Ladies and gentlemen, good day, and welcome to V-Mart Retail Q2 FY24 earnings conference call, hosted by PhillipCapital (India) Private Limited. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Ankit Kedia from PhillipCapital (India) Private Limited. Thank you, and over to you, sir.
Thank you. Good afternoon, everyone. On behalf of PhillipCapital, I would like to welcome you to the Q2 FY 2024 earnings conference call of V-Mart Retail. From the management today, we have Mr. Lalit Agarwal, Managing Director, Mr. Anand Agarwal, Chief Financial Officer, and Ms. Suchi Mukherjee, CEO of LimeRoad. I would now like to hand over the call to Lalitji for his opening remarks. Over to you, Lalitji.
Hi, good afternoon, everyone. Welcome to this call. Thank you, Ankit, and good. So, we are at the peak of the festivals. The buzz of Diwali is being seen in the entire India, especially in the northern part of India and western part of India. The eastern part of India did see a wonderful Durga Puja. The start was very good towards the end, because the Durga Puja was launched a little earlier in Bengal, so some customers started moving out for Durga Puja festival. So things became normal, but anyway, the overall performance in the Durga Puja markets was better and good.
Overall, we see definitely some improvement and good improvement in both the macro Indian economy, because we are seeing definitely good growth coming in from the volumetric point of view. And we are also seeing consumer coming back, and coming back to shop. So, I'm seeing a healthy growth coming in. There's definitely good monsoon, which we have seen in the entire India, except one or two states, where we are seeing the little dampness in the monsoon. But I'm not seeing too much of effect coming in from there. Largely, the overall macro Indian economy, I think, has become much more better. It is showing up great results.
Our team India, the whole government is working so much to bring in newer investments and newer production facilities and new employment opportunities, which is making people look very highly motivated. And as I've been traveling in all these small towns and villages and multiple states and towns, I've been talking to multiple people, both entrepreneurs, consumers, and even our store team, we have been getting very positive mindset outlook from the people with respect to India. And they are all feeling proud, and they are all feeling very confident that the things are going to become better and better. So that's what we are seeing on the card. So similarly, the consumer sentiments are also becoming better.
Definitely there is a pain. There was a pain, which was existing for those consumers in the rural markets, in those consumers who actually either are from villages or are living in the small town. These consumers had challenges, and we have seen those challenges in the last two, three years, especially after inflationary pressures. And those pressures are now getting diffused, and we are seeing those pressures year on year, every quarter, we are seeing those getting diffused as well, as we are approaching the election times. So these are still getting better and will get better as the time comes in. So we are seeing good development both in the agriculture sector.
We are seeing the prices of the yield, the prices which are coming for the yield are actually delivering good prices to the farmers. The whole farmer community seems to be happy. This seems to be helping the economy to, you know, generate higher demand or higher consumption. And that's what we always believed in, and that's the onset of the cycle, which is led from the rural demand. And I think that's what has happened and which we are seeing, and we were expecting, and we are expecting in this festival. And we should see some part of those benefits. Still, there's still a lot of benefit can be approved. So a lot of changes has come in.
A lot of changes has come in, in terms of our own operational process. And I would like to focus very highly on the whole strategic pieces that we did in the last two years. The whole change in the whole buying process, the designing process, the change in the whole vendor selection process, the whole lead nomination processes, the kind of product lines that is coming out of these, these product, these initiatives and all the kind of improvement in our cost structure, which is happening. So all of those things definitely have taken a lot of breadth and has taken a lot of effort. And the team at V-Mart has been very, very consistent on delivering most of these projects.
And the biggest project was also the warehouse, new warehouse development, automation of the new warehouse. All of those things, there are—whenever there are new things which get implemented, these things definitely gives us a little teething issues or little disruption in our operational processes, which are also a part of this performance that we have been seeing. So we have gone through all of those. We are still on the path to create newer processes, create newer technology platforms, have those platforms which makes us much better, both in terms of increasing the agility...
better coordination between multiple departments within the organization, and better coordination between the store and the back-end team, or better coordination between a vendor or a mill to the buyers. So we are working on a lot of these areas, including the entire logistics chain, and then the logistics fleet. So a lot of new platforms have been introduced, a lot of new technologies have come in, a lot of better analytical tools has got introduced. We have used a lot of analytical model that we had created with the help of the consultant that we had before, and we have changed a lot of initiatives there as well.
And we are trying to get better in all those areas so that the outcome, which is in terms of the consumer demand, or in terms of meeting the consumer aspiration, or in terms of meeting the timeliness of the product line, are also get aligned and get integrated. So all of those things, I think we have worked a lot.
There is a lot that the team or you people may not be able to see, but there's a lot which is going on in the organization, both from the perspective of product, from the perspective of store, the store look and feel, the store so far, the change in renovations, lot of work on the way we display the product, on the way we dispatch the products, the way we allocate the product, the way we create the product, and the way we get it manufactured now. So, a lot of those things now we are able to see those coming out in the stores, and the consumers are also very happy.
We have been able to decrease our average selling price also in these processes, and that is our goal. Because our goal is definitely to give the customer the best value proposition, and the best value proposition is largely looking at their budget and looking at the kind of fashion that they want with the greatest quality that we can offer. So all of those things, I think we are making inch by inch these building blocks, so that these building blocks actually create much more better strength, which will be used in the longer term, and that's what customer is realizing. We know that we have disappointed the consumers in the last season, in the last year, and now we want to bring them back, and that is... This is what is coming in.
And that's how we are also now rolling out all those things, initiatives, both in the V-Mart market as well as our Unlimited market. And then our Unlimited market is also showing up great, great strength. All the stores that we are opening up there, the new stores which has come up in those Unlimited markets are really showing good results, are showing similar results to as V-Mart, and that's the positive news there. There are still some laggards which are the legacy stores, which are still not coming up to the operational parameters, and that's where we are working on.
Either we take some decisions, write those off, or as we demonstrated that in the last two quarters before where we have some pain in some certain stores in the Unlimited market, we'll try to take some decisions on those as well. As part of our online strategy, I think the team there is also working greatly well in line with their projects. They have definitely created some new projects. They had some projects earlier. Most of those projects are, they are able to meet the expectations.
Some of the projects they are still working on, and there are some new projects that they have taken up, so that we actually bring down the cost of operation there and then take up the whole profitability angle and bring in a profitable, sustainable model. And that's what we are trying to work on. But the team there is definitely bringing in a lot of new innovations, lot of new technology, lot of new processes, which is actually bringing in to integrate both and create an Omni-channel experience. So that's the model that we are trying to work on, and that's where we are trying to create a legacy and create a strong foothold, which will become unique in the market.
I think we have been very, very aggressive both in terms of the customer expectation as well as the customer attention. And then that's where we think we have improved. We have improved on our communication skills. We have improved on our marketing capabilities. We've improved both in the offline world as well as the online world. We are working. There's lot yet to be done, and that's what we'll focus on. And largely, I think we feel that there's a lot of confidence which is coming in in the internal team. There's a lot of work that we have done. There's a lot of travel that the people are doing to the stores.
There's definitely some part that we are seeing also the competitor is gearing up. They are making better things better. But I think this whole organized retail market has become much better. It's becoming much more lucrative in terms of the consumers now understand that in the market, it is just not, they are not going to go to those unorganized, brick-and-mortar, old-fashioned retail stores. So there's large shift which is coming up and which is expected to come up, and that's what this new generation retail is all about in India. And then this is what is a new welcoming move, and I think the share of organized retail overall is going to go up, and that's what is happening.
We are seeing players who have been delivering good value to the customer, players who have been... Whatever is the brand name, the customer is not, not, you know, not too, too, aligned with the brand, but the customer is more aligned with the product, and customer is more aligned with the experience. So that's what at V-Mart, we believe that our store team has to become the fashion assistant. Our store team has to become the helper to the customers, value proposition and the, and the styling proposition. And that's what we are trying to take up. We focus, we want to focus very, very high on the core consumer, which is the core family customer, the young family customer that we have, and that's the focus area.
Because our capability to deliver a great kidswear product, great women's product, and the casual wear, the men's segment. And those things have actually geared up. In this new season, we feel the whole winter range and the new festival range, which we have launched in the market, should bring in a very good result. This quarter three, we expect is going to be a good quarter for us, should be a good profitable quarter for us, because we have not seen profits for a long time. So this is something which we are working on and trying to get the best out of this. And we'll keep you updated. We have been definitely also expanding on multiple areas in retail.
I think a lot of stores that we have opened up, even in this quarter, almost all the 30 stores we opened up in this quarter are in multiple destinations in India, but also in South India, which is in Tamil Nadu, we have aggressively expanded. We have expanded in Kerala. We expanded in our basic towns of basic states of Uttar Pradesh and Bihar as well, and then some part of Eastern India operations have really shown up great results there as well. So some pieces we have done there.
As I've already spoken about, the Omni piece, which we are working on, there's not that Suchi will also update you in the, in the, in the, in this call, or maybe, maybe, that maybe Anand can update the team also. And then I think the entire consumer segment is going to show up this time. The wedding also is there in this particular quarter, towards the end, after the Diwali. So that also should be a good booster to the consumer. And I think our intelligence, our data understanding, our focus on taking decisions from with data, our focus on up-building the ecosystem to use technology and become on the digitalization.
Some of these initiatives are very, very important to the company, and that is where our focus is. That is where we are working on, so that we can create sustainable and scalable model. It is just not showing up results in this quarter, but it is also showing up results even after this quarter. So that's the area that we, my team is working on, and that's what we will try to upscale and better, and then create an excellence. And I'll leave this call and ask Anand to give you a little more detail, and then we can come on the question and answer session. Thank you.
Thank you, Lalit, and good afternoon, everybody. Let me take you through some of the key operational highlights from this quarter, and then we can open the session for questions. Unfortunately, Suchi has been trying to log in, but because of some network issues, she's not able to join in. We'll try if it's possible for her to join, but otherwise, I'll try and cover as much as possible on LimeRoad as well. So coming on to the quarter highlights. Quarter two is usually a very small quarter, and, like every year, you know, it's not the best of the quarters that we might usually have. But with Adhik Maas and also the shift of the festive calendar by 20 days, the quarter became even less eventful this year.
So last year, Durga Puja and Dussehra fell on 5th October, while this year this was on 24th of October, which meant the run-up to the festive sales, which usually begins 15-20 days in advance, entirely got shifted to quarter three this year. Despite this, and on the back of eight new stores, plus the nine new stores that we opened in Q1 , and also the volume-led sales improvements, the sales for offline business grew by 5%, while at an entity level, factoring in the contribution of the newly acquired LimeRoad business, the total revenue is 2.9%. We had spoken about the correction in pricing over the last few quarters, and with great emphasis on attracting the inflation-impacted, price-conscious value customer. We focused on increasing volumes while reducing our apparel ASPs by 6% YTD.
For the quarter, the apparel ASPs actually decreased by almost 12%, which was driven more by, you know, the change in the product mix from premium to economy, which is also in line with the customer expectations and demand during this period when the festival shifted to the next month. The decrease in average selling prices has also helped achieve a 6% positive LTL volume growth, despite a non-festive quarter, and has helped us drive more footfalls, which will grow even stronger in the main season ahead. The decrease of ASP in South has been much steeper, at 19%, as the potential to improve pricing was much higher there.
The good news has been that the steep price benefit for South customers has also resulted in 11% quantity growth, even in a relatively flat period, which should eventually help us to build higher footfalls and volume growth going forward. We opened eight stores during the quarter, while we closed two, and in the last 36 days, post Q2 , we opened another 14 stores and closed one, to take the total tally to 450 stores across 291 cities now. For the full year, we maintained the guidance of opening 50+ stores, as mentioned earlier as well. In addition, there has been a lot of focus around renovation of older stores with the new fashion dialer fitments and façade changes.
Some part of that might also be visible in the investor deck that we have put up on our website. These are very important changes and will help us improve sales per square feet of existing stores at a small incremental CapEx. On the margins front, the decrease in ASP and strategically improving the product mix towards lower price product mix to attract, the, you know, the under stress, lower income earning group customers led to a margin drop. Also, the slow sales period meant an extended promotion period on EOSS, which has partially impacted the margins. EOSS also was a good time to liquidate major part of the higher cost inventory from last year, which was purchased during the times of peak cotton prices. This also impacted the gross margin slightly negatively.
As we've communicated in our calls in the last two years, we've been pushing more V-Mart inventory in South Unlimited stores, which is significantly more sharply priced and, lower on gross margins. This has also, partially impacted the overall gross margins for the quarter. Post Q2s, Q3, which is traditionally a very strong quarter, both for top line as well as bottom line, the margin trajectory should stabilize and, come in line with our strategy to grow on volumes and give higher benefits to customers. For the full year, I, my sense is that the margin should marginally be lower than last year in percentage terms, as we build higher volumes, but they will definitely be higher in rupee terms.
Coming to expenses, while the total expenses are increased by 46%, they also include the impact of LimeRoad business, where the expenses are the same as last quarter, despite the revenues increasing by 25%. And that's a very good sign, and this is what exactly we were trying to communicate in our earlier calls as well, where we have an internal plan of building the LimeRoad business, but on a quarter-to-quarter basis improvement. During the quarter, we have also completely transitioned the vmartretail.com business to limeroad.com from end August, and it is heartening to note that there has been no sales loss due to this shift.
And in fact, on the contrary, online sales have only grown on LimeRoad for V-Mart products due to this redirection, amplifying the confidence of the online business team in leveraging LimeRoad as the go-to marketplace for affordable fashion. Excluding the expense for LimeRoad, the expenses for the quarter grew by 14%. And for the LimeRoad business, while marketing costs accounted for majority of the expense, there has been a significant rationalization of the marketing expense in quarter three, and on a go-forward basis, it should come down as well. The integration of V-Mart Retail with LimeRoad will also provide some online marketing cost synergies in the medium to long run. On the Unlimited side, there were certain savings on rent and other expenses due to the closure of loss-making stores in the previous quarters.
Otherwise, on the total other expenses besides marketing, there is inflationary pressure as usual, which needs to be offset by LTL sales or like-to-like sales or volume growth, which is what, as a team, we are targeting and aspiring to achieve on a full year basis. Moving on to EBITDA. For the offline business, EBITDA for the quarter was 4.1%, with Unlimited at 3.1%, while at entity level, the EBITDA was flat, at almost 0%, which included a loss of INR 20 crore from LimeRoad. The decrease in EBITDA from previous years has been, as mentioned earlier, in the gross margin discussion, due to the planned change in product mix and also introduction of more entry price point products and higher liquidation during the quarter, which partially lowered the gross margin available for offsetting the expenses.
The LimeRoad business has been performing mostly to plan, with double-digit improvement in net merchandise value, commission revenues, and also the decrease in cash burn quarter on quarter. The next half of the year for LimeRoad business should see serious curtailment in burn to limit the overall EBITDA loss to, you know, approximately around 20% of the overall V-Mart EBITDA level, as communicated earlier. The team has been working very strongly, very, very steadily in ensuring that the focus of the LimeRoad business remains firmly on achieving the bottom line. I'll just speak about that a bit later. On the cash flow and CapEx, largely the CapEx has been around new store additions, store refurbishments, and leftover work in the newly operationalized warehouse.
There has been a lot of work done around the buying and merchandising and ensuring that right and relevant inventory availability is at stores. As a result, despite the festive push, and 15% more number of stores, the total inventory reduced by INR 74 crore year-on-year, helping improve the working capital cycle. 10% of the overall inventory remains, from partner brands and, which is deployed in Unlimited stores, where the company has lower risk with fixed margins on sales and higher trade period. Coming to new store expansion, during the quarter, we opened 5 stores in V-Mart and three in Unlimited, a total of eight stores, while we also closed two stores, one each in both the brands. The runway for the year is still maintained at 50+.
Happy to note that 14 stores have already been opened in October and till yesterday evening in the run-up to festive period, till date in quarter three. As Lalit mentioned, the festive season has begun well, with a good Puja, and good start to Diwali pan-India. Early winter chill and wedding calendar in December should further aid well for the quarter performance. Now, since Suchi is not here, I'll just try to fill in some part on LimeRoad, to the extent possible. So the entire focus, as I mentioned earlier, of the team, has been to stabilize the operations, to integrate the operations as much as possible with the V-Mart omni-offering, the V-Mart catalog uploading onto the LimeRoad platform. There is significant progress which we have made in integrating the two, you know, catalogs.
There is already a significant amount of total V-Mart online sales, which is now coming in from LimeRoad. In fact, LimeRoad now becomes the highest share of orders in online order generation from the online channel for V-Mart. And that is also comes at the highest amount of profitability or least amount of loss.
The focus of the team, for the go-forward basis for the next three months, the LimeRoad team is going to, number one, is going to on optimizing the bottom line by optimizing the customer acquisition cost, marketing. Second is to ensure that we are able to get more projects deliverable as planned around organic customer acquisitions, improving the customer acquisition cost, improving the throughput, so that we are able to achieve the targeted EBITDA bottom line.
And also, lastly, but not lastly, and also very importantly, the integration of online channel with V-Mart offline, which basically means that any customer who is coming to a V-Mart store is seamlessly able to order any missing sizes or any missing designs in the on the LimeRoad app, using a single click, standing at the store. So, overall, I think the trajectory of the LimeRoad team and the business seems on firm ground, with 25% improvement in revenues and also, you know, reduction in the loss versus the last quarter.
I think the way things stand today, we are all very confident that we should be able to achieve our stated numbers of achieving, you know, we've stated around 20% EBITDA loss as a group, for maximum 20% EBITDA loss as a group, being contributed by the LimeRoad business. So that is all from my side, and I'll now ask Ankit to, you know, open the floor for questions. Thank you.
Thank you, sir. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone phone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to only use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Mr. Tejas Shah from Spark Capital. Please go ahead, sir.
Hi, Lalitji. Hi, Anand. Thanks for the opportunity. Lalitji, you spoke about that we have kind of undertaken many projects in the last two years, and they are now finally kind of activated, if I understood correctly. So just wanted to know, as an outsider or as an investor, how should we monitor or appreciate the impact of these projects? Will it be better revenue momentum or margins or capital efficiency? How should we kind of judge in terms of financial parameters, effectiveness of all these projects?
Tejas, I understand, and that's what my ask is also, from that, you know, all these projects should lead to better customer experience, number one, which means better sell-through of products, which means better sales coming in, and which also means better supply chain management, which also means better inventory management. So I think we should be able to, if we do well, and the market supports, we should be able to show up results all across, and we should be able to see these results, which are the lagging indicators. And the lagging indicators are ultimately the sales growth. The lagging indicators are ultimately the margin growth. The lagging indicators are also the inventory.
In the margin, we may take a strategy that we may want to still offer the consumer at affordable prices. We may do all of those, but yeah, largely, we should be able to see results on all the three areas and the scalability.
Got it. And second, last year we had communicated that we are not very comfortable with high level of margins. And as you spoke, Anand also spoke that we want to kind of add more value to the customers. So are we done with that, margin or price correction journey, or we believe that, there's still some benefit left to pass on to the customer, which will mean that there'll be some pressure on at least gross margin level in coming quarters?
No, I think we have seen the work, but definitely, there is also what we have seen is some lower prices. We have dropped the prices this year. We have seen that in the last summer season, but this season also, we will see our ASPs almost at a decreased level because our ASP comparatively will be lower. What has also been there, that last year when we were buying and the inventory that we had, were also high-priced inventory, and we have communicated that as well. So we are also trying to liquidate or we have liquidated large part of those. Some of the inventory, which is the winter inventory, which is left over, will also get liquidated in some part in the coming quarter.
But, but largely, I think we are done with most of those as a margin management piece. We will, and all the projects are also targeted towards margin betterment, which is in terms of the cost structure. The cost should come down so that it automatically leads to a better margin. And I think the team has done a good job. We should be able to reflect some in the coming quarter.
So Lalit, 80%-90%, if you can give some ballpark number, what % of that high-price inventory will be, would have been flushed out by now, and then what is still left for second half?
I think almost 70% of the inventory has been liquidated. But yeah, there is still 30% of the inventory, which will be liquidated in the second half as well.
Okay. And then last one, if I may. LimeRoad, we had two kind of guidance. One was definitely 20% of EBITDA of the core business, and there was some absolute number of INR 40 crore-INR 50 crore. So when I see first half itself, we have touched that absolute limit. And obviously, with the core business also being under pressure, we are kind of hitting that ceiling. So just want you to understand how should we think about that loss, that number from here on, and considering that the core business is also kind of fighting macro headwinds, how should we kind of curtail or rethink on that number?
No, I think Suchi is working on it, and I think Suchi is also there on the line. She, we have not been able to give her the line. I will request Asha, the coordinator also, to maybe allow Suchi to speak here, and maybe Suchi can also help you give a little more guidance on our future plans on LimeRoad and what the team is working on, what are the projects that they're working on. Maybe, Tejas, if you can just hold on, maybe Suchi can also deliver that. Asha, can you connect Suchi also?
Yes, sir. Suchi ma'am, you can go ahead, ma'am.
Sure. Lalit, thank you so much. Let me give you some context. This is the third quarter post deal. As we have looked at our customer segments, I'll give you some context, and then I will squarely answer the EBITDA question, which will hopefully make for a clearer narrative for you. As we've looked at our customer segments, our segments as well as V-Mart's original segments, what we're clearly seeing, and have a very clear view, is that the Indian value consumer has two psychographic segments. It's a fa- One is a fashion-forward segment, the second is a fashion-following segment. The fashion-forward segment is the user who says, "I want fashion first. I'm happy to pay a little bit more prices.
Maybe value, you know, it doesn't have to be the cheapest in the market." And the price and therefore is not very sensitive to marginal price changes. The fashion-following, value matters a lot, wants fashion, but value matters a lot. And these are two very clear segments that we are seeing. And these two segments have two channel choices. They are either online first or they are offline first. And what fundamentally, as a group, the view we are having, is that this LimeRoad integration increases the TAM for the VM group by adding a fashion-forward segment as well as an online-first segment. So we, as the LimeRoad team within the group, have continued on our mission to deliver these excellent choices for our fashion-forward consumers.
And the real high point of this quarter was a clear delinking of growth from burn, with the aim to hit profitability. And so the team grew the LimeRoad business. I was listening to Anand speak and tell you that we grew 21% on NMV, which is top line, quarter on quarter, but we also had 22% lower burn. Therefore, on a per unit basis, we're actually 40% better, literally quarter on quarter. Now, if you compare our exit months, and this I'm giving you so that you can see the trajectory better. If you compare our exit month for the quarter, so that will be September versus June, we are higher, marginally higher on NMV, 3%-4% higher, but we are 31% lower on burn, right?
That will reflect roughly, you know, more than 50% improvement on profitability per unit basis. Now this trajectory actually continues. Just to give you a sense of November, November, we will be, you know, at or exceed 50% lower burn than even June, at similar top line. We are actually starting to see some growing top line as well. So every process, every action that we are doing and we are orchestrating as a team, is designed to take this platform to profitability, but also grow profitability. Hopefully that answers the question on EBITDA. So the guidance that Anand has given you in terms of 20% EBITDA is something that we are all committed to delivering.
Yeah, but, Suchi, the point was that we have kind of that guidance has already been exhausted in absolute terms for first half. So should we expect that the burn that we have seen in first half will dramatically kind of go away or it will materially come down in second half, and hence this guidance still holds true or should we kind of revisit the guidance for now?
No, I think it's aforementioned very clearly. It's happening. It's already happening. We are on that curve, and that was the plan. So, it is happening, and I think the guidance on absolute number, Anand will be able to tell you better. But, we are committed on the 20% of EBITDA number, and we will deliver with the 20% of EBITDA number.
Yeah. So, Tejas, just to add to what Suchi said, so while we all as a team stand committed to that number, and I think in terms of absolute value, we had earlier indicated INR 55-60 crores for as a burn, and that is where we still stand. And I think, we should still hope to deliver, that or better.
Very clear. And Anand, last one for you, on working capital. So half-yearly basis, cash flow looks decent, but it has largely come up from creditor improvement received so payable days. And I was just looking at inventory. Inventory has not changed much in absolute even versus March as much. So I was just wondering, have you changed any payable terms or is there any kind of non-trade payables also, which has kind of expanded that number?
So, there is two things which have happened here. One is obviously the, so, if you compare to March, which is again a big festive period, Holi and, you know, Eid build-up, so that inventory was slightly higher there, so we've definitely improved. But if you look from last year, same period, quarter two, and which was peak Diwali or peak Dussehra period, so the inventory has improved by almost INR 74 crores versus last year. On the vendor side, there is some tweaking that we have done around our arrangements with the vendor. We have also entered into certain factoring arrangements, which is also yielding some, you know, benefit. But definitely all of these three benefits are eventually combining to give us a better cash flow.
Got it. Got it. Thanks, and, all the best, and Diwali wishes to the team. Thank you.
Thank you. The next question is from the line of Mr- Miss Nihal Mahesh Jham from Nuvama Wealth Management Limited. Please go ahead.
Yes, thank you so much. Good evening, Anand and Lalit . My first question was that you did allude to the fact that there was a positive volume growth in SSG that we saw. But if I look at the absolute value-wise SSG versus Q1, the performance in Q2 actually deteriorated. So is that clearly a case of consumer sentiments, or maybe it is, as Lalit mentioned, a case of obviously competition getting intense? And has that in a way turned positive when you were discussing about the festive season also, for both Durga Puja and the upcoming Diwali?
So, Nihal, Anand is right. So that shift is mostly because of the festive shift. Actually, two reasons, largely because of the festive shift, and if you see this trend across any of the years from Q1 to Q2, there is always a, you know, a negative shift from Q1 to Q2, because Q1 is a peak or high season period, while Q2 is a low season period. Added to that, in this year, because you had Adhik Maas and also the complete shift out of Dussehra for quarter three, therefore, you have that shift. Second part is, again, as I mentioned earlier, which is the drop in the average selling prices.
So we are consciously building up on volumes, are trying to attract, you know, the value customer or the real, low-price customer, which was earlier thronging or coming to our stores very, very often, which had sort of reduced his number of visits in the last one year. So we are trying to get him back and with good results, because if you also correlate this to the footfall growth. So we've seen 13% footfall growth during the quarter, which is again a good sign that we are able to get back to the customer who had sort of started to come less.
Understood. That is clear. The second question was that over the last six months, we've obviously been focusing on improving the collection that we've been putting out. Just wanted to understand in terms of the current inventory at the store, what would be the proportion of this inventory which has been recently launched, and as you're saying, is, is a focus on fresh and revamped versus the older inventory, which is still yet to be discounted in the second half of the year?
Nihal, I think, the store today has almost 90% of the inventory, which is fresh and then which has been given in the set for the year. So the, yeah, yeah, most of the inventory here is fresh now, and but there is some inventory which is at the warehouse, which we brought back last year because of the winter over ten date, which we have yet to send, and after Diwali, we'll send those inventory in the store. It will also make so that we can liquidate those inventory. So that is some inventory which will go, which is also around 5% of the total inventory.
Got that. So at least on the store, you're saying more than 90% of the inventory is less than six months or, or, in the last collection.
Yeah, yeah.
Got it. Just one last clarification, Anand ji. Did you say that for FY 2024, you're expecting absolute EBITDA to be higher than FY 2023, including the losses for LimeRoad? I was not sure if I heard that.
Yeah. Right now, the plan would be towards that only, Nihal. So we would definitely want to, you know, have that. But also, please try and appreciate that last year, LimeRoad business was accounted for only in one quarter or, you know, four months, while for this year you'll have a full year operation, so that appropriately will need to be built up into the model.
Got that. Sure. Thank you so much. That's it from my side. Wish you all the best.
Thank you. The next question is from the line of Mr. Varun Singh from ICICI Securities. Please go ahead.
Yeah, thanks for taking my question. So my first question is on a consistent reduction in average selling price. So Lalit sir, just wanted to pick your mind on how are you thinking about, especially on the Unlimited side of the business, and especially so on the legacy stores, where maybe the business pickup is relatively lower than our expectations. So how much you think, you know, lying low on the prices, the business could be fine-tuned with regards to, you know, solving for revenue growth, et cetera? So the last three quarters, of course, there has been more ASP correction in Unlimited compared to V-Mart, but in both the, in both our brand and formats.
So, first question is, what is the need for, you know, going as much low? I understand, we want to, volume growth is positive, and we want to recruit our core customers and don't go, want to go away too much. But still, where do you think, you know, or strategically, how are you thinking about how much low we want to go on the prices to fine-tune the growth model in both V-Mart and Unlimited? And second question is in Unlimited, of course, in South India, there is more brand-conscious customers, which, as a consequence of it, our ASP is relatively higher. But still, you know, do you think there will be too much of a risk if we follow 100%?... V-Mart model kind of, matching the average selling price, et cetera.
If you can give us some understanding over there, Lalit sir.
Yeah, very intelligent question, Varun, and thank you for bringing that up. This is definitely something that we always spelled out, and we always communicated that, you know, what we know as V-Martian, as a team at V-Mart, and what we believe is our strength, is delivering value at the affordable—delivering great fashion at the valuation, the valuation price. So I think that's the core of it, and we believe why we took over Unlimited from Arvind, because they were not able to deliver those kind of value. And value retail is all about delivering value, not higher prices. So we want to offer great product, but at a lower price. Definitely, it is creating a challenge in terms of how do you call in those number of customers? How do you collect more number of pieces?
That's the challenge that we have to meet. Because what we want to do is deliver at the right value and deliver the right product. And that's what we are doing. We have not reduced the prices just because we are selling cheaper products. We have reduced the prices because we are selling affordable products, which is inbuilt at the right cost. And that's what we are doing. We are continuing to sell those brands in Unlimited, which are already there, and we are not discontinuing those or reducing those, but we are definitely trying to attract newer audience, newer set of audience, which is those middle, lower middle class consumer, which is actual V-Martian consumer, which is the actual mass population even in South India, and which do not, did not use to come to Unlimited.
Now, they have started appreciating this. Even the existing customers, they have started appreciating this. The only factor today is that we need to attract a little more customer, little more footfall. We need to convert a little more customers with little more number of pieces. We have seen some volumetric growth even there. In spite of all of this, we have seen volumetric growth, means we are getting new customers. We just need a little more period so that we are able to do it. There will be some few legacy stores which may not be our core markets, which we may not be able to deliver.
If those, those stores do not realize or the consumers around those, those areas do not understand this particular value proposition, we may not be able to, as a team, deliver a separated or distinct strategy for them, because it's very difficult to manage multiple things. We want to be very, very focused, and our, our clarity on that focus is what we are driving. This is what we want to do. We definitely want to bring it at par, on the, on the product prices, on the pieces. But definitely at South India, as you rightly said, the consumer, because of the very high per capita income, the consumer need could be a little better product, could be a little more branded product, so we are offering all of those. We will not want to take it down from here.
This is the bottom line that I think we are seeing, and this is where we should continue.
Got it. Got it, sir. Understood, very clear. And then my second question is on LimeRoad. Now that we have integrated, as per our guidance, we have been on track with regards to integrating V-Mart with LimeRoad. But still over here, sir, just wanted to understand your medium-term aspiration. Maybe, I mean, the bottom line will take care of itself, but from the top-line point of view, how are you thinking, maybe, you know, over next two to five years or maybe next two to three years, sir? How are you aspiring for growth into this segment?
See, Varun, our very clear communication and our belief is that this is an omni-channel drive that we are trying to do. This is definitely also giving consumer the product lines which they don't get at our stores, and also catering to some niche consumers who are also looking at certain kind of fashion, which could be both fashion-forward as well as the ethnic or the regional taste. So how do we try and integrate all of those? That's our primary model. We have taken up this model not for creating an online growth. We don't want to create a great, big online growth. We want to create a sustainable, scalable, omni-channel business, wherein there could be a participation of online as well as marketplace, and that's the entirety of the process.
We have our plans, we would want to grow, but the baseline objective is to create a sustainable growth and a profitable growth. That's also an objective, and if required, we will definitely. We have our plans to continue this growth rate as we have been seeing in quarter-on-quarter. We have our plans to continue those growth rate, but we don't want to still compromise on our profitability. That's our bottom line challenge that we will also try to win. Maybe, Suchi, if you want to add something, you can also come in and add.
Yeah, so I would just say that two things. One is we will find the profitable segments, both online and offline, to cater to. There are three things we do which are very synergistic to the core user that Lalit talked about. Number one, we're able to give them supply that is fundamentally more marketplace driven, which the core offline business is not able to either access or deliver, and we will do it with technology. That's number one. Number two is online, there are these segments who come to us, and as long as we can grow profitably, which we have, we have shown and we will continue to show, we will continue to scale this business.
To give you a sense, you know, on a daily basis, we have over 1 million visitors.
And our goal is to make sure that they, more and more of them are buying on a daily basis, right? So, as long as this thing, as long as we can make money, we will find pools of, consumers in the value segment who are, are our core consumers when we fashion forward, as I explained, and we will also service the offline customers in V-Mart. And I think together, doing that can still be a very large top line business. That's the plan we're working on. That's the plan we're also, fine-tuning. We don't have a three-year plan completely nailed yet, but that's what we're working on, and I think, the last quarter gives us a lot of comfort, that that's possible, the last quarter and the last two, the, the two months of the current quarter.
Okay. The last question on store expansion, given 13, 14 stores that we have added, so addition rate has been relatively soft in first half. So in second half, how much more store addition would be kind of a rational number to assume or to go for?
So Varun, on a full year basis, we still maintain the trajectory of 50+ stores. So while for the first half, we had added 17 stores, as I mentioned, we have already added 14 stores in the last 36 days. So we are on path to definitely exceed 50 stores for the full year.
Understood. That's it from my side, sir. Thank you very much, and wish you all the best.
Thank you. The next question is from the line of Mr. Shirish Pardeshi from Centrum Broking Limited. Please go ahead, sir.
Hi, Lalit ji, Anand ji. Good afternoon, thanks for the opportunity. There are too much discussion happened on margin front. So I just have a very simple question to reference Anand ji. You said that last year we did about close to INR 270 odd crore EBITDA. This first half, we have done close to about INR 53 crore, so the balance is about INR 200 odd crore, INR 216 crore to be precise. Can you tell me the roadmap, how Quarter Two base will look, Q3 and Q4 ? And what are the levers or what are the strategies, or what are the effects which we can monitor, and this number will be at the best, similar, like what we delivered in FY 2023?
Hi, Shirish. So if you look at the YTD sale number, I think so far, YTD September, we have done roughly around INR 1,228 crore-
Correct.
in sales. And our aspiration would definitely be to grow last year's sales or beat last year's sales by at least 15%-20%, if not more. So if I were to do that math, I think the balance of the year should account for almost 6%0-65% of the sales. And quarter two definitely is usually never the best quarter for us. So I think the way we have to look forward is that quarter three should be a very large quarter, both in terms of top line as well as bottom line, delivering higher than normal.
If I, if I were to use the normal word more, not in terms of absolute value or percentage value, but more in terms of the contribution mix percentage, both for top line as well as bottom line, which should give us the desired numbers for the full year.
I got that, but is it that we are factoring in low base, spoiled last quarter three, and then festive season? Because Lalit ji, in the beginning, you have given a lot of positive remarks saying that the retail business is still lucrative. So are these strategies or at the back end, the work which has happened, give us the confidence that we'll be able to deliver, say, 20% growth in second half?
Shirish, don't take us for add on. So we'll definitely deliver, because anyway, the festival has also shifted. So at a total level, we definitely will deliver. I don't know about the like for like, like for like in new, but anyway, I think the whatever mood and sentiments that we are seeing, we are seeing things positive. And then we should be able to deliver. And there are levers which I've already spoken, and those are the levers that we will track, we will focus on and we'll bring in. It's always there is always something that you don't know about consumers and consumers too. Right now, like, we saw a very great weekend ending day for yesterday.
So it was wonderful, and we have six to seven days of Diwali, and then we have Chhath festival, and then we have marriages in the winter season. So all of this, I think this whole quarter is going to be quite, quite good, and we should be seeing good results coming in. And our collection has been liked by the consumers, and they have appreciated. We have started seeing almost 25%-30% growth share coming in from the winter wear products. So all of those are working well, and then we should be able to deliver our expected growth.
That, that's helpful, Lalit ji. Sorry, I never wanted to do the comparison, but half an hour before, Trent has also reported the number, and I'm sure you will have the revenue expectation what they have delivered. I'm just saying that last eight, nine quarters, starting from UP, Bihar, then we had inflation in cotton prices, then we had food inflation, which has not come out. Somewhat it feels that the semi-urban, urban populations are doing better, and we still focus on the rural. I'm not saying change in strategy, but I think what I'm expecting is that, do we have enough understanding about the consumer behavior and the strategy of taking price drops in Unlimited, and also before that, we took some price cuts in V-Mart. Is this enough?
Is it, is it going to really yield the fruit, or we are still trying to do the experiments and then hoping that festive will be happening, winter will be all right, and we will be back to the 20% growth?
I think, Shirish, we need to first have the confidence in the model, and we need to understand that there is a consumer base, there is a population, there is a demand in those markets, and this is where V-Mart's strength lies, and this is where V-Mart has delivered profitability and delivered the growth. That is what our core strength is, and that is where we are working on. We have our playing ground, and we'll work on those playing ground, and we are very confident that we'll these consumers are going to come back, and we are seeing some traction. We're seeing traction not only in my business, but we are seeing traction also in FMCG businesses.
So, consumer volume growth is being seen across, and we are getting those good positive vibes and positive moods. And I think these are all temporary stuffs, and don't question mark on even your own non-belief and your own understandings. I think you guys know it also the best.
No, no, sorry for... I'm really sorry. So, I mean, Lalit ji, thanks for your patience.
Don't apologize, but go back to your confidence level, and that's ultimately we are the same, and we are doing better, so we need to grow it there. We will grow it, and this we don't need to look at every time with a competitive lens. There are markets which have not been explored even by us, and that some players are trying to explore. Let them explore, and let them create good growth. That's the best part of retail.
Anyway, I'll take it offline. The last question on the, on the LimeRoad. Though, the one figure which sticks, to my mind on Slide 12, in the first half, you have almost spent INR 51 crore, or 4% sales of, on the advertisement spends on the LimeRoad. Is this number is going to be stable at 4%, will look up, or will come down in second half or full year?
So we'll see some, there is definitely, some efficiency that we are generating out of the marketing spend. And, initially, there was a spending which we did to acquire some consumer base. Now, we have done that, we now want to use the existing resources. We want to get the returns out of those ad spend a little more higher, and I think Suchi and the team is really working hard to get those numbers up. And then, the cost, of, as a percentage, should go down.
Thank you, and all the best, and advance wishes for the forthcoming festivals to you and Lalit ji and Anand ji.
Thank you so much.
Thank you. In the interest of time, that was the last question for today. I now hand the conference over to the management for closing comments.
Thank you so much for being on the call. Wishing everyone a very, very happy Diwali and great festivities ahead. Don't worry, and we are on the job. We know our field. We know our math. We know our ground. We know what strategy to be used to steer what kind of business. But yes, we'll have to always demonstrate passion, patience, and that's where we are working on. So we will keep reporting back, and then we are on to a good quarter, and we should expect a good outcome of this quarter also. Thank you so much. Have a good day.
Thank you, sir. On behalf of PhillipCapital (India) Private Limited, that concludes the conference call. Thank you for joining us, and you may now disconnect your lines.