its margin. We think at least 300 basis points improvements from here is pretty much something that we will look to target in the next couple of years.
Sure.
If that's helpful, I will come back and touch you.
Thank you. Our next question comes from the line of Garima Mishra from Kotak Securities. Please go ahead.
Hi. Thank you so much for the opportunity. First question, demerged ABFRL has started off with a net cash balance, right? Would this current cash balance be sufficient to fund the planned expansion and investment across the different business segments in this company?
Yes, Karima. I think, as Jagdish mentioned, we are sitting very well-capitalized for the growth ambition.
Due to an emergency, it is necessary to evacuate the building. Please use one of the nearest exits. Attention, please.
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Ladies and gentlemen, we request you to stay connected. We have the management line connected, so you can go ahead.
Sorry, sorry.
All those who are on call, there was some emergency alarm, so we were stuck with that. Ashish, you were explaining about well-capitalization of our company.
Yeah. Jagdish, coming back to your question, as Jagdish mentioned, there is sufficient capital close to INR 2,000 crore plus, which is lying as gross cash in the ABFRL subsidy. You would also know that we are looking to raise capital separately in TMRW, which would be required to fund that part of the business. We feel adequately capitalized to drive this over the next three-four years.
All right. You did mention that the process of finding an external investor for TMRW is on. Is there any timeline you have in mind as to by when you think this process might see some result?
Sometime this financial year.
Okay. Okay. Understood. One question on Pantaloons.
FY25, clearly, you did see some store rationalization. What should we expect really for store additions in FY26 and FY27?
I remember this, Sangeeta. I think while we rationalize, and as Ashish explained, that stores which were not in line with our strategy are the ones that we have closed. The new stores that we are opening obviously are with a stronger set of guardrails in terms of the kind of stores that we are opening. We are opening larger stores focused largely on metros and mini-metros and class one towns. We expect to open around 15-20 stores in the coming year.
Thank you for that. Last question from me, again on Pantaloons. Of course, this year we saw a big EBITDA margin improvement. Can I also get the pre-index EBITDA margin for Pantaloons?
Karima, we'll declare segment-wise pre-index margins at a periodic frequency. We do it at the end of every year, and we'll need that because otherwise it'll lead to too many numbers and different accounts being seen by different people because this could be asked for any segment of our business.
So Ashish, any number that I could have for FY2025? Maybe not for the quarter, but anything you may share for FY2025?
Karima, I have given it at a company as a whole, at least from comparable figures. It is there in my published figures on segmental. Let me work on it. I will come back to you on that.
Thank you so much.
Thank you. Our next question comes from the line of Devanshu Bansal from Emkay Global. Please go ahead.
Hi sir. Thanks for taking my question.
Sir, I was referring to this company-wide balance sheet that you have provided in the PPT. The net working capital for the demerged ABFRL is at negative INR 36 crore. There are some businesses like TCNS which would be operating at around INR 200-250 crore of working capital. This implies that the working capital for the other businesses is even more negative. I wanted to take all these sustainable levels and what is the long-term assumption that we should work with?
I think two parts. One is, as you know, ABFRL demerged entity has multiple businesses, so they will behave differently, as you rightly mentioned, different parts of the business. For a regular branded business with small format stores, we operate with early double-digit net working capital to sales to high single digit.
Our most productive from capital point of view, from working capital point of view, our most productive businesses are in the Pantaloons segment, which is the largest part of this company. That operates with close to zero net working capital. A part of it is negative. In some quarters, you'll get marginally positive. It is the net balance of these businesses, which is what you will see quarter and quarter.
Currently, it is negative level at least on an overall basis, at least because Pantaloons is at zero and others are high single digit, double digit. That should be like 5-6% of sales is a good estimate, right?
Yeah. Currently, it's negative we can figure out, which means Pantaloons itself is showing negative and Pantaloons segment is showing negative working capital, which is what is driving it.
Understood.
Sir, from a CapEx perspective, since we are opening about 40-50 Style Up stores, 15-20 Pantaloons, 25 in Tattva, and then TCNS Luxury is also expected to accelerate, what is the CapEx expectation for this demerged ABFRL for the next few years? About, on an ongoing basis, close to INR 400 crore. Okay. This would include Galeries as well?
Galeries is the fit. Galeries is the fit, will be a one-time thing which will be this year, about INR 100-100 plus crore. This year it should be INR 500 crore and then INR 400 crore is the... Yeah, INR 400 crore. Yes, Devanshu.
Okay. Sir, lastly, I do not want segment-wise, but between pre-index and post-index numbers for ABFRL, we are seeing that the difference is 13-14%. Is this expected to sustain going ahead? Can we sort of bake our assumptions based on this 13-14% difference?
This is a function of how many stores are signed and agreed upon. This time, because our signing was much more, they were 13-14%. Let me work on it, Devanshu. We can talk offline going forward. Understood. Last question from my end, sir, this is in reference to the invested day PPT on page number 40 of 205. The Style Up brand has been placed in the INR 2,000-5,000 crore revenue size bracket by FY 2031. The expansion target is pretty encouraging but aggressive on the other hand as well. I wanted to understand what is the kind of store expansion that we are pursuing for this format for the next five years? Sangeeta?
Yeah. Yeah. Hi, Devanshu. Our Style Up, we currently have about 46 stores. This year in FY 2026, we plan to open about another 50 stores.
Over the next two to three years, we plan to open about close to 250 or so.
Okay. Beyond FY2026, we will see accelerated expansion.
That's right.
Yeah. This year we will start with acceleration, but you will see much steeper acceleration going forward. A large part of our capital allocation in the preceding fundraise is meant to drive Style Up expansion.
Fair enough, Ashish. Thanks for taking the question.
Thank you. Our next question comes from the line of Gaurav Jogani with JM Financial. Please go ahead.
Thank you for the opportunity, sir. Sir, if we are reading the balance sheet for the ABFRL business, the net cash actually comes to around INR 9.3 billion. The net cash, that is. Now, of that INR 9.3 billion, if we look at... Yeah.
If we look at the CapEx that you just announced, that will be around INR 5 billion. Now, assuming there will be still some losses at the PAT level in FY2026, do you still think that it would suffice for the expansions and the plans going ahead?
Yeah. Gaurav, thanks. As Ashish explained, the gross cash available with ABFRL demerged is INR 2,300 crore, right? Then we have a long-term loan, which is up to FY2030, and which will go, the repayment go up to 2030-2031. And then the subsidiary is borrowing. That includes borrowing in TMRW also. As Ashish explained, we have a plan to raise separate capital in TMRW.
If I exclude that, we have adequate cash and we have well-capitalized our company for taking care of the CapEx, working capital, and the loss funding for next two years, which, according to me, the losses will be for next two years. After that, all my businesses will be profit-making.
Sure. Sir, in effect, there will be gross debt that could occur at some point in time, right?
Oh, no, no.
You know what? Because, as you mentioned, while that's a long-term debt, that might sustain. You might not pay that off. The TMRW entity, if there is a fundraise, then definitely that debt could come down from that level, right? If the fundraise is not there, then it will be debt.
Gaurav, you'll have to add to the existing net debt numbers something between INR 1,200 crore-INR 1,500 crore of cash, if not more, of additional fundraising TMRW to look at your calculation. Either you do that or you remove TMRW debt and look at the picture separately. In both cases, you'll find that there is sufficient capital.
Sure. Sure. That's helpful. Sir, the other question now is with regards to the ABLBL part of the business. I mean, the ABLBL part, you have already mentioned that the growth there will be more on a steady-state basis that you're looking and would be largely led by network expansion. If there, in that entity, if you can help us out, what would be the kind of CapEx?
Because if we dissect the CapEx that's been done this year, I think approximately INR 3.5 billion odd was done towards the ABFRL entity and approximately INR 3 billion was still done towards the ABLBL entity. If you can help us out, how the CapEx would shape up for the coming years in the ABLBL part of the business?
Vishak, will you take this?
Yeah. Hi, Gaurav. Gaurav, as you know, in the Madurai side of business or ABLBL, a large part of our expansion is franchisee-driven. We have the option of having the right blend of partnered expansion and franchise expansion. This year, like Jagdish was mentioning earlier, we have planned an aggressive expansion plan, which also includes significant CapEx-driven expansion. That is a choice that this organization will always have of how much to do as CapEx, own CapEx-driven expansion versus franchise-driven expansion, right?
This year, we plan to open about 300 odd stores, 300 plus stores. Maybe out of that, 200 would be driven by our own CapEx and the rest would be partners. That is the kind of CapEx that we would require. Sure. Vishak, this 200 that you mentioned, the own-driven, that would be, I am assuming, including the Reebok and the Van Heusen EVOs also? That is right. Reebok is included in this. Van Heusen Innerwear is largely partner-driven expansion. There is not too much of own expansion in the Van Heusen Innerwear business.
Okay. Has the factory CapEx that was supposed to be done for this entity been done or it still will be incurred in financial year 2026?
Yeah. A large part of it is already complete, sir.
It's a small part remaining, but a large part of the expense is already incurred last year.
Vishak, would it be prudent to assume at least a similar amount of CapEx is done in 2025 to 2026?
Sorry. In overall, are you saying factory? What is... Sorry, Gaurav.
The overall CapEx for the overall CapEx for ABL, ABL for fiscal year 2026?
This year would be more. Gaurav, it will be more in retail, not so much in manufacturing and heavy CapEx. Retail would be more because this year we've chosen to have a significant aggressive expansion. A large part of that we will see in Q2 and the second half of this year. This year would have a much higher retail expansion CapEx component as compared to last year.
Sure. Sure.
Just lastly, on the ethnic piece of the business, I mean, if you can help us out, how much profitability on a steady-state basis could be expected in the business? Because the margins that have been shared are on the post-index basis and rental being a higher part of this part of the business does not give a true picture of the profitability here. Some color on this directionally would be helpful.
Sorry, Gaurav, before I pass it on to the others for the ethnic part, just to give you a number in case you are looking for a number, about INR 2.5 billion of CapEx this year in case you wanted that.
Sure. That was helpful. That was helpful.
Yeah. Thank you.
Ashish, the ethnics.
Sorry. Sure.
Coming back to your question on the ethnic part, it clearly has two segments as you can know, the designer part and the premium ethnic wear business. The designer business, because the throughput per store is very high, the index impact is very small. Therefore, the margins that you see, the dilution pre- and post-index is significantly lesser because rent is a small part of the business. Individual stores have very high throughput. On the premium ethnic wear, it is material, and that is where our designer business would operate in post-index in high 20s and pre-index in high teens to mid-teens kind of number. That is the goal that we have. Most of the businesses are very close to that as a portfolio level for designers. For premium businesses where Tattva and TCNS are the prime contributors today, TCNS is the largest part over a period of time.
Tattva and TCNS will be a significant part. That's where currently we have loss-making business. We expect to get to double-digit sort of pre-index margins in these two businesses over the next three to four years. That's the goal that we have for this. Currently, both these businesses are loss-making.
That's very helpful, Ashish. Thank you.
Thank you. Our next question comes from the line of Archana Menon with Morgan Stanley. Please go ahead.
Hi. Thank you for the opportunity. A few questions from my side. The first one is on Pantaloons. If you could share any update on the whole redesigning and reimagining of stores that is being conducted. When is this expected to be completed? Any initial positive signs that you're very happy about?
This is one of the key pillars of our strategy, as we had also mentioned in the investor meet, delivering a distinctive store experience for our customers. Within that, our store design and redoing our store layouts, I think, are both very important set of actions that we've put in place. If you look at our network today, about 400 plus stores, many of them are with the retail identity that we had launched three to four years back. The work that we have talked about is actually refreshing that and also changing the layouts of some of our existing stores and renovation of stores, which we do every year. The change of layout has already happened in close to about 30 stores. It has just happened about four or five months back as we started this season.
The new retail identity, which is going to be, again, a refreshed retail identity, which is on international benchmarks and something that we believe our customers will notice and will be in line with our brand strategy, that is work in progress. That should be rolled out in the next two months.
Perfect. Thank you. The second question was on Style Up. The value fashion space obviously is very, very competitive right now. How are you looking to differentiate versus some of your peers?
Right. I think clearly there are opportunities that we have identified and which have driven our thesis on Style Up at this stage. I think it is too early for us to lay out each one of those elements. I think Sangeeta did cover some of it in our annual presentation that we made.
I don't think we have significant more at this point to deal.
Got it. On the ethnic side for Tattva, you mentioned plans to expand to around 200 odd stores. Which markets would this be focusing on? Also, if you could share some details around how the older stores are doing in terms of revenue throughput?
As you could make out, in this market also the business is growing at very high double-digits, which reflects the sort of positive consumer sentiments that are towards the brand. We currently have about 65, 67 stores. The remaining stores also would be largely in the bigger cities. We think the capital productivity is much higher in these cities. Therefore, we'll operate primarily in top 60-70 markets.
That's right. Got it. Anything on the revenue throughput for your mature stores?
It's very different.
A store in South Delhi versus a store in Jaipur, the rents are very different revenue service. No point in harmonizing each of these elements. Obviously, these stores are profitable for us to give us the confidence to expand this business. We grew this business by 50% this year. Last year, we grew by another 50% this year. That's the kind of momentum we are seeing in the brand.
Understood. Sir, just last question from me. Any color you can share on how demand trends have been in general over April and May? Are you seeing any signs of a pickup?
I can't say. Underlying demand is very different. Of course, there are wedding dates which have come in this quarter versus last year. To that extent, the wedding parts of the businesses have the benefit of those dates.
I do not think that reflects the underlying state of the economy and consumption situation.
Understood. Thank you so much for taking my questions.
Thank you.
Thank you. Our next question comes from the line of Kunal Shah from Jefferies. Please go ahead.
Hi. Thank you for the opportunity. My first question is on Pantaloons. You mentioned opportunity for 2,300 basis points margin expansion over the coming few years. Does this also include any potential, let's say, lower margin operations that you will have in Style Up over the coming years, or is this just Pantaloons format? Do you expect meaningful losses for Style Up in the coming years?
No, I was referring more to Pantaloons margins. This question was more specific to Pantaloons formats. I was responding more to Pantaloons. Style Up will have its own journey, Kunal.
As I mentioned, we have a fairly large part of our thesis of growth in this company is built around opening up that value end of the market for us. We look to open about 250-300 stores as we go forward. A part of that would entail a little bit of margin dilution on the segment itself, perhaps in the first 12-18 months.
Understood. Understood. The second question is on ABLBL. Beyond lifestyle brands, as you see, growth has been a bit muted for the last few quarters now. I did hear a comment that it was marginally impacted this quarter by fast fashion business being there in the base. Any sense you can give on which parts of the portfolio beyond lifestyle brands are growing well, which are struggling, and what is the outlook for the next year?
Vishak, will you speak? Yeah.
Hi, Kunal. Kunal, if you look at the outside of lifestyle, what we've got, we've got American Eagle, we've got Reebok, and we've got Van Heusen Innerwear. Apart from that, we also had F21. A significant amount of the sales growth delta that you would see is because we were scaling down F21, and you would see the impact of that. Now, if I were to take the other three segments, American Eagle has been on a steady growth path for the year. It's been a significant double-digit growth path for the year. Reebok is also growing steadily, and you would see that in the network expansion over the coming quarters also in Reebok. It's a profitable growth expansion. Innerwear has to, we've done a lot of initiatives around Innerwear to be able to grow that business. It is on its path to profitability in that sense.
That is more important for us than growth per se. It will be a calibrated growth with a very high focus on getting on path to profitability. That is the three big components within the mix that you will have.
Understood. Understood. Finally, for lifestyle brands, retail has done well, but wholesale and others have had a bit of volatile performance over the last few quarters. I know wholesale did well this quarter, but can you give a sense of how you see next year panning out for both these channels?
Yeah. If you look at it, if you look at department store business, we have had a significant Q4. I think that momentum should continue through the year.
The other, which is largely driven by e-comm, etc., like I had said last time also, we're trying to see how we can make our overall business more and take on lines and parts of business which are more profitable. What is in terms of greater emphasis on profitable growth than growth per se in some of those segments. I think that trend is something you should see continuing. A large part of our growth has to be fueled by retail, followed by department stores and other trade business. E-comm, we will grow. We will grow steadily, and we will grow to a profitable growth model. That is how we're working with various partners to be able to drive that agenda for profitable growth. Understood. Understood.
That's all from my side. Thank you.
Thanks, Kunal.
Thank you.
The next question comes from the line of Sameer Gupta from IIFL. Please go ahead.
Hi. Good evening, everyone, and thanks for taking my question. Sir, firstly, I just wanted some color on Sabyasachi. This is a very large business now within ABFRL. I believe it's a more profitable business. Growth of 15% in FY in fourth quarter. Can I have the number for FY2025, how much it has grown? How do you look at growth in this particular segment going forward? Are you planning to add more stores? Is it all L2L driven? Something on this aspect.
As you know, Sabyasachi business operates with very few stores. Expansion, while selective, is not going to be the primary driver for this business.
The business is growing at early double-digit this year, but an addition of a store here and there can sort of change the trajectory a little bit. Over a long period of time, we believe this would be closer to 20% growth business over four to five years, with few years being higher if you add a store and few years being lower than that. Most part of the growth of the business will be organic. It's a luxury brand. Perhaps India is the only true luxury brand born in this country, which has a stage and potential to go globally. We are not trying to rush this journey because it's incredibly valuable, and luxury brands take their time to grow, and we will be patient with that growth.
Got it, sir. Anything on the pre-index profitability here in Sabyasachi?
Very profitable is all I can tell you.
I'll leave it at that. I think we don't want to give segmental profitability at that level. Very, very profitable.
Fair enough. Let's look at overall profitability then. EBITDA loss of INR 1.8 billion in FY2025. Now, given where we are, when do you foresee to break even on this number? Is it FY2027? Is it beyond that?
You are talking of the full company?
ABFRL, the demerged entity.
Excluding PCMS, Sameer's excluding TMRW, sorry. Excluding TMRW, we will be with a positive next year.
I think there is a part of the business because multiple moving parts. TMRW is something that we still have some journey to cover. I think all other businesses cumulatively and together would be profitable next year. Independently, every business would achieve profitability by FY2027, with perhaps TMRW being the only business which might take a year more.
Got it, sir.
One last question, if I may. On the Innerwear portion in ABLBL. Now, we've been in this segment since 2016. And we are at a ballpark INR 500 crore-INR 550 crore of turnover today. And it's still a loss-making segment. First of all, I mean, do you feel this business, the way it has been run over the years, has met your expectations when you started out initially? If not, what are the pieces where we are struggling, which need work, and what kind of ambition do we have here? I know Vishak mentioned the focus is there on profitability. Overall ambition in this, because this is still a large segment, and INR 500 crore doesn't really do justice to the scale and capabilities of ABFRL as a whole.
I think you've answered large part of your questions.
Obviously, when we started the business in 2017, the business ambition was much higher. We were expecting to grow. Up till the COVID period, I think we kept that trajectory going. The business has been more, I would say, stable and stagnant for the last three years, which has really been the time in which we have been trying to recover from the kind of expansive plans we had made pre-COVID. As the situation emerged, we had a lot of inventory built up. Those are corrections that we have done. I think it does not change the picture on the long-term view of this business. ABFRL, the combined ABFRL business, had multiple growth opportunities. We realized at some point of time that we would have to capitalize it and structure it differently to pursue independent growth opportunities more aggressively. Innerwear was one such.
I think as it becomes part of a company which is fundamentally profitable, free cash flow generator, and it's an important part of its growth journey, Innerwear will get the attention, which it would not have got when we had five or six such growth opportunities in front of us. You will see going forward, while medium term, as Vishak indicated, we obviously want to get the trajectory of profitability right. Our ambition about being very competitive in size and scale in this business has not dimmed at all. In fact, you will see greater impetus to that being part of a company where every other part of the business has very strong and proven business model. This will get the attention that it deserves.
Great, sir. Thank you. That's all for me. I'll come back in the queue. Thank you.
Thank you.
The next question comes from the line of Nipin Bhura with HSBC. Please go ahead. Nipin, your line has been unmuted. May I request you to unmute your line from your side and go ahead with your question? There is no response. I would request you move to the next question. Our next question comes from the line of Rajiv Bharati from Nuwama. Please go ahead.
Good afternoon, sir. Thanks for the opportunity. Sir, on ABFRL demerged entity, if you were to add back that INR 97 crore on the gross margin side, then the gross margin is basically up by close to 300 basis points. On the post-index EBITDA, adjusting to the same thing, it is up by 410. The cost of retailing, which is the gap between the two, is up by 130 basis points.
This includes your store closure effort and also you said leverage on procurement stuff. 130 basis points for the entire bit. Is there more juice left here, which we will probably see in the subsequent quarters, or this is it?
Sir, I think this is, I would not say any part of this business, this is it, because this consists of many businesses with very, very different margin trajectory, margin profile. I would be hesitant to make observation because the mix of businesses in this itself is going to change as we go forward. I think you should look at individual businesses, which is why we give segmental results in this, which contribute to the overall picture. It will more be driven by the mix of the individual businesses and the improvement within the businesses themselves. There is a significant improvement possible in this.
Rajiv, what I suggest is you look at my segmental result. The INR 97 crore has gone into that elimination row, right? The individual businesses' margins improvement, if you see, Pantaloons margins have gone up from 13% to 16.9%. This, I explained to you because of one-time effect. It is an inter-unit or intra-company elimination. Therefore, it does not include into the Pantaloons segment margin.
Sure. Sure, sir. Just one thing. On your acquisition in the ethnic side, TCNS, you said it will be profitable by FY2027. Is that right?
Yeah. This question was, I think, asked around the ABFRL as a full portfolio. In response to that, I was saying when the company as a whole, EBITDA will be profitable by that, individual businesses also will be profitable by FY2027. That is all from me. With the exception of TMRW. Yeah.
Thank you.
The next question comes frjithom the line of Rajith Agarwal from Nilgiri Investment Managers Private Limited. Please go ahead.
Thank you, Rajiv sir. Congratulations on good operational performance across both the entities. I just have quick clarifications on two or three items of both ABLBL and ABFRL. First is the interest cost, which still continues to be high despite the repayment of debt. Do you see the run rate same as going forward for the next couple of quarters as well?
See, the interest cost, which you are seeing in both the companies' and public's results, is a factor of financial charge as well as the index impact. So financial cost in ABFRL will come down significantly, but the index impact will continue. In ABLBL business, the finance cost should come down INR 50-60 crore next year, but the index impact will continue.
Okay.
Can you share similar number for ABFRL? As to how much reduction in interest cost can we see in terms of financial charge?
If you see my debt profile, you will realize that from a debt of INR 2,000 crore last year in March, I am sitting on cash. There will not be any finance charge for this year. Yeah.
Thank you. On the debt piece itself, I mean, the expectation on ABFRL was that it would be debt-free and that ABLBL would have only INR 700 crore of debt. Now, in both these entities, the red numbers are higher than what was earlier mentioned.
No, but ABFRL, I said that at console level, I have cash of INR 2,300 crore, right?
Right. I agree. I agree, sir. I am not concerned as such on the total debt or net debt piece.
I just would like to understand how do you see this. I mean, this debt will continue on the books and along with the cash, of course.
Yeah. Because these are long-term loans, contracted at a very attractive rate. We want to continue, and lenders also wanted to have continuity. We will continue.
Fair enough, sir. On the last bit of the depreciation that you mentioned, that INR 148 crore has not been accounted for. Now, if we were to include that INR 148 crore, would that imply that ABLBL would have shown some loss in Q4?
No, no, no, no. I explained to you that my reported INR 150 crore, you should read that the P50 normalizes INR 250 crore. ABLBL I am talking about because the depreciation impact is only in ABLBL. Yeah?
Right. Okay. Also, profit would have been higher.
That is right. That is right. Okay.
Thank you, sir. Thank you for the time.
Thank you. Ladies and gentlemen, that was the last question of the Q&A session. Thank you very much, ladies and gentlemen, on behalf of the management. We thank all the participants for joining us. In case of any further queries, you may please get in touch with Mr. Amit Triveridhi. You may now disconnect your line. Thank you.