Ladies and gentlemen, good day and welcome to the Campus Activewear Limited Q2 and H1 FY25 earnings conference call. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing the star, then zero on your touch-tone phone. Before we proceed on this call, let me remind you that the discussion may contain forward-looking statements that may involve known or unknown risks, uncertainties, and other factors which could cause actual results, performance, or achievements to differ significantly from what is expressed or implied by such forward-looking statements. Campus Activewear's management team is represented by Mr. Nikhil Aggarwal, Whole-time Director and CEO, and Mr. Sanjay Chhabra, CFO.
I now hand the conference over to Mr. Nikhil Aggarwal, Whole-time Director and CEO, for his opening remarks. Thank you, and over to you, sir.
Thank you. Good evening, everyone. We appreciate your presence at our Q2 and H1 FY25 earnings call today. Campus Activewear continues to display exceptional adaptability and notable agility with a 36% volume growth, navigating challenging macro environment and subdued demand across geographies. Our revenue surged by 28.8% YOY during Q2 FY24, led by strategic distribution initiatives, including the highest number of annual retailers meet, more than 120, which have been conducted across regions. We had a successful new product placement drive, with our top articles being placed in over 80% of our distribution network. We introduced 87 new styles, including our strong sneaker offering across channels, further strengthening our product portfolio. During the quarter, we expanded our large-format store presence. We have introduced our products in Lifestyle stores and scaled up our presence in Reliance Footprint.
During the quarter, we have onboarded Rick Koshel and Vikrant Massey, renowned Bollywood actors, as our new brand ambassadors. We plan to leverage this association for further building our brand through various media channels. Additionally, our recent Move Your Way campaign, launched across various platforms, is designed to resonate with the youth, encouraging them to celebrate their uniqueness. Our gross margin for the quarter stands at 52.8%, marginally lower versus Q1 FY25, that is 53.3%, driven by planned higher promotions and retailers meet to showcase new product and drive placements ahead of season in distribution channels. Our EBITDA margins were lower at 12.3% versus 15.8% during Q1, driven by lower gross margin, higher investments in advertisement and sales promotion, and higher commission on online business.
We believe a part of this dilution has a phasing element, as the timing of Big Billion Days offers was more towards week four of September. We continue to invest judiciously in media spend, including TV campaigns, outdoor coverage, and social media engagements for strengthening our brand and widening our consumer engagement. Our new TV ad with Vicky Kaushal is live on air as we speak. During the quarter, we have added nine new stores across India, taking our total EBO count to 288. We would further like to update you that our board has approved a capacity expansion plan at Ganaur and Haridwar with an investment of approximately INR 35 crores. These investments shall help us to cater to the growth in upcoming years.
Here at Campus, our steadfastness and perseverance are anchored by five essential pillars, namely product innovation, design philosophy, omnichannel presence, and innovative marketing capabilities, and our vertically integrated manufacturing system with a digital transformation that strengthens our core and drives our momentum. These critical elements empower us to navigate challenges, amplify our business expansion, and enable us to stay ahead of the curve, thereby creating long-term value for our esteemed stakeholders. Thank you, and now I hand over the call to our CFO, Mr. Sanjay Chhabra, to take you through more details on the Q2 and H1 performance. Over to you, Sanjay.
Thank you, Nikhil. Good evening, everyone, and thank you for joining us in our Q2 and H1 FY25 earnings call for Campus Activewear. Our operational revenue grew by 28.8% year-on-year to INR 333 crores in Q2 FY25, largely benefited by higher distribution, which has shown around 30% growth, and online channel around 36% growth. The company sold approximately 5.4 million pairs during this quarter, up 36.2% year-on-year. The average selling price stood at INR 622 in Q2 versus INR 585 during Q1, which is largely an open footwear season, and INR 658 in Q2 last year. The dilution in ASP was largely driven by higher schemes and promotions in distribution channel towards the retailers meet, and also a part was attributable to non-BIS inventory liquidation in line with our inventory optimization strategy. We have been able to reduce our non-BIS inventory by 25% during the quarter.
Our overall inventory days have reduced from 126 days in Q2 FY24 to around 110 days at the end of quarter in FY25. Our gross margins were at 52.8% during Q2 versus 53.3% in Q1, marginally lower driven by higher retailer meet-led trade spend. Our EBITDA for Q2 FY25 was at INR 41.6 crores. The EBITDA margin stood at 12.3% during Q2, owing to higher advertisement and promotion costs incurred for performance marketing and marginally higher online commission. Ads stood at INR 14.3 crores in Q2 FY25, and ad margin was at 4.2%. Our balance sheet continues to demonstrate strength and robust return ratios, such as return on capital employed and return on equity of 18.4% and 15.1%, respectively, as of 30 September 2024. With this summary, I will now conclude my remarks and open the floor to the moderator for the Q&A. Thank you.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. If you wish to withdraw yourself from the question queue, you may press star and two. Participants are requested to use the handset while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Priyank Chheda from Vallum Capital. Please go ahead.
Yeah, hi, team. Great performance. Of course, this has come on the lower base, plus it has come at the cost of margin. So my first question is, if there are some one-offs with respect to retailer meet or higher commissions given to them or higher online sales in the Big Billion Days, if you can quantify to get us a sense of what could be a normalized margin, if there is a one-off cost involved, what was the quantum of that cost?
Hi, this is Sanjay. If you look at our gross margin, the dilution in gross margin is only 50 basis points. So that's a reflection to this extent we had higher trade promotions and schemes for retailers meet. Of course, on the ASP dilution front, apart from the trade spends, the liquidation of non-BIS has also contributed. But as far as gross margin, 50 basis points dilution, that's the quantification. And secondly, on the A&P part, yes, we did spend around 1% higher in terms of advertisement and promotion. And that's largely, I would say, phasing. We need to look at it from a full year or a longer or six months perspective because there is a bit of seasonality element. We did invest in September and ahead of the season, and we would be getting a return on that during October and November during the Diwali and festival season.
Got it. Wonderful and clear. So there were two particular guidances that we were guided. One on the EBITDA margins for the full year to be 17%-19% range, as well as strategically with whatever actions on the growth side we are taking, we will maintain the ASP. So anything that you would like to help us think about how FY25 should be on these two guidances that were given?
Yeah, hi, Priyank. So we said last time that our endeavor definitely is to deliver in those number ranges in terms of EBITDA margins. But of course, at the same time, strategically, we have also taken an initiative to basically liquidate all of our non-BIS inventory within this fiscal year. We don't want to carry any such inventory over to next year. Therefore, we don't anticipate, honestly, a large or any kind of material dilution effect, but there could be some, I mean, because it is slightly older stock. So to that extent, we would be looking at slightly lower margins given versus the guidance that we've given, slightly lower on that side. But we do expect now that with the balance two quarters, obviously, the base is larger in terms of revenue, so there should be higher operating leverage and margin inflow from the balance two.
Okay. Got it. Yeah. On the traditional channel, so we were targeting somewhere around 25,000 touch points by the year-end. Where are we right now? And we also were targeting to increase the billing from that each counter, which we were at around 3.5 lakhs per shell by FY24. Where are we right now on that? And as well as traditionally, we were weak in south and west. You did highlight in the last quarter that there were a few product gaps that you plan to bridge. How has been the progress on these three aspects? One is on the touch points, the increase in the share of each counter on the billing side and the south and west. Thank you.
On the touch points, we have grown our total number of touch points from about 22,000, let's say, or 22,200 at the end of last quarter to about 23,000 at the end of this quarter. So about 800 odd touch points have been increased. At the same time, we have grown our share. There's been a product mix. So with the right product mix in place, we have been able to grow our volume significantly over this entire channel, at about approximately 36%. Sorry, 44% is the volume growth in the GTM channel, which has led to about a 36% value growth. So there has been definitely an increase in per counter share, which has led to this kind of growth.
Our main objective for this quarter has been about placement, where we have a certain number of focused articles that we call them, which are priority articles or hero articles. The endeavor was to maximize the placement of those focused articles across this entire channel. That has been a very successful drive, which has led to a lot of this volume growth, right, for the channel. In terms of geographical split, we are very similar to last quarter. We have been able to grow our West share from actually about 20.8% last quarter to about 24.4% this quarter for the West. Central is at 10% each in both the quarters. South has slightly regrown in this quarter from 5.1% last quarter to 3.3%. That is primarily due to a bit of a seasonal effect because of the open category being phased out in quarter two.
Open category sells the most during quarter one as a seasonal product. So that is the only thing. Otherwise, everything else remains the same in terms of the mix and the geographical split.
Amazing. Just a last question on the few other strategic areas that we were focusing with respect to sneakers, women's portfolio. How has been the growth in that, if you can highlight? As well as I do see that our NPDs and the number of launches has seen a step-up growth. So what has been the contribution from such NPDs? How do you define the NPDs when you track such a large number of new additions, new articles getting added? So how do you track the NPDs for the full year and their contribution in the revenue?
So NPDs, let me take a second question first. NPDs are tracked based on the placement, right? So of course, there is a certain number, which strategically I will not be able to talk about on this call, as that's the strategy for the company. But there is a certain contribution that we target from NPDs every quarter. And even this quarter, we've launched about 87 new styles. Those have really, really done well, and we've had a very, very good response. So that has, again, also added to this volume growth. While coming back to sneakers, right, sneakers, amongst those 87 styles, a lot of them, I would say, at least 30% are about sneakers, the new sneakers that have been launched. And it's also received an overwhelming response.
Even in terms of the new expansion plans that we just mentioned in terms of Haridwar and Ganaur, the expansion is mainly to do with the sneaker range, right? So that will help us expand the capacity to produce even more volume of higher quality sneakers in the coming quarters. So that's where we are in terms of the initiatives. Again, our another initiative that focus area is about the demographics in terms of men and women. So very happy to say that we've grown our share of women by another %. So right now, the split is about 78% and 22%, approximately 78% men, about 14% women, and balanced from kids' age. So the overall share has gone up from, let's say, 21% to 22% for women and kids put together.
Perfect. Sorry, if I can just squeeze in one more question. So Chinese imports.
Priyank sir, can you please fall back in the question queue?
No problem. Thank you.
Thank you. The next question is from the line of Umang Mehta from Kotak Securities. Please go ahead.
Hi. Thank you for the opportunity. My question was more on primary and secondary sales. So last year, we had seen that in third quarter, we had seen some restocking in some states where you have taken channel inventory correction. And given that there's an early festival this year, and you spoke about the retailer meets as well, do you see any kind of headwind for primary sales in the December quarter, particularly in the MBO channel?
I have not noticed at all. In fact, see, quarter two was a lot about primary placement, as we did see consumer sentiments being subdued at the tertiary level. But given for quarter three, it's back on track, and the markets have opened up. So we don't see any tertiary issues at the moment. And a lot of the placement that was done during the end of quarter two has basically materialized. And we are now basically looking at the replenishment of those orders and repeating the orders for those placements. So.
Understood.
No issues in terms of primary as well.
Understood. That's very encouraging. The second thing was on A&P. So given that you have signed these two ambassadors and you spoke about the TV campaign, on an annual basis, would you be able to share any percentage which you are looking at? You spent around INR 108 crores last year on A&P. How much growth can we expect from these initiatives?
No, we cannot quantify this. These are actually building blocks for the brand, right? In terms of spend, it could be pretty much the same as last year in terms of the overall A&P spend. But in terms of quantification of the growth in business from these initiatives, that would be, I would say, it's a longer-term initiative. It takes time to constantly build the brand and grow it over time. So this would not be ideal to quantify it at this stage.
Understood. And then one last question on performance marketing. Given that you called out that it was higher this quarter, now, again, if I go back to the base quarter in Q3, we had to recoup the sales lost in B2B, increase the performance marketing spend, which weighed on your EBITDA margin in Q3 last year. Given the phasing of Big Billion Days this year, that shouldn't recur, right, this year? We should see margins normalize in Q3 in that sense. Would that be correct?
That's the right interpretation. I mean, because of the Big Billion Days falling in week four of September, so we couldn't get the fullest ROI. I mean, most of the improvement in top line would get reflected in the next quarter. However, we had to do the investments upfront.
Great. That's very encouraging to hear. Thank you so much, and all the best for the rest of the year.
Thank you.
Thank you. Before taking the next question, we would like to remind participants that you may press star and one to ask a question. The next question is from the line of Gaurav Jogani from JM Financial. Please go ahead.
Thank you for the opportunity and congratulations on the strong revenue growth number. So my first question is with regards to these spends that you mentioned on the trade meet, etc. So one would be giving them discounts on the product price. But wouldn't the trade meet expense would be accounted in the other expenses rather than the gross margins? Please correct me if I'm not interpreting it in the right way.
Sort of a typical accounting question. I mean, if I do a spend, it gets accounted in other expense or in sales promotion. But if I support my distributor through a credit note, then it's a reduction to the sales and hence a lower ASP and lower gross margin.
Okay. Okay, sir. Got it. Got it. Also, sir, related to this, given that there is a focus of clearing the BIS inventory, the non-BIS inventory this quarter, sorry, this year rather, FY25, would it be prudent to estimate some contraction in the gross margin at least for this year? And maybe once things normalize and restore, the gross margins could restore, and hence we can restore the guidance also of the 17%-19% that we have given earlier?
Yeah. I mean, it's now nine months down the line, so we are not left with too much of non-BIS inventory. However, in a phased manner, we are trying to sort of liquidate the entire inventory by FY25. So which means we are targeting that as of March 2025, we should not be sitting on anything which is produced prior to December 2023.
Sure. And then the last question is if you can highlight some of the initiatives that you have taken over the last one and a half years just to drive the growth across the various channels and what you have done in terms of restoring growth. And additionally, if you can also help us to quantify or not quantify, rather, help us out how BIS, once the Non-BIS inventory is out, how this measure can help the company as a whole. That would be fine.
Sure, Gaurav. This growth is definitely not a one-quarter phenomenon. It has come on the back of several initiatives we've taken over the last few quarters. I'm very proud of the new team that has been put in place now after a lot of these structurings that have happened over the last few quarters. One is on the back of that. Second is a lot of these initiatives in terms of strategies across the distribution channel, more placement, more focused articles with a higher volume throughput for each article. Very focused. Basically, we're going for very high-efficiency execution across GTM, across all the channels, rather. New channels have also been incubated, right, in terms of more stores in terms of LFS like Lifestyle, Reliance Trends. We're also focusing on starting off exports, for example. Incubating that is right in the process.
There have been several initiatives which have been taken both at the product level and at the geographical channel level demographics. We basically cater to all the pillars that would lead to sustainable growth going forward. In terms of BIS, we have been very, very positive and very happy with the way the Chinese imports have basically largely been dried up. We also get to know from our channel checks that there have been absolutely no Chinese finished goods import over the last nine to 10 months in the country today, largely due to the non-BIS regulation. We do anticipate that over the next maybe one or two quarters, this entire non-BIS inventory would sort of dry up, and that's when the domestic brands across the country would benefit from this.
Sure. Thank you so much for answering my question. All the best. Thank you.
Thank you, Gaurav.
Thank you. Participants who wish to ask a question to the management may press star and one. The next question is from the line of Vidisha Sheth from Ambit Capital. Please go ahead.
Yes, hi. Thank you for the opportunity. My first question was on the ASP. While for FY25, it would be impacted as we're trying to liquidate the non-BIS compliant inventory. But from a long-term basis, how are you looking at the trajectory to shape up?
Hi, Vidisha. So we may end up, I mean, this year would not be a year wherein we'll see a step-up growth in ASP. But from a longer-term perspective, we would continue to go with the trend of perhaps sneakerization or we'll add the NPDs, which are more trendy, and likewise, we can command the premium, and the ASP eventually would go up. I mean, it would be a part of strategy that there would be certain core items in the distribution channel to drive volume. At the same time, we will be displaying a wider range of our articles in the other channels, which include the large-format stores, the online and our brand.com and our exclusive outlets. So these channels would continue to help us drive the premiumization and hence realization of higher ASP.
Having said that, I mean, it would start from the product strategy per se, wherein certain percentage of our products would be developed in the premium range to help us continue with the strategy. Yeah. Just to add to that, Vidisha, we do see an opportunity gap in the market in terms of the premium price point, which is INR 1,500 plus to about, let's say, up to INR 2,500-INR 3,000 bucks. And there is a significant gap there in terms of availability of high-quality shoes at these price points. And we are completely committed to delivering a stunning premium range as well. And it would be a combination of sneakers, sports shoes, all kinds of categories. There is no category in terms of closed shoes apart from, obviously, leather shoes. We don't do leather, but every other category would be touched in this, even in these price points.
Got it. And second on the capacity expansion, by when do you expect it to get commercialized?
I think conservatively by end of quarter four.
Okay. Got it. That's all from my side. Thank you, Nikhil. Thanks.
Thanks.
Thank you. The next question is from the line of Giriraj Daga from Visaria Family Trust. Please go ahead.
Yeah. Hello, team. Am I audible?
Yes.
Yeah. So my first question is related to our non-BIS component. So if I was to see like-for-like realization, what should be the call-out for? Like-for-like, how much decline in growth or what do you witness in the realization for quarter two?
Okay. Is your question that to what extent the ASP dilution is at?
Because of.
Correct.
So that would be in the range of INR 8-INR 10 per pair. Okay. So we had about 3.5, 5.4% was our decline, roughly 5.5%. So roughly, okay, about 1.5% came from the non-BIS markup.
Yeah.
And rest because of the mixed channel mix?
Rest because of the higher schemes in the distribution channel just to drive the retailers' need. And also, remaining portion would be because of mix.
Okay. My second question would be on your channel expansion. You mentioned about 23,000 touch points. If I look at for a two-to-three-year perspective, what is the total term you are addressing here? Can this 22,000 go to 40,000, 50,000? Or what is the outlook there for the two-to-three-year perspective?
So we have a universe of, and I'm talking about closed shoes because the overall universe is close to 60,000, 70,000 retailers in the country. But that also includes very low-value slippers, which is the starting point. If we talk about closed shoes, there is a universe of about 40,000-45,000 outlets, of which the top 23,000 are the ones that we are catering to at the moment. But over time, over the years, we will continue to add on at least 5%-10% new outlets every year as we also have a big opportunity to continue to gain market share in each and every outlet. So it's both the initiatives that we will run hand in hand.
Sure. Thank you from my side.
Thanks.
Thank you. The next question is from the line of Prerna Jhunjhunwala from Elara Capital. Please go ahead.
Thank you for the opportunity. My first question is on how do you see the demand now in the second half, given that the festive demand is the obvious in the country and other categories? So how do you see the demand going forward?
Demand has definitely opened up compared to quarter two as the festive season, and this was expected as well. So at the moment, I would say that we are happy with and satisfied with the way the demand has shaped up in quarter three.
How's been the festive sales for you?
Encouraging. Good. It was good.
Okay. And given that there is a mixed dilution in Q2, how do you see the mixed improvement coming? Do we see this mixed improvement coming in the second half, or it should be a more longer-term thing that will happen?
We see some bit of improvement coming in through, I would say, that the retailers meet for the event, which was specific to Q2, would not be at this scale in Q3. So to that extent, our ASPs and margins would improve. Likewise, non-BIS liquidation, of course, that's an event that may not be to the extent of 10-12 rupees in Q3 and Q4, difficult to quantify. But yeah, retailers meet is an event which, from a controllable factor, yes. And otherwise, organically, from a business perspective, when we move to Q3, it is more of closed footwear, higher sale of shoes, and has the ASPs improved by virtue of seasonality.
Would it be possible for you to quantify the non-BIS inventory quantum with me? For us to just have an understanding on how much would be the effect and how long?
Okay. A bit difficult to quantify at this point in time. However, it's not a sizable chunk. I mean, we have moved past nine months since the BIS implementation at our factories. Nine or, I would say, rather 10 months because from 1st of December or mid of December, we implemented BIS, and so difficult to give you exact numbers, but we are left with a very small portion.
Okay. And what would be the revenue growth and margin guidance for FY25 and beyond?
Sorry, no. I would refrain from giving any guidance. We have shared quite candidly in terms of the building blocks for the rest of the year and what we expect in terms of Non-BIS as well, so we do expect, I can just tell you that we certainly expect much superior margins to last year overall at the end of the year.
Okay. Understood. Thank you and all the best.
Thank you. Thank you.
Thank you. The next question is from the line of Ankit Kedia from PhillipCapital. Please go ahead.
So the government is talking about Indian footwear sizing. Do you think that's going to have a positive impact given that more and more manufacturing is happening in-house for you now?
Absolutely. It is something that can have a materially positive impact. But it would take time. We believe that something like this does not happen overnight in terms of a transition and the effect of it. But yes, overall, on a long-term basis, it should have a positive impact. As the consumers, there would be one size, and the consumers would have more, let's say, visibility and more comfort in terms of the sizing when they're selecting any product.
Do you think unorganized market that time, given that government has given a leeway to a lot of unorganized players in terms of revenue threshold? And that's where some of the brand players like yourself can really disrupt the market at a lower price point and at the premium level?
We don't necessarily compete with the unorganized segment because their product offerings and the quality and the strategies are vastly different from organized players like ourselves. So we would like to just continue to focus on the initiatives that have been working well for the brand and just keep building on that. That is the long-term objective. So I don't see any, honestly, any kind of threat or issues from any unorganized players in the market.
And so my last question is on the EBO channel. If I look at B2C offline, the growth has tapered a bit in the last couple of quarters. Is it because the number of EBO growth is a bit moderate, or is it to do with the general demand environment being slow?
Yeah. It's largely due to the subdued demand in the market. We have tapered the growth and the opening of new stores accordingly. But as we believe that the demand is picking up, we will certainly expand the store opening more, accelerate the store opening from now on.
So, what is your target EBO? We are targeting for FY25?
It would be difficult to comment at this point as it is largely dependent on the availability of the right location. It's very important to not go just after a certain number when you're opening EBO, but you need to be in the right place and the right TG, the right geographical set. So that is more important at this point. But we do endeavor to open about 70-80 stores every year.
Sure. That's helpful, sir. Thank you so much.
Thank you.
The next question is from the line of Devanshu Bansal from Emkay Global Financial Services. Please go ahead.
Hi. Thanks for the opportunity and congratulations on the boot kick-off in Q2. Sir, sorry for persisting on this, but this non-BIS inventory must have been declared by you to the government, right? So any specific reason for not calling this out? Because this must be ready with you, right?
Yeah. Any specific reason, meaning we would have these inventories both some at our warehouses and some in the distribution channels? So it depends to what extent we need to first, we need to push it out from our warehouses. And then, if at all required, we need to see that in the distributor's place, such inventory is not stuck up and they are not sitting on inventory days beyond certain defined norms, which we monitor through the DMS.
Okay. But out of this INR 475-odd crore of inventory that is there on your books, can you sort of call out, as in how much is the leftover Non-BIS inventory?
We can call out our inventory, but we cannot quantify what is sitting in our distributor's network or distributor's channel, which are non-BIS partners, right? So at an overall level, I mean, it becomes difficult to give a number. However, since I mean, as we are with every passing month, such inventory is getting reduced. And as I said, that the ASP dilution was to the extent of INR 10-INR 12, which is just 2%. So it's not a very big number to concern us. Yes, it is a bit diluted on ASP, and it will be there for, let's say, two more quarters max.
Okay, sir. Understood. Thanks for taking my questions.
The next question is from the line of Varun Vakharia from Omkara Capital. Please go ahead.
Hi, sir, and thanks for the opportunity, so just wanted to understand what is the commissioning component in our other expenses? I'm sorry if I've missed that earlier.
Yeah. Sorry. Can you please come again?
What is the commissioning component in our other expenses ahead, and how does it stack up, by and while?
Okay. Online commission is ranging between six to 10% depending on the portals. And again, it becomes very difficult to put a specific number if you're looking at it. It is six to 10% of our online sales, online marketplace sales.
Okay, so what has largely driven the other expenses? It seems they are up 11% to 10% YoY and while so.
Okay. In other expenses, we have the freight and warehousing fees, the online commission fees, and all other SG&A admin expenses, which includes travel.
CSR.
CSR and provisions for receivables, inventories, and all that stuff. If you're referring to, of course, this quarter, this quarter, we have shown a 9% growth in marketplace. So correspondingly, online commission will also grow because of the volume impact. And there is an element wherein the mix will play, I mean, which portal we are selling higher. So versus last quarter, the online commission is higher by around INR 2.5 crores.
Got it. Okay. And sir, how is the demand now looking?
You already answered that question, that demand has opened up compared to quarter two.
Okay. Okay. Thank you.
Thank you. Participants who wish to ask a question may press star and one. The next question is a follow-up question. It's from the line of Priyank Chheda from Vallum Capital. Please go ahead.
Yeah. Hi, sir. So sir, December quarter seems to be contributing almost one-third of our total sales for the annual revenue that we target. And in the past, two years ago, we did touch upon seven million pairs in a quarter of December 2022. How do you see this spanning out as far as December 2024 goes? What are the internal targets that you're thinking of to beat the previous peak?
Yeah. Priyank, that will go into the guidance. So I would refrain from giving any guidance for the quarter. But like I've mentioned a couple of times on this call, that we have certainly seen demand opening up at the tertiary level. And given the initiatives and that we started early in terms of the retailers meet and the placement drive, we certainly see a good, let's say, replenishment and repeat orders coming from those initiatives. So we don't see any issues in terms of both primary and tertiary sales for quarter three going forward. That should contribute to a decent quarter three, I would say.
Perfect. Sir, in B2C online, how has been the growth for marketplace as well as for O2O? And as far as O2O goes, which is into a B2C online O2O, there was a restocking which we called out, which has bottomed out at Q1. So have we started seeing sales picking up? Now, have we reached around 30-35 crores of sales per quarter in that channel also?
Yeah. I mean, overall, we have seen the sales, both value and volume, to grow in two of our biggest channels, online and distribution. So online also, in the earlier call, I mentioned that our Q1 was the last quarter wherein we had the impact of higher base, and that stands corrected. So now, from this quarter onwards, we are showing a growth in B2B and O2O. O2O, by and large, I would say that now is sort of nonexistent, very small portion. It is largely B2B wherein we do outright sales to some of the portals. And versus last year, we have shown growth in that as well. So we have grown in marketplace by around 9%, but in the outright, we have grown at a much higher rate.
Okay. So when we say about phasing of performance marketing spends, what we really mean, sir, in that way?
It's like in marketplace, I do invest for a particular month. But whatever sales happens in the last few days of the month, there's an element of GIT, and that does not get recognized as a sale, whereas I've done the marketing spend, right? So it's a normal course. But when those last four, five days is a Big Billion Days period, then a big number goes and sits as a GIT, right? And from an accounting perspective, I tend to recognize that sales in the subsequent month and, in this case, subsequent quarter.
Got it. Got it. Clear. And just last question on non-BIS inventory. It can be the case for the industry as well where the inventory would be higher. And at least MCA data suggests that Chinese imports are on the rise, at least till September quarter. They have risen in terms of absolute in terms of total imports that we do just before the deadline was ended. And then the non-BIS inventory deadline was also extended till June 26. So if it's the case for industry, would it also impact the non-BIS inventory ASP for you till the time industry also liquidates the non-BIS inventory?
So just a small correction there. The MCA has given time for the non-BIS liquidation till July 2026 to the entire industry. But the imports were banned from China for finished goods starting November, I believe, November or October last year. So since then, no finished goods have been imported in the country. Only SFG, to some extent, like upper or sole or some raw material is basically being imported from China. Having said that, we do not anticipate the ASP dilution, like what Sanjay just mentioned, in terms of 1% to 1.5% or, let's say, maximum 2% ASP dilution on account of non-BIS goods. We don't anticipate any dilution further than that on account of that.
Got it, sir. Got it. Thank you.
Thanks.
The next question is from the line of Alia sgar Shakir from Motilal Oswal. Please go ahead.
Yeah. Thanks for the opportunity, and thank you, and congratulations on beating the revenue growth. My question is on the margin, so if I understood correctly, you mentioned that FY25 margin should be higher than FY24 margin. Now, in H1 we observed that we are about 140 days down, so does that imply we should probably, then, in that case, have about high-teens margin in the H2, which obviously also gives the operating leverage because of the higher revenue base?
That's right. Without commenting on specific margin percentage, your interpretation is correct. The second half definitely contributes to much higher margins than first half.
Got it. And a quick clarification on the revenue side. Now, I know you don't want to give guidance, but this quarter, we did excellent growth thanks to also a low base of last year. So in that context, now, I mean, thinking while the base will be obviously good, given that it's a seasonally strong quarter, but should we expect kind of similar trends to continue or probably this quarter was benefited because of the lower base and therefore we should not extrapolate that?
Yeah. Certainly. I mean, this quarter two had the benefit of lower base, which got corrected. And of course, there was an element of strong execution as far as distribution is concerned through both having organizing retailers meet and driving product placement. So to that extent, I would say that we have, by and large, tried to cover the gaps in our execution and got our fair share in the market. And going forward, we would continue to sort of build on this, whatever good work we have done on the ground. However, I would just like to say that 30% growth is a number which won't I mean, you can't have that quarter on quarter, right?
Yeah, that's true. But in the past, we've been talking about double-digit growth. So this particular quarter did double-digit growth after probably seven quarters. So does that trend of double-digit growth now trajectory that we have been seeing in Q2, that at least should continue?
It's a guidance again, but see, all the building blocks will certainly help us a lot. So the endeavor is that only. I would just want to give you some comfort that that is the endeavor. The rest, we, of course, need the markets to support, which certainly the macros have improved in the country in quarter three.
Got it. Excellent. Very useful. Thank you so much. And best of luck.
You too.
The next question is from the line of Rajiv Bharati from Nuvama. Please go ahead.
Yeah. Good afternoon, sir. Thanks for the opportunity. Since we are hearing that there have been correction issues from the trade side in the business. We don't see that in your numbers. But are you hearing something of similar order in the competition, sir?
Can you elaborate the correction in what sense?
Collection. Collection in the sense.
Collection issues. Yeah. Our collections, in fact, our DSO days have come down from, I believe, 35 to 30 days in quarter to end. So Sanjay, do you want to elaborate?
I'll just put that we do have a strong system in place to monitor our receivables, our OOB receivables, and I mean, to restrict our exposure. The latter part of your question, that are you hearing this from competition, we would refrain from commenting on that. But as far as we are concerned, we do have systems in place how to deal with a customer with OOB outstanding. I mean, we don't overexpose unduly just to pump in the inventory.
Yeah, so just to add to Sanjay's point, the sales have not come on the back of pump and dump. You can just say that.
Sure. On the online bit, what is the credit to your extent? Because you said the growth is higher there.
Online marketplace, they pay immediately after the replacement or no-questions-asked return period is over. So which is largely, I mean, the agreed credit days is 21 days, and we do collect within 30 days.
Good. That's all from my side. All the best. Thanks a lot.
Thank you. The next question is from the line of Prerna Jhunjhunwala from Elara Capital. Please go ahead.
Thank you for the opportunity. I just wanted some details on the CapEx that you mentioned in the beginning of the commentary that you are undergoing a CapEx 35% growth. Could you please highlight what will be the capacity expansion or backward integration initiatives that you are taking over here?
This would be a combination. I would say that the capacity expansion would be to the extent of 10%-12%-odd as far as our backward integration is concerned.
So it will be net capacity addition, or it will be just backward integration? I'm just speaking to the audience.
It's not backward integration. It's more the component capacity addition.
Okay. And net capacity 35 million pairs continues to remain there as well?
That continues to remain there. And in the event of season, we can look at a small investment to debottleneck it wherever, whichever, I mean, units there are doing in Baddi, wherever we need to unlock some of the capacity. To that extent, we have the flexibility.
Okay. And this 22 lakhs capacity is similar for upper and sole both, or is it different?
Yeah. It's at the moment. So there are both the projects in the pipeline for both upper and sole. There would be capacity expansion in both these areas. On the upper side, specifically more for sneakers to make high-quality sneakers. And so there's a regular expansion of the entire sole project, the sole plant that we have in Ganaur, so addition of even injection lines, basically.
Thank you so much. Thank you very much.
Thank you. The next participant is from the line of Umang Mehta from Kotak Securities. Please go ahead.
Yeah. Hi. Thanks for the follow-up opportunity. Nikhil, I heard that marketplaces grew by 9%, which means that B2B outright more than doubled on a YOY basis. Our understanding was that you all were deprioritizing the B2B channels or a greater control on pricing. I just wanted to understand what has changed here. Thank you.
Hi, Umang. Nothing much has changed except for the Big Billion Days, as explained earlier. The lower growth in marketplace is only a reflection of timing of Big Billion Days. Had it been during September, mid of September, we would have been able to recognize the entire sales. As I said, that it was in the last week of September, so large part of the Big Billion Days sales was sitting in GIT in our books.
So Sanjay, the entire Big Billion Days is on outright basis, is it?
Sorry?
The Big Billion Days model is on outright basis for you completely?
Yeah. No, no, no. No. Big Billion Days is both. I'm just helping you understand that it's not that outright has grown and marketplace has shown a slower growth. Marketplace would have shown a growth, a decent growth had the Big Billion Days. Timing would have been different.
Understood. Sure. And just one thing, if you can help with it. So this quarter has several one-offs and different aspects kind of impacting margins. Would you be able to share any clean EBITDA margin print? I mean, just so that we anchor ourselves to a cleaner number.
Again, I already explained that the one-off was a retailers meet. And if you see the gross margin dilution, that is only to the extent of 0.5%. 0.5% on 333 crores is roughly INR 1.5 crore-INR 2 crores. So to that extent and to the extent of non-BIS liquidation, it would be, again, in the similar range. I would say around INR 80 lakhs-INR 1 crore. So to that extent, it is one-off. So 1% is the one-off. Rest, whatever you see in the EBITDA margin, lower EBITDA margin is driven by phasing of A&P spends, phasing of CSR, and all. So all these things, I mean, on a quarter-on-quarter basis, these are moving pieces. I would suggest that a full year view would be a more relevant view.
Okay. Sure. Thank you so much.
Thank you. The next question is from the line of Ankit Kedia from PhillipCapital. Please go ahead.
Just one question on the BIS compliant inventory. We are doing more Type 2 inventory in the market. Is the retailer educated enough to train the consumer that our product is more superior versus unorganized or versus competition? How are we educating that or charging a premium to a consumer for Type 2 inventory?
So it's about the brand and the legacy of the brand. It's not. Campus has been there in the market for the last almost 25 years now. So it's about the comfort and the trust and experience of the distributors and retailer partners. They trust the brand. They know us very well. They know the quality, the designs of the shoes. They know that Campus stands for excellence in quality along with the latest in design quality material trends across the bringing them first to the country from across the world in very reasonable price points. So it's nothing that is out of books for them, and it's very easy for them to sell this to the end consumer.
Do you think you can manufacture Type 2 inventory also at a lower price point to compete with the unorganized market and grow volumes?
Just come again. Sorry. Your voice is muffling.
I said that, do you think you want to manufacture Type 2 inventory at the lower price point to compete with unorganized market to gain market share and drive volumes?
We can, but it would just dilute the ASP. And we do have the starting price points of INR 899. That's where we start selling the shoes from. I'm talking about men's casual shoes, sports shoes. And going anywhere less than that would further unnecessarily dilute the ASP. So we take a very calculated call in terms of the number of pairs that we need to sell for each and every price point so the overall ASP can be maintained. We don't want to also further dilute the brand because going anything lower than that also unnecessarily dilutes the brand.
Sure. That's helpful. Thank you so much.
Thank you. Ladies and gentlemen, that was the last question for today's conference call. On behalf of Campus Activewear Limited, that concludes this conference. Thank you for joining us. And in case of any further queries, please reach out to Campus Activewear's investor relation team at ird@campusshoes.com. You may now disconnect your line. Thank you.