Ladies and gentlemen, good day and welcome to Sai Silks (Kalamandir) Limited Q2 FY 2025-26 Earnings Conference Call. As a reminder, all participant lines will be in 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 star then zero on your touchtone phone.
Please note that this conference is being recorded. I now hand the conference over to Mr. Bharadwaj, Senior Vice President from Sai Silks (Kalamandir) Limited. Thank you, and over to you, sir.
Thank you. Good morning, everyone. On behalf of Sai Silks (Kalamandir) Limited, I welcome you all to our Q2 FY 2025-2026 and half-yearly FY 2026-2025-2026 earnings conference call. I am joined today by Mr. K. D. L. N. Sharma, Chief Financial Officer. To start off, I would like to give you an overview of the market. The ethnic retail market witnessed a heavy traction of a strong wedding dates pipeline in Q2 FY 2026.
This particular quarter has benefited from vacation and festive demand, which has contributed to a stronger consumer demand, converting a stronger footfall to our stores. The consumer sentiment also remained upbeat, with notable growth across these categories. Shoppers started making bulk purchases, with gifting also becoming a major sales driver. There has been a rise in digital discovery, where consumers and customers are increasingly.
Hi, sorry to interrupt, sir, but your voice is breaking, so I'll reconnect you quickly.
Sure.
Ladies and gentlemen, thank you for your patience. We have the line from the management reconnected. Please go ahead, sir.
Thank you, Bhumika. So I'll quickly start the opening remarks again. Apologies on that. So good morning, everyone. On behalf of SSKL, I welcome you all to Q2 FY 2025-2026 and half-yearly FY 2025-2026 earnings conference call. I am joined today by Mr. K. D. L. N. Sharma, our Chief Financial Officer. Let me start off by giving you an overview on the market. In this particular quarter, the ethnic retail market witnessed healthy traction.
The quarter benefited from a favorable wedding calendar and the early onset of festivities, both of which contributed to a stronger consumer demand. Consumer sentiment also remained upbeat, with notable growth coming across wedding wear and occasion wear categories, where SSKL operates the most. Shoppers also started making bulk purchases, with gifting becoming a major sales driver. In this particular quarter, we've also seen increased footfalls across all our stores and formats.
There has also been a rise in digital discovery, where consumers are increasingly starting their shopping journey online, even if they make the final purchase in stores. Retailers are also doubling down on their unified online/offline presence. With respect to SSKL's business update, over the last two years, we have added close to 1.5 lakh sq ft of new retail space as part of our expansion strategy. These stores are currently at varying stages of maturity and steadily ramping up their performance quarter- on- quarter.
The wedding and festive collections especially witnessed strong traction across our four states of the South Indian market, and therefore has given increased footfall, reflecting consistent consumer loyalty and sentiment and engagement. We are also closely listening to our market trends and enhancing our digital presence across multiple social platforms to make our brand more accessible.
These initiatives are enabling easier product discovery and fostering stronger and more meaningful engagement with our customers and to have a unified shopping experience of what they see on social media towards what they can actually find in our stores. During the first half of the year, we added approximately 33,000 sq ft of retail space through six new store openings, and we have no store closures.
We further strengthened our retail network by converting a few of our existing stores into our Valli format stores, bringing the total number of Valli format store count to seven stores. Valli format, as discussed, is designed to cater to the evolving consumer preferences while staying true and core to our product offering, which is quality sarees at affordable prices.
Today, our retail presence spans to 7.5 lakh sq ft of retail area with 74 stores spread across 22 cities in four states, which reflects a strong and continued commitment to our regional growth and accessibility. With respect to our Q2 financial performance, our revenues stood at INR 444 crores compared to INR 347 crores last year, a growth of about 28%. Our EBITDA stood at 16.21% compared to 15.95%, an increase of about 26 basis points compared to last year's quarter two.
We achieved a PAT of INR 40 crores this quarter compared to INR 23.75 crores last year of Q2. The same store sales growth also for this quarter stood at 17.5%. For the half-year FY 2025-26, our revenues stood at INR 823 crores compared to INR 614 crores last year, marking a growth of about 34%. EBITDA for H1 stood at 15.68% compared to 12%, a significant increase of about 368 basis points.
Our PAT for H1 stood at INR 70 crores compared to INR 26 crores last year, marking a significant increase of about 430 basis points. Our SSG for the half-year stood at 21.5%. Looking ahead, we remain very optimistic about the second half of the year, supported by the major festive season and the wedding calendar. Quarter three and quarter four traditionally have a healthy contribution, and we are well prepared with curated festive collections, localized marketing campaigns, and inventory planning.
Our focus remains on sustainable growth, balancing expansion with profitability and deepening our engagement through product innovation and digital integration, and spanning our presence one city at a time, one state at a time. We are now happy to take your questions.
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 touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question comes from the line of Nitin Jain from Fair Value Investment Advisors. Please go ahead.
Yeah, thank you for the opportunity, and congratulations on a very good quarter. I have a few questions, sir, so most of the stores that the company has added in the first half of this year are Valli Silks, which is a comparatively lower margin format, so how do we see this impacting our margins going forward? And also, how do we plan to utilize the remaining IPO funds that we have? If you can answer these, I have a few more questions. Thank you.
Sure. See, Valli Silks has a unique product positioning, unique brand positioning, I would say. This format is envisioned through the changing consumer preferences, which is a lot of our consumers are now finding easier accessible forms to shop while the digital presence is very stronger, so Valli Silks has actually envisioned to have a digital-first shopping experience where they're able to identify the products and see the products much before even they walk into our stores, and we do have a Valli store back in 2022-2023.
We had one such experimental store, which was actually mentioned in our DRHP as well. This store was in Rajahmundry, so we have been collecting the data from this particular format ever since and has been yielding a good consumer response.
So what we have done is, like in quarter one last year, I think we have also made some commentary that we will be doubling down on our Valli Silks format, and this format, I think we have opened about four stores this quarter, as you rightly said, and we also have converted three of our existing stores to Valli store format, taking the total store count to seven.
With our experience in this particular quarter with these seven stores, we have been getting a very good traction with respect to the overall product positioning as well as the consumer, I mean, acceptance as well, so, I mean, these stores are relatively quicker to expand, which is like a small 3,500 sq ft is the average square feet of Valli store. It's quicker to expand. We are able to reduce our CapEx costs by about 20-25%.
The inventory requirement is also a little bit leaner than the other formats. So this format has been customized and curated to see a rapid expansion growth. Now, while temporarily this particular format commands a lesser margin, on a longer perspective, we should be able to bring the margins up. But at this point of time, we are very early in the market, and the primary objective for us too is to get the brand penetrated deep into consumers.
So until that time happens, maybe a couple of quarters, we should be aware of a lower, comparatively lower margin. But on a broader perspective, I think this format can command easy penetration to multiple markets and geographies. So that's the overall plan for Valli right now.
In addition to that, I wish to clarify. I'm Sharma here. I wish to clarify that the Vara Mahalakshmi expansion has not been put on hold. Only during this festival season, because this Valli format can be brought to operations within 20-25 days, we have focused on it. Already, there are about two Valli , two Vara Mahalakshmis in capital work in progress, and another three are there. In fact, against the 25 stores that we stated in DRHP for Vara Mahalakshmi format, 19 are operational, and two are in work in progress.
We are trying to complete the balance of the Vara Mahalakshmi from the IPO funds will be completed as per the schedule only. In fact, in the DRHP, we have also mentioned that we will put up another five Kalamandir stores, small format stores.
Since Valli is on Kalamandir format only, only five stores are being funded from IPO funds. And any additional Valli format stores that we are bringing in, depending on the business requirement at this point of time, will be through internal resources. So we can say that beyond five, the Valli formats will be in addition to the expansion envisaged in our IPO objectives. Hope I am clear.
Right. That's very helpful, sir. So, and just a couple more questions. What are your thoughts on asset-light expansion? And by that, I mean, what are you thinking about franchising out stores? And my last question is on payables. If I compare them to the March 2025 numbers, they have increased quite significantly. So if you could provide some color on this. Thank you. And that's all.
Yeah. I will explain the payable part first. As you must have seen, because of the festival season, of course, anytime, even in earlier years also, September, we will be having a lot of stock because of festivals like Dussehra, Deepavali, and also the wedding season that would be coming in during that period. It will be immediately after that Pitru Paksha during the later part of September, August, and the early part of September. So there will be huge purchases to meet these requirements of both Dussehra, Diwali, and the wedding season. So September inventory vis-à-vis September purchases would always be high.
S ince Diwali was also there, then the purchases have been made, and the bills have not become due. So as on 30th September, we have purchased substantial quantities, and the bills will be paid by the due dates.
When we come back to the original by the annual closing, the creditors' levels will substantially come down or suitably come down. This is because at that one particular point of time when there were huge purchases and the bills were not due at this point of time, you are seeing a higher figure on that.
With respect to the asset-light expansion mode, I think if you're referring to Valli as a format, I think this format is relatively much newer. It's just like an infant stage. We are focused on at least seeing a couple of quarters before we build an actual business model out of it. At this point of time, we are not looking at any franchisee-based expansion.
Thank you, and all the best.
Thank you.
Thank you. The next question comes from the line of Rahul Jain from Credence Wealth. Please go ahead.
Thanks for the opportunity. Am I audible?
Yeah, you are.
Yes, Mr. Rahul, please tell me.
Sure, sure.
Thank you.
So first of all, sir, as I've said, congratulations on a good set of numbers and good set of numbers, including the P&L as well as the good cash flows. Sir, my questions are with regards to the gross margin. We have maintained our gross margins around 42%. And based on now the increased contribution coming from Vara Mahalakshmi, where we opened stores in the last year in Tamil Nadu, and the productivity of those stores must be improving further from about 29,000, which you mentioned in quarter one on call.
So do we expect some improvement on the gross margin given the increased contribution from Vara Mahalakshmi store format going ahead?
Yeah. See, now we are concentrating on the productivity aspect. Second quarter, we realized that the productivity has improved to approximately INR 35,000 per sq ft on the expanded capacity. So the objective, as you know, Vara Mahalakshmi is in the range of about INR 45,000-INR 50,000. So perhaps in the third quarter or by the end of fourth quarter, we should be reaching the objective of achieving the optimal productivity. And then once the client profile is fully established, we are able to achieve the productivity aspects suitable to the format. Then we shall slowly improve the margin profile on that.
Currently, since the stores are on a maturity basis, taking a higher margin at this point of time may affect productivity aspect. So we are planning to continue with around 42+ or - kind of a margin profile for the current year. And focus more on the productivity aspect.
Sure. So in the current quarter, the other expenses have seen a sharp increase to almost INR 61 crores. So is there some kind of this is related to additional stores or is it related to higher amount of marketing advertisement given the festive season? How do we look at this number of other expenses of INR 61 crores?
Business promotion expenses have increased by approximately INR 6-INR 7 crores. Basically, the.
Customer vouchers.
Yeah, customer vouchers, customer vouchers, etc. And we have seen an increased output out of KLM. In fact, KLM has done around INR 125 crores this quarter against INR 100 last year. So KLM is slowly coming back onto the rails. And the only perhaps the additional thing that has come is this encashment of vouchers during this quarter. That is to the extent of around INR 7 crores, I think.
Okay. The benefit of which should come in the next two quarters also.
Right.
Sure. Last question, sir. On the sales side, the first-half sales have been, if you take the last four quarter numbers, so the first half itself gives us almost 15% growth for the full year, so our initial target of 15% growth for the current year, given the first-half sales is already done, so given the good festive, given the good wedding season ahead, can we expect that overall sales target for the current year should be higher, much higher than that 15% target?
Definitely, it should be more than 15%. Last year, third quarter was a big quarter. That was the highest quarter for us thus far. So there may not be an increase to the extent of 20% or so during third quarter, fourth quarter maybe. On a broader perspective, last year, in the second half, we did about INR 850 crores. We should be doing in the range of about INR 925 or so, which will, on a total scale, total company level, it should come to approximately INR 1,750 or so.
That would end up around 18 to anywhere between 18 to 20% on an overall growth. Last year, second half, we did a net profit of INR 80 crores. 105, of course, removing that in one-time income tax part. Operationally, we did about INR 80 crores of turnover net profit last year.
So even if we repeat the same thing, then you know the figure.
Sure. That's quite helpful. So that means on both profit and top line, you would be much higher than the earlier guided 15% and INR 140 crores of profit.
Correct.
Sure, sure.
Thank you so much, sir. And all the best. Wish you good time period. Thanks.
Thank you. The next question comes from the line of Arpit Shah from Stallion Asset. Please go ahead.
Yeah. Am I audible?
Yes.
Good morning, sir. Please tell me.
Yeah. I have a couple of questions. I just list out all my questions first. I just wanted to understand the Vara Mahalakshmi model is steady-state hybrid economics looking like over there. It's clearly been the growth engine for us for the last couple of years. Just wanted to understand what is our capital efficiency over there. And Valli Silks continues to started, which is a new format for us.
I just wanted to understand our strategy over there, why the pivot is happening now, what is the differentiation between Kalamandir and Mandir compared to Valli , and what kind of economics we are targeting in this format. And even on the debt and working capital side, we had very tight control this quarter. Working capital, you already explained some part of it.
I wanted to understand how are we looking at that given the year given the FY 2026 and how we should be looking at that number? We're almost debt-free now, at least this quarter which has gone by. And you also gave some color around the second half. I do understand that Q3 last year was a big year where Dussehra and Diwali was clubbed in one quarter. But how should we look at this quarter, quarter three, where Dussehra has already happened and Diwali has happened this last month?
What kind of trajectory we should be looking at in terms of revenues and margin this quarter? Because last quarter was a bit on high. Should we start looking in building in about, let's say, INR 550 crores of revenues this quarter?
And on FY 2027, if I could just put a highlight over there, if I just plug in the numbers that we have guided in the couple of past quarters, are you confident of hitting that INR 1 crore mark in terms of profits for FY 2027 and how reasonable that estimate looks like? Because the execution momentum is really, really good for the last couple of quarters. And how should we build onto that? Those are my questions.
Sure. Arpit, I'll try to answer a couple of your questions here. If I probably miss out, you can let me know. See, in terms of the overall Vara Mahalakshmi, the capital allotment-wise, so generally, for CapEx requirements for Vara Mahalakshmi is around INR 5,500 per sq ft. Now, when you compare that with the Valli format, which we are anywhere around INR 3,750-INR 4,000, so almost 20%-25% of reduced capital is what requires for a Valli format.
In terms of the square footage, also, Vara Mahalakshmi is a working capital-heavy model where a larger amount of inventory requires and goes on to Vara Mahalakshmi compared to Valli . Now, with this particular format, Valli , at this point of time, we are in the very probably we are looking at one full quarter of operations.
Even in the one full quarter, it is derived and it is heavily dependent on this boosted festive and wedding calendar that has come. Probably if there is one or two more quarters of full operations, probably I can be able to comment you more on the kind of working capital requirements. On the capital expenditure side, I think 20%-25% of reduced capital expenditure and Valli in the inventory format-wise, at this point of time, to give you a guidance, will be in the same range as Kalamandir.
That's the differentiation between Vara Mahalakshmi and Valli . Now, to your question of how is it different from Kalamandir, Mandir, Valli I mean, Vara Mahalakshmi, I'll give you full four, five brand differentiate. Valli is that particular format which is going to be digital-first.
Now, in terms of product-wise, the kind of products that are there in Valli are heavily focused on power loom categories and entry-level price points of silk saris. So majority of our product offering, we don't heavily focus on handloom as a category since this particular format also has ethnic wear contribution. I think 20% of our collections will range above that INR 7,000-INR 30,000 price range.
Otherwise, majority of our product offering is less than INR 4,000. So that's the kind of price point, product offering, and the brand positioning that we have for Valli . Now, when you compare to a Kalamandir store, Kalamandir stores are positioned more like a family stores where there's menswear, kidswear, everything put together. And to a certain extent, yes, there is menswear contribution, but it has the heritage of the last 20 years as a family store.
So now, Valli is that young, new, dynamic format which is focused on today's ways of doing business, which is digital-first. That's the vision behind Valli format. With respect to, I mean, I hope I was clear on the overall Valli brand positioning. And I mean, as I mentioned in the earlier also, I think this format is not a very new format that we are going aggressively. We have already opened one store back in the past, and we have been collecting some data points.
And now we believe that this is the right time for us to expand further into not just tier-one stores, but in tier-two, tier-three as well. It's easy to expand.
Got it. So Vara Mahalakshmi, you're targeting about INR 20,000 inventory per square feet. And you have the numbers of like INR 12,000, INR 15,000 inventory per sq ft?
So currently, as I did mention, I think it's too early for me to give a model. But yes, you can take a comparison of a Kalamandir kind of a metrics with respect to Valli 's inventory.
Got it.
But on Vara Mahalakshmi side, you're right. I think INR 20,000 sq ft is the kind of inventory requirement for Vara Mahalakshmi. So with respect to your right on quarter three, quarter four, generally, historically, second half contributes higher than the first half contribution. So the same is what we should be able to anticipate this year, just that we have a little bit of season change that has happened. Barring that, we should I mean, if there are no I don't anticipate any surprises in terms of wedding dates also.
There is a healthy pipeline of wedding dates. So there should not be any such external factors that stop us. I mean, especially last couple of days has been a little bad with the rains, especially in the Karnataka and Andhra market. But I think it's still a manageable problem. It's not huge.
I mean, it's mentioned that there is a cyclone that is going to come up in the next one, two, three, four days, heavily affecting Andhra area. So apart from these factors, overall, from the business standpoint of view, it still stands to be healthy. And to your last question of what will be our PAT guidance for FY 2027, I think this year-end, we are probably giving you a guidance on the overall PAT number. But for the year later, we will still be focused to expand our retail sq ft presence by about 8%-10% of total retail sq ft addition.
Obviously, since we will be adding more Vara Mahalakshmi stores and more of those Valli stores and Vara Mahalakshmi stores both, the profitability generally should be a little bit higher because of the operational efficiencies kicking in.
These stores, I would want to mention that the additional stores that are coming, there is a good number of pipeline number of stores coming in the existing four, five states also. The nature it works is that because it comes from the existing warehouse, the operational efficiency should be able to technically kick in. I don't want to probably comment on the exact INR 200 crore kind of a number, but you should be able to see a good number, I mean, a PAC percentage number of about 8.5%-9% kind of a PAC number overall for the next year.
Got it. Thank you. Thank you so much for your answers. Thank you.
Thank you.
Thank you. The next question comes from the line of Shailesh Shinde from Millennium Finance. Please go ahead. Mr. Shilesh, please go ahead. Mr. Shilesh, please unmute your line and go ahead. There is no reply from the line of Mr. Shilesh. I will next move to Param Vora from Trinetra Asset Managers. Please go ahead.
Hello. Thank you for taking my question. And congratulations for a great set of numbers. So what I wanted to ask was regarding the aging inventory in your warehouse or stores. So do you usually write down the slow-moving SKUs, or you keep the price intact?
So overall, with respect to aging, we do have a healthy tracker of the kind of aging that we have. And historically, we have been operating at about 10%-12% of the overall inventory where the age is above one year. But the nature of the business model, as we keep talking about, is it doesn't just wear out or lose opportunity to sell, right? It's like majority of our product offering is sari, so it's one size fits all kind of a product.
So even after three years, four years, there is still a very good probability for it being sold. Now, the way we do it is through multiple methodologies. We give a better incentive. We rotate the stock between stores.
A couple of these business-level enhancements we do, and that in itself covers most of the problem where the products fly off our shelf when you incentivize the team rightly. But on a yearly basis, I think what we actually do is because we need to provide a positioning it for the end of the year where the inventory crosses more than three years or four years, we have a formula that is guided by the banks. With that, we demark that particular proportionate, and we adjust it to the gross margin.
But technically, we do not throw away these products anywhere, and these products are still in our stores and have a good probability to sell. So the ideology behind this is to go behind every last single product, make any value additions if required, and upsell the products in multiple stores and formats.
Okay. My next question is regarding the expansion in product portfolio. You are already into women's ethnic wear. Do you plan to expand men's ethnic wear and kids' ethnic wear?
Yeah, I think currently, we are still focused on the women's wear only. Women's wear industry is 5x more than the menswear segment. At this point of time, we don't want to diversify heavily into that. However, the diversity I mean, in terms of menswear and kids' wear, to your question, to a certain extent in KLM contribution of menswear, ethnic wear contribution is decent enough in the KLM story. But on the overall aspect, if we have to diversify, probably we should be able to start pinning down on focusing more on the women's ready-made category, which is kurtas and kurtis.
So that will be the category where we should be focused more on doubling down. But for menswear and kidswear, probably not yet.
Okay. Okay. Thank you.
Thank you. The next question comes from the line of Akhil Parekh from B&K Securities. Please go ahead.
Thanks for the opportunity. My first question is, Vara Mahalakshmi has guided roughly INR 925 crore, INR 950 crore of a top line for the second half, which implies growth of 8%-10% for the second half, so is the number more on a conservative side, or is it based on the portfolio that we are seeing in the month of October? That's my first question.
No, it's with a broader assumption of our annual growth in the range of 18%-20%. We have targeted annual growth into 18%-20%. It's on that assumption. October anyway is going well only. There is no drawback on any sales or anything. The broader assumption is earlier we were thinking of a 15%. 15% is already achieved. So on an annual basis, we are targeting anywhere between 18%-20% on a conservative basis. The figures are basing on that.
Okay. Sure. So there is a scope for upward guidance, basically upward growth than what is guiding based on the demand. I hope that understanding.
Correct.
Okay. Second question on the operating leverage side, right? As we have grown at 30%, and probably for the full year, we'll grow at 20%-25% depending on how the Q2 and Q4 pans out. Is there enough scope at 42% of gross margin level to go beyond 16% at EBITDA level?
Yeah. Already this quarter, we did 16% plus EBITDA margin. And if you remember last year, Q3, we did about 17.5% EBITDA margin. So as the Vara Mahalakshmi composition in the total sales is increasing, this margin will go up anyway. On the gross margin level, we deliberately put it at 42% for this year, 42% plus or minus 0.5% this side, 0.5% that side, mainly because the stores are under maturity, particularly the expanded capacity of about INR 125,000.
It's under maturity level. And for it almost reached about 70%-75% of its productivity against anticipated appropriately INR 50,000. We have reached around INR 36,000 at the second quarter. So the first target we put is that we should reach the productivity levels comparable or expected of Tamil Nadu stores. And then slowly, we will improve our margin profile therefrom.
By that time, the brands will be fully established in the market, and then we will have the other economies of scale, etc., kicking in fully, and then so next year onwards, we will focus more on improving the gross margin levels.
Sir, in your SSG calculation of the 74 stores, how many stores are one plus year old, and how many are say 2 and 3+ year old?
See, as per the purpose of SSG, we'll leave out the year in which the store was established, plus one year for the maturity. Then the next year would be the base year for comparison. Subsequent year will be the SSG format. So when I gave you the SSG number this time, it is pertaining to 50 stores which have qualified into this kind of a practice. The practice is like that for us. So at this point of time, the SSGs mentioned were on 50 stores.
Okay. And so is it fair to assume the remaining 24 stores of the 74 stores would be operating at a lower productivity, as you said, and would be at around INR 35,000, and then they will kind of next year probably reach INR 50,000 level?
Not all of them are operating at lower level. In fact, some of the flagship stores like our Pondy Bazaar or other stores, they are doing much more than that. So it's not as though the rest of the stores are giving productivity suboptimally. It is on an average for these stores. Average of these stores now will be when I said INR 36,000, INR 35,000. It is with respect to Tamil Nadu stores which have gone into expansion subsequent to IPO.
Got it. And last question from my side on the KLM fashion. Mr. Bharadwaj has highlighted in his opening remark or in one of the questions, I guess. He said on an improving trend, if you can give more color on what's happening. That's all from my side.
With respect to KLM, right, I think we are seeing a second good quarter of improved SSGs in overall KLM, which is supported by both change of product mix. We are trying to focus on bringing new collections and new particular segment, and the focus is shifted towards a little bit towards getting more ethnic wear component on the certain categories such as menswear, kidswear, and the women's wear side, so that's still the progress.
I think we are also doing a certain initiatives where we want to change the rack system and display system, so we have been able to get a positive trend so far. However, we would want to wait and see for another couple of quarters before we start rolling this out to other stores as well. Currently, this has been operational for about four to five stores.
And if this trend continues for another quarter or two, we should be able to start expanding and putting this out into the remaining eight stores as well. So sorry, remaining 13 stores as well. So that's with respect to KLM side of it. We are actively working on reduced expenditures with respect to HR personnel costs and other expenditures as well.
However, KLM is pointed towards that aspirational class value fashion. So we still have to do a certain amount of marketing expenditure and business promotion expenditure. And that's what we have seen in the current quarter too. Quarter two generally marks that point of time where pre-Dussehra time is where we try to attract our customers. And again, there will be a small window of opportunity during the Sankranti time for the business promotion expenditure. But at this point of time, I think it's growing good.
We are happy that we are able to see a second quarter, continued quarter of SSG growth. We are hoping that this trend will continue for the remaining year as well.
Okay. Great. Thanks a lot and best luck for coming quarters.
Thank you.
Thank you. The next question comes from the line of Naitik from NV Alpha. Please go ahead.
Hi sir. Thanks for taking our question. So my first question is, in our business update earlier this month, you had mentioned that you are going to add 10 more stores, six for Vara Mahalakshmi and four Valli . So just wanted to confirm these 10 stores we would be adding in the second half itself?
Yes. I think second half, we are poised to open around close to around 30,000 to 30,000 sq ft + or -, out of which I think there are about five to six Valli format stores, and there are about three to four Vara Mahalakshmi stores.
Got it. Got it. So my second question is, you mentioned earlier that three of the stores were converted to the Valli format. So which store formats were actually converted to Valli format?
So the reason behind converting this into Valli formats depends on the market changing dynamics. So one of them was from Mandir store. We've moved away where we've removed a Mandir store and changed it into Valli store. And we have converted two Kalamandir stores to Valli stores. So that's the count. But the majority, I mean, the thought process behind conversion is not format-wise. It's basically understanding that market dynamics and taking actions on that particular format.
Got it. Got it, sir. So next question is, what sort of revenue do you expect from a Valli store once it sort of matures?
I mean, it's really difficult to comment on that because we are looking at a festive, Dussehra-based quarter this quarter. And so far, the numbers are looking very healthy right now. But probably we should look at a year full of operations, and then I should be probably able to make a business model out of it. And that's the reason why the investor presentations and everything actually cover just the store count and not a business model. Probably we should be able to start making a business model once it at least completes a couple more quarters.
Right. Right. So my next question is, if you could give format-wise number of stores that we have currently and how will it look one year out, say in FY 2027? So that would give us an understanding of how to look at the numbers.
Sure. I think Valli stands at seven, Kalamandir stands at nine, KLM stands at 19, and the rest are Vara Mahalakshmi in that segment.
Three Mandir and 36 Vara Mahalakshmi.
Yeah. Three Mandir and 36 Vara Mahalakshmi. Yes.
I mean, fast forward, I think one, two years, I think you should be able to see Vara Mahalakshmi stores and Valli stores contributing.
Got it. Got it. Got it. So that's it from my side. Thank you.
Thank you.
Thank you. The next question comes from the line of Madhav from SKP. Please go ahead, sir.
Yeah. Hello. Thanks for the opportunity. So I wanted to know your thoughts on two aspects. One is the rent, and the other one is competition. So like several other players, several other listed retailers, they have been pointing out on rising rents and increased competition. So what are your thoughts on these two points? Yes.
In terms of rent, yes, there is an increased rental that is happening overall. But I think in the areas where we are operating, we are still able to maintain a decent amount of rental. But more than the actual rupee rent cost, the real thing is around making sure that the rent-to-revenue ratio is always healthy.
So we compare to other traditional players which operate almost about 8%-9% kind of a number, our rent-to-revenue ratio still stands at 4% despite the fact of our expansion into newer geographies. So that's an industry-level metric that we are able to outbeat the remaining rest of the competition because of higher productivity levels that we're having at a store.
Okay. And on the overall competition part, considering both organized and unorganized players, how is the competition? There is a surge or how do you see it? How are you seeing it?
On the competition front, there is a surge in the overall, in both listed, I mean, both organized and unorganized players. There are a few digital-only players and digital-first players who are trying to make some changes, but these are hardly like one, two, three kind of players, and it's not a big number at this point of time. It's still relatively small. We have seen such trends even in the past.
We have seen trends where these small-scale players have increasingly come on board, and in that same pace, they have also consolidated as well, so there are multiple examples like that. Though these guys, this new competition comes and tries to capture the market and disrupt the market temporarily, but on a broader perspective, this thing balances out because of the kind of brand power and the brand positioning that we are able to have.
It's that loyalty and trust which is what is helping us sustain year after year irrespective of the fact that too many competition is coming in any location.
Got it. Got it. And sir, just one more query. On the rent part, so what I can understand is basically the rentals are decided like how are the terms decided? The increased rent, this concern is only on the new stores that are opened or the existing stores also? Because on the existing stores, I'm assuming that the rental, the rate at which the rent will increase, these things are pre-decided, right, for the next several years or how can you give some light on this part?
Got it. So Madhav, so what happens is our negotiation generally happens between around nine to 15 years. It is a kind of negotiation term that we sign up. And you are right on the part that the newer stores have a different, I mean, a little bit increased. I wouldn't say it's very high increase. It all depends on the kind of market that you're going to.
But the old stores remain with their existing negotiated terms where we increase 15% for every three years. So it's still in that aspect only. And we have had new leases that we have signed. We have renewed our leases, and there has not been any surprises on that front. We are still able to retain the terms that we spoke about from the initial period only.
Got it. Okay. Thank you, and congratulations on a great set of numbers.
Thank you, Mr. Madhav. Thank you.
Thank you. The next question comes from the line of Manan Shah from MoneyBee Investment Advisor. Please go ahead.
Yeah. Hi. Thank you for the opportunity and congratulations for which set of numbers. My question was regarding the new store openings that we are planning to do. Are these in newer cities or these will be in the existing cities where we are already present?
It will be a combination of both. So with respect to the Valli formats, we have an opportunity in the existing store clusters as well. But Vara Mahalakshmi stores will majorly be in new cities.
Okay. Understood. And do we still, I mean, are looking to focus in the southern part of India or we are looking to then expand to the adjoining western and eastern and central regions as well?
So currently, as we speak, we do have plans to go beyond these four states. But again, it will be a small pilot and small pivot. It will not be a considerable change in our expansion strategy. Our majority of the expansion will still, in the next at least one year, one and a half years, will still be from the existing four geographies only. The way it works is I'll give you an example. So see, the kind of stores that we were able to open for Valli in the existing, though it calls existing geographies, are kind of stores where you would not have a fancy parking. You would not have a big street, like an 80-ft sq ft kind of a street.
However, these are smaller and inner roads where there is a very good spending power and very good market availability, but doesn't have the luxury of having a big, big parking or anything as such. So that's the kind of play that we are going with Valli 6. And these are three, three and a half thousand sq ft, so very quick to open. And that's the reason why the rental is a little bit marginally higher for Valli . But that's the logic behind our stores that we are expanding. But Vara Mahalakshmi stores, you're right on it. They're going beyond the existing cities. They're going outside of the existing cities.
Understood. These are primarily tied to cities?
For Vara Mahalakshmi? Yes.
For Vara Mahalakshmi and for Valli , currently it's centered towards?
Valli is a mix of both, right? It's a mix of both tier one and tier two both.
Okay. And the expansion that we are doing, are we the first entrant in those markets among the organized competition? And in the existing places where we are maybe first movers, are you seeing incremental competition coming in? And how is that impacting of those stores?
As I did mention, wherever we are going, probably we are the relatively new player and the kind of brand power or muscle power that we are able to command better products, better margins, and that kind of digital-first approach. We are trying to go all in and communicate that we are a quality brand for affordable prices that you can come and shop with us.
So far on that side, there has not been much that is impacting the overall story. But on the other side, in the existing stores that we are having, wherever there is a new competition that is coming up, as I did mention, there could be a temporary impact in terms of footfall because generally the consumers want to try out multiple stores before they end up their final purchase decision they make. But that, again, is a common phenomenon across this industry.
It keeps happening year over year. Some year it's less, some year it's more. And what we have seen is when those stores complete probably one year or one and a half year, and all that entire euphoria will come down. And obviously, the product and the positioning and the brand takes a front seat in this. And on that front, we are not worried.
We have seen these cycles happen. If you look back into our commentary, not last year, before year, we have seen an increased amount of competition that came in and that has created some loss in footfalls. But on a larger picture, on a grander scale, that's not something that we are worried about.
Understood. And then on the KLM side, you had an intention of franchising this format maybe in the longer future. So where do you think you are when you can start opening more KLM stores under the franchisee format? And also over here, what would be the mix of our own brands versus private labels? And how are we planning to move that more towards our own brands, thereby having more control over the designing and the product and so on?
With respect to KLM, I think we have to wait a couple more quarters before we build a model around franchising. At this point of time, I'm not able to give you an idea on how soon we will be able to expand, but it will not happen anytime in the next couple of quarters. On the product and portfolio side, majority of our product offering is in private labels only.
The reason being, even in KLM, the bigger contributor of the KLM in the overall revenue still stands to be sarees only. Though there is a small component of, I mean, in terms of private labels only, majority of it is happening. We are trying to focus on in the private label space only. We are figuring out products which can command a better margin.
Though we anticipate the private labeling where we wanted to slowly grow our in-house label called Desi Sitara, I think probably next couple of quarters we should be able to take actions on that, and that should be a bigger contributor in the overall. And Desi Sitara is a brand that is focused on women's kurtas and kurtis.
Okay. And then in terms of the private labels, what is the return policy or is it entirely outright purchase? I mean, do you have the option of returning these products if they are slow-moving or something, or it is generally outright purchase? And how are we looking to move towards a sale-or-return model over there?
So majority of it is outright purchase. We do not have much in the SOR category, sale-or-return. But however, we are trying to focus to start implementing a little bit of sale-or-return. I think last quarter also, I think we have started small. The objective here is we don't want to have dumped the stores with too much inventory as well. So the goal for us at this point of time is to improvise the SOR category, but so far it's still a negligible component in the overall inventory.
Got it. And overall on the inventory side, we were looking to gradually reach towards, say, 2.5 x inventory turn versus roughly 2 x. Do you see that happening over the next year, or it will take longer to reach that sort of inventory turn? Thanks.
We should be able to achieve it by the next financial year because once we reach optimum productivity on these stores and once we establish the warehouse in Tamil Nadu, then it will enable. But right now also, on a consignment basis, the inventory is coming down. Of course, September is not an indicative figure for that. September end figure is not an indicative figure for that. We are continuously bringing it down, and we should be able to achieve that 140 days kind of a thing by the end of next year.
Thanks. That was all from my side, and all the best for the future quarter.
Thank you.
Thank you. Ladies and gentlemen, we will take that as the last question for today's call. I would now like to hand over the conference to Mr. Bharadwaj for the closing comments.
Thank you. To conclude, I think Sai Silks Kalamandir continues to still deliver consistent growth while remaining focused on our long-term strategic priorities. Thank you all to our customers, employees, stakeholders for the continued support and trust. Looking forward to connecting back with you guys in the next quarter earnings call. Thank you so much. Have a good day.
On behalf of Sai Silks Kalamandir Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.