Ladies and gentlemen, good day, and welcome to third quarter and first nine months of FY 2022 earnings conference call of Aditya Birla Fashion and Retail Limited. The call will begin with a brief discussion of the company's management on the Q3 FY 2022 performance, followed by a question and answer session. We have with us today Mr. Ashish Dikshit, Managing Director, Mr. Jagdish Bajaj, CFO, Mr. Vishak Kumar, Director and CEO, Lifestyle Business, and Ms. Sangeeta Pendurkar, Director and CEO, Pantaloons. I want to thank the management team on behalf of all the participants for taking valuable time to be with us. I must remind you that the discussion on today's earnings call may include certain forward-looking statements and must be viewed therefore in conjunction with the risk that the company faces. Please restrict your questions to the quarter and half yearly performance and to strategic questions only. Housekeeping questions can be dealt with separately with the IR team. 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. With this, I now hand the conference to Mr. Jagdish Bajaj. Thank you, and over to you, sir. Good evening, and welcome to the earnings call for our company. Let me first take you through the highlights for the quarter. The company saw its highest ever quarterly sales and profitability in this quarter. You will be pleased to note all the business lines of the company individually also have posted their new highs in terms of revenue, profit and cash generation. Company delivered sales of INR 2,987 crore, a 44% growth over same quarter last year. The company achieved historically highest consolidated EBITDA of INR 609 crore, a 44% growth over last year levels. Improved profitability was driven by an agile product to market fit strategy, better discount management and continued fixed cost controls, driving a record EBITDA margin of 20.2% this quarter. Happy to inform that the company has closed this quarter with a positive cash of INR 118 crore instead of net debt of INR 8 crore at the end of Q2 FY 2022, thereby generating nearly INR 126 crore of cash from operations in this quarter. In line with our comprehensive ethnic wear strategy, we are pleased to announce that we have launched our premium men's ethnic wear brand, Tasva, in collaboration with the ace designer Tarun Tahiliani in this quarter. The brand also has quickly scaled up to three stores and will close this fiscal with a total of five stores across different markets. The company continued to expand its portfolio to enter into large, meaningful consumer lifestyle segments with signing of agreement to acquire India operations of Reebok in sportswear and 51% acquisition of House of Masaba to enter into beauty and personal care segment. Both these transactions are expected to be completed by end of this fiscal. Reebok India is poised to reach INR 1,000 crore in next five years. Similarly, Masaba has a potential to scale up to INR 500 crore brand in next five years. We have accelerated our network expansion and launched more than 200 stores this quarter across businesses, formats and town classes. In line with our objective of expanding offline footprint across India, we have expanded our omni-channel coverage with 50% of our network omni-enabled across India, which is 1,500 stores across all our brands put together. The strong push to our digital plans continue as we evolve ourselves with changing consumer needs. Now I will take you through the performance of individual businesses, starting with Lifestyle brand business. The Lifestyle brands recorded a historical high sales and EBITDA of INR 1,589 crore and INR 346 crore respectively. The EBITDA has grown by 8% over last year with margin of 21.8% also being a historical high. The performance is a testimony to the strength on our brands in a resilient business model. The brand continued to gain market share and grew by 55% over last year with retail sales growing at a historic high of 41% YoY and an L-to-L of 34%. Retail sales even surpassed pre-COVID levels by 30%. Our focus on category extension continues as our new launches of VH Flag and Louise received strong consumer traction along with our womenswear segment doubling in size over pre-COVID level. Our recent foray into kids wear through our Peter England Girls and Boys has been received very well in the market. Our expansion in small town India continues aggressively as we take our brands to these markets through an asset light format. PE Red now sells across 400 stores, while Louis Philippe, Allen Solly and Van Heusen continue to build on their successful pilots early this year. E-commerce sales continue to emerge as a dominant sales channel, with this quarter recording the highest ever revenue. I want to reiterate that Madura brand portfolio is one of the largest branded fashion e-commerce business in the country. Pantaloons business recorded sales of INR 1,066 crore with a growth of 31% over last year with the highest ever EBITDA of INR 216 crore. This was on the back of robust footfall during the festive period. Pantaloons almost recovered to pre-COVID levels during this quarter. The sales could have been significantly higher, but for the impact on footfalls in the last week of December due to onset of third wave. Higher share of mall stores and significant presence in certain markets which were relatively on more stringent restrictions also adversely impacted this performance. E-commerce continues to make strides, growing by 67% year-on-year across our own pantaloons.com and partner sites, with pantaloons.com sales almost doubling in size versus previous year. Pantaloons opened 22 new stores during the quarter and expects to open 20+ more stores in Q4. With this, Pantaloons is likely to close the fiscal with a store count of over 380 stores. Innerwear business continues to scale up rapidly and reached 25,000 outlets at the end of December 2021. The revenue of this segment grew 1.5x over pre-COVID Q3 FY 2020 levels. The segment will have more than 100 EBOs by the end of March. The business is continuing on its strong trajectory and is on track to break even. Now, if we talk to you about global brands, which is youth and super premium, this business continued to witness a strong momentum. In youth business fashion brands, Forever 21 is back in expansion mode with three new stores this quarter. American Eagle saw a 127% jump over pre-COVID levels. Five new American Eagle stores opened during the quarter, and the brand is strongly establishing itself in the denim segment. The Collective and the other super premium brands business also witnessed a sharp growth of 37% over last year. The segment has consistently maintained a strong profitability journey over the past few quarters. Our own e-commerce site, thecollective.in, recorded 4x growth over last year. Across the super premium brands portfolio, we have opened nine stores so far in this fiscal. Ethnic business, as you are aware, we have set up a number of partnership initiatives in the ethnic sector with big brands in the ethnic space like Sabyasachi, Tarun Tahiliani, Shantanu & Nikhil, and Jaypore. In addition, we have organically launched women's mid-premium brand Marigold Lane, along with affordable premium men's ethnic wear brand Tasva. At an aggregate level, the segment has grown fivefold over previous year and is currently operating profitably at an annual run rate of INR 400 crore. The segment has added eight stores across all its brands and is currently operating a network of 23 stores across key markets in India, as well as one store in Dubai. We will aggressively expand the store network across all the constituent brands over the next few years. I wish to reemphasize that ethnic wear is a huge market opportunity where we wish to build a large, meaningful play through our comprehensive portfolio. At our current levels, we are on track to build scale in this segment profitably. I'm also glad to apprise you that ABFRL board today approved setting up a wholly owned subsidiary for incubating a portfolio of fashion and Lifestyle D2C brands. As you would be aware, D2C is a fast-growing space with an expected total addressable market of about 100 billion by 2025. ABFRL has played a leadership role over the last 25 years in building the most iconic fashion brand in the offline space. With this move, we intend to replicate this success into the digital world as well, thereby evolving along with our consumers. In conclusion, I am glad to announce that this quarter, ABFRL reached new heights in terms of revenue and profits. As we continue to leverage the strength of our brands, our resilient business model, continuous innovation and evolution in line with changing consumer needs, we are confident to reach new highs in future. With the most comprehensive portfolio play in Indian fashion industry, ABFRL is poised to continue its leadership position in India's fashion and apparel sector. Thank you, and we are open to questions now. 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. Participants, you may press star and one to ask a question. The first question is from the line of Yash Mehta from Edelweiss Securities. Please go ahead. Oh, yes, thank you so much. This is Nihal Jham here from Edelweiss. Am I audible? Yes, sir, you are. Thank you so much. Sir, congratulations on the strong performance. A couple of questions from my side. First, on the cash flow bit, you mentioned that you've done a cash flow of around INR 1,000 crore this quarter, and this obviously, I would assume includes a decent working capital release also that has happened. I just wanted to understand that, is any of it expected to reverse in the coming quarters or this is something that was pending and now got completed and incrementally most of the EBITDA that will get converted into cash flow will be as per the past trends? Nihal, hi, this is Ashish here. You're right, roughly close to INR 1,000 crore cash has got generated. A significant part has come from working capital release as well. As you know, this quarter happens to be a relatively high quarter compared to the annual average. To that extent, the cash release in the system is higher because you sell more, release more inventory. Some of it has a tendency of coming back, but very small in quarter four, where sales typically comes down while your purchases become due for payment, a part of it. I think that difference will be maybe INR 150 crore-INR 200 crore shift quarter-on-quarter. Otherwise, you typically go in line with how your sales and profits are. This is helpful, Ashish. Just a question on Pantaloons. In your opening remarks, you mentioned that there was an impact in the last week on footfalls given, you know, the COVID wave. Is it just possible to give a sense, you know, say, looking at the daily sales that what was this contraction that happened in the last one week to ten days because of, say, the COVID impact? Sangeeta, you wanna come in? Hi, Nihal. I think if you look at our October/November trajectory, I think that's when we did a very, very good, you know, performance, and we saw some very good footfalls coming through festive. I think as we approached December, we saw a reduction in the, you know, the back end as kind of the third wave started coming in. We saw a reduction in terms of our footfalls. We believe that, you know, that was just the beginning of the third wave, and we saw some sale loss there on account of that. That's kind of continued, as we know, in January as well. However, I think the big, most important thing for us is to note that, you know, in October/November, when things were looking good, the business really came back to normal and our recoveries, even versus FY 2020 were fantastic. If it was not for the shift that we saw in the last 10 days in terms of footfalls dropping to the tune of about, you know, almost about 20% versus what we would have expected, our numbers would have been even higher. Understood. That's helpful. Last question from my side. Ashish, it's now a year, you know, since we held our annual Investor Day, and we've given targets out for the next five years, where obviously we had plans for each of the businesses in terms of ethnic, underwear and the other parts. Over the last six months, there have obviously been some new pieces that have also been added, whether it was the Reebok part of it or even recently Masaba, and now there is obviously the release today on the D2C part that you're contemplating. Just in terms of the revised thought process, what is it that ABFRL is looking at over the next three, five years? And also a little more detail on the D2C part, because I... In my limited experience, I've only seen mainly, say, e-commerce platforms get into something because they have a platform to provide these brands to scale up, which then gives them a way to, you know, gives them some kind of complement with this. From our side, what is it that we plan to provide these D2C brands, which can help them scale up, and how do we see ourselves monetizing this thing? I'll be done. Thank you. Nihal, a lot of questions in this. Let me try and address as many as I can. First is, what's our view on the longer term? A year back, almost a year back, we presented during the Investor Day a long-term five-year plan in a pretty granular detail. I think where we stand in this journey, despite an intermittent, you know, disturbance due to wave, the second wave and subsequently even third wave, we are more confident than even a year back that we will definitely sort of exceed that plan. On top of it, Reebok is a very large opportunity. You know, sportswear is a large industry. Some of the leading companies are INR 1,000 crore plus. Reebok is also starting with a good base of INR 400 crore. Some of our plans in ethnic have become more visible as we are going down. We have launched two new organic brands, both Tasva and Marigold Lane. In many sense, if anything, I were to sit and remove the effect of the two waves and just look ahead, I think we are much better placed than anything that we had said about a year back. Coming quickly to the D2C brand business that we are talking about. See, let me just take few minutes because I think this question will come from multiple people since we have just made this announcement to explain that. Today, a whole new set of brands are coming to the market and growing very rapidly on the platforms, as you rightly mentioned. Some of them even have capability and have learned very smartly because they are either digitally savvy or it's the next generation of idea, which has traction on their own website. Most of them, a large part of them are primarily brands which are taking shape and getting formed on large platforms. Platforms are already doing what they can do, which is to provide access of these brands to the consumers that are there on their platforms. What these brands need is really an experienced hand, apart from capital, because at some point of time, as they grow first INR 10 crore, 20 crore, 30 crore, 40 crore, at some stage, management bandwidth, expertise, competence to run larger business, ability to expand into multiple lines, sourcing and supply chain efficiency, digital marketing, technology capability, just to run their business more and more efficiently. Apart from capital, whether it's working capital for growth or initial investment, these are the things which hamper what could be a promising and potentially large business from actualizing its full potential. This is what we want to provide. See, we have 25 years of experience of building brands. Each of our brand has evolved multiple times in its journey. We have expanded into new categories. We have built deep capability in supply chain. We understand fashion ecosystem particularly, and now adjacent categories like accessories and other products. Therefore, there is a lot of value that we can add. We are not just channel providers. We can convert potentially promising small brands into meaningfully large brands through this combination of capital, management expertise, access to partners, access to channels of growth, and that's really what we want to do. That's clear, Ashish. I'll come back in the Q&A show as well. Thanks. Thank you. The next question is from the line of Tejas Shah from Spark Capital Advisors Pvt Ltd. Hi. Hi, team. Thanks for the opportunity and congrats on the good recovery. My first question pertains to Pantaloons. Sangeeta spoke about the recovery part, but surprisingly with lesser throughput, we are doing well on margins part. If you help us to understand how one should think about margins going forward when the recovery happens. Is it a new base that we have formed, and on that we'll build new profitability? Or is it actually more of a response to COVID cost cutting and it will normalize as we go forward? Right. Hi. Let me try and respond to your question in two parts. One is, I just want to remind, you know, everyone on the call in terms of the journey that Pantaloons has been on, right? We have mentioned and talked about this in every single call. I think our business today fundamentally is of a better quality. Therefore, the key things that have led to this quality of business, starting right from how we started our journey in terms of improving our product and product aesthetics, the new categories that we launched, to the new labels that we have introduced. More importantly, I think in terms of expansion, we know our stores are profitable, right from the first year. The new retail identity that we have put out, I hope some of you have had the chance to go and see it. It redefines the customer experience that we want to provide inside the Pantaloons stores and likewise on pantaloons.com, providing a seamless kind of experience. Now, from a cost standpoint, last year we had, you know, made some decisions in terms of overheads and in terms of how we invested in marketing. I think this year, again, few measures in terms of tight cost control measures, some of which have become intrinsic to our business, and we kind of now understand the levers to manage costs. Overall, we feel pretty confident that, you know, we will be able to sustain some of those costs and keep those costs under control. As Ashish said before, this also happens to be one of our largest quarters in the year, and therefore, we do get a leverage on account of a higher turnover there. Going forward, our journey on constant improvement, if you remember, not very long ago, our EBITDA margin used to sit in single digit, which we have kind of improved constantly with all the things that I mentioned in terms of improving our portfolio, our journey towards improving our private label share, et cetera. We feel confident that we'll be able to constantly improve our margin. Yes, this quarter is slightly different because the quarter in itself is a quarter where our dependence on festive being high. We see higher numbers and, therefore, I think in the subsequent quarters too, you will see us, our endeavors to improve our costs will continue. Tejas, do you have any follow-up question? Yes, yes. I was on mute. Thanks, Sangeeta. This was very, very loud and clear. Second question pertains to Athleisure business. If you can help us with some trailing twelve-month number and run rate over there. Tejas, you mean Innerwear Athleisure business, Van Heusen? Yes, Van Heusen. I think we are tracking somewhere, if you were to look at annualized run rate kind of number, we are closer to INR 500 crore. It's growing rapidly year-over-year. Even through the COVID, it's been growing 30%+. That's the trajectory as of now. Sure. Any sense on profitability there, if you can help? It's marginally, you know, some quarters it's breakeven, some quarters marginally lower. Its profitability is again moving very rapidly from initial days of deep investment to now coming to a point where it's also generating enough to sort of fund its growth, but at a very nominal level right now. Sure. Last question. I'm actually struggling to find an efficient way to ask this. If we keep last year's Analyst Day's Business Plan Presentation as a compass for the strategy that we have decided for ourselves for next four, five years, should we see this current initiatives on Reebok, Masaba, and D2C platform as a detour or is it much more, I would say, agile response to changing scenario that we are seeing in the marketplace? Tejas, I think it's very important you see our strategy as a continuity. We have been saying and doing the same thing for last five years. We said we will get into ethnic wear, build a portfolio to play in all segments of ethnic wear. We took initial small steps with Jaypore and Shantanu & Nikhil, bigger steps when we made investment in Sabyasachi, even bigger when we came up with a plan to launch two large premium ethnic wear brands, one in menswear with Tarun Tahiliani and the other one in Marigold Lane. Masaba is a part of that, and therefore it's no way different from a plan that we are building. Reebok is an opportunity that came to us. It is not something that we had engineered. Reebok is one of the top three global brands in the world. It is a very, very powerful brand, which we believe in India. India is one of the few markets where Reebok has been a market leader ahead of Nike and Adidas and Puma till six, seven years back. It's a strong brand, fast-growing segment. We're already playing that partly through our Athleisure initiative in innerwear, but we were never able to sort of take the sportswear brand head-on. This is something that we did, but it's part of our strategy to play in the emerging market segments. The D2C initiative is more fundamental as you know strategies need to absorb the large shifts that are happening. How consumers are shopping today, how brands are getting built today, the pace at which e-commerce, both in marketplace and otherwise, is growing, is creating a very large set of opportunities, which is creating new entrepreneurs who are building businesses. Digitally native consumers meeting digital-first brand is a very large shift. It's a five, 10, 15 year shift happening across the category and across the world. In fashion also, this is at play. Therefore, we need to build next generation of brands also and not just grow what we have. This is because it's such a monumental shift in the world, and you and I live that as a consumer and experience it. It requires a response from a large company. That's really what we have started on. We'll over the next few years build a portfolio of brands where we add our ability from ecosystem point of view, competence point of view, capital point of view, but also combine that with the entrepreneurship that is thriving in today's very digital world. I would say to that extent, it's a part of our overall digital pivot that as a company we are making. Sure. Just one follow-up. Financial capital and all this long-tail initiatives are relatively easier to track. If you can spend some time on explaining or sharing the managerial capital that you would have added to support this long tail of initiatives that you have taken in the last two to three years. If you can right from managerial bandwidth to each division level, if you can summarize. I think you only talked about tail of initiatives. You've not talked about I would call it tail, head of management bandwidth that we have got with it. Yeah. Yeah. Yeah. We've got one of India's finest designers that this country has produced in last three decades. Sabyasachi, Tarun Tahiliani, Shantanu & Nikhil, Masaba, these people have invested individually between 15-25 years honing their skills, testing them against the best, creating aspirations and desires for them. This doesn't come free, Tejas. This takes decades, and that's the management capital that we have got along with the brand image that you're talking about. That's substantial, and that's what we are actually building. We are not just building stores, products and brands. We are building a management team with capability which is unmatched and very, very rare in the industry. Sure. Just last one, so that I don't have to come back on the call. When we are actually spreading ourselves in so many directions, how do you ensure that the firm and the balance sheet has capacity to suffer mishaps, which will be very natural in this course of journey. How do you ensure or what do you internally put it as a safety check when you actually go in any new initiatives? I think, Tejas, you could decide to call Allen Solly Kids a new initiative, Peter England Girls a new initiative. Sabyasachi is a brand. Tarun Tahiliani is a brand which have got Reebok is a brand. These are brands which have got built over decades, as I said. We have got them into new. We have got them with management expertise in more often than not. If the question is about capital, I think it's last 18-24 months when the global fashion industry, Indian fashion industry, retail industry has been such a has seen such a monumental sort of pressure on itself, you would see how we have managed our balance sheet. Not just with the infusion of capital, but managing working capital, releasing cash from it, taking business in the same period from debt which had peaked to INR 3,500 crore, despite wave two and wave three coming to a completely debt-free company. Needless to say, we are very, very mindful of how we deploy cash, where we deploy cash, how we manage it. If anything, it should give you comfort that in a growing complex but potentially large business opportunity pursuit, we are managing our capital very well. Fair enough. That's all from my side and all the best to the team. Thank you. The next question is from the line of Chirag Shah, Individual Investor. Please go ahead. Hi. This is Chirag Shah calling from CLSA. Hi, Ashish. Hi, Sangeeta. Hi, Jagdish. Good evening, everyone. Hi, Chirag. Hi. I must say that you guys clearly seem to be on a roll, and working overtime to achieve your long-term goals that you spelled out at the last annual Investor Day. At the outset, real congratulations to the entire Retail team to have used the last two years of crisis so very well to emerge stronger from it. Also moving to a debt-free company. I mean, that's was seemingly impossible a couple of years back. Congratulations to the entire team. I guess a lot of my questions have already got answered, but just two things that, Ashish, if you can just highlight how are you rolling out your digitization initiatives in the omni-channel strategy? Because that's also gonna be very important as we start building that and integrate all these different modules onto a common platform and benefit from that. Secondly, how do we really ensure that while we get into a high growth mode on revenues, we keep the working capital in mind and ensure that the inventory turns is something that we really benefit from in terms of return on capital employed. These are the two questions. Thanks, Chirag. I think the first question is around our digital play for our existing business. If you broadly look at our digital play, even it is in continuation of Tejas' question, consists of two parts. One is, what are we doing to digitally pivot the existing brand and retail network and assets that we have? The second is, what other opportunities can our company, based on the competency and strength it has, can build in the new age digital system? Second one is what we have just announced with the new initiative, and which is what I described to Tejas' earlier question. On the first one, we had laid out a strategy, I think, about four, six months back, where we had said we are looking to build two large platforms. One is the super app of our brand, where we can get individual brands and also have the ability to toggle between our brands so that we get the leverage of consumers in our ecosystem of brands, which is very much the largest portfolio of strong brands in the country. Secondly, at the value end, which is more middle class India, is to build and invest in Pantaloons as a platform for brands, where every middle class Indian can come in and get his lifestyle needs from clothing, fashion, beauty, accessories and any other product categories that Pantaloons extends to. Both these platforms are underway. The brand super app is likely to be launched sometime in the quarter two. Pantaloons' first version is just got launched for Pantaloons app. We will revisit and refine it over the next three to four months, and these two will become our vehicles. In terms of omni-channel capability, both these initiatives of building digital platform are the front ends, but these are backed by integration between the online and offline. Today, both our businesses have more than half their network connected through omni-channel, which means if you place an order on allensolly.com or pantaloons.com, it's most likely if you've ordered from Jalandhar, you'll probably get it from Jalandhar, Chandigarh or Ludhiana. Yeah. 55% of our online traffic is being serviced by stores. At more than 1,000 stores across the brand portfolio in this omni-channel network, we have India's largest fashion omni-channel today, and we'll continue to build on that. Right. Ashish, on the working capital part that I mentioned, as we really grow, how do we keep the inventory turns in context to benefit in terms of higher return on capital? Chirag, we had shown in the last Investor Day, and in fact the only reason we are able to generate this cash flow that we are talking about, is primarily because we are very focused on working capital returns. Our ROCE in individual businesses at operating level, if you look at our total capital employed, is about INR 3,500 crore. Of which if you take away investments and goodwill, we are operating what is potentially anything between INR 10,000 crore-INR 12,000 crore business of a post-COVID scenario at an operating capital of less than INR 800 crore. That's the way we are rotating our capital, and a lot of it comes from the way we manage our inventory, so we're very focused on that, Chirag. Got it, Ashish. Ashish, if I may just ask one more question on this new D2C strategy that you are putting in. It seems like the house of brands concept. Clearly, you know, some of these newer brands which get about $10 million in size, not able to get to the next level, can use our platform. Do we also get in an external capital into that subsidiary to ensure that we have a much faster scale up of that? Yeah, Chirag. The idea, and I think we have called out in this, the reason to separate is threefold. One, we want to build a set of competency and ecosystem which attracts both talent and capital to win in the digital world. Right. Second, we will put some capital and initiate this business from ABFRL's point of view, but even from capital point of view, we will seek to go out at some point and raise whatever is required to be competitive in that model. Third, the ecosystem which requires mindset of raising capital, investing capital, nurturing entrepreneurship, is a slightly different mindset from operating companies, and that's why we are building it into a separate business entity. Perfect. Thank you so much, Ashish, and all the best to the entire team. Really exciting times ahead for you guys. Thank you. Thank you. Thank you. The next question is from the line of Richard Liu from JM Financial Services. Please go ahead. Hi. Thank you for taking my question. Just wanna check, am I audible? Richard, sorry to interrupt you. You're sounding very low. Oh, okay. Am I audible? Slightly better. Okay. Thank you. Hi, Ashish. Hi, Jagdish. Hi, everyone. Good evening. You know, three questions really. One is, if I look at Pantaloons' margin, for the quarter, right? I mean, I think that has declined from around 23.5% to 20%, despite this very, very strong YoY growth in Pantaloons. If you could help us understand that. Very quickly, Richard. It's because the rental savings that we got during the phase two, a lot of it was flowing over in Q3 last year. This year, because the overall impact by the time we came to quarter three, and therefore the savings were lesser, that's what is reflecting. In fact, inherently, Pantaloons' business has improved this quarter. Okay. It's more an accounting accrual kind of a thing, is it, Ashish? No, it's a base adjustment of last year. While on that topic of rental, what got charged to your PNL this time is a number of about INR 250 crore before considering the rent waiver, right? I mean, INR 200 crore is in the P&L, and then I think you had deducted INR 54 crore being the rent waiver, so the gross charge is about INR 250 crore. Now, if I annualize that number, INR 250 crore into four quarters, it means that you will still be charging about INR 1,000 crore of rental to your P&L, you know, even on a post-Ind AS 116 basis. If I look back to FY 2020, for reference, the charge to the PNL for rental used to be about INR 480 crore, which is now currently at a run rate of about INR 1,000 crore. Can you explain this? You know, how should we look at it? Therefore, in light of this, what is the rental cost pool in the system as on date? I didn't hear the full question. The question is, as on date. Yeah, sorry. Sorry, Richard. I couldn't hear the question. Is your question rent this year is INR 1,000 crore versus INR 500 crore last year? Is that the point? No. Ashish, what I was saying is that if I look at the rent that gets charged to the PNL, right, which is only a part of the rent, that number is about INR 250 crores for this quarter. It's INR 200 crores plus the INR 50 crore that you got as a waiver. The gross charge to the PNL is about INR 250 crores before the waiver, right? Yeah. For a moment, if I annualize this number, INR 250 crore into four, it means that the annual charge will be about INR 1,000 crore. If I look at FY 2020, the annual charge to the PNL in an Ind AS 116 financial statement used to be about INR 487 crore. The rent that gets charged to the PNL has doubled, you know, between FY 2020 and now. I presume that this is obviously not a full cost rent, right? Because, you know, this is Ind AS 116, and there is still a large lease rent which you are capitalizing. In light of this, you know, how has that INR 480 crore become INR 1,000 crore in terms of the charge to the PNL? Two, the total rental cost pool which ABFRL as an entity is now incurring, what would that figure be looking like at this point in time? I think we'll have to come back and give you details later, Richard. Let me assure you that our rent numbers are in line with our revenue growth, and therefore it's unlikely they'll be that dramatically different from. Yes. From what you have in FY 2020. Ashish, you know, let me, Richard, my rent to revenue at pre-Ind AS level is 14%, whether it is from in Q3 FY 2021 or, you know, 2022 versus last year. The escalation or the, you know, the number you are deriving which is three components. Firstly, the operations from compared to last quarter. Number two is the rent concessions, you know, which were available there in the last quarter is not there. Then thirdly, if I add more stores, you know, the Ind AS 116 impact will be more. Therefore, you know, the reported number, if I remove it from, you know, rent and take it to finance and on, it is not a right measure to do that. You compare what I have done in published result. Okay. Just quick, you know, I just got a quick sort of first level of numbers, Richard. FY 2020, our total rent base was about INR 1,200 crores between fixed and variable, because there are multiple models exist. Yeah. Our current rate is lower than that. Yes. Okay. On a full cost basis? On a full, yes, yes. Okay. Sure. That helps. Thank you. Lastly, you know, if I can make this request again, I tried it two quarters back, and I guess it's not possible for you to give it, you know, in as clear a term. If I can just, you know, request you to, you know, to let us know even on a memorandum basis, maybe, you know, as a part of your address in the call, on what are the pre-Ind AS margins like, right? I mean, you know, it's my fault because I'm not able to yet identify with this new margin structure. Alternatively, if you're not able to do that, you know, the benchmark margin that you had set, you know, in the investor day in terms of what you want to achieve in Madura, Pantaloons, et cetera, if you can convert that into a post-Ind AS 116 number, so that we can, you know, track progress against that milestone accordingly. Yeah? Fair, fair request, and we'll see how we can do the reverse part. The problem in giving two numbers was that people were picking up different numbers at different points of time. Comparisons were becoming harder to do, so the industry had completely moved to these, and that's why we've done that. I think it's a fair point from your side. We'll have to convert our long-term plan into similar numbers. Richard, you know, now it is not one year. Last three years, we are giving the comparable numbers of the margins. From there, you can draw the, you know, conclusion, you know, what has happened in last year and what has happened into this year. I think, you know, they are comparable, absolutely comparable margin numbers. I understand that. I mean, it which is why the second part where if you can reverse calculate the margin addition that you showed in February of 2021 in the Investor Day, so that we have something which is like to like- We will, of course. I hear you. We'll come back to you. Right. Sure. Thank you very much, and wish you all the best. Thank you. Thank you. The next question is from the line of Aliasgar Shakir from Motilal Oswal. Please go ahead. Yeah, thanks for the opportunity. I have a few questions. First is on, you know, Reebok. I mean, I think very good acquisition and at a very good price. I just want to understand here that, you know, in typically, you know, sportswear business, I see that there is a lot of support that the brand gets from the parent, you know, specifically if you see your peers, like probably Puma, Nike and the others. So, you know, whether it is in terms of, you know, product design capabilities or maybe even in terms of, you know, global advertisement, global brand ambassadors that they, you know, have. Could you just explain, you know, how do we plan to address that and what kind of advertisement we will require to do? What kind of, you know, you know, branding advertisement cost that we'll have to do? What are your ambitions over three to five year period, you know, given that, what you mentioned and I understand that a lot of your peers who are now maybe probably three, four times your size were at one point of time actually much before, much behind you. You know what I mean, what are their ambitions over the three to five year period? Okay. Hi, this is Vishak here. I think it's a brand which is, as you would know, it's globally big four brand. It continues to have an ambition which is to become very, very large. Even globally, it wants to be a $10 billion business, and we would be hopefully a part of that growth story. There is also a plan to create a Reebok Design Group which would be able to address the needs of various markets, including India. It's still early days for us as we go into this, but clearly this is something where we want to be a very large significant player in this market. It's also, as you know, a very, very fast growing segment, and we believe that we can add tremendous value with our understanding of the market, consumers, relationships with various, partners in the market, et cetera. I think it's a great opportunity for us to be able to create leadership in this segment. Okay. To answer your question, we'll have to do what it takes to be a leader in this business. Okay, that's useful. Can you just share some, you know, numbers in terms of we are probably around INR 400 crore today. You know, what would be the kind of advertisement branding exercise we will have to do, you know? I mean, what is our ambition we can be in three to five year period? Because I'm just looking at it from this point of view that, let's say if you want to grow three times, four times from here, then, you know, we may have to do very significant investments in advertisement branding. How are we looking at that part? I think it's multiple things. Segment like this, there is celebrity endorsement, there is events, there is advertising, and of course, at various levels it's distribution, e-commerce, channel strategy, partners. I don't think it's any one aspect of the mix. We will have to employ all of this, and we will have to do this effectively. You know, it, as you would know and Ashish was saying this a little while back, even up to six, seven years back, it was a very, very strong player in the Indian market. Some of that we will have to bring that mojo back in today's context and scale it up. The big brands in this segment are in the INR 1,000 crore-INR 1,500 crore space. If we have to be leader there, that's, and of course it's a moving target. If you look at it three years from now and so on, whether it's three years, five years, that is the kind of trajectory we will have to get to very soon. Okay. Got it. Okay, second question is on the gross margins. Can you just share some more color in terms of what has led to this very good 200+ you know margin improvement between your discount reduction or you know price increases or you know whether Pantaloons has seen mixed benefit, private label improvement, and how much of this we should see is sustainable margin for us from here? Yeah, I think. Can I take that? I'll take that. I think gross margin in a mixed business like this is more often than not reflective of the mix of the businesses that we are selling. You shouldn't literally convert gross margin into either premiumization or discounting. Having said that, and with that caveat, not necessarily related to this quarter, the fact is that we are operating in a period which is a festive period. Most of the products are fresh because our old inventory over a period of time has come down, you know, our brands are able to sustain that premium. That's really reflective of that. The only reason I'm making this comment is gross margin will change quarter-on-quarter because the mix of businesses in various quarters keep changing. Right. Should you expect the increase in GST to have some effect in fourth quarter, this the one under 1000 rupee from 5%- 12%? No. As you know that the government has decided not to proceed with that. As an industry, we are representing to the government to not go forward with that. Right. Come up with a different plan. As of now, we don't see it coming through, but we'll have to see if the government changes its mind. Understood. Just last question on D2C. You know, we have a very strong capability across products, across brands, you know, multiple categories that they are managing. I was just wondering if this platform, each of this platform we could, you know, incubate more product categories in-house or, you know, what is the benefit of probably going through a platform route that you could not explore through in-house incubation of a lot of these brands? As I said in response to a previous question with Chirag, winning in digital requires ecosystem of partnerships, talent, operating model, which are different from the dominant operating model in which we have built our businesses. A lot of competencies are transferable, and that's what we will do. New competencies will be required to build that, and that's why we are creating this platform, which can focus on digital first as a primary thing. That's why the business model there will have to be slightly different. I must also add that to your point, and you've very rightly said, that a lot of what we want to build D2C will also come from organic D2C brands that we will build from scratch. It's not just about investment in new brands and so on. We will identify niches. We have a lot of capability, and we'll transfer that by building organic direct to consumer brands, direct to consumer brands. Got it. This is very useful. Thank you. Thank you. The next question is from the line of Swagato Ghosh from Franklin Templeton. Please go ahead. Yeah, thanks for taking my question. Ashish, sir, I had one very simple question. On the acquisition front, we are winning a lot. Like, that's a good thing, obviously. But I'm just curious, who are we competing against and, how come we are, like, winning so many deals? What is the secret sauce of that? See, I think every individual opportunity, the partner on the other side is taking a call, looking at our capability, our performance, our value system, Aditya Birla Group's partnership, its prestige, and wanting to work with that. I would say it's the wholesomeness of the whole proposition. We obviously don't chase everybody. We talk to a few people where we think there is a right value and try and find that mixture and see how we can add value and create value for that partner as well. I don't really know who we are competing against because what the other choices for them are is for them to decide. Really, our promise is very simple. As an Aditya Birla Group company, we bring governance, we bring systems. As ABFRL, we bring capability, on the fashion side, and that's what we want to partner and build. Okay, that's fair. Also, I just want to understand in terms of org structure, because of the deals we are doing, are we looking at like, ethnic business head or a D2C business head? Even if not now, maybe a couple of years down the line, will the org structure look like that? Definitely we'll have to keep evolving our organization structures in line with our strategies. At this point of time, these businesses are relatively different and independent, and we are building business heads in each one of them. D2C will definitely have a business head which will be independent and separate. On ethnic side, at this stage, there is no immediate need for consolidation, but as these businesses grow, we look for that opportunity. Yeah. One last quick one. In 10 years' time, where do you see the contribution of Madura and Pantaloons combined for the company? Will it be still very sizable, or can it actually come down because of the actions taken now and maybe in the next three to four years? I think, clearly these are very large businesses and they have their own growth story. Other small businesses are, because they are smaller, they will grow faster. I don't see Madura and Pantaloons being significantly lower, at least in next two, three years than where they are. Sorry, this is more of a longer-term question, but maybe, yeah, it's difficult to predict, and we can discuss that offline. Thank you, sir. Thank you. Thank you very much. The next question is from Gaurav Jogani of Axis Capital Limited. Please go ahead. Thank you for the opportunity, sir. My first question is with regards to the stores in the lifestyle brands or the brands, let's say. There has been a sharp decline on a Q2 basis of around 256 odd stores. Any particular reason for this? What is the question? Can you repeat it again for us, please? Sure. The number of stores at the end of Q2 FY 2022 was around 2,750 stores, and now it's around 2,288 stores. There is a decline of around 260 odd stores on a Q2 basis. Not really. I don't know where you got that number, but I can safely tell you that in the Lifestyle Business, YTD December, we've added about 350-odd stores. Yeah, because your presentation, as of now, it shows 2,488 stores vis-à-vis the current one, and the Q2 presentation did show 2,750 odd stores. Or we can take it offline at least. Yeah, I can check. We'll do a recalculation, come back to you. Please be assured, the store numbers have only gone up. The second question is with regards to, you know, I would like to congratulate on the ethnic foray that you have done, and the Tasva collection, you know, seems to be really good. Want to know if you can comment on how, you know, your ethnic journey is pacing out now, given you have already done around 211 odd stores till now, and how it's planned over the next one year. Are there any further acquisitions or white spaces that you see in the ethnic space? I think we have done a very rapid fill up of portfolio. As you can see in this quarter result, I think we have commented about INR 400 crore run rate. This run rate itself will grow by 50%-60% for next couple of years because our big expansion opportunities are in Tasva, which has just started and is not even included in these numbers because our first two stores only opened at this point. You will see very rapid expansion over next two, three years. We had projected in our plan to be INR 1,500 crore ethnic wear business by FY 2026, by FY 2028. Probably we'll do better than that. Sure, sir. Sir, the last question is, you know, with regards to, you know, during this pandemic time, a lot of companies have, you know, done a lot of efficiencies program or improvement, you know, in their inventory count and everything. Any specific measure that you'd like to highlight as to how you've gone about, you know, improving the inventory turns in your business? As you rightly pointed out, you know, that with an INR 800-odd crore capital employed, you're able to do this INR 10,000-odd crore of revenue. Any specific measure that you would like to highlight on this front and the further steps that you're taking to improve the turns further? I can take this from a Madura perspective, lifestyle business perspective. One is that, look, with this COVID and the now three waves that we've seen of COVID, we have figured methods by which we can become more nimble in managing the ups and downs in inventory. Also, it's important that, you know, while you do so, you don't compromise on what is required from a season-specific perspective. For example, winter wear is independent of how your summer went. You've got to be strong on some of these segments. What we've also done is, you know, I've said this a few quarters back, we have done away with the whole concept of two seasons. We moved to a 12-season model, and in that we have done away with the entire concept of the end of season sale. What this allows us to do is to do true active merchandising of the merchandise we've got, where bestsellers keep selling out fast, and it's the tail which gets marked down actively on a real-time basis through the 12 months of the year, and hence drives freshness. Many of these things, plus working closer with the vendor partners, with mills, quick response mechanisms, vendor managed inventory program, many of these are methods by which we're trying to keep ourselves as nimble as possible in managing inventory. Sure, sure. That's helpful. Any you would like to quantify this? Like, how lower can we bring down our inventory days from the FY 2020 base? Hard to put a number to it, because our days of cover does keep changing every quarter because of the seasonality in the business. On top of that, now we also have to deal with the uncertainties of COVID waves, et cetera. We have to be prepared to build up, build down, build up, build down, et cetera. The better approach that we are looking at is to say, how do we become agile and make sure that even if we add inventory, it's fresh inventory, and you do not get to any kind of old inventory. If at all you have some inventory which gets built up because of a lockdown or because of something, it's fresh inventory and you can very quickly deploy that as soon as things come back to the market. I don't want to give you a number here because that wouldn't be the right way to measure this efficiency. Okay. Sure, sir. Thank you for your time. Thank you very much. Ladies and gentlemen, on behalf of the management, we thank all the participants for joining us. In case of any further queries, you may please get in touch with Mr. Rahul Desai or Mr. Amit Dwivedi. You may now disconnect your lines. Thank you. Thank you.