Okay. Good evening, everyone. Welcome to Brainbees Solutions Limited, quarter one of FY 2027 earnings call. This is Harsh Kabra, and I have with me Mr. Supam Maheshwari, Managing Director and CEO of the company, Mr. Gautam Sharma, Group Chief Financial Officer, Mr. Vivek Goyal, Chief Business Officer of the company, and Mr. Abhinav Sharma, Country Head of Middle East business operation. We also have Mr. Anuj Jain, the Chief Business Officer of GlobalBees. Kindly note that this call is meant for analysts and investors of the company. We wish to highlight that the call is being recorded, and by participating in this event, you consent to such recording, distribution, and publication.
All participants have been muted as per the default mode, and participants will be unmuted once we open the Q&A forum for the members to ask questions and after the presentation from the management concludes. We will be covering the presentation in the beginning of the call, and we will thereafter open for the Q&A forum. We would like to point out that some of the statement made in today's call may be forward-looking in nature, and the disclaimer to this effect has been included in the presentation shared with you. With this, I request Mr. Supam Maheshwari to take it over.
Yeah, good evening, everyone. Welcome once again to our first quarter of FY 2027 performance. Thank you for joining this call. I request if you can put up the presentation, Harsh, we can at least we can't see it.
Yes, sir. I'm presenting it. Let me know once it is.
Yes, you can. Just go on the first slide here.
Yes. Yes, sir.
Perfect. Thank you. Yeah, so welcome once again. I think, yeah, we will begin with our sort of a vision and mission as you are all very familiar with that, I will not repeat it. But Baby's FirstCry is a special moment for parents. And at FirstCry, we continue to work towards an aim to make this very moment, as well as all such moments of parenting journey, filled with joy and happiness for all young parents. That is our mission so far, and we will continue to drive that going forward as well. We will be covering today some of these points, and we will begin with the first, overall performance.
So, key highlights for the quarter one FY 2027 performance from a consol business perspective, which is consolidating our India multichannel, international business, GlobalBees, and other segments, which is primarily our preschool business. Overall business has grown 13% year-on-year. This is the strongest revenue growth in last five quarters that we have demonstrated on a consol basis. We have also demonstrated 34% improvement year-on-year basis on a consol basis on loss reduction after tax. Now, we will go into the segmental updates. On India multichannel, which is the core business segment, reflecting the highest growth rates that we have been focusing on. You can see on the right-hand side, the quarterly year-on-year sequential growth. In this quarter, we have demonstrated around 17.7% revenue growth rate, the strongest again in last seven quarters.
These are all some of our initiatives that have been at play in FY 2026 and even in FY 2027 that we have been sharing with you for the last many quarters. With some of our initiatives in the offline channel as well, the GMV of offline continues to again grow in the mid-teens in quarter one of FY 2027. With all our current initiatives, which we will speak in subsequent slide as well, both in online and offline business, we believe that the structural growth rate will remain elevated in the subsequent quarters as well. It is not just a one-off phenomena. It is what we believe very strongly, given what all we have done as a homework, as an input to our business structurally, both from an online and offline business perspective.
Overall, India multichannel business continues to be PAT positive for Q1 FY 2027. Now moving to international business. The revenue of international business grew by 12% year-on-year for quarter one. As we have mentioned earlier, we continue to focus on our sustainable growth while reducing our adjusted EBITDA. Adjusted EBITDA for ESOP cost has reduced by 22.3% year-on-year basis in Q1 over Q1 last year. With respect to GlobalBees, we have delivered a flattish growth. However, we have demonstrated a very significant improvement in growth of adjusted EBITDA by a factor of 308% from Q1 year-on-year basis. Overall, a very strong performance from an India multichannel view. A strong growth rate powered by both online, offline structural improvement through our initiatives that we have undertaken.
International business continue to demonstrate a sustainable growth and very laser-sharp focus on improvement of adjusted EBITDA from a losses perspective. Objective is to solve for becoming an EBITDA-neutral business as soon as possible. GlobalBees continue to demonstrate an improvement in adjusted EBITDA as well. We will go into a little more detail as we go forward. Overall snapshot, in terms of some more numerical data points. Overall, consolidated business AUTC grew by 10% to 11.8 million. The GMV grew by 12% to INR 2,807 crores. Overall revenue from operations grew by 13%, INR 2,106 crores. Consolidated EBITDA, adjusted EBITDA grew to 4.24% versus 4.98% at INR 289.3 crores. Consolidated gross margin, likewise, to 36.5% from 38.5%. Cash after profit to 2.4% to INR 50.8 crores at a consolidated level for Q1 for the business.
Moving further, we will just focus on India multichannel, on the key initiatives that we have been sharing with you for last few quarters. The three initiatives have really scaled very nicely. Very happy to share updates on all of these three. RocketBees, which is our internal faster delivery framework that we had started roughly around calendar year start of the last year, and we have been updating on every quarter as expanded. When we spoke last time in May, for the March quarter, we have expanded from 62 to 72 cities. The overall volume that we are covering today, at the end of June quarter, as we had promised, we had targeted to cover around 50% of our total online shipment under RocketBees umbrella. Happy to share that we have been able to successfully deliver that milestone.
We continue to grow the network, and also witnessing 20% improvement in turnaround time from delivery perspective and growing better growth as well as our customer experience in a very tight sort of a, I would say, industry where customer experience matters the most. This overall delivery initiative of RocketBees has been very successful, and we will continue to grow and work harder towards growing more area under the curve. Now, on the FC Quick, while two quarters back, we had just started as an experiment. Last quarter in March ending in May, when we shared this update with you, we were in five cities, and around close to 60,000 shipments in March. We have now expanded our Quick from a pilot to solidifying our sort of a growth strategy.
Now we have taken it a full-fledged strategy to now 12 cities and delivered 125,000 shipments, almost a growth of more than 100% from March to June, just in three months alone. We continue to see very great customer satisfaction. We will continue to grow with our framework of COCO stores. Our infra of dark stores that we have built out, especially in some cities, in some PIN codes, and our warehouses. All of that collective framework has helped us to grow on the FC Quick and on a RocketBees sort of platform. As I said, we will continue to grow. We had an overall ambition of growing to 10% of our overall shipment onto the FC Quick platform. In any specific sort of PIN code that we will operate, we will aim to grow to 20% of our volumes.
We'll continue in journey in that direction, and has really worked out very well. We have well-oiled our engine, and we'll continue to improve our assortment, continue to improve our overall TAT. From three hours to many cities and many PIN codes, we have reduced it to two hours, and we will continue to work towards it further reducing it. Yes, of course, not 10 minutes and 15 minutes because we are dealing with a far larger kind of an assortment with fashion and overall non-fashion. The breadth of our universe in terms of our FC Quick is far larger and far superior, and serves every bit of a requirement that a young mother and a young father would look for.
So it really is solving the pain from the new generation or the new customer expectations that we are able to fulfill for Gen Z parents and millennial parents. Third initiative that we have been speaking about, it's in full flow now. We had talked about that we will realign our product portfolio from a width-to-a-depth strategy, has really fully scaled out. The impact of this was visible even in last quarter, and it continues in this quarter. It has helped us to drive footfalls, conversions, both of them, and we continue to deliver 15% GMV growth for our offline business in Q1 FY 2027. We are extremely positive, bullish on all the three initiatives.
We will continue to scale the first and the second, and continue with the third refinement of the third initiative, which is offline, to continue to drive a new store growth expansion as well in the subsequent quarters. Because we had paused it a little bit to make sure that we align our product portfolio, we bring back capital efficiency, and then grow from there onwards. We have seen that now for two quarters, and now we will be expanding, as you will see in our subsequent quarters to come. The growth rate should remain elevated. With that, I think I have explained all the three initiatives in as much detail. Of course, any more questions, we will take it at the end.
Moving further, I will ask Vivek to take over the further updates on the India multichannel.
Thank you, Supam. Some of the key updates on India multichannel business. We have continued sequential improvement on year-on-year growth in revenue, with the strongest growth that we have demonstrated in India multichannel business in last seven quarters. Our diapering category continues to witness heightened competitive intensity during the quarter. However, the same has started to soften a bit in this quarter, in the current ongoing quarter. Our non-diapering portfolio, contributing to 85% of our GMV, remains robust and continues to perform really well for us. Our AUTC growth has been at 10%, orders growth is much healthier at 12%, and the GMV growth is at 12% as well. We can move to the next slide. We have delivered a strong revenue growth of 18% Y-on-Y in Q1.
This growth was accompanied by some moderation in gross margins on the Y-on-Y basis, which resulted in EBITDA margin being lower on Y-on-Y basis. In order to explain the moderation of the gross margin, we will take a step back and I will take you to Q4, where the gross margin moderated by 280 bps, largely because of two reasons. One, competitive intensity in diapering category, which constitutes to about 15% of our business, putting pressure on our margins. Secondly, the impact on gross margins in our manufacturing business because of rupee depreciation and increase in crude-linked raw material prices. While we recovered 20 basis points of this lost gross margin in Q1, we believe the margin recovery in subsequent quarters will be much faster due to the following reasons.
One, again, margin moderation, which was largely because of competitive intensity in diapering category, has started bouncing back since we are seeing the reduction in competitive intensity in market signals in the ongoing quarter. On the loss of margins in manufacturing business, we have started passing the increase in crude-linked raw material prices in manufacturing business to our customers and expect to fully recover it by the end of this quarter. I think we can move to the next slide. I will hand over to Abhinav for the international business updates.
Good evening, everyone. For the international business in this quarter, Q1 of FY 2027, we continued our focus on a sustainable growth as we have mentioned in the previous quarters as well. Q1 FY 2027 revenue growth was 12% YOY, with more importantly adjusted EBITDA losses reducing by 22% in the comparative quarter. As we all know, there are some geopolitical disruptions ongoing in the Middle East. However, our Middle East business, both the markets sustained a healthy growth and a higher potential. More importantly, it reflects on the higher potential when the environment is largely stabilized, hopefully in the near term. Our AUTC grew by 7%, GMV grew by 90% in comparative quarters, FY 2027 versus FY 2026. Next slide, Harsh. We talk about sustainable growth on the back of expanding margins and reducing EBITDA losses.
As you can see, we grew 12%, which came with also a gross margin expansion in the comparative quarters by about 280 bps, which then resulted also in the adjusted EBITDA losses by 22% in absolute terms. And in loss terms as compared to revenue, we had an improvement by 320 bps from 10% to 7%. Harsh, next slide. As you can see, we have mentioned in over the last four or five quarter calls that we will be continuing to reduce our losses as we move forward and sustainably grow the business in the Middle East. FY 2023 in comparison, if you compare FY 2026 versus FY 2023 full year, there has been a reduction of 1,500 bps in our losses.
And if you compare the quarterly loss, comparative quarters FY 2027 versus FY 2026 Q1, we have a 320 bps reduction in losses. Our focus has been on reducing these losses and our path to profitability while we grow the top line sustainably. Anuj, over to you.
Thanks, Abhinav. Good evening, everyone. The update on GlobalBees. Revenue has been almost flattish for the quarter. This is a temporary state and not a long-term structural change in the business, and I will explain later why. Core categories of GlobalBees have grown by 2%. The margin profile for co-brands continued to be strong, and we posted a 4.3% adjusted EBITDA margin, post-corporate expenses. A key factor that affected the growth was a planned transition in one of our co-brands. It is related to a longer-term normalization of business operations and involved the shifting of the business warehouse and inventory. This is a temporary and planned transition that should be complete in quarter two. Therefore, we expect the growth to bounce back starting quarter three.
If I assume that we had done the same business for this brand as quarter one of FY 2025 and take a very nominal growth, and on top of that, add the impact of Flipkart settlement, which is about 2%, the year-on-year growth for this quarter would have been in the high teens. That is why I was saying that this is not a structural change in the GlobalBees business. We will very much be back on track by quarter three. This growth is entirely organic as our last acquisition was in September 2022. Okay. What we have been doing is also focusing on expanding margins. If you see that while there has been a slight drop in our gross margins, overall, our adjusted EBITDA has grown from 1% to 3.9%.
This continues to be a strong focus for us as we move forward . The overall momentum on the adjusted EBITDA continues. Year-on-year, we have been demonstrating a strong improvement in margin profile, and the same thing is visible in the quarter-to-quarter, year-on-year change of 290 bps. Like I said, we will continue to focus on improving our profitability as we go forward.
This is our fourth business segment, which is the preschool business. Both revenue and the EBITDA growth was very strong in Q1. A 47% growth in the net revenue from INR 13 crore to INR 19 crore, and a 65% jump in our adjusted EBITDA from INR 3 crore to INR 5 crore in Q1 FY 2027. Next slide. Yeah, next. Before I talk about, next slide, Harsh. Before I talk about the consolidated numbers, a quick recap on various business segment numbers. While there is an impact on the adjusted EBITDA margin, which Vivek talked about. He explained in detail why the margin has dipped, and going forward, the recovery of margin should be much faster. Happy to mention that we have delivered a very good growth in the India multi-channel business. It is best in last seven quarters.
International business, despite of the geopolitical tensions in Middle East, we have delivered a 12% growth and a very healthy reduction in our EBITDA from 10% to 7%. GlobalBees, while the revenue growth or our flattish growth in GlobalBees business is temporary, we have focused on improvement of EBITDA margin, which has improved from 1% to 3.9% in Q1 FY 2027. And the school segment continues to do very well. A 47% jump in the revenue and 26% EBITDA compared to 23% in Q1 FY 2026. Combining these four segments, next slide, Harsh, we get these consolidated numbers, a 13% growth in revenue, best in last five quarters, and consolidated adjusted EBITDA on an absolute value more or less remain same, largely because of some impact on our EBITDA in the India multi-channel business.
However, we will continue to improve this in subsequent quarters. One important thing I would like to mention is that while this is the adjusted EBITDA, 4.24% on the net revenue. We have increased our EBITDA by almost 80% on a YOY basis in Q1 FY 2027, compared to Q1 FY 2026.
If you adjust for the ESOP cost.
Yeah. This is after the adjustment of ESOP cost, yes. That's it.
Okay. Thank you, team. We can wait for a minute for the queue to get full, and then we can start with the Q&A. I request participants to raise their hands for asking questions. We will unmute you one by one, and you will have the access to the mic. Please introduce yourself and the name of the organization you represent. The participants are also requested to limit their questions to a maximum of two. For any follow-up questions, you may join the queue again. Okay. The first question is from Jay Laddha . Jay , please unmute yourself.
Yeah. Hello. Good evening, sir.
Good evening, Jay.
Hi, Jay. Good evening.
The numbers are very much good, and the whole busi ness is totally recovered from the past losses. My question is related to the gross margin and manufacturing losses. Basically, you guided that in Q2 FY 2027, we will get fully normal. But you haven't mentioned that number anywhere. My curiosity is to know that in Q1, how much of that has been recovered?
Is your question linked to the India multi-channel business gross margin, Jay ?
Consolidated related. Overall.
If you see the Middle East business, the gross margin on all the fronts except the India multi-channel business has improved. Gross margin for the international business is continuously improving. Gross margin, if we exclude the impact of the change in the revenue recognition done by Flipkart, I think we are more or less similar in terms of gross margin compared to Q1 FY 2026. Gross margin for the school business is also continuously improving. That is evident from the improvement in EBITDA. Now, what remains is the gross margin of India multi-channel business, which Vivek talked about, that we have recovered around 20 bps. What he has done is he has taken you back to Q4, wherein we have lost around 280 bps of gross margin, out of which 20 bps of the gross margin is recovered.
The two reasons which contributed to this loss of gross margin was, A, heightened competitive intensity in the diapering category, which has started easing out. It is clearly visible, and we should see the impact on the gross margin in Q2. The second reason was the rupee depreciation and the increase in the crude linked raw material prices, which we said that we have started passing on those price increase to our customers, and by end of Q2, I think we should be able to pass on the entire increase to the customers. On both the fronts, you will see the gross margins continuously increasing or improving. While structurally, other factors will continue to help us expand the gross margins, which includes a continuous increase in the home brand mix, fashion mix, negotiation of margins with third-party brands.
Yeah. Another question is that international segment breakeven, what period should be there? FY 2027 full year guidance. Any updates related on that?
Gautam, you want me to take this?
Yeah. Please.
Jay , on the breakeven point, as far as timelines, we want to avoid a specific quarter that we want to give out. However, what I can tell you about the trajectory. If you look at the last quarter presentation, there was one of the slides that showed you the gross margin trend in comparison to India at the same similar age of the business. We are very much there. Secondly, as you can see our input. These numbers, EBITDA, and the growth, and the gross margin expansion are all output numbers. But how do we arrive at that? Input is where we need to be more. The comfort level should be coming from the input side of the business.
I can say that from an input side of the business, we continuously focus on, without deviation, on reducing our burn and growing the top line. How do we do this? One fundamental thing is improving our home brand mix of the top line. Second is also curating the brands that are high gross margin brands. Third is acquiring extremely high-quality customers at this stage in the business who have a lifetime value of our liking. When you do these three things, and obviously service levels, we continuously improve and work upon our service levels in the Middle East as well. Once you do these things, the comfort comes from, you see the numbers, EBITDA losses reducing, you see gross margin expansion, you see a sort of an early teens to mid-teens sort of a growth every quarter when you compare.
Once we achieve, once we are at a stage where we believe our unit economics and our gross margin sort of stack up to allow us to be more aggressive and double down on our growth trajectory, which then obviously will give us the leverage for the bottom line. I think that is where I wanted to explain how we are approaching the business in the Middle East. Having said all of this, we all know what's going on. We all know the situation is not ideal, so to speak. But as a business, we have taken this as an opportunity rather than a challenge, ecosystem challenge. We've taken it as an opportunity where we've seen our home brand continuously performing, continuous expansion in gross margins, and continuous sort of top-line growth.
From a comfort standpoint, there are many variables, many numbers that should give you a comforting sort of a feel, and this is for everybody on the call. A comforting feel to where the business is heading. Putting a timeline, it probably, I would say, very tricky at this point in time, but sooner than you think. Let's put it that way.
I think the great testimony is basically March 2025 number was -16%, which has come down to -7% in Q1 FY 2027. So in a span of 15 months, the losses has reduced by 9%.
It will continue to go down as we go along subsequent quarters as well.
Yeah. I understand all the things. Basically, the business is totally recovering from the past losses, and it is good to see that. Thank you.
Thank you.
Thanks. Next question is from Aaditya Kumar. Aaditya, if you can just unmute yourself.
Thank you. Good evening, everyone. I have two follow-up questions, one on the growth and second is the margin. I will take first on the growth. I think, it's good to see exceptional growth in the multi-channel business in the current quarter. Will we be able to see similar type of growth in the upcoming quarter? This is my question on the growth. On the margins, when will we be able to see, and the management believe how we will be able to recover the margin which has been lost in the multi-channel business. This is two questions from my side.
Sure. Aaditya, I think on the India multi-channel, your question was related to India multi-channel, right?
Yeah.
India multi-channel, I think, we demonstrated almost 18% growth. That was the highest in last seven quarters, as we mentioned. We believe that for the next few quarters, it will remain elevated as well, because of the input that we have been sharing with you, the key initiatives, all of them are focused towards our online and offline business. RocketBees has helped us to improve customer experience, improve 20% of the delivery TAT. Now as we have just mentioned, that it has gone to more than 50% of our total online volumes as a delivery framework. We have also started reverse as well. I think with all of that, customer experience is bound to improve, and thereby, that is what we had visualized a few quarters back. That is what the business was suffering from. We have fixed it.
We will continue to even improve further. The growth will remain elevated on that front. Second, on the FC Quick, you have seen the numbers we just shared from 60,000 in March, in five cities, now in 12 cities. 125,000 numbers in June, almost doubling up. Also reducing our timeline from three hours to, in a few PIN codes and a few cities, to two hours. Our ambition is to even go lower. With that, the customer experience is further improving. Obviously on the offline side, as well, we have demonstrated 15% GMV growth simply because of our assortment, product assortment that we talked about from a width to a depth strategy to be able to offer products to some lower price point as well, without really having a material impact on the gross margin, which is what we have demonstrated.
We have tasted success. We had planned it from an FY 2026, and we saw the impact of this in Q4 of last year. We continue to see the impact in Q1. With this now, we will double down on opening more stores as well, which will further accelerate growth. With all of this and the improvement in the product availability itself is something that we have worked very hard, which we had also struggled a little bit in between because of a lot of geopolitical situations into some of the brands and in our footwear category. Some of those also have been fixed. With all of these improvements, we continue to strongly believe that our growth rate will remain elevated in India multi-channel for the subsequent quarters for FY 2027. On the margins.
That is evident from if you see the sequential growth of the revenue India multi-channel business every quarter. From 7.5% in Q1, we have sequentially improved the growth from 7.5% to 7.9%, 8.9%, 11.4%, and now almost 18%.
On margin front, I think the explanation is very simply given by both Vivek as well as Gautam. I think our 280 bps loss or a drop in Q4, we believe we will be recovering it, although there is a recovery of 20 bps only in Q1. We believe we will have a much faster recovery. We are already seeing less competitive intensity than what we had seen for the previous two quarters. With the lesser competitive intensity, this is all happening because of the market dynamics and everybody is trying to focus more on the gross margin and bottom line. With that, I think this exactly phenomena happened in 2015, 2016 as well, and same is happening again. We had mentioned in our last quarter as well that it will take four to six quarters to fully normalize.
Which we have just started to see in Q2 as we speak in this quarter, in both July as well as in August. We are seeing a benign state in terms of competitive intensity, lesser than what we had experienced in the past, which will have a positive impact on the retention of gross margin, drawing back from that 280 bps or 260 bps recovery period. Second, on the crude linked as well as raw material price or the rupee depreciation, I think by end of this quarter, we will be pretty much recovered from that as we pass on to the customer. So, you will see the impact positive in Q2. Q3 onwards, you will see most likely full recovery. So I think with that, the margins will also come back, growth will remain elevated.
So we believe we are back to be happy in a state where we wanted to be. Obviously, we will continue to strive even superior, even better outcome than what we just talked about. But I hope that answers.
Just to add on the margin front, actually, the remaining 85% of our business, which is non-diapering, will also continue to accrue higher margins with the levers of increasing fashion contribution and home brand contributions. So, yeah.
Okay. Thank you, Aaditya. Next question is from Randeep Singh. Randeep, please unmute yourself.
Sure. Thank you. Just inquisitive, what is our right to win in the diapering space, given we have been seeing aggressive competition and if we see the overall ecosystem, someone walks into an Apollo Pharmacy, now Apollo Essentials have launched their diapers, or there are MedPlus in societies which are of 2,000 plus apartments. MedPlus has launched their own diapers. Now, are we in a market which is intensive competition, which we have been seeing for the last couple of quarters? What is the school of thought at the management level to really crack this space? Thank you. That is my first question.
Sure. Vivek, you want to go or should I take that?
Supam, I will go ahead and then you can carry forward from there. See, diapering is a complex category, and the consumer retention on the product is very critical, and that is where it is not easy for any brand like Apollo Pharmacy or any other private label product to be able to have high retention rate. Because essentially it is being used on a baby. From that window, the real I would say disproportionate pricing kind of a strategy happens on the established brands, where other e-commerce players or quick commerce players try to attract consumers with very aggressive pricing and for a limited period of time. That is what we have seen, as Supam was mentioning, had happened during 2015, 2016 period. That has been happening with the aggressive expansion of quick commerce over last two, three quarters.
We have already started seeing a bit of improvement in this quarter on the branded side of the diapering category, and essentially everything else follows that. So, fairly confident that the category itself will optimize over the next couple of quarters. Supam, you want to add on anything on this?
No, I think, and Randeep, we are also adding our FC Quick. If you think of it, customers who are very loyal or who would want to remain in our platform because we offer the full destination for babies and kids. Young mothers and young fathers who are not solving for a 10-minute or Apollo Pharmacy or any other particular brand, most of it is available with us. Now we are also solving in two hours, in three hours through our FC Quick in 12 cities, and we will continue to expand there. With that framework, we should be able to retain those customers and get a larger benefit. We remain very confident on that. This is same playbook that has happened in, as I said, 2015, 2016.
It is just going to be coming back in a different form because we ha d to do FC Quick. At that time, FC Quick did not exist, or that customer expectation did not exist. But now we are doing it with the revised or with the new customer expectation. Obviously, we have done fairly well. I just talked about how much we have done in FC Quick. With that, we believe that new onboarding of customers happens largely with us because of the FirstCry as a brand, as an ecosystem, as a destination, which all young parents or young mothers while they are pregnant, they all know about it. We are their favorite, in that sense, sort of a destination.
Rest, I think we have to deliver that service to continue to retain, which we are on that path. We only digress from a margin loss perspective from Q3 onwards, but we have started to see some recovery, and hopefully we will see a much faster recovery going forward as well.
Sure. Noted. My second question was with respect to our fourth business vertical. While which is very small and I understand the base effect, and hence we are seeing aggressive growth, just wanted to understand what is management thinking in terms of making the vertical, is there a hope and opportunity of a merger and acquisition that we are exploring? Case in point, being the number one player, which is Kidzee, where the group is in shambles, so it is a great opportunity. Are we thinking through of building with a model which is growing at 100% per year basis, or are we bank acquisition to make this a larger vertical?
So look, I think we will continue to grow. Currently, we have almost 500-plus preschools under our umbrella as FirstCry and Intellitots. We will continue to grow, for sure, rapidly. I think the salience is in the framework, in our curriculum framework that we have built, in the discipline framework of what we have built as technological framework as well as curriculum framework and execution framework. While these three frameworks are already in place, we understand the franchisee operations that we have run even in our offline business for our stores. We are able to, with our FirstCry brand, which is the largest destination for mothers, baby, and kids. We already know the babies and kids for our preschool business in every catchment in the country, pretty much.
For our natural ability to be able to partner with far more number of franchises and business partners in the preschool to continue to grow, expansion in new and new cities and within the cities, within cities, in more dense areas, that we will continue. I won't be able to comment on the M&A. It's too early. I don't think we are looking at it yet. But we have a very solid organic growth path forward. We believe, over a period of time, we should not be looking for less than 1,000 preschools over the next couple of years.
Randeep, on your point of a lower base, see, structurally, the business will always have a lower revenue. It will never contribute a significant amount to the overall revenue because it's a royalty-based model, right? If you convert this revenue to the revenue accrued at the franchisee end, probably you can multiply it by almost multiple times to get the actual revenue being made by franchisees.
We remain quite bullish on that, is all I would say, and we'll continue to grow organically on that business. I think we have still a few years before we'll become a very big force on a preschool side of the business. This strategically fits very well as well, because most of our kids and the parents that are associated and are part of our preschool sort of framework are power users for FirstCry as well, from a retail perspective.
Okay. Thanks, Randeep. Next question is from Percy Panthaki. Percy, if you can just unmute yourself.
Yeah. Am I audible?
Yeah, Percy. Yes.
Yeah. Just wanted to understand this margins. In Q4 for the India multi-channel business was about 7.3%, now it is 5.7%. This sequential deterioration that we have seen, is it largely because of the crude-linked inflation?
Percy, we spoke about, if you go back to our Q4 presentation, you will see a 280 bps drop, from a year-on-year basis. The two factors that we had articulated were continued diapering competitive intensity, which started from Q3, which continued in Q4, was there in Q1, and now it started to sort of get moderated and become better. The 280 bps was a combination of the impact on our margins from a diapering perspective and the crude link, as well as the rupee depreciation part. The first one we talked about, it will take four to six quarters. We have started to see improvement from this quarter, Q2 onwards itself, because of slightly better or lesser competitive intensity.
As we all know what is happening outside the market in terms of the other players and all focusing on the gross margin and bottom line, because most of them are getting into public market or already in public markets. Having said this, on the second point, which was the crude link and the rupee depreciation was largely coming fr om our manufacturing setup where it takes time to pass on all the input costs to the customers. By end of this quarter, we will completely be able to pass on all the increase of these crude link and rupee depreciation. You would still continue to see, and from Q3 onwards, obviously it will get normalized. You will see the impact of that in Q2 as well.
I am saying by end of this quarter, we should be able to do it completely. With that, a significant part should be able to claw back from Q3, and then obviously the first part will take maybe Q4. I think that is where we are. Rest 85% of the business, which is non-diapering, will continue to improve gross margins as well. With that, we remain what we had originally promised. In between this journey we came across, but in long life of a journey of a company, we all go through some of these surprises, but I think we are well-focused, well, sharply delivering and focused on improving our gross margin back to wher e it was and back to the journey that we have to improve it furt her from there.
We will recover back this 280. 20 is recovered, 260 we will recover back, and then we will grow back where we had wanted to reach.
Does this mean that second half of the year, our YOY EBITDA margin should at least be equal to previous year for the India multichannel business?
The 280 bps will further dramatically should reduce, is what we will say.
Percy, the impact of the margin loss because of the competition diapering category will take some quarters to get back in the business while the margin loss because of the rupee depreciation and the crude link raw material prices will be fully recovered by end of Q2 so that it will be completely reflected in full Q3.
And sorry, this 280 basis points which you are talking about, is it Q1 2027 compared to Q1 2026? Is that the 280 basis points you are talking about?
No. This is basically the numbers of Q4 versus Q4. All right? That's the YOY comparison of Q4 versus Q4, where we have seen gross margins declining by 280 bps.
My question was more on the EBITDA and again, only for the India multichannel. Q4 is actually 200 bps YOY. My question was also that Q1 has further deteriorated also from Q4 level. I think I am asking a slightly different question versus what you are addressing.
No, Percy, what we are talking about is basically a YOY comparison. If you see the YOY dec line in EBITDA in Q1 versus Q1 last year, it is a 290 bps decline on a YOY basis, right?
Correct.
Now, the bridge of this 290 is 260 coming from the gross margin reduction, which we have started seeing from Q4 onwards. Q4, we have lost a gross margin of 280 bps, which came down to 260 bps in Q1 on a YOY comparison, right? The remaining 30 bps is basically a factor of, it is a combination of the increase in the logistic cost because of our logistic initiatives in RocketBees and FirstCry Quick, and a positive recovery of the margins because of the operating leverage which we have got in the marketing spends and the fixed cost. That's the 290 bps.
Understood. Secondly, I just wanted to, just some accounting hygiene. Your India revenue growth is 18%, but the GMV growth is 12%, so what explains that?
As an India multichannel, it's a combination of our online, offline, and our manufacturing.
See, Percy, one of the. This is a combination of these three things, and plus, Percy, if you see the GMV is basically, it represents the MRP of the product, right? There was a GST too, which got implemented in Q2, right? Some minor impact is because of that also, which led to a reduction in the MRP. That's the reason you see some difference between the GMV growth and the net revenue.
Understood. That is all from me. Thanks, and all the best.
Thank you, Percy.
Thanks, Percy.
Thanks, Percy. In the interest of time, we will take the last question. The next question is from Harsh Gokalgandhi. Harsh, if you can just unmute yourself.
Yeah. Hi. I hope I am audible.
Yeah.
Yeah. Just two questions from my end. Firstly, on the India multichannel business, just wanted to understand what's the delta of profitability for a diaper business versus a non-diaper? Given that it's just 15% of our business and yet impacting gross margin significantly. That's my first question. Secondly, just wanted to understand what's our share in this whole diaper category in terms of versus comp etitors. Yeah, those were the two questions I had.
Harsh, having been in this business for almost now 15 years plus, diapering is one of the important categories while solving for what we have set out as a mission from a mother's perspective, and young parents, fathers perspective. We took multiple steps in our journey earlier, to ensure that we will be able to build a profitable trade while doing a diapering sort of a business. In the early years of our business formation, we had to bleed. But those were very early years of our formation or of our journey. But over a period of time, not only we partnered with our other partner brands, we also built our home brand, which helped us to retain more customers as well as improve our margin profile. We settled that trade when some of the horizontals in 2015, 2016 came.
That trade was settled after the increased intensity of competition and during 2015 to 2017 period. Everyone was happy with their share of their diapering as a category, their growth rates, their margins that they would want to make. So we were. With that, we continued our journey from 2017 to 2024 absolutely smoothly, while improving our gross margin, while improving our EBITDA margin as a total overall business. Because the customer who buys just diaper also buys some other products, so w e can't lose that customer. It builds a sort of a cohort as well. As I said, it's an intrinsic part of the need of the young parent when the child is from a newborn to especially up to two and a half to three years.
Having said this is a very recent phenomena with which more players entered into, with more capital entered into the fray, and led to more competitive intensity. This, we talked about in last two quarters. This is transitional, this is absolutely unsustainable. As we speak this quarter onwards, because of certain things that are playing out in the market, I don't have to say it, we all have observed it. Some of the IPOs getting postponed and some of those events happening has helped to get more sanity into the market, and I'm pretty sure that over a period of next few quarters, that this will be completely normalized. With our FC Quick, we will give back some service that our customer is looking for. With our home brands, we'll continue to retain those customers with a superior product.
And with all of that combination, with our basket size and all of that, I think we will be back in shape as how we managed during 2015, 2017 period. We will manage this during this period as well. I think, this is more of a transitory period, nothing structural. And hopefully in next two quarters, you will have far more visibility on that, which we will demonstrate.
Fair enough, sir. And just on my first question on the delta of profitability for a diaper segment versus the non-diaper, if you can just help me understand that.
All I can say is, look, as we speak, obviously the delta has increased between diapering and non-diapering. And it is a very commonsensical sort of a point, since you are talking about the reduction due to diapering. So obviously the rest of the business is delivering healthy sort of margin in fashion. We deliver more than 50% of our GMV in fashion, and more than 50% of our business is also in home brands. Both of that leads to a fairly healthy margins. So the delta obviously is quite meaningful.
But we do not make losses in diapering.
Because, yeah, that is not what we do as a business, but we believe that the delta will shrink over the next few quarters when the diapering margins also come back, from positive levels to far more positive levels than we used to have in early part of FY 2026.
Understood. Fair enough. Thanks a lot, Supam.
Thank you, Harsh.
Thanks, Harsh. We have some more time. We can take up one last question. The last question is from Archana Menon. Archana, if you can just unmute yourself.
Thank you so much for the opportunity. Supam, my first question was on the India multi-channel business. On the offline side, we have seen the growth improve. Could you help us understand a little better as to what are the kind of changes that have been made, and beyond the revenue growth number, what are the other KPIs which have been improving that you are tracking?
Sure, Archana. Look, I think, fundamentally when we had visualized, we were in Q2 of last year. We had talked about very clearly that we were witnessing challenges on customer experiences due to poor delivery on the back of third-party framework, which was also struggling in its own ways. I won't go in that direction of why was that happening. But we struggled as a company because our goods were from 10 grams to a 30-kilogram toy car. So we are like a mini horizontal in that sense, and it's very difficult to manage and be able to deliver the customer experience as what we had expected. Given that, we took those steps. First step was introduction of our own framework, which is RocketBees, which we started somewhere in January, March, a period of 20, I would say, 6.
Then full year, quarter on quarter, day on day, literally day on day, we built that framework from zero cities to now 72 cities. From 0% volume of our third party or 100% third party to now RocketBees is delivering more than 50% of our volumes already. We promised two quarters back that we will deli ver 50% plus by June end. This is what we have delivered. So this is the one KPI that we are able to check on a day-on-day basis, that delivery TATs of our customers under the RocketBees framework is 20% superior, and with lesser RTOs and so on and so forth. There are many benefits of this. I can't tell you how a young mother and a young father will be elated to see their goods arrive, and the whole family is very happy.
It has an impact on repeat, it has an impact on further cohort of those customers, which will reflect over a period of time because, many customers have experienced this, many customers are yet to experience. FC Quick is an layer on top, which we started, again, December last year as a pilot. Today, as I mentioned, we have doubled our volumes from March, from five cities, from 60,000 to 125,000 in June in 12 cities. We have seen, again, very happy faces, great customer experiences. This is what we had experienced in early part of our journey when we had no such challenges on delivery side. These are two input areas that we continue to dial down, double down on this.
And then third was offline, which we had said middle of last year, that we will change our product assortment a bit, from width to depth, ensuring we can have some lower price points as well, improve our conversions and footfalls, which exactly what happened. Very strong volume growth that we are able to deliver in our offline channel, and leading to a 15% GMV sort of a growth, both in Q4 as well as in Q1. We believe now our expansion of our new stores will really take off, which we had kind of more or less paused, and we were conservative from a capital efficiency perspective. And now we have already pedaled down on that path. So you will see some of those new store growth coming up as well.
So with all of this, I think we feel that our growth will continue to remain elevated for India multichannel with all the inputs and the KPIs that we are tracking is, as I just speak about, the pain points that we were trying to solve. And there are many more KPIs that we track, but I'm just trying to tell you the pain points KPI that we are very happy to report. Literally every day in the morning is that KPI flashes on our screen, which gives us a smile, which gives us a challenge to even solve further. So we will continue to drive all the two initiatives more and more aggressively. We have still a lot of headroom to grow on the first two initiatives.
Third one is fully sort of delivered, but now we will do a more store expansion. And then a more optimization on product assortment, even in the offline, but not from a perspective of width to depth, but there are more opportunities there as well, which we will solve in the subsequent sort of quarters. So we believe very strongly about the growth, because of the input variables that we have put in.
Thanks for that, Supam. Just two more questions from me. Firstly, if you could share your store expansion plans for the coming years. And secondly, what would be your salience of non-diapering consumables? So personal care or any other consumables, and how are you looking at competition on that side from QC?
On the second one, I think we will add close to around 100.
Might be 200.
Around 100 stores is what.
On a net basis, this is that of attritions, if any.
We will be able to add that for this fiscal year. That is the answer to the store expa nsion question. Obviously FY 2028 will be even better because we were waiting for this transition to happen that we just spoke about. We will do all of this expansion in the remainder of the quarters. But for the full year, FY 2028, obviously it should be even better because we would have had no loss of a quarter or a preparation of a quarter. On your question.
On the non-diapering consumables, we continue to grow, as per the overall business trajectory. There is no challenge in that. As well as the margins remain healthy there.
But what would be the salience of that part, Vivek, for your India revenues?
It is around close to 15% of our GMV is what we had mentioned even in our last quarter. That is 15%.
Okay. Thank you so much.
Yeah. All right. Thank you. Thank you.
Thank you, everyone.
Thank you.
Thank you very much.