Good day, and welcome to the Vedant Fashions Q2 FY23 earnings conference call hosted by Axis Securities. 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. Gaurav Jogani. Thank you, and over to you, sir.
Sure. Thank you. Good afternoon, everyone. On behalf of Axis Securities, it's my pleasure to welcome you all and Vedant Fashions management for today's conference call. We have with us today Mr. Vedant Modi, Chief Marketing Officer, and Mr. Rahul Murarka, Chief Financial Officer. The management will start with a brief about the quarter, and we will then leave the floor for the Q&A. Thank you, and over to you.
Thank you, Gaurav. Good afternoon and a warm welcome to all the participants. I'm Vedant Modi, Chief Marketing Officer of the company. Thank you for joining us today to discuss the Vedant Fashions Limited Quarter Two and H1 2023 results. I'm joined by Mr. Rahul Murarka, the Chief Financial Officer of our company. I hope everyone got an opportunity to go through our financial results and investor presentation, which have been uploaded on the stock exchange as well as the company's website. Let me take you through the quarter ending and half yearly performance. We delivered another good quarter. In this quarter, we increased the number of EBOs, which is the dominant channel for the company. As of September 2022, the EBO area stands at 1.34 million sq ft, spanning 626 stores in 244 cities and towns globally.
The national EBO footprint validly is at 612 stores spread across 235 cities and towns. In quarter two, we opened net square feet area of around 62,000 sq ft and 23 exclusive brand outlets in India. We have also opened one new international store in the U.S., in Chicago, and we now have 14 international stores spanning across three countries. We're also happy to share that we have a strong and healthy pipeline for new rollouts planned for the remaining part of the financial year. Our overall customer sales growth ended at 73.1% over quarter two of financial year 2020 and 20% over quarter two of financial year 2022. SSG growth has been 35.1% over quarter two of financial year 2020, which was pre-COVID levels.
If we exclude the stores under renovation, we saw SSG growth, which stood at about 4.1%, which is including the stores under renovation and at about 6.7% if we exclude the renovations, which is in comparison to quarter two FY 2022. In addition to the network expansion, I would like to highlight our marketing and branding campaigns with Mr. Ranveer Singh during the quarter. The Taiyaar Hokar Aaiye campaign was built around savoring the truest sense of a wedding in your favorite Indian attire. The campaign was targeted to connect with the wedding attendees and close family members of bride and groom. The overall idea is to drive a behavioral shift in Indian men to dress up for Indian weddings. In this quarter, we also ran a 360-degree Rakhi campaign, which targeted the non-wedding occasions market.
We received a positive response from the market, and this was a good step towards reinforcing Manyavar as a celebration wear brand. Overall, we can see that the fundamentals of the business have been sound, robust, and the company has been encompassing growth. With this, I would now hand over to Mr. Rahul Murarka, who will take you through the financial performance of our company. Thank you.
Thank you, Vedant. Namaskar, and good afternoon, everyone. I would now like to highlight the key financial performance for the quarter and half year ended 30th September 2022, based upon the consolidated financial statements. The company has continued to demonstrate strong financial metrics and returns during this period. Starting from H1 of FY 2023 update, the company reported revenue from operations of INR 572 crore during H1 of FY 2023, delivering a strong growth of 59% compared to H1 of FY 2022. The company continues to report industry-leading gross margin of 67.8% during H1 of FY 2023 as compared to 66.1% in H1 of FY 2022. The EBITDA margin was around 49% and the EBITDA stood at INR 281 crore during H1 of FY 2023. It grows around 60% compared to H1 of FY 2022.
The reported PBT during H1 of FY 2023 is INR 228 crore, which has significantly increased by 72% compared to H1 of FY 2022. The company continued to report best-in-class PAT margin of around 30% and the profit after tax stood at INR 170 crore during H1 of FY 2023, with a significant growth of 73% compared to H1 of FY 2022. The company has a track record of generating significant cash driven by a healthy cash conversion ratio. Based upon PBT September 2022, our company continued to generate high cash conversion ratio of approx 85%, which has been computed based upon operating cash flow over PAT. With optimization in working capital, we have been able to achieve industry-leading trailing twelve months RoCE of approx 84% during twelve-month period ended September 2022.
Sales of our company was around INR 793 crore during H1 of FY 2023. It's a significant growth of around 68% over H1 of FY 2022, along with a SSG growth of around 54%. Due to COVID, FY 2022 was an abnormal year, having impact on performance across all the quarters. Hence, it is relevant to compare our performance with pre-COVID level figures of FY 2020, based on the management MIS. Our revenue from operations significantly grew by approx 70%, and we witnessed significant growth in PAT by approx 140% in H1 of FY 2023 over H1 of FY 2020. Sales to our customers also significantly grew by around 65%, along with a strong SSG growth of around 28% over H1 of FY 2020. Now coming to Q2 of FY 2023 performance update.
The company has reported revenue from operation of INR 247 crore in Q2 of FY 2023, delivering a very strong growth of around 23.5% compared to Q2 of FY 2022. The company continued to report industry-leading gross margin of around 66.5% during Q2 of FY 2023 against 65.9% in Q2 of FY 2022. The EBITDA margin was around 47% and the EBITDA stood at INR 116 crore during Q2 of FY 2023, with a growth of around 21% compared to Q2 of FY 2022. The reported PBT during Q2 of FY 2023 is INR 92.5 crore, which has increased by around 30% compared to Q2 of FY 2022. The company reported PAT margin of 28% and the profit after tax stood at INR 69 crore during Q2 of FY 2023 with a strong growth of 30% compared to Q2 of FY 2022.
Our sales was around INR 294 crore during Q2 of FY 2023, with a growth of over 20% over Q2 of FY 2022, along with SSG growth of around 4.1%. The SSG growth excluding impact of certain stores under renovation during the period was around 6.7%. Net store area of 62,000 sq ft was added in Q2 of FY 2023, with total presence of 1.34 million sq ft as on 30 September 2022. Now I'm comparing our Q2 FY 2023 performance with pre-COVID level of Q2 of FY 2020, whose figure has been considered based on management MIS. Our revenue from operations significantly grew by around 89%, and we witnessed significant growth in PAT by approximately 359% over Q2 of FY 2020. Our number of customers also significantly grew by approximately 73% with a strong SSG growth of around 35.1% over Q2 of FY 2020.
Thank you and namaskar everyone. We can now move to the Q&A session.
Thank you very much. We will now begin with the question and answer session. Anyone who wishes to ask a question may press star and one on your touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we'll wait for a moment for the question queue to assemble. Thank you. We take the first question from the line of Mr. Nihal from Nuvama. Please go ahead, sir.
Yes, thank you so much, and congratulations on the good performance. I have three questions. First was on the quarter, just on the gross margin improvement we have seen, annually 60 basis points versus YOY. Just wanted to understand, is that a mix-driven improvement or some price rises may have taken in the quarter mostly as well?
Our Q2 FY23 gross margin is 66.5% compared to 65.9%, which was there in Q2 of FY22. If you see a historical trend of gross margin, we have seen improvement in gross margin due to the efficiencies we have been able to build over the model. That is the main reason. You know, efficiency is not only in one aspect, but in various aspects, we have been improving efficiency. As a result of it, we are seeing improvement in gross margin. You know, on a quarter level, it can vary. It is always better to look at the annual level, which is around 66%-67% historically, which we saw.
Thanks, Rahul. The second was comparing your SSG of 35% versus the 4% that's on a YOY. It gives us a sense, and it was known also that last year there was a bumper crop in weddings, which would have seen a strong Q2 of last quarter. Is it that the last Q3 also saw a significant consumption weddings or say the festive period which could, you know, potentially have an impact on the YOY growth as we look at this quarter? Just to understand that better.
Nihal, just to answer your question, you know, the relevant way of looking at this would be that when we compare the numbers to FY 2020, quarter two, we were able to see SSG growth of almost 35%. That on a CAGR basis also at 10.5%. If we look at it that way, the health of the business seems very, very right. Looking at how Q3 goes, given that weddings start at 22nd November, once we start seeing the trend, we will be in a much better position to answer this question in the next earnings call. For now, all we can say is that quarter two's performance has been very encouraging for us. These are the kind of CAGR numbers we've been able to witness, based on a pre-COVID level as well.
Absolutely, Vedant. You know, as I said, as of Q2 also, as you rightly said that 35% versus the CAGR also jumps up 10, 11% kind of SSG, and last year was 4% even if you say, you consider the stores which were under renovation. It basically says that Q2 and last year would have been a very strong performance, and now we're seeing a reasonable sequential. Just what I just want to understand that is that inference right when I'm comparing these two numbers that you've highlighted, or there's something more that I want to map out.
No. Sure. I mean, that's one way to look at it, right? Last year was really good, and that's why we see numbers like these this year. On the other hand, I would also just like to mention that because we have come out of COVID, there's a large fleet that was under renovation in quarter two, and that's why we also mentioned that if we exclude the stores that were under renovation, the actual SSG numbers comes to be 6.7%.
Not bad. I just have one last question. Is this possible to give any qualitative or quantitative commentary on Mohey, how it has performed and any metrics in terms of how the business is progressing?
Sure. In terms of Mohey, the SSSG again has been reached at a company level, and we've been seeing very good positive feedback from the customers on the store level. Each and every metric that we track from a retail point of view has been improving, lead conversion, lead productivity. We are very, very excited about the brand. The Manyavar Mohey concept, which is of having Mohey in the flagship Manyavar stores, has proven to be a success and we continue to roll that out. While on the other front, like we discussed in the last earnings call as well, we are also working out on the standalone Mohey concept, which we plan to roll out very, very soon, in the coming quarters.
Yeah, you will start to see these stores going live in the coming quarters, and we are excited about witnessing the results of those and then taking a call on how fast we want to scale the standalone model from that point on.
Just very quickly, one last thing, the entire count for Mohey and the areas if possible to share that.
For Mohey, there will be no SIS. That is not something which we do. In terms of overall store count, we would be in the range of 100+ stores. It would be somewhat about 103 odd stores.
That's very helpful, Vedant. Wish you all the best. Thanks.
Thanks.
Thank you. We take the next question from the line of Percy Panthaki from IIFL. Please go ahead, sir.
My question was, also on Mohey. Just wanted to understand, the optimism that you're having in the brand is when Mohey is selling, inside your Manyavar store, I mean, side by side or whatever you call it, do you have any, test or a pilot where, Mohey is a separate, standalone store and what kind of, sort of experience you have or what kind of, KPIs does that store kind of generate? Do you have that yet or not?
Percy, we do have what we call an exclusive brand outlet store of Mohey in Kolkata. However, the catch here is that it's next to a Manyavar store. That's why from a metric point of view, what you're requesting, I don't find it correct to refer to this store. This particular store would only happen once the standalone stores open, starting quarter four of the current financial year. This is what we are working on currently in the pipeline, and you will start to see these stores coming up in quarter four. That is what we intend to study, and how scalable that as a model would be once we have actual data of those stores coming in.
What are the parameters you would track for these standalone Mohey stores to decide whether they are ramping up properly or not?
The important measures for the standalone stores would be the most important one which kind of talks about the scale, scalability of the business would be productivity. While there are a lot of other supply chain measures which you would take into account, such as inventory turnover ratio, and what kind of conversion levels we're able to see at the store level, which all leads to a better productivity in some sense or the other. The idea is to make sure that our franchisees are getting good ROI and that the business is also profitable, if we have good supply chain efficiencies built in. These would be the kind of ratios we would monitor and track.
What has changed in the Mohey brand over the last 12 or 18 months to give you more confidence that now we are getting it right?
See, I mean, as a business, we've always been confident, and it is just a result of improved merchandising mix and improved conversion rates at the store level, which has just been a result of better data efficiency and better, data management that leads us to having better merchandising at the store level. As we've been explaining across the IPO process and across earnings call that our entire supply chain is very tech-driven, and that basically results in the more data we have, the better we can perform at a brand level, which is what we're able to now witness with the Mohey brand as well.
Okay. Second question on your overall store rollout, can you give me some idea in terms of square footage? What is the percentage addition that you would target every year for the next two, three years?
The way we look at it, in the past that we've been able to grow our retail footprint at a CAGR of about 16 odd percent, we're quite confident that we'll continue scaling up our retail footprint at a similar kind of growth level when we look at it at a CAGR level. 16% CAGR is what we expect to see over the next 2 to 3 years.
What stops you from, sort of taking an accelerated path here that for the next two, three years you accelerate your store rollout and thereafter you sort of, recede it down? Why not front end it?
For sure. See, it's a matter of both planning the demand and planning the supply chain. We have to be very, you know, kind of, as a business, have to look at all sides of things and only grow stores at a level we're able to supply, number one. Number two, it's also a matter of being very controlled from a cost point of view also. We want to open stores that are very profitable, and that can only happen when we understand areas better. That is why we are comfortable seeing 16, which we're sure if we can grow faster, we'll try to do that as well.
Right. Last quick question, if I might. Any comments on the competitive landscape, and any changes in the competitive landscape that you're witnessing with some of the large players sort of having big ambitions in the ethnic wear space, wedding space?
No. We have access to our own data, and that shows us that the business health is extremely positive. We've been able to grow very well, both from a CAGR and from an overall fleet perspective. Given the kind of industry we operate in, the overall Indian ethnic wear market is about INR 1.8 lakh crores, right? There is room for definitely more than one player. The way we see it is that there's a lot of moats in our industry. Given that Indian wear takes a lot of time to produce, demand planning has to be done six months in advance. Given the kind of data we've collected over the past two decades, we have an advantage on understanding consumer preferences of India, which varies every 50 kilometers, given the dynamic cultural nature of our country.
These are the kinds of moats that our company enjoys. Furthermore, with the Manyavar brand, it's a brand that has almost become synonymous with the category, given the kind of branding initiatives we've taken over the past decade. With all of these things said, sure, there is room for more than a player, but we're very confident about our brand continuing to scale up.
Okay. That's all from me. Thanks, and all the best.
Thank you.
Thank you, sir. We take the next question from the line of Priyanka Trivedi from Antique Stock Broking. Please go ahead.
Hi. Thank you. My first question would be on our international business, how the demand has been in that market, and in terms of the contribution of this business to our overall
Sure. Our international business has been doing really well and has been growing fantastically. The growth has been almost triple digit when we talk about quarter two compared to FY 2020. We've been growing about 128% as the growth level compared to financial year 2020 quarter two. All of these metrics are very positive in terms of international business. While at an overall level, the contribution from our international business is still pretty low. We are still working out on different strategies, how do we convert it into an omnichannel business and take the international business forward from that point on. Multiple new stores are in the pipeline to boost this build up. Financially continue to enjoy a very high, high ROI from an international perspective as well. Yeah, we are very confident of the international business and see it growing quite rapidly.
Okay.
Sorry to interrupt, Priyanka. Your voice is breaking up, ma'am.
Yeah. Can you hear me now?
Yes.
Am I audible? Yeah. My second question would be on what has been the price-led growth driver, volume-led growth over the pre-COVID and on a year-on-year basis also.
Sure. When we see from pre-COVID, we were able to achieve 35% CAGR, of which there was a fair balanced mix between volume and ASP. That is the kind of growth we saw at a company level. That is how the CAGR was derived.
Oh, okay. Lastly on, you know, just the online share, what has been the share of online business currently?
From a share perspective, our online business directly contributes about 3% or so to our total revenue. There are multiple strategies that are in play with our online business. With our new digital initiative project still in the pipeline, we plan to launch it in quarter four. We have partnered with the best of tech companies to create one of a kind omnichannel digital experience. What we are trying to achieve is that both our online business take off from this digital project, and secondly, we'll be able to provide a very different experience to our physical consumers as well by planning a phygital journey for them, which connects the digital world with the physical world. We plan to roll out the new experience with the new store design sometime in quarter four.
Okay. That's it.
Thank you very much.
Thank you. We take the next question from the line of Ankit Kedia from PhillipCapital . Please go ahead, sir.
A couple of questions from my side. First thing on the new advertising campaign, you know, with, you know, Taiyaar Hokar Aaiye campaign, how do you see the inventory in the store changing, and how has been the initial response? Are we, you know, increasing the non-Manyavar side of the inventory at the store level? How is the shelf area at the store changing because of that?
Sure, Ankit. To answer the first part of the question, with Taiyaar Hokar Aaiye is a long-term play for us. What we're trying to do is drive a behavioral shift in Indian men so that they dress up to Indian weddings and the overall per capita consumption of Indian wear increases as a whole. However, that said, it's not something that would happen in the short term. We have to keep nudging the consumers with Taiyaar Hokar Aaiye to actually be able to drive such a shift, which is a long-term play for us. On the other part, which is how does inventory move in the store? The benefit to that is that products like kurta and jacket, they don't actually require so much of a shelf space because they can be stacked.
Rather wedding inventory like a sherwani needs hanging space, so they end up occupying slightly more area. Given the kind of inventory replenishment system we have, given our current fleet, we are able to manage stock very beautifully where big stores are almost replenished 3-4 times in a week and smaller stores are replenished 1-3 times in a week.
The kurtas, are we increasing the lower ASP kurtas from 1,000-1,500 range as well or we are playing in the 2,000-3,000, 4,000 range?
When we talk about the INR 1,000-INR 1,500 rupee kurtas, the main brand that would cater for that demand would be Manthan. In the Manyavar brand, we aspire for the pricing to start at INR 2,000 while there are some casual kurtas available below that as well. However, as you mentioned, the range would be INR 2,000+ within Manyavar while Manthan would continue to cater the INR 800-INR 1,500 rupee kurta market which also contributes to our online business.
Sure. The last question is on Twamev. You know, we were expected to launch 2 EBOs, you know, this year. What is the status on that and how is the pricing strategy, you know, differential between Manyavar and Twamev, you know, because demand for premium sherwanis for grooms is high at the moment. How do you plan to capture that?
Talking about the Twamev here, absolutely in the pipeline the stores, the two stores have been signed. We are about to, you know, kind of we are planning how to launch it. The design work has also been done. We were able to bring in a French design agency to design the entire retail experience for Twamev. Everything has come out beautifully. We are extremely super excited about the brand being launched sometime in quarter four. However, given that one of the stores is in Delhi and there are some construction prohibitions by the Delhi government, we will have to see how that store, if we're able to manage to launch it in quarter four or will that spill over to quarter one. That is still a question based on the guidelines of the government. Rest everything is aligned.
From a pricing strategy perspective, the company believes in the aspect of perceived value. We price our products based on how a consumer would perceive it. From an overall gross margin level, even though it is, it would be slightly lower than Manyavar, we are still very confident of scaling it up to Manyavar levels in the future and at a company level in the future. Yeah, overall demand from a Twamev point of view and the conversion rate that we see in the Manyavar store gives us a lot of confidence for the brand.
One last thing, what is the shop-in-shop number overall for the company for this quarter?
The total shop-in-shop number that we opened this quarter in total.
In total we have 100+ shop-in-shops as on 13th September 2022.
This number was 77 end of quarter four, right?
It was around 77, 80.
Okay. Bulk of the store opening this half is shop-in-shops, right? Is that a good assumption to make?
No. We opened about 17 shop-in-shops. Actually 16 shop-in-shops while we opened 7 exclusive brand outlets in this quarter.
That's helpful. Thank you.
Thank you very much.
Thank you. A reminder to all the participants, anyone who wishes to ask a question may press star then one on their touchtone phone. We take the next question from the line of Mr. Santosh Kumar from Shivansh Holding. Please go ahead, sir.
Hello.
No. Yes.
Yeah. Rahul, thank you for the opportunity. I just have a small question. I just want to understand that, for example, if you see your quarter number there's a slight decline. I just want to understand that, for example, in general, when there's a quarter or improvement or decrease, what is the main reasons which you attribute for? This quarter as an example also.
If I had to explain our business, right, it's not a business to be looked at quarter-over-quarter. Given that our primary market is the wedding wear market, currently, our business moves as the wedding calendar moves in a typical year. To just give you an example, if you look at historical averages of how our quarterly business moves. Quarter one typically would give us 24% of our business, quarter two, 13%, quarter three, 37%, and quarter four, 20%-27%. That is a typical way our business moves and progresses. Quarter-over-quarter would not be a right metric to judge our business by and that is why what we tend to do as a business is look at it from a YOY perspective.
Because last year was still we were coming out of the shadows of COVID, and we were still in shadows of COVID, we are also compared it with FY 2020 Q3 numbers.
Furthermore like if we have approximate range numbers it's not, you know, specific that this will be 24 or 13. It can be 2, 3% ± within quarters. But these are broad ranges which we have mentioned.
Okay. Okay, got it. My last question is on the Mebaz brand. Which is mainly concentrated in South India. What is going on with the brand? Can you just give some light on that?
Sure. Mebaz is a brand we acquired in 2017, and the brand has been doing very, very well. It has a very strong heritage background and a very strong cultural connect with the consumers of AP and Telangana. Yeah, we've been able to witness very good SSG growth in the brand this quarter. We continue to build that brand in those markets. The strategy is to remain in ATM, that is, own Mebaz, and continue its growth in those markets.
Okay. Got it. Thank you, sir. Have a good day.
Thank you very much.
Thank you. We'll take the next question from the line of Anush Mokashi from Yadnya Academy Private Limited. Please go ahead.
Yeah, hi. Thanks for the opportunity. My question is about the franchising model we have. Essentially, I understand that we operate on 18% and 29% channel margins. Just wanted to understand from you, are you like differentiating giving franchise that 18% and 29% or is it that one of it is more beneficial to you?
No, actually two. You're right, we have two models, 18% and 29.5%. It's not that, you know, one model is more beneficial than another. Okay? 18% model, we are paying the lease rent. Generally it happens wherever we have a strategic location where we want to take the lease. That is one difference. 29.5%, the franchisee is having both. He's paying the lease as well, lease cost as well. We have derived the model in such a way that the differential margin between with or without lease cost easily takes care of the, you know, incremental lease cost. It's not about, you know, who is getting more benefited with the different franchise model. It is equally, I would say, completed so that it is beneficial for both the franchisee as well as the franchisor.
None of it is, like, margin negative, that is what I'm trying to get onto.
Yeah, yeah. It doesn't have any impact on the P&L or anything like that. It has balanced it neutral enough based upon our historical trend and experience.
Okay. Great. Essentially my next question was about these margins. These margins are like particularly, and just to sort of understand from you, like what is causing them to be, maybe that high? Is it just the pricing which we are seeing or maybe there's a cost advantage? If you can just explain us what is that cost advantage we are having?
Sure. To put it correctly, it's neither price nor cost to an exact definition. What the company's biggest USP is, it's supply chain technology. We're able to plan our demand correctly and we're able to supply just enough. That allows us to never have sold a single product on discount in the Manyavar brand. From a pricing perspective, we price our products very similar on a similar multiple on cost as other players and other peers of the industry. Yet because we never sell a product on discount and there's high demand and there's high demand planning efficiencies, we're able to do away with discount and that is what leads us to such good margins. That's the main reason if I have to put it that way.
Okay. Okay, great. This last question is about international business. In terms of, like, the internationally expanding and the capital internationally is higher, so are you able to price the products higher outside as compared to domestic pricing?
Yes. Given the kind of cost we, the franchisees have to bear outside India, we do a pricing strategy model for each of the countries we open, and the pricing changes for the country based on the kind of costs the franchisee is going to incur in the country. Yeah, they are definitely higher than Indian prices. As a result, we've been able to increase our ROI across different countries, because ethnic wear as a segment is a one-on-one shopping experience. Even in the U.S. you will find that one fashion advisor would be dealing with one customer. To deal with those reasons, the price has to be taken. Given that, employee expenses are a lot more than India.
Okay. Thank you. Thank you so much. That is all from my side. Thank you.
Thank you.
Thank you, sir. We take the next question from the line of Mr. Abhishek from Mirae Asset. Please go ahead, sir.
Hello. Hi, Abhishek.
I think we've lost the line. Just allow me a moment. We take the next question from the line of Mr. Gaurav Jogani from Axis Capital. Please go ahead, sir.
Hello. My question, you know, is with regards to is it better to look at the kind of better performance more on a, you know, a sales per sq ft metric? Because when you do that on a sales per sq ft basis, it seems that, you know, your sales per sq ft has increased, you know, 8% YOY, despite the fact that, you know, you had a high base and also the fact that, you know, you had a large number of store openings which would have not contributed fully. Do you think that would be right method that's to look at the overall performance?
Sure. Absolutely point taken that, you know, rent, so revenue per sq ft, which we call productivity internally, is one of the most important metrics from a retail point of view, and that is what leads to a good profit for the franchisee and for the company overall. Those numbers have been very encouraging for us. Our current productivity stands at about INR 13,200, which has significantly grown over the years. In fact, it's even grown from the FY 2022 numbers, which stood at about INR 12,700. Yeah, those numbers are very encouraging for us. Hopefully, the idea is that we continue to kind of grow this from here on.
Awesome. Also the next question, you know, is with regards to your employee costs. If you see the employee cost, you know, it has remained kind of flatish in an absolute level on a QoQ basis. If you can help us out, you know, how we should look at it given the context, you know, in the first quarter there was also some, you know, cut in the management remuneration as well that we were able to. If you can guide us, you know, how we should look at that and what is the guideline there.
Because the company does not hire employees on the front end, which is on the retail stores, majority of the employee cost you see is all the employees that sit out of the head office and that work at a corporate level. The major reason, like you mentioned, is because of lowering in director remuneration, which we took in quarter one. In terms of guidance, we don't want to give any particular guidance. However, as the company is moving forward from being a one brand, majorly led by one brand, which is Manyavar, to being a house of brands with five brands internally, we are building up our verticals in a similar sense now. Yeah, we will start to see some of the HR costs from that aspect in the long term.
I don't want to give any particular guidance. As you know, efficiency will be the key, so we will do as much as we can to keep building on efficiencies in the business.
Sure. You know, one last question from my end is in terms of, you know, we have seen that you have also added five new cities, you know, during the quarter. You know, even the city addition has been robust. If you can, you know, just give us some sense on how you are looking to open the stores across the various Tiers of India and how it will become interesting, you know, how the metros are performing versus the rural Tier 2, Tier 3, Tier 2 towns kind of coming to some. If you can highlight on that front.
Sure. Overall, like you said, yeah, it was. We saw a very robust opening in terms of new cities. We entered some Tier 2 cities, like Bangalore and Kolkata, while the remaining were all Tier 3 cities, and these continue to do really well for us. From overall metro versus non-metro growth perspective, when we compare the numbers to FY 2020, we see that all tiers have grown very well, pretty much equally, metros being at a slight advantage when compared to FY 2020. However, when we compare it to COVID impacted years, then we see that the growth from Tier 2 and 3 was very high in the COVID impacted years, where we believe that people were staying back in their towns and cities and purchasing in those areas. However, as COVID is normalizing, we are out of it.
We're seeing that the trend of good share coming out of metros has returned.
Sure. Thanks. Thank you, ma'am. Understood.
Thank you. Ladies and gentlemen, that was the last question for the day. I would now like to hand the conference over to the management for closing comments.
Thank you very much for all the encouraging words and it's always a pleasure interacting with all the analysts. I'm looking forward to the next quarter and a very happy festive season to all of you. Thank you very much and Namaskar.
Thank you. On behalf of Axis Capital Limited, that concludes this conference. Thank you for joining us and you may now disconnect your lines.