Ladies and gentlemen, good day, and welcome to the First Quarter of FY 2023 Earnings Conference Call of Aditya Birla Fashion and Retail Limited. The call will begin with a brief discussion by the company's management on the Q1 FY 2023 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 risks that the company faces. Please restrict your questions to the quarter and yearly performance and to strategic questions only. Housekeeping questions can be dealt with separately with the IR team. With this, I hand the conference over to Mr. Jagdish Bajaj. Thank you, and over to you, sir. Thank you. Good evening, and welcome to the earnings call for our company. The first quarter of FY 2023 has been a disruption-free first quarter after a gap of three years. The quarter has seen strong demand and has followed the trajectory of the last two quarters. Since the Q1 of both FY 2021 and 2022 was severely affected by COVID, I will compare the performance of this quarter with Q1 FY 2020, which is a comparable quarter to give investors a comparable perspective of our performance. Now let me take you through the performance of Q1 FY 2023. ABFRL did its best ever Q1 performance in terms of both sales and profitability at consolidated as well as business level. Sales in Q1 FY 2023 is INR 2,875 crore, a growth of 39% over Q1 FY 2020. EBITDA in Q1 is INR 500 crore, which is 51% above Q1 FY 2020. The net profit after tax in the quarter is INR 94 crore compared to a net profit of INR 22 crore in Q1 FY 2020. E-commerce continued to deliver a strong performance, with revenue scaling to more than three times our pre-COVID number. The share of sales from digital channel in our total revenue is now more than doubled over Q1 FY 2020. We have continued to ramp up our digital capabilities and omni network, with more than our 1,600 stores network now omni-enabled, which makes us one of the largest omni network in fashion industry. The net debt of the company stand at INR 649 crore at the end of the quarter. I would like to reiterate that ABFRL has continued to deliver excellent performance in continuation of what we saw in H2 FY 2022. After six quarters of strong resilience in COVID phase, this is the third quarter in succession that we delivered robust growth over pre-COVID levels, and we strongly believe this momentum will continue in the quarters to come. This also is testament to the versatility of our brand and execution of their growth strategy. I will now take you through the performance of individual businesses, starting with Lifestyle brand. Lifestyle brand has delivered an outstanding performance in the quarter, backed by exceptional retail growth and strong e-commerce performance. This business has continued on its journey of significant market share expansion. Sales in Q1 was INR 1,519 crores, showing a growth of 51% over Q1 FY 2020. We are very proud to share that our large retail network has delivered like-for-like growth of 29% over Q1 FY 2021-2022, 2000+ store network. EBITDA has grown by more than 30% over pre-COVID to INR 266 crore. Both casual and formal wear has shown strong growth in the portfolio, and we expect this strong momentum of demand to continue in the upcoming festive and wedding season. Retail channel has grown 76% over pre-COVID levels, while e-com channel continued to accelerate to 50% growth over last year. Our wholesale channel also bounced back almost to pre-COVID levels. I would like to reiterate that Lifestyle brand is one of the largest e-commerce apparel players in the country. Lifestyle brands closed the quarter with a network of 2,527 operational stores, spanning across more than 3.2 million sq ft of area. We'll continue to rapidly keep growing our network for the next few years in all geographies from metros to Tier 3 and Tier 4 cities. Lifestyle brands have been successful in their transformation journey of shifting to a largely direct-to-consumer business model, driven by a larger shift to retail and e-commerce channel. Let me give you an update on Reebok transfer. Reebok India operations will transfer to us with effect from 1st October 2022, and for the interim phase, that is from 1st April 2022 to 13th September 2022, ABFRL is entitled for the net economic benefits from the Reebok India operations. Now Pantaloons business. Pantaloons has recorded another quarter with INR 1,000 crore+ revenue and continued to generate strong EBITDA. Revenue in Q1 grew by 15% over pre-COVID to reach INR 1,027 crore. EBITDA for the quarter grew at 33% over pre-COVID to reach INR 218 crore, with noticeable expansion of 270 basis points in EBITDA margins. E-commerce channel grew by 70% year-on-year, backed by strong traction on own platforms. Pantaloons continued to expand its private label portfolio with new launches addressing diverse spaces like casual wear, innerwear, and tween segment. Pantaloons exited Q1 FY 2023 with a total of 375 stores. While Q1 saw an addition of only three stores, we have opened further seven stores in July and likely to close the H1 with 13 new stores. Our plan to open 70-80 stores during this fiscal is stayed on track. Lastly, our other business segment, which includes Active athleisure, Innovia, youth western wear, and super premium brands. Revenue from other business segment witnessed 38% growth over Q1 FY2020 to reach INR 282 crore versus INR 205 crore in Q1 FY2020. These businesses have now started contributing to profitability of ABFRL with INR 23 crore EBITDA during the quarter. Our active athleisure Innovia business segment achieved highest ever quarterly sales, with business growing to almost two and a half times of last year. We have continued our network expansion with addition of approximately 2,000 trade outlets to the network, with our brand now available across 29,900+ trade outlets. The youth fashion and premium international brands continue to scale up the business profitably. American Eagle grew to 3x Q1 FY20 and is now established as a premium denim wear brand for its consumers. Forever 21 improved its margin with gaining better control over product by leveraging local sourcing. The super- premium brands business segment, which includes The Collective and international mono- brands, is one of the fastest growing within ABFRL portfolio, with sales growing more than 2x pre-COVID levels. The business continued to deliver a strong profitability. Ethnic wear, ABFRL is one of the strongest and most comprehensive portfolio of Ethnic Brands across price points, consumer segments, and occasions. ABFRL has made a bouquet of partnerships with leading designers Sabyasachi, Tarun Tahiliani, Shantanu & Nikhil, and Masaba Gupta to add to its first investment in Jaipur. The revenue of the segment in Q1 FY 2023 was INR 101 crore and EBITDA of INR 4 crore. This financial year will see ABFRL rapidly scale up its Ethnic business with investment in both the channels, offline and online. Let me briefly cover the developments in the Ethnic businesses. Jaypore revenue is 3.5x of last year, with both the channels, offline as well as online, showing strong growth. Physical network for the brand has now been expanded to 11 stores. New categories in the portfolio such as home category, sleepwear, lounge, contributed significantly towards the brand growth. Shantanu & Nikhil, the business delivered the highest ever Q1 performance, with revenue growing more than 2x of pre-COVID levels. The brand added two stores and is now available across 12 stores. Sabyasachi grew by 160% over pre-COVID levels. Apparel business continued to be a market leader in luxury designer segment with industry-leading profitability. After strong acceptance from customers, Sabyasachi will continue to increase its focus on new segments like jewelry and accessories in FY 2023. Tasva has seen a strong demand in the six stores it opened in FY 2022. This brand has received a stellar response in the market it has launched. At the base of strong consumer appreciation, the brand is on track to build a large distribution network in a short span of time. In Q1 FY 2023, Tasva had 12 operational stores, which are expected to increase to 70 by the end of this fiscal, making it one of the fastest expansion story in fashion space in country. House of Masaba, the company completed the transactions to acquire majority stake in House of Masaba during the quarter. The brand is available across seven stores and brings to the table a unique form of designer ethnic for young women. We are pleased to announce that the beauty and skincare line of Masaba just got launched today and is available across leading beauty e-commerce platform and its own website. ABFRL is poised to be one of the leading players in the large ethnic wear market. Tomorrow, our direct-to-consumer subsidiary, we have announced our intention to enter the exciting world of direct-to-consumer brands in apparel, accessories, home, personal care, and other allied lifestyle segments. We intend to build a portfolio of 30-40 digital-first brands within this entity through organic and inorganic modes. This entity has been incorporated and the organization is being set up to execute this vision. Summing up, our business portfolio has unique combination of strong existing businesses and exciting future growth platform. Lifestyle Brand has successfully transformed itself into direct-to-consumer player, and most of the sales is coming directly from our exclusive stores and e-com retail channels. The Pantaloons business model is now firmly proven both in terms of profitability and cash generation return on capital employed. I am confident that these metrics will only improve over the next three years. Innerware will continue to scale rapidly with aggressive expansion in both exclusive stores and trade channels. Our Ethnic wear portfolio is one of the finest and will be industry-leading in spaces they operate. ABFRL has significantly strengthened its balance sheet by reforming its working capital management and increasing capital to take care of all its future growth plans. Before I conclude, I would like to draw your attention to last three quarters' performance, in which the company has delivered a cumulative revenue exceeding INR 8,000 crore and EBITDA of more than INR 1,500 crore in these nine months. This is despite the disruption caused by the Omicron wave in December 2021 and January 2022. This reflects the intrinsic strength of our brands and business models. We expect this momentum to accelerate further in the coming festive and wedding seasons and beyond. We are confident that we will exceed the goal that we have set for ourselves in our long-term strategy shared with you in March 2021. Thank you. We'll now take your questions. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Participants, you may press star and one to ask a question. The first question is from the line of Nihal Jham from Edelweiss. Please go ahead. Yes, thank you so much, and congratulations for strong performance. Three questions from my side. Starting off with Madura. In Madura's case, if I look at our revenue per store, even if I compare it to pre-COVID, there has been a significant improvement and whether it is in, even in the like-for-like number that you have disclosed. What I wanted to understand, Vishak, was that other than the casual portfolio that we've added, are there any other incremental changes that have happened in the Madura portfolio which has led to this significant improvement? I'm assuming there will be a slight mix element, but we would believe that wouldn't have too much of an impact in terms of how we are seeing this number. Okay. Do you wanna ask all your three questions or you wanna go one by one? I would do one by one if that is fine. I think you're right. It's many things. There was, of course, the impact of casualization, which significantly helped us. There are other factors also at play, including, you know, very strong consumer movement of back to office, physical offices. Wedding season also was quite strong for us during the quarter. I think many of our other initiatives on assortment, et cetera, also paid a lot of dividends. Of course, the fact that market was good. All these together may have contributed to a strong quarter. You know, we are an overall 29%. Our premium brands were even higher. Especially in the premium segment, it was a very strong like-for-like productivity in retail. Just one follow-up. What will be the casual share comparing it to the pre-COVID quarter to this quarter? In general, what is the number now like versus pre-COVID? I think, casuals are at offhand about 55%-60%, depending on the brand. Okay? I must also say that there has been a very strong resurgence in the formal segment also, okay, in the last few months, which is primarily because of people coming back to physical offices. Sure. That's helpful, Vishak. The second question was again on Madura and, you know, taking the other channel on e-commerce. Now, ideally, some of the trends that are currently visible is that because of the spending that is happening in offline, there has been a slight moderation at least flattening out on the e-commerce. But in your case, even that as a channel has accelerated. Again, the question is that this is a like-for-like growth, or have we, you know, been available on more platforms or we've got new brands on, e-commerce which is, you know, driving this kind of traffic? I think this, you know, as far as the lifestyle, Madura Fashion & Lifestyle business is concerned, there is no new platforms or no new brands. It's the same set of platforms and brands. It is just productivity improvements, also very strongly aided by our omni-channel network. With the omni-channel network, both the assortments that becomes available to a consumer on the marketplaces as well as the speed by which we deliver, both significantly improved, leading to better productivity and throughput. Sure. Helpful. One last question on Pantaloons. You know, we've alluded to the fact that the EOSS has been postponed has helped margin. I just wanted to understand, would it be fair to believe that given the larger apparel problem Q2 that margins will moderate, or are we looking at a lower number of EOSS days for this year? Yeah. Hi, this is Sangeeta. As you rightly pointed out, I think this decision that we took to postpone the EOSS was primarily because we wanted to make sure that as our business has been growing over a period of time, if you go back to FY 2020, at that point of time, there were several changes that we had made, which had resulted in a very good margin even in FY 2020. Intrinsically, several aspects of the business, if you recall, from improvement in product, improvement in planning, there were inherent shifts that we had made in the business. If it was not for the last two weeks of COVID, FY 2020 would have been our best ever year in the history of Pantaloons. From that point of time, our margin was at 18.5%. We took a very informed decision this year to shift the EOSS. It may have cost us a little bit in terms of our growth on the top line. Inherently, with the confidence that we have in the business, we made this decision to take a shift, and July has been our EOSS. Effectively, we have reduced the number of days for the EOSS, and therefore this is also reflected with a better margin in quarter one. Sure. Thank you so much. I'll come back if required. Best wishes. Thank you. Next question is from the line of Tejas Shah from Spark Capital. Please go ahead. Congrats on a good recovery. Tejas, can you check? Your voice is breaking terribly. Yeah. Is this better? Yes. Yeah, thanks. Yeah, thanks and congrats on a good recovery. A couple of questions. First on Lifestyle Brand. If I see there is a very interesting interplay between the different channels, whereas wholesale has a three-year CAGR basis kind of degrowth, but other two channels have done phenomenally well. Any insights if you can share, is it deliberate or is this how consumers are also, footfalls are also changing? Hi, Tejas Shah. Tejas Shah, first things first, yes, we are scaling up our retail business much faster with the kind of expansion that we're having, as well as throughput improvements in retail. Multiple initiatives going on to constantly keep strengthening the retail network and expanding it. On the wholesale, however, I think the wholesale business actually has been quite strong. Two things have impacted specifically the quarter one performance. One being the lack of business with Central during the quarter. Central, as you know, is a very large, you know, large trading partner for us. We've not been able to do any business with them over the last one quarter, so that's affected our Q1. Second is also, you know, we've been going through this process of disintermediation of our Peter England distributor business. There is a bit of change. You know, it's now directly to the retail stores, and hence that pipeline is gradually being removed. That also has impacted the primary sales to the channel in the quarter. These are two reasons why the wholesale number looks like that. Having said that, the larger point around retail becoming bigger is very much valid. Tejas Shah. Okay. Just one follow-up on that Central point. Many other companies had some exposure outstanding to Future Group, and they had taken provision. Any update on that from our side? Tejas, we do business with the Future Group on both sides, which is Madura Fashion & Lifestyle, which sell with them, and some of the Future Group businesses which sell through at Pantaloons. We are squared off in terms of our exposure. Okay. Okay, interesting. Yeah. Sir, on Pantaloons, so when I see and I try to gauge consumer sentiment from our different segments, number our revenue line item in particular, there seems to be a robust recovery. In Pantaloons, Sangeeta has been vocal about it on this, that we have been working on improving profitability. I understand there's an EOSS element also this quarter. Still, even if I take inflation into the picture, which is, I'm reasonably sure that like-for-like article cost will be higher than 5% CAGR versus pre-COVID FY 2020 quarter. Just wanted to understand, A, are we kind of sacrificing growth to improve profitability, A? And B, how should we think about sustainable growth in Pantaloons going ahead? Tejas, let me just first, I think you mentioned that Sangeeta has been talking about profitable growth. I, as she started the first question, let's just rewind, FY 2020 same quarter, also our EBITDA margins were north of 18, close to 19%. Pantaloons intrinsically has improved its intrinsic profitability of the business. This quarter, it was further aided because of the decision to shift EOSS out. We have not just shifted EOSS out, I think we've also shrunk it to four weeks. Earlier it used to be seven, eight weeks, et cetera, so we have taken that out. The outcome of that is the revenue line has probably not grown as fast because EOSS you get a lot of revenue, the volume growth is much higher, et cetera. We have sacrificed that in the short term, which is the revenue growth is lower than what could have been if you had followed the normal path. Our profitability is slightly better. Please remember, this is the profitability not very different from what we had in FY 2020 also. On the larger question of Pantaloons growth, I think which is intrinsically the point that you're raising, we are quite confident of Pantaloons' store model. The fact that our constraints of capital, COVID situation, ability to execute at that point of time, has resulted in lower expansion in Pantaloons the last two years. Even this quarter we could open only four stores and, we have now visibility for another 20-25 stores in H1. We remain committed to opening about 70 stores for Pantaloons. That will change the trajectory of Pantaloons. There are really two parts. One is intrinsic store economics, which is very, very strong, and there is a fundamental expansion leading to a lot of store expansion, which you couldn't see this time, but which will hopefully play out over the next nine, 12 months. On the question of value versus volume, in a quarter like this, when you forego end of season sale, obviously the value growth, most of the growth comes from value because you've given up a lot of volume which happens during the quarter. I would say that's a more short-term phenomenon. Okay. Sir, out of the 70 stores, any guidance on how much will be on franchise basis? We have been consistently. Tejas Shah, talking about 20%. 20%, yeah. Broadly, that's been the trend. I mean, we used to be at about 15%, 18%. Currently it's 20%, and I think that's what we expect would be the case for FY 2023. Yeah. Sangeeta, just one follow-up on this. If I remember, I could be slightly foggy on the timeline, but if I remember correctly, we are one of the first, if not the first, to experiment with the franchise route to large format store kind of model. Of late, other peers, other players we are seeing that they are actually ramping up their presence on both the value side and even on the slightly premium side on franchise basis. It seems that the model is working and there is now proof of concept as well. Any restriction or inhibition on our side as a business model that we think we don't want to put too much weight on that vehicle of growth and we still want to fund it through our own balance sheet only? I think, Tejas Shah, you know, we have to recognize that primary business of retailer is to retail, and there is a bias to control that experience from our side. We know we are capable of doing franchising because we are the largest franchisee company in the country in fashion industry, and you know the Madura side of the business. Even Pantaloons, starting from zero, we've got to 18%-20%. I think it's important to keep that balance. Also considering the store economics, the return per store, it's a very attractive investment even for us, leave alone franchising. As our balance sheet has improved, we feel even more confident. Ability to execute is much faster, and especially considering the fact that there are apprehensions among franchisees for large format. There are apprehensions from our side in terms of what kind of quality of consumer experience they will be able to deliver, to what extent we should allow them. That's why it's a balanced approach. I don't think at this point we are ready to swing completely to a franchisee model, even though financially it may be possible to be achieved. Okay. That's all from my side. Thanks and all the best. Thank you. Next question is from the line of Aliasgar Shakir from Motilal Oswal. Please go ahead. Yeah. Hi. Thanks for the opportunity and congratulations for such a good set of numbers. Couple of questions. First is on a bit on the macro. You know, I mean, I hear the commentary very positive, and we've seen very good performance across verticals. You know, some of the channel checks we do indicate that, you know, lot of the rural markets and also in fact lot of companies indicate rural market, Tier 2, Tier 3 are not doing very well. If you can just, you know, share some color in terms of how have we delivered across, you know, our multiple regions. Do we see any, you know, pockets of regions which are weak for us or, you know, could be any concern or, I mean, how is the outlook here? Ali, I don't think there are very strong, discernible and statistically valid, data that we can pull out and say one region is doing much worse particularly and so on. I think, not just this quarter, but if you look at our performance previous quarter and quarter before that, there's all round sort of buoyancy in the market. There is definitely greater resilience as you go up the price point. Our higher priced products, brands which are more premium, have shown much faster growth, reflecting clearly a resilience in the premium end of the market. The challenges as you come down the price point are slightly more visible. I would say a lot of, you know, commentary in the market right now is driven by essential products, perhaps where, inflation and, other recessionary trends are visible. As far as our business is concerned, while there is a higher growth at the premium end of the market, I don't think the growth is a challenge even at the bottom to middle of the market as of now for us. It probably also reflects to some extent the level of under-penetration that this industry has. We don't really have a large part of business coming from Tier 3, Tier 4 towns at this point, as an industry. I'm not talking about it only as a Company. To that extent, therefore, we may be representing only a strata of the market and consumers, which is probably less affected in these times. Understood. This is very helpful. Second thing on Lifestyle Business. I think Vishak did indicate, you know, the performance in casual and, you know, women wear in fact was also done well. If I faintly remember correctly, I think rather the formal men's formal wear category was somewhere like about 40%-50% contributor to us, and that was one category which, you know, has a moderate growth and we've now extended of course in multiple categories. If you can just share some more color in terms of this big growth we have seen. You know, can you share some softer aspect about what is the kind of growth we are seeing, you know, in the formal wear and, you know, other categories? How we should look at the overall segment given that, you know, there is one category which would have a, you know, moderate growth and the brand extensions that we are doing are giving us a very good strong growth. You know, how should we look at this segment overall from that point of view? I'll let Vishak comment here, but let me first, Ali, tell you that as an industry, we have been very early stage of sort of penetration of branded market. We see very strong opportunity on all parts of the market, the formal wear, the casual wear, the athleisure. While there may be industry shifts, there is also consolidation and market share gains that our brands are actually achieving and recording these times. Therefore for us, this kind of growth can only come if all segments of the market are growing. Vishak talked about recovery, as people came back to office, as people started going out. So, Vishak, do you wanna add to this question? Yeah. Ali, I think, you know, if you look at the various segments which we operate in, there is the formal work wear segment which, like I was telling Tejas a little while back, has grown beautifully during the quarter when lot of people came back to physical offices. There is a wedding segment which has, again, done very well in the last quarter and continues to be on a great momentum. There is the casual segment which again, like, you know, we've built a lot of capabilities around that, extremely well done. Denim segment, which again has had a fantastic response. Lot of innovative products that we've launched in denim, which have done extremely well. Flex, athleisure, activewear, all of these which are active lines and athleisure lines which have again done beautifully. I think the key is to be able to respond well to the lifestyles, to the spirit of the times. Brands which are able to see the, you know, trend in the market and respond well, definitely get some of those benefits of that. I think we have to be constantly watching that. There will be times when different segments will have greater or lesser traction, and we'll have to be able to create assortment plans which reflect that strongly, Ali. I think we've been able to do that in and some of that is what is giving us the kind of results that we've had. Okay. Quick follow-up. If you could share, you know, what would be formal wear share now? If I compare both, you know, I mean, could you give us some color in terms of what is the formal versus non-formal wear growth, either for you or for the industry? I'm just trying to get some clarity about, you know, what is the pace of growth both shares. You know, I, you know, it would vary across brands. For example, Allen Solly has a much larger casual component or, you know, and so on. On an average between the lifestyle brands, about 45%-46% would have been formal wear, and the rest of it is the other segments that I spoke about. Actually for Q1, all segments would have had similar growth. We can give you the data, but I would say it's not as if something has grown at the expense of something else. It's been a fairly strong uniform growth across both formal and non-formal categories. Got it. This is very useful. Just last one, if I can slip in. Pantaloons, if I understand, we've seen two store closures in this quarter. So, you know, any reason we have a very strong growth target for this year, about 70 store addition? You know, what has happened in this quarter that we have not added stores? Yeah. Hi. As Ashish mentioned earlier that first and foremost, because we do believe that we have a very strong business model, we are very confident that this year we are gonna stay on our plan, and we will be on course in second quarter to open the 70-odd stores that we committed at the beginning of the year. Now, you know, in retail, and especially with COVID, as we've had disruptions, I think we review the economics of our stores from time to time. Whenever there's an opportunity where we believe that the store from a potential standpoint perhaps is not going to be working for us, we take calls every quarter to shut a few stores. This is just a part of that. It's. I think the numbers look different because this quarter we've not been able to open as many stores as we would have liked. July, for example, as Jagdish said, we have only opened seven stores. Some of the openings of June actually slipped into July. In H1 of this year, we will have 30 new stores for the year. This is very helpful. Thank you. Thank you. The next question is from the line of Gaurav Jagani from Axis Capital. Please go ahead. Congrats on a good set of results. My first question is with regard to again Pantaloons. I mean, if we see in terms of the margins for Pantaloons, you know, that have been very wavy. I mean, while we understand, you know, that there have been elements of COVID also in between impacting the business for format stores. According to you, what would be a steady state margin for this format now, you know, with the assumption that the things will be normal going ahead? I think, if you, unfortunately, we have operated in some form of COVID impact for most of last two and a half years, except perhaps Q3 of FY 2022 and Q1 this year. If you remove those quarters and go back to even as far back as some people saying FY 2020 for three quarters which are clean, you would get a fairly good sense of margins, which are stable margins for Pantaloons. We continue to improve on that, just as we have done in previous four, five years of Pantaloons' journey. I think lot of variation, there is intrinsic seasonal variation that fashion business has, and therefore, whether it's Madura, Pantaloons, any other fashion business would have quarter on quarter. If you average it out and look at a weighted average of three, four quarters, a couple of years, you'll see a consistent improvement in margins. This quarter is a further improvement over what was Q1 two years back, three years back, which is the previous normal quarter. It's not a extraordinary shift. It is actually a marginal improvement over what we had delivered the same quarter two, three years back. Sorry, sir. If you can quantify, you know, what would be the element of benefit on the margins because of the shift in the mix for Pantaloons this quarter? Hard to say because what happens is, on one side you make the margin gain, on the other side there is a loss of revenue. It's emotional loss, but we know it's a real loss. It's not that we lose money on that revenue. We make less money on it and therefore it will be a hypothetical number if I were to give you one. You can go back and look at maybe FY 2020 numbers that had 15 days of sales. This time it didn't have. Anything in between of what we had done, which is about 18.5, 19% to what we delivered this year would potentially be the number around that. Sure, sir. That's helpful. Sir, in terms of the overall gross margins also for the business, you know, we see the performance has been quite strong, you know, despite the headwinds in terms of the inflation that we have seen, especially in the retail business. What would you attribute this to and how sustainable these margins are on the gross level as well? First a word of warning. In a highly complex multi-divisional business. The gross margin that you see is also a reflection of the mix of business rather than the individual gross margin. Let me come back and anyway address the point that you've raised. I think the improved gross margin is a reflection of the strength of our brands, in our ability to pass on a large part of an exceptional inflationary environment the textile industry has gone through over the last 12 months-15 months. We have managed to, by and large, pass that on, more so in premium brands and little less with the brands which are in the mid-premium segment or below that. I would say it's a reflection of that, and as time goes, hopefully we'll be able to retain some of these margin gains. Sure. Sir, just last couple of bookkeeping questions in this end. One is on the Reebok part. While we know the economic benefits are to be transferred to us in this quarter, if you can quantify how much of this benefit we would have received from Reebok for this particular quarter? I think right now we are in a mix of a business which is transient. I wouldn't want to give a number because that probably is not fully reflective. Many moving parts in that. It's in transitionary phase. You will start to see a more stable number as we take over business. Just one quarter away, request you to give us time to see that. Sure, sir. No worries there. If you can clarify on this part that will it be qualified under the Madura brands or the Lifestyle brand segment or it will be classified separately when the impact comes? As of now, we will classify under other businesses in the Madura segment. But as we go forward, we'll look at how best to represent it. Sure. Sir, just one last bit from my end is on the taxation part. I mean, given that we have accumulated losses over you know past couple of years, how should we build tax gates going ahead? For next two years, there is no current tax. So whatever we have this deferred tax assets in our books, the rate will be around 25%, which we have to expense it out. Okay. Sure, sir. Thank you for answering my questions and all the best. Thank you. Next question is from the line of Devanshu from Emkay Global. Please go ahead. Sir, thanks for the opportunity and congratulations for continued strong execution in Q1. Sir, with Lifestyle moving towards D2C, what is the growth trajectory expected for wholesale channel within this segment? Related to this, how is the EBITDA margin performance profile for wholesale segment versus the other two segments? Vishak, do you wanna cover it? Yeah. Look, I don't wanna put a number for wholesale growth. All I wanna tell you is that it's an important part of our business. We'll continue to build that. Like I said, you know, as and when the Central business comes back, that will prepare the overall wholesale business further. We are also looking forward to a strong festive, especially with, you know, the early bookings for Onam are looking very strong. Puja also the indications are very strong. We usually when Onam and Puja do well, the Diwali business is strong. We are looking at a strong wholesale. I don't wanna put a number to it. Profitability-wise, you know, our profitability model is such that our retail profitability is largely a function of the sales per square foot, which we have made significant, you know, you saw the kind of like to like that we've done. Both these are like, you know, in that sense, profitable channels for us. It's not a this versus that. There is a consumer opportunity in both the channels, so we have to make the most of that and be where consumer is, expecting our brands to be. Sure. My concern or maybe the question was to understand if the wholesale mix sort of goes down, will the margin trajectory for Lifestyle segment improve or decline? Just wanted if you can share some ballpark commentary on that, it will be. Again, wholesale is not one homogeneous segment. You know, we have a multi-brand trade, we have a department store, you know. It's not one where there are different channels. It's not one homogeneous wholesale. We'll have to again further de-average that to look at each segment. I just want you to know that, each of these are opportunities and, each of them would have at different points of time, different growth trajectories. They continue to be an important part of our business. It should not be seen as some business shift from here to there. It's just the rate of growth in different channels might be different. At this point of time, we have a significant share again as a retail business and that's good for us. It's a profitable retail. We will continually build on the wholesale business as well. Thanks, Vishak. Sir, with all the investments that we have done in our supply chain, I wanted to check what should be the trajectory of our working capital going ahead? I think, Devanshu, if the question is, see fundamentally, if you look at our operating model, we operate with light working capital matching our inventory and payables. As the share of retail grows, the share of inventory on our book will grow, but it will be sort of balanced with the payables on the other side. That's the net balance we have found. Our net working capital in Madura business is in early double digits, in Pantaloons it's low single digits, and therefore we are operating with a net working capital to sales, which is very, very sort of competitive and one of the benchmarks in the industry. We've taken this as a conscious call and achieved it consistently over four or five years. This is not a one-time phenomenon. Obviously, we continue to keep improving our inventory models through automation of supply chain model, distribution, planning, and so on. Those are benefits that you keep seeing incrementally year on year. Our overall wheel is very well balanced in terms of net working capital as a percentage. Sure, sir. Sir, lastly, wanted to check for Pantaloons. How should we see the longevity of this 70-80 annual store additions in this segment, as the play here is in a very large economic market? How should we see the longevity for Pantaloons store additions? Hi, Devanshu. As we mentioned before, we've been on a journey as far as Pantaloons is concerned. Today, we feel we've traveled a long path and feel extremely confident of our expansion plans simply because both our business model and the fundamentals of the business have intrinsically improved. This year, and as Ashish mentioned, that in the past we have perhaps not been expanding to the extent that we would have liked. This year we are confident that we will open about 70 stores. There is a huge opportunity in this market, wherein with the penetrations we have and the distribution footprint that we have to open more stores. Therefore, we feel confident that every year a number of 50-70 stores is what we will continue to open, and this will obviously keep getting reviewed every year based on the opportunity, could be higher, could be lower. This year we stand committed to the 70 stores that we talked about a quarter ago. Thank you, ma'am. That's it from my end. Yes, sure. Thank you. The next question is from the line of Priyam Khimawat from ASK Investment Managers. Please go ahead. Good evening, team. Two questions from my end. First is on Pantaloons, just trying to correlate our margins with net store additions. Because when I look at our net store additions over the last three and a half years, it has been very underwhelming and much lower than what we had guided for or as well what competition has been able to achieve during this period. Because we were close to 310-odd stores, and now we have just 375 stores over this period. Is it just because we were short of capital or maybe it was because we have kept closing a lot of stores leading to such a low number of net store additions? If we have closed out so many stores which have been loss-making, has that actually been the key driver for a significant margin improvement in Pantaloons? I think some of the larger. You know, over the last two and a half years, we are trying to restructure the balance in terms of rentals and fairly tough conversations over this period. Wherever we felt that the meaningful benefits that we are seeking were not possible, even if the store was marginally or decently profitable, we've taken a call to sort of set an example and shut some of those stores. I think past two and a half years are reflective of the underlying dynamics that retailers and the landlords have gone through. Clearly, our addition of 70-75, which you mentioned we have done over this period, perhaps we have done about 30 stores in 2020 and about 19-20 stores in 2021, where we have literally shut the shops, sort of shuttered. 2022, we have come back to about 39. We have also shut stores because of the reasons that I explained. I think where we stand today. I don't think this dramatically explains the shift in margin because that's not a material number. That's a very small number in a network of 350 stores. If you actually look at the kind of stores we would have shut, the share of revenue would be even smaller than that. I don't think that has had an impact which is meaningful enough, but it was important to execute the agenda that we were on in the COVID period. As Sangeeta Pendurkar explained, now that we have demonstrated feel strong in terms of balance sheet of the company itself, therefore both willingness and ability to execute, you will see a very different pace of expansion in Pantaloons. Fair enough. Sir, on the Lifestyle Brands business, while we have done a great job, if you could share some more color on how the smaller format stores in Peter England and Allen Solly have been performing? Priyam Khimawat, I'm assuming when you say, yeah, smaller formats, you mean the smaller town formats? Yeah, yeah. I think it's been a very strong journey on, not just in Peter England and Allen Solly, but also across Van Heusen and Louis Philippe. Of course, Louis Philippe, we don't go that deep into town classifications, but in the other three brands, we go fairly deep, deepest in Peter England. I think the traction has been very strong. We continue to expand a lot of our expansion. On one hand, there is malls and urban markets. On the other hand, there is also small town expansion. We've also taken a statewide drive on this because we also realized that each state is very unique in terms of merchandise, assortment, sensibility, and so on. It's a very statewide scaling up plan. We go one state at a time. For example, Van Heusen is available in Tamil Nadu and UP. Allen Solly likewise is in Tamil Nadu and Andhra and Telangana. We've taken a very state-wide approach to this so that we are able to make the most of consumer insights in these markets and then scale up. The response has been very, very good. Okay, fair enough. Sir, lastly, just one suggestion or feedback which even earlier has been highlighted to you. If you could please give pre-index number as well in your presentation, because when you look at all our peer set companies like DMart, Trent, Shoppers Stop or even QSR then Multiply show that better. Everyone gives that data, and especially for a company like ours who has given their five-year roadmap on pre-index basis, it would be really helpful for the investor and analyst community if you could disclose that number. Thanks. I think we've received this feedback in past. You know, one of the problems we've had is that people are using different numbers at different points of time. As an industry, most companies are consistently reporting post-index numbers and therefore there's comparison possible. Even in relative terms, our numbers which are reported to stock exchange, people pick up data from different places. To ensure consistency of information and singularity of information is why we continue to believe that it will create more confusion in the larger market. Of course, unless some of you who have greater sort of time, desire, ability to synthesize data would probably get benefited. But it also creates confusion and duality of information across wider people, and that's really why we've refrained from it so far. Okay, sir. Thank you. The next question is from the line of Ankit Kedia from PhillipCapital. Please go ahead. Sir, three questions from my side. First is, in our segmental EBITDA, there is other section which is INR 8 crore loss we have reported. Is that got to do with the new B2C subsidiary we have created? Should we annualize the number? It's a one-time loss. These are small expenses which, of course, include B2C and other experimental ventures that we do. Please remember that these kind of things take long time to come to fruition. Specifically B2C, we have just started the business, but we have been working for it for last 6 to nine months. There are expenses with research, analyzing companies, looking at attractive customer segments to enter, and therefore various other expenses. While you can annualize the cost, please remember there'll be revenue that will follow because that's the whole purpose of this entity. To that extent, there would be, you know, the plus side, the revenue and hopefully some profits. Yeah, there will be expenses on the other side as well. Sir, the investments in B2C which we would do, would these companies be profitable from day one or we would actually have losses, you know, in the startup phase and then the profits will follow back ending? It will have both. I think the current plan is to look at a portfolio mix which looks at some companies which are on marketplace model and intrinsically profitable, and also to look at some companies which have scale opportunity and therefore we need to invest for growth. We'll keep a balance as we go forward, but it's too early to sort of indicate a number on that right now. Sure. Sir, my second question is, you know, our fundraise happened around two months back, and you said the investments would only increase from there. Is it fair to assume, getting into quarter two and quarter three, our investments into advertising businesses would only increase and that could put some pressure on the margins given that the benefits of the investments would again be slightly delayed? Things like advertising, yes, definitely they will go up. I don't think fundraise was meant to fund the P&L of the business as much as the growth ambition coming out of new stores, building new businesses. Of course, there are new businesses like Tasva, some of the ethnic brands which are in early stage where there would be losses which we'll have to fund. Clearly, the advertising investments will go up significantly towards the end of Q2 and largely in Q3. They also come in line with significant increase in revenues. To that extent, they balance each other out. Sure. My third question is regarding debt. You know, despite the INR 600, actually INR 750 crores fundraise because warrants money 25% would also come in, our net debt has actually increased. Is it fair to assume working capital would have increased by around INR 1,000 crores in the quarter? No chance. Your assumption is wrong. We have not yet received, our process of fundraise is still undergoing few steps. That money has not come in. To that extent, therefore, what we have done, if you look at from March results, our debt has effectively at consolidated level gone up only by INR 100 crore, which is also equivalent of the investment that we have done to acquire stake in Masaba and little bit that we have invested in Reebok initial expenses. I don't think our working capital has significantly increased. It perhaps as a percentage of revenue, if anything, it has come down even further. Sure. No, my assumption was the money would have come in off the fundraise. I timed that. No, it will come in second quarter. Okay. Thanks so much, you know, and all the best. Thank you. Next question is from the line of Bharat Chhoda from ICICI Securities. Please go ahead. Yeah, thanks for the opportunity, sir. I have a query on this Lifestyle brand EBITDA margin. If you look at the EBITDA margin, actually it is down by 150 basis points to 17.5%. We have had a robust growth and but that benefit of operating leverage is somehow not visible. Any specific reason over here, sir? There is a channel mix issue which, while one side of the business has done very well, the wholesale has not fully recovered. Vishak explained some of the reasons that existed at that point of time. Obviously, there is also an element of higher growth in e-commerce, which today generates less profit compared to the retail channel growth. These are the channel mix issues which are actually driving the shift in margin. Okay. Sir, one question on this, Reebok, store. Like, how is the investment and CapEx happening over there? Will these be basically on a franchise basis or how this model will work? The primary model right now that Reebok has in India is a complete franchisee model. We believe to strengthen the brand, we will do a combination of franchisee model, but also do some exclusive company-owned stores. This is required to reposition the brand well, to gain share in some of the key markets. As you know, all our small format businesses are largely franchisee-led, so it will remain that way. There would be some investment in at least the key markets where we would like to establish the brand more strongly and spend company's money. Yeah, that's it from me. Thanks for answering my questions. Thank you, sir. Thank you. Next question is from the line of Priyanka Trivedi from Antique Stock Broking. Please go ahead. Hi. Thank you for the opportunity, and congratulations on the set of numbers. My first question is basically on Pantaloons, and on the non-apparel segment. What is the focus there? We see that, you know, the footwear is a fast growing. Priyanka, sorry to interrupt you, but your voice is breaking when you're talking. Okay. Am I audible now? Yes. Can I request you to speak little louder, please? Yes. Yeah. My question is basically for Pantaloons and on the non-apparel segment, actually. Wanted to understand our focus on that segment. As you see that the footwear is a fast-growing industry and many peers are focusing on this segment now. Globally also, footwear is very important for retailers. What is our plan for footwear in the Pantaloons business and what is it contributing currently? Yeah, right. Hi, Priyanka. This segment actually includes multiple categories. The largest ones, of course, are footwear, bags. We do some bit of jewelry. A new category that we launched was home. A lot of these category focus areas that we defined were pre-COVID, and we've continued to kind of invest in them as we've seen recovery in the market. I think accessorization is a very important trend, and therefore, with our strategy of wanting to complete the ensemble for the lady, the woman consumer or for the man for that matter, with accessories, I think has been a stated strategy. Therefore, if you see over the last one year also, of course in FY 2022, given that a lot of people were still not stepping out of the house, etc., we have seen a dip in non-apparel as a category. We've seen a good comeback, and we will continue to invest in terms of expanding the category. Home has been one addition, where we have started off well. We think as these are adjacent fashion categories, both in case of adjacencies to apparel and home because our lives changed during COVID and large part of time was being spent at home. Both of these will continue to be areas of focus, going forward. Okay. Got it. What would be the share currently on the non-app side? Currently, sitting quarter one, it's about 10%. Oh, okay. Yeah. My second question is basically on, you know, athleisure. So like you've mentioned that, you know, formal wear as such has been picking up now, you know, with the normalization in the lives of the consumers. So are we witnessing any, you know, shift in the share towards formal and athleisure reducing, or is it improving going ahead? Yeah. This question is for Vishak. In terms of the trend across in Pantaloons as well as on the Lifestyle brand. I think there are some trends to some extent which are democratic and will continue to grow. The journey of casualization is a 10-year trend. It's not a one-quarter trend, and therefore it will continue to grow. Quarter-on-quarter, because in some quarters people are not going to work, so formal wear may fall and it'll come back. Those are gradual and incremental shifts. There is nothing very dramatic at play. As Vishak explained, our portfolio allows us to capture opportunity as those happen. When formal wear comes back, the share of formal wear will look high, but it doesn't mean absolute growth of athleisure has come down. I think as consumer lifestyle, you must agree, is shifting to greater comfort. Work from home will... If it was 100% at some point of time, but it will not go back to being zero. Whatever it is, so some of those shifts are gradual and happen over a period of time and will reflect in the share of segment. I think one quarter here and there is not really good way to look at the shifts in trends. Okay. Got it. Yeah. Thank you. That is all my side. Thank you. The next question is from the line of Tejas Shah from Spark Capital. Please go ahead. Hi, it's follow-ups. Anecdotally, it seems based on channel checks that we would have gained market share in lifestyle brands versus pre-COVID period. Any insights or there could be sample set bias, but just wanted to know if you are also getting some sense validated by numbers. I think very simple. Sorry. Sorry, Ashish, you were saying something? No, go ahead, go ahead. You know, one indicator of this is our performance in malls vis-´´a-vis other brands, et cetera, which seems to be suggesting what you're saying. The other is our rankings in department stores, which have also been very, very strong, which also suggests that we've had some gain in share. You know, as you know, there is no Nielsen or no clear numbers to say what is your share, so we can't confirm that. I think, broadly, the kind of growth that we've had should result in an increased market, should have resulted in an increased market share for us. Perfect. Last one, you spoke about Reebok, a bit early to comment on capital deployment and other strategies. But just on pricing part or how you want to position the brand, any thoughts? Because it has gone all over the place in last five, 10 years. Where do you want to place the brand and how do you want to actually scale it going forward? It is a very, very powerful brand. Okay. It's, you know, it was at some point of time the largest, sportswear brand in India. I think, the task ahead is to be able to bring, that kind of position back to the brand. Multiple things have to be done. As you know, we would be moving in, from 1st of October. Pricing one of them, the kind of, product segments where we want to strengthen further, the kind of geographies, the distribution, multiple, dimensions stages which will have to be addressed. All I want you to know is that, look, this is a brand which has what it takes to be a market leader. Fair point. Fair point. That's all from my side. Thanks and all the best. 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. On behalf of Aditya Birla Fashion and Retail Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.