Welcome everyone, and thank you for joining us on Arvind Fashions Limited Earnings Conference Call for the second quarter and half year ended September 30, 2021. I am joined here today by Kulin Lalbhai, Non-Executive Director, Shailesh Chaturvedi, Managing Director and CEO, and Pramod Gupta, Chief Financial Officer of Arvind Fashions Limited. Please note that results, press release, and earnings presentation had been mailed across to you earlier, and these are also available on our website, www.arvindfashions.com. I hope you had the opportunity to browse through the highlights of the performance. We'll commence the call with Kulin providing his key thoughts and brief update about our financial performance for the second quarter and half year ended 30 September 2021. He shall be followed by Shailesh, who will share insights into business performance and key priorities for us moving forward. At the end of the management discussion, we will have a Q&A session. Before we start, I would like to remind you that some of the statements made or discussed on this call today may be forward-looking in nature and must be viewed in conjunction with risks and uncertainties we face. A detailed explanation of these risks is available in this quarter's earnings presentation. The company does not undertake to update these forward-looking statements publicly. With that said, I would now turn the call over to Kulin to share his views. Thank you, and over to you, Kulin. Thanks, Ankit. A very good evening to you all. Thank you for joining us for the Q2 results. The previous quarter saw the markets opening up post the COVID second wave. What was very heartening to see is that the recovery was more than twice as fast as the recovery after the first wave. Most of the retail channel opened up by August, and the market response to the end of season sale was also strong. AFL was able to make the most of this recovery and post a strong set of numbers with a cash breakeven in the continuing business. Sales for the quarter were up 113% year-on-year and 155% quarter-on-quarter. Higher sales and good cost controls led to a INR 100 crore swing in the EBITDA compared to the same quarter last year, and we ended the quarter with an EBITDA of INR 72 crores. The offline channel showed a lot of resilience. While July remained affected by store shutdowns, August and September retail sales were almost back to pre-COVID levels. A highlight was the performance of the power brands, which saw a 145% growth over the same quarter last year. The department store channel saw a slightly slower recovery, but we do expect momentum to pick up in the channel in quarter three. The MBO channel also saw very robust retail sales due to full stocks and healthy footfalls. The offline recovery has seen further momentum building up post quarter two. This was one of the strongest Diwali seasons we have seen in many, many years. Customers came out in big numbers this Diwali, and with a fresher and higher level of stocking in the channel, we were able to post high double-digit LTL sales across our brands compared to the FY Diwali season, which was before the COVID impact. We are also cautiously optimistic that this performance will sustain post-Diwali due to a strong performance of the winter wear offering. The online business continues to be a highlight. Even on a very large base, the business saw growth of 55%. We added INR 120 crores of additional sales in the online channel compared to quarter two of last year. Marketplace sales have scaled up with an expanded offering in the core business, launch of new categories, and by connecting a larger number of stores for omni-sales. FM continues to gather momentum, with sales almost doubling year-on-year for quarter two. Nnnow.com has scaled up with a focus on fresh season launches, a scale-up in the beauty category, and the launch of more exclusive offerings. We are well on track to achieve INR 1,000 crore online business run rate as we exit the year. Our focus on improving inventory turns has started showing results. Even though sales have gone up 113% compared to last year, inventory has come down by INR 60 crore from the comparable quarter last year for the continuing businesses. Overall inventory reduction is over INR 180 crore considering the business exits. We are on track to exiting the year with an inventory turn of 4. Q2 also saw completion of two important strategic actions. The first one was the exit of the Unlimited retail business to V-Mart. The transaction has been completed, and the company has already received INR 166 crore from the transaction. In addition to the upfront amount, AFL will also receive milestone-linked payments in the future. Another critical transaction was raising INR 400 crore through the preferential allotment route. We are happy that marquee investors participated in the round and reposed their faith in the company. Debt reduced by INR 70 crore compared to the quarter before. With the preferential funds which came in in the month of October and strong collections from the festive season, we expect the debt to further reduce and settle around INR 600 crore by the end of the year. This would be the last quarter of losses from discontinued operations. The one-off charge largely comprises of the operating losses of the Unlimited business before it was handed over and the complete exit of the Gap business. We have accounted for all future losses that would accrue for a complete business exit, and hence there will be no other losses from discontinued business moving forward. We are excited about the second half of the year. The festive season has gone off very well, and the momentum for the autumn/winter season appears to be strong. With healthy inventory levels and a high level of freshness, we expect a boost in productivity through the retail channel. Store openings have also accelerated, and we expect to open 150+ stores by the end of the year. The digital channel should continue its momentum with new category launches and the omni-channel push. We will remain tight on costs and focus on further improvement in working capital terms. With the scale returning to the business, improvements in productivity along with reduced cost structures and exit of loss-making businesses will allow us to achieve a positive PBT for the second half of this year. I would like to now hand it over to Shailesh Chaturvedi to talk about the brand level highlights, market recovery and the plans moving forward. Thanks, Kulin, and good afternoon, everyone. Q2 was a quarter of robust recovery in business, both strategic gains as well as on recovery of revenue and profitability. Strategically, sale of Unlimited around second half July was a very key outcome. A month from then, we also raised INR 400 crore preferential share in second half of August, which capitalized the balance sheet adequately, leading to sharp reduction in net debt, which stands at close to INR 420 crore at end October as the capital reached our bank in early October. By September end, we've also completed exit from discontinued brands and made all the adequate provisions for every anticipated hit here there. Business of continuing brands reached cash breakeven in Q2, and with high teen like-for-like retail growth in pre-Diwali season, we are achieving higher level of business performance. The like-for-like growth has been even higher for our top performing brands like U.S. Polo Assn., Tommy Hilfiger, and Calvin Klein. I'm very excited to see double-digit pre-Ind AS EBITDA and U.S. Polo Assn. once again in Q2. Overall, AFL revenues more than doubled in Q2, and they continue to gain traction even after Diwali season. Timely onset of winter has helped retail footfalls. Demand has been very strong in Q2, and it has continued that momentum in Q3 also. With very high freshness quotient in merchandise in this fall holiday season and with significant strengthening of back-end processes in terms of buying, stock planning, loyalty program, visual merchandising, we are pleased with high quality of our execution in this season. We are sharp focused on our six high conviction brands, and our portfolio has unique consumer appeal in post-COVID scenario with inherent relaxed, casual, and comfortable appeal along with multi-category play. Online channel grew 55% in Q2 and accounted for more than 30% share of our revenue with a scale of more than INR 300 crore from online in Q2. With a growth of INR 120 crore in quarter two compared to the same quarter last year and more than 90% growth over pre-COVID, we remain undisputed leader in online business in apparel lifestyle accessories space with a monthly run rate of more than INR 100 crore in this quarter. We added omni capabilities another 150 stores, taking the count of omni-enabled stores to 7,750+, and we achieved mid-teen% share of store business through omni linkages. We also added further capabilities in B2C warehousing for online with higher volume and faster and cheaper fulfillment. With completion of exit strategy on discontinued brands at end September, INR 400 crore capital raise in Q2, full recovery of revenue by August, cash breakeven in continuing brands in Q2, sharply lower debt at end October and fantastic same-store growth of high-teens% in key Diwali season, AFL is poised for strong business performance in times to come. Our focus will remain on strong execution on six high conviction brands and on improving profitability. We can now keep the floor open for Q&A, Ankit. Over to you. Thank you. Ali, please go ahead. Thank you very much. Ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the touch-tone phone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Rishikesh Ojha from Elara Capital. Please go ahead. Hi, sir. Am I audible? Yes. Great. Sir, one question from my side. Sir, EBITDA numbers are around INR 72 crores for this quarter, but we see majority of our lease or rent expenses, they are recognized into depreciation or interest expenses. In that case, isn't it will it be fair to say that our real EBITDA is actually very less? Sorry. The, whatever the result, the reduction in the rentals, that is reflected as a practical expedience in our P&L. It is not a reduction in the rent and in the, you know, depreciation and interest. Frankly, I've not been able to understand your question because this is a real reduction in the operating costs. There is no reduction in the interest and depreciation because as per the Ind AS and we can, Ankit or I can separately explain to you know, outside of this call, but that rent reductions and all do not impact any reduction in the either debt, interest or depreciation. Okay, no problem. I'll call. We'll take it later on. Just one thing I would like to add is even, you know, without Ind AS impact, the EBITDA of the company, you know, has been enough that we achieved the cash profit as well on the continuing business. Since, you know, the offline recovery was not back to 100%, even without a 100% recovery, we have posted a reasonably strong set of, numbers on the EBITDA side. I think as we reach full normalcy and we get back into LTL growth and full scale, you will see the percentage EBITDA, improve in the quarters to come. Okay. If I could just add the numbers, I mean, you know, and without Ind AS impact also, if we were to just look at the numbers prior to Ind AS, our EBITDA was INR 27 crore, whereas our interest cost was around INR 26 odd crore. Therefore there is a small, but nevertheless it's a positive cash profit quarter. That enables us to just back out the entire impact of Ind AS and just talk intrinsic business to business. Got it. Okay. No problem, sir. Thank you. Thank you. Before we take the next question, we would like to remind participants that you may press star and one to ask a question. The next question is from the line of Nishid Shah from Ambika Fincap. Please go ahead. Hi. Congratulations on a good set of numbers. Thanks for taking my question. My question is, what's the strategy now on beauty and fashion, especially on Sephora, given the fact that Nykaa has a dream run and a dream listing, how are we trying to capitalize on that? That's my first question. Yeah, I can come in here. See, I think one important thing to just keep in mind is one should not draw one-to-one comparison between different formats which are quite different in terms of their ASP and addressable market. Coming to the Sephora business specifically, Sephora operates in the prestige part of the beauty business. You know, this is a INR 1,500+ ASP product. And within that product range, it actually has a very strong dominant market share. In fact, between whatever we do on the offline side plus online, Sephora does have a strong position in that market. And we believe that that market will continue to grow extremely well in India because as the per capita GDP goes up, there will be more and more women upgrading into that particular segment. Sephora will continue to operate in the prestige segment. I don't think there would ever be a strategy to get into the mass segment, because that's not what Sephora is known for or why would we do that. In order to win in the prestige segment, the key aspects of the strategy that, you know, world over have worked very well is one, a very unique offering, because Sephora private label as well as the exclusive brands which are launched through the Sephora franchise globally every year are the unique differentiation of Sephora. Some of the world's most exciting new beauty brands are born in Sephora because they get the whole huge global Sephora network to scale up. Every year there will be many of these new exciting brands coming into the country. With that exclusive catalog, it really helps cement Sephora in the place of the prestige customer. The second aspect is the retail experience. You know, one of the things that Sephora is known for globally is not just selling products, but selling experiences, selling makeups, I mean makeup experiences, the in-store wow that needs to be delivered. That is possible because of again, the format and the kind of animations and in-store services that are made available. There also the idea is, as you know, digitization comes into the store and as more and more, you know, the store experience is upgraded globally, we would want to bring more and more aspects of that global rich experience to the retail format. I think if we stay true to what Sephora is known for globally, which is this unique assortment and very high experiential retail, we believe that Sephora will have a strong place in the Indian market, especially in the prestige part of the market, which is as such the real addressable market for a format like Sephora. I'm glad you explained this in detail, but when do we have Sephora India? Because if you go internationally on Sephora site, you have a very different and a unique experience which is not available in any of the online sites right now. Like for example, a woman go onto the site and looking at her skin color and all, they will suggest what kind of makeup has to be used and all of that. Right now on nnnow.com, you do not have those kind of options. When are you going to have sephoraindia.com coming in into play? No, we are working with our global partners on that thought process. Since it's a global tech stack which requires to be executed, you know, in a fully comprehensive way, we have to figure out how we can execute it perfectly. It is definitely something which is a ongoing discussion and we hope to, you know, bring that aspect also of the experience to the market, you know, as soon as we can. My last question is on what you mentioned, and that's very good that you are a leader now in the online space, especially in segments in which we are operating. Now, how do we capitalize that? Like, we are a leader, but how do we capitalize and have more brands and more prominence in the online space? If you can elaborate a little bit on that. Yeah. What we had discussed, you know, maybe even in the last call is that, you know, online as a business model is evolving very quickly, where rather than a wholesale mindset, it is a model where brands now will directly control the experience through own dotcoms and through the marketplace model on third-party websites. We actually will now be developing merchandise just for the online channel. The more you use analytics and a quick supply chain to quickly feed the online channel, one can grow very disruptively. Our company is building all of these new age capabilities along the lines of analytics, along the lines of, you know, flexible and quick supply chain, new category insights. All of this allows us to build a very robust and quick, efficient catalog for the online business. I think capitalizing online opportunity can be done with the very strong portfolio of brands we have. In fact, a lot of the levers are also about getting into new categories like footwear, for example, where U.S. Polo has become a number one footwear brand. It could not have happened in the offline space, but it can happen in the online space. A part of the reason you are seeing this kind of traction is we have built all of these capabilities, and we hope to keep doubling down on that and you know, protecting the market share and continuing the growth momentum. I don't think we would lose the opportunity in any way, and we would work to capitalize on it to the full extent. Yeah, this is Dhruv here. I have two questions. One is, you mentioned that you will exit this year with a 4x inventory turn. If I recollect correctly, last time, you said that you want to end with 5x. Are we on course to deliver that? See, you know what we mentioned last time and what our stated goal is to move towards 4 stock turn, and we are on course for that. We've also done a lot of back-end changes on the way we place the orders for inventory. There is a supply chain project going on to reduce the lead time with suppliers and include the turns on the core products with the automatic replenishment model. Our entire objective is to reach 5. Sorry, we were in 3. We are now this year improving it significantly to close the year by 4. As we go along, we will definitely move. Our intent is to move towards 5, but it will take step-by-step approach. Okay. We are very committed. This is a key priority for our organization to increase continuously the stock turn, and we are improving our stock turn. If you look at last two quarters that we have managed our inventory quite well despite COVID and our stock turns are going up and our intent is to reach five turns in the medium term. I just can you guys elaborate on the margins front as far as the online and offline, now that online is almost 30% of your revenues, so it will be heartening to know what is the margin difference between an offline and online. I'm talking pre-Ind AS basis. See, both online margin and offline margins for AFL are on the upturn. We are seeing the trends where both the margins are going up and also because as we recover fully post-COVID, our margins are going up. Now, if you say a difference between an offline margin and an online margin, now the way our company and the way our online business is, you know, constructed, it's a very profitable business already. So online and offline margins are very similar, you know, in the successful power brand, and both are sort of converging, you know, and we are looking at, you know, moving to double-digit EBITDA in sort of medium term, both offline and online. We'll try for that in the medium term. It's a very similar percentage of margin we are seeing in offline and online. Right. Thank you. My last question is, you mentioned about Tommy, Calvin and U.S. Polo. Can you give us a word on Arrow? How much recovery have we seen in Arrow now that most offices have started? Yeah. Arrow has also seen good upswing. July, definitely the business was impacted by COVID, and Arrow has a higher percentage of its business coming from department store and EBO in the big cities. July was COVID impacted, but September onwards, Arrow has started breaking even on the EBITDA level, and we are hopeful that in the quarter three, Arrow should reach, you know, mid single digit EBITDA percentage turn as we go along. Arrow also profitability is improving on a slightly lower base to start with, but we are seeing good traction in Arrow also in terms of the like-for-like sales growth and also in terms of EBITDA profitability. Great. Thank you and all the best guys. Thank you. Thank you. The next question is from the line of Harsh from Dimensional Securities Limited. Please go ahead. Hi, good evening, sir. Harsh, I'm sorry, you're not audible. Is this better now? Yes, thank you. Yeah. My question is on the gross margin front. If we look at the current quarter, we have done somewhere around 41.5%, which is still in the range that we used to do when we had Unlimited in our revenue base. I would believe that Unlimited being an economical brand was a lower gross margin business. If we remove that, then shouldn't our gross margin have been much higher? In addition to this, if I look at your numbers below the gross margins, then we have 4% royalty expense, and then we have another 7%-8% of commission expenses. If I deduct these from your gross margins, then we come to roughly around 20%-30% net gross margin, if that makes sense. My question is, from where can we get that operating leverage to reach the mid-double-digit kind of EBITDA margins? You know, if I look at our margins toward FY 2020, the pre-COVID times, today we are at 42%. Another way we look at our margin is what is called as contribution, where the variable costs is removed. At contribution level, we are at a place where our contributions are going up by 2-3%. We've seen that trend in Q2, and we are seeing that trend continuing. Our margins are going up at 2-3% at contribution level. GP level in the last quarter, this quarter, in the same quarter in 2019, we were similar 42% GP. If you look at Q2, there are two things which stand out as far as the GP part is concerned. One is, for an exceptional reason of COVID, the entire EOSS, the end of season sale happened in Q2. Typically this happens, starts in June, and then it comes into July. Part of the lower margin of the EOSS happens in first quarter in our industry, and then the remaining part happens in the early part of the Q2. This year, because the malls were not open, the retail was not open, the entire discounting in the EOSS happened in the Q2. As an exceptional event, the Q2 margins got slightly impacted because of the full EOSS discounting that happened in this quarter rather than happening in Q1. That's a one-off thing. Despite that, our margins are holding up at 42%, similar to what it was at the pre-COVID level. At contribution level we are going up by 2%-3% because of all the efficiencies that we brought in. Second thing is that we also have to look at our GP in terms of channel mix change. Now, here the online business comes into picture, and online, as the share of online business has gone up significantly in this quarter compared to the pre-COVID same quarter. Now, online is a very profitable business, as I said earlier, very similar to the offline profitability. But there is a difference between the GP level and at the contribution level. In online business, the difference between GP and contribution is very low. The retail select, et cetera, that comes in offline doesn't come in online. The right way to look at margin in our company and in our industry is to look at contribution level. Online has a very good contribution level, but it has a slightly lower GP level. As the online business share has gone up significantly, you will see GP staying at 42%, same as what it was in pre-COVID quarter two FY 2020. Whereas at contribution, we are seeing a 2%-3% higher contribution because of all the efficiencies that are kicking in and the profitability, inherent profitability of our power brand that we mentioned as we are exiting the less profitable businesses. We believe that in our short-term horizon, we should move from 42% up to mid-40s. That's a very likely scenario as the efficiencies are kicking in, and we should reach that goal. We are very confident that in the couple of quarters we will hit the mid-40s% gross margin and 2%-3% increase in contribution level. That is trend we are seeing. They should stabilize, and we should improve further on that. Can you explain also difference between gross GP and contribution? How do you calculate these numbers? What is the mathematics? Yeah. The GP, when we remove the discounting and the taxation from the retail price, we get to the GP. From the GP, we remove you know variable expenses. We remove the retail select, which doesn't come through in online business. It comes only in offline. We remove the commissions, rental, et cetera. All the variable components get impacted. They get reduced from the GP to variable. Okay. Still, can you explain? Also royalty gets reduced from there. One other way to think about it is below contribution. We only have advertising and fixed costs. The rest of the variable costs are between GP and contribution. Okay, understood. My another question is on the commission side, which is nearly at 7% of revenue. I would believe a lot of our sales also comes from the franchisee route, right? What exactly is this commission? Whom we are paying? At 7%, because none of the peer has this line item at, which is so high. Yes, you're right. This is the franchisee margin that we pay. We have smaller percentage of our own company stores and we have a larger franchisee network, so that line item comes through as a commission. What would be the split between franchisee and own sales? We have 900, so 2-9 kind of percentage. Our own COCO share is less than own stores is less than 20%. Okay. 80% you are saying would be from franchisee route? Yeah, higher than 80%. All right. The store expansion which you're talking about would, again, mostly be from franchisee route? Our store expansion is on the asset-light model. That's what we stated, our focused policy. Most of our store expansion will be through the franchisee network. You know, we have figured out a method where we manage the operations very, very tightly in a franchisee model also. You're right that most of our expansion, you know, close to 175 stores that we're planning to open, 150 plus, that they all be largely from the franchisee route. Okay. Another bookkeeping question which I wanted to ask is just wanted to understand the accounting aspect of this. When we sell via franchisee, is the commission expense only the revenue that your franchisee earns, or do we also give him certain discounts to the selling price? The discounts that we give to the selling price goes into the discounting line. In any case, if you have a more detailed understanding, if you want, Ankit can connect with you separately, and explain to you a little more in detail, because that will enable you to have a little more interactive dialogue in a one-on-one setting. Sure. Understood. That's it from my side. Thank you so much. Okay. All right. Thank you. The next question is from the line of Sagar Parekh from the Financial Consultants Private Limited. Please go ahead. Hi, good evening. My question was on the leverage. If I heard it correctly, you said that by the end of the year we are looking at about INR 600 crores of debt. Right now, if I adjust the cash, we are about at around net debt of about INR 400-INR 450 crores. We are talking about improving profitability and cash flows in H2. What is the missing link here? Because if we are at INR 400 crores right now, and as the cash flows improve, then ideally the debt should reduce further from here. Sagar, there's no missing link aspect in this. The thing is that, like, you know, as you know, you know, September quarter end, we would have had, you know, bought a fair amount of inventories in order to build up the inventory for the upcoming season areas. And since October month itself also has been a great, you know, month for us in terms of sales. Therefore, while the cash has got upfront because our sales have been pretty good, but some of those inventories will have to be paid for. Intrinsically, let's say, from around INR 450 odd crores, if we were to reach at the debt levels for just, you know, it should be, you know, a little lower than INR 600 or so, in that range. Around INR 100 crore or so should be going into our working capital. In any case, I mean, we had been, you know, at the end of September, the money had just come in, so some amount of this will get utilized, and that's what we had mentioned earlier also, that we are raising these funds both to, you know, make sure that we have adequate growth funds available as well as to reduce our debt. Debt will be significantly lower than what it was at the end of March. Like if you were to look at March 2021 to March 2022, there will be a reduction in debt of at least INR 350 crore. We will. We are completely focused on reducing the leverage even in the times to come. Just so on H2 FY 2022, as we improve our profitability, we would throw some cash, right, in H2 or, we would probably after working capital we'll just like break even. What is the sense there? No, I mean, see, our continuing business already is at a cash breakeven stage even in Q2, and that had significant impact of COVID in July, right? H2 looking very, very promising and it should throw up significantly higher cash than what we have seen in Q2. Our you know debt levels that we are forecasting will be INR 600 or maybe slightly lower than that. Our intent is to you know keep the debt level as tight as possible. Our guidance has been conservative always and you know we hope to beat that guidance. Other than building, you know, growth inventory for channels for the season launch that will happen in spring summer, in February and March, we will have no other sort of reason, you know, for that. Our debt levels will be very tightly monitored. Our inventory, you'll see last two quarters we managed inventory very, very tightly. Our execution has been good and I don't think we'll disappoint on that front. Now basically since Unlimited is gone, CapEx would largely be very minuscule, right? Going forward also in FY 2023 and H2 because the store additions are all coming through franchisee route, so CapEx would be minimal. Is that the right understanding, like INR 30 crores-INR 40 crores per year? I mean, between INR 30 crore-INR 50 crore is the kind of number you should be looking at. Having said that, all Sephora will not be franchisee. And then we are committed to investing very heavily around IT systems and all, so therefore there will be investments behind that. Plus, you know, if you look at the macros and all, we would invest behind some of the experience stores and some renovation, et cetera. I think INR 30 crore-INR 50 crore kind of CapEx is the right number to think about. Right. Sephora, how many stores do we have currently operational? 24 right now we have operational. How many stores do we plan to add next year and H2 also? I mean, in the next 18 months, how many stores do we look to add? We have dialogues on for six more stores. You know, depends on how the mall work comes up. Between 4-6 stores we will definitely open. Our target is 6, but somewhere between 4-6 is the realistic scenario. New stores in Sephora. That would entail a CapEx of? What will be per store CapEx? Sagar, we don't specifically talk about, you know, this level of details regarding our CapEx. You can rest assured that we will continue to maintain a very significant amount of capital efficiency when the stores open. Sephora stores will typically be prestige stores, so therefore it will be a place where we would like to give an excellent you know, experience to the customers. Let's just leave it at the fact that we would like to do the stores well, but at the same time maintain the capital efficiency of investments behind that. Okay, got it. My last question would be on the margins, pre-Ind AS for next year. Given a normalized scenario, what should be like the pre-Ind AS margins that we should look at broadly, given that we have done all the cost cutting, some bit of permanent cost cutting and with improving inventory turns, and you know, the situation getting normalized. So obviously the sales will pick up. What should be like the pre-Ind AS EBITDA margins that we should look at? See, you know, On an annual basis, yeah. Yeah. We don't, you know, give specific guidance like that, but I would definitely like to discuss with you that our intent is to move to because all the brands now are high conviction brand that, you know, near double-digit EBITDA is the next goal for us. In the short to medium term, we should reach that number. Now, beyond that, I cannot specifically answer that question, but we want to continue to make progress on profitability of our brands. That I can confirm. Got it. At INR 4,000 crores kind of top line for the six plus the smaller brands, I mean, broadly. At INR 4,000 crores you think we can reach about. We won't comment on that specific numbers, Sagar. Sorry? Yeah. I mean, we won't talk about a specific, top-line number and, you know, specific margin right now. You see, there is a significant progress happening at AFL. Okay. Basically a double-digit EBITDA is possible, let's say in 2-3 years from now, at least that. I think you should think about, you know, in the next year, since your question was regarding specifically FY 2023, you could think of high single-digit kind of EBITDA margins pre and post for the next year. Okay, that's great. Yeah. That's it from my side, and all the best. Thank you. The next question is from the line of Miyush Gandhi from Canara Robeco Mutual Fund. Please go ahead. Hi, sir. Is it possible to share the revenue of the top six brands, the core six brands that we intend to pursue very strategically? You know, we don't give brand-level forecast as such. I'm sorry, I won't be able to discuss that. Will it be possible to share what was the peak revenues of these continuing businesses in maybe in 2019 or 2020, whenever it is? Because, see, the business has gone a lot of restructuring, so it becomes very difficult for us to kind of work with numbers and project an estimate. So some further disclosures will be very helpful in terms of, you know, understanding where the business is going on. So maybe at least if you could share with us the peak revenues the continuing business had reached pre-COVID. You know, I would. I'm sorry, I won't be able to discuss at a brand level, but I can say that the way the recovery has been robust in our business in Q2, and the way what we are seeing in the Diwali season that, we think that, at the end of this year, we should reach, you know, what the pre-COVID level of revenue was. Next year we should grow over that, you know, substantially. We are on a good sort of recovery and the demand side growth right now. We've seen recovery from COVID, now we are seeing growth over pre-COVID numbers. That trend in the short run should continue going, and we will reach scale which would have been, you know, higher than the peak in the past. Towards the end of this year also, we should reach closer to where we were, and then we'll grow from there. Yeah, we don't know where we were, so how do we, you know, how do we judge whether we are pre-COVID above or below? That's where the question came from. Yeah, I think one broad number you can look at is, you know, that kind of pre-COVID run rate was close to INR 800 crore sort of run rate a quarter. For the continuing business? Yeah, yeah. Okay. You can consider that as a broad range, and then there will be growth year-on-year. Fair enough. That's very helpful. Is it possible to quantify how much network expansion would have happened in the last two years? You know, this year we will grow our network by more than 150 stores. That's guidance and we are on course for that. Last year was COVID impacted, so- Yeah that number was close to 100, because last year was very uneven period, you know. Our expansion rate is now we expanding really rapidly into the tier three, four cities. What is 150 to 175 this year is likely to become 175 to 200 stores expansion next year. That's a very, again, a very focused area of, you know, for AFL that we want to penetrate deeper into the tier three and tier four cities. We have put a distribution structure already in place that will support this distribution expansion. Fair enough. That's quite helpful. Sir, just one last question from my side on the online side. I'm sure you must be tracking it. Where is the incremental demand coming from? Is it more urban centric or it's more rural areas? The reason for asking this question is whether our existing demand, which was kind of, you know, fulfilled from stores, has that moved to online? Or we've been able to find newer locations and geographies where we are not present, and that is a new area where we are getting new sales from? If we look at the online data, and we have a partnership with Flipkart Group on Flying Machine, and we work very closely with all the big portals. We are the leader with each one of them. Now, what we are seeing is that what started as an urban metro phenomenon of online growth in the big cities, in last two years and it has gone to the smaller town and COVID sort of accentuated that penetration into smaller town. We are seeing very, very healthy pickup from tier three, tier four cities online. Also, in our store network, which is metro centric and tier two, three cities, we are seeing good omni connect. We're only reaching mid-teen level of omni business where consumers are, you know, linking offline and online experiences. Metro urban cities, we are seeing good traction. The growth is good there. As a percentage, obviously because of the lower base, the tier three, tier four city percentage growth is much higher. We are seeing the appeal of online channel and also the appeal of omnichannel store is going into the smaller tier cities also. It's quite visible. One number which, you know, is interesting is that if you look at incremental sales, almost 60% now are outside of the metro and tier one. To what Shailesh was saying, the growth is faster in tier two, tier three. In fact, it's a world where brands maybe first experience online and then our stores follow. What we have actually done in some of our brands is when we see sales in certain pin codes reach a very high level, that's when one can open up a store in that catchment. I think the world is quite omni, and it's not a cannibalization but a you know, cohesive throughput that comes from an online plus offline experience irrespective of town. In this quarter, the online share of revenue is around 30%, right? That number. No, it's 40+%. 42% AFL revenue share came from online business, and that was a growth of INR 120 crore over same quarter last year. We're seeing very good traction in online business. Yeah, that's a very large number. It's a little high because also offline was, you know, not fully back in quarter two. Yes. I think we believe that a normal kind of share will be, you know, around INR 30 and not INR 40. You know, I think one data point that really pleases us is that, in quarter two, our online business was more than INR 300 crore. You know, we were always chasing INR 100 crore a month in the short run online revenue, and we crossed that consistently now. That one milestone we have achieved, and we are looking at scaling the new peak. It has been very, very satisfying, you know, leadership standpoint from the online side. Yeah, no, it's a really very well executed strategy. Best of luck, and we look forward to more disclosures, especially in the online business, given where the current market context is. Thanks. Thanks a lot. That's it from my side. Thank you. Before we take the next question, we would like to remind participants that you may press star and one to ask a question. The next question is from the line of Yash Mandrewala from Mandrewala Family Office. Please go ahead. Hi. Thanks for taking my question. We've seen really unprecedented levels of inflation of late, raw materials, packaging, almost every line item. We also have potentially a GST hike on our products in January. How much would the MRPs have to increase by in percentage terms for us to absorb both of these items? Just broadly, if you can also give a sense of how we are planning to tackle this? You know, Yash, question is very, very relevant in the current context. We have seen a short-term increase in the cost structure, and we hope that the, you know, the situation improves in medium term, short term. Currently what we are seeing is that there is very little option. Efficiency, we have gone after in the last two years since we've made our company very lean on cost structure. From this base, we are looking at industry practices and what we are, you know, seeing in the market is that a large part of this cost increase is likely to be passed on to the consumer, which could be, you know. It will vary from category to category, brand to brand, but it could be from 5% to 8-9% right now. You see, this is a very fluid situation. We don't know how much more the cost will go up or hopefully how fast the cost may come down because we have seen that, you know, things cool down very fast also. So we will wait and watch. We will take the decision very close to the event, so we take well-informed decision. As far as the GST is increase is concerned, that is at a price point which is not very significant portion of our business. So most of our brands and most of our categories will not impact, because it will impact much lower priced businesses. Right now our focus will be to manage the cost pressure and to see what industry practices are on that, and we will follow and pass whatever consumers can, you know, absorb. Got it. Yes. Do you reckon it'll have any impact on final offtake as well if, you know, prices were to go up substantially? See, you know, there are two parts. One, right now the demand side is very strong and, you know, we are seeing consumers are really, you know, shopping after two years. I think they got bored of the COVID situation and with a revenge, they're traveling and they're shopping. Demand pool is very strong right now. Cost increase is also a reality. Now, it's anybody's guess where how it sort of, you know, spans out. We will wait and watch as to what happens. Got it. Just one last question, which is on the footwear business. Can you just provide some more details on this part of the business? So, you know, what would the size of the footwear business be? And, you know, if we look sort of mid to long term, you know, what are the margins and inventory turns on footwear likely to be in what range? See, you know, our footwear initiative has been largely on U.S. Polo Assn. business. You know, we invested ahead of time on adjacent category in our strongest brand, U.S. Polo Assn. We created footwear business, dedicated team. We created dedicated team on Innerwear. We had a dedicated team on the Kidswear business. Innerwear in the footwear business, if I normalize, is now crossing INR 150 crores, normalized time. It's a fairly profitable business with very good return on capital employed metrics. It's a, you know, very good business with very healthy financial metrics. We don't give too much of details at a brand level, at a category level, but I can tell you that this is a category where we invested ahead of time, and we are very happy with that investment because in online space, in many portals, including Myntra, our footwear business has been winning awards. We are a market leader in that segment. This has been a wonderful addition to our portfolio. Do you think the ROCEs there, at least for the power brands, could it be on par with the apparel business in the long term? Currently, it's higher than the apparel business. Okay. Got it. Great. That's it from me. Yeah. Thank you. Due to time constraints, that was the last question. I now hand the conference over to Mr. Ankit Arora for closing comments. Thank you, everybody, for joining us on the call today. If any of your questions have been unanswered, please feel free to reach out to me separately, and I would be happy to answer them offline. Thanks so much for your time, and look forward to interacting with you again next quarter.