Ladies and gentlemen, good day, and welcome to the Arvind Fashions Limited Q3 FY 2022 Earnings Conference Call. As a reminder, all participant lines will be in the listen-only mode. There will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference, please signal an operator by pressing star and then zero on your touch-tone telephone. Please note that this conference is being recorded. I now hand the conference over to Mr. Ankit Arora, Head of Investor Relations at Arvind Fashions. Thank you, and over to you, sir. Hello. Welcome, everyone, and thank you for joining us on Arvind Fashions Limited earnings conference call for the third quarter and nine months ended December 31, 2021. I am joined here today by Kulin Lalbhai, Non-Executive Director, Shailesh Chaturvedi, Managing Director and CEO, our outgoing CFO, Mr. Pramod Gupta, who is moving into a group role within Arvind Group. I warmly welcome our new Chief Financial Officer, Piyush Gupta, who has joined Arvind Fashions from his previous stint at Bata India. 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 today with Kulin providing his key thoughts on our financial performance for the third quarter. He shall be followed by Shailesh, who will share insights into business and financial performance and key priorities for us moving forward. At the end of the management discussion, we'll 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 statement 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. Thanks for joining us today. Q3 was a landmark quarter for AFL, where the business achieved profitability after many years and also saw a very robust performance across the brand portfolio. The highlights of the quarter include a very strong retail performance led by the Power brand, continued traction in our online channel, large deleveraging due to the combination of the fundraise and collection, and finally, the highest inventory turn the business has delivered to date. Sales for the quarter were up 30% year-on-year. EBITDA improved by 62% due to the strong improvement in gross margin, channel profitability and operating leverage. The retail channel performed exceptionally well. We were able to deliver 40% plus like-for-like compared to last year. While the market sentiments were positive, this performance was possible due to the timely launch and detailed merchandise planning as well as very strong retail execution. The business was able to open 60 new stores, and the momentum is likely to accelerate in the quarters to come. With strong capabilities being built on the retail execution, we expect the strength in the retail channel to continue. The MBO channel also showed strong performance. With tight inventory management processes in place, this business delivered strong tertiary growth as well as good collections for the quarter. The online business continues to see strong momentum. It has grown 20% year-on-year and has doubled in size over the last two years. It accounts for more than 25% of the overall revenues of AFL. One of the highlights in the online business has been the very strong growth in our footwear business. It has grown 55% year-on-year, and U.S. Polo Assn. has emerged as one of the most successful sneaker brands in the online channel. We are well on track to achieve INR 1,000 crore business run rate as we exit the year. We continue to see improvement in our working capital turns. Inventory turns have been more than 4 this quarter. With continued efforts on supply chain transformation and stronger processes around inventory management, we hope to improve inventory turns in the years to come. Our receivables have also seen very healthy improvement. Tight working capital management and the funds from the equity raise have helped us reduce debt by INR 370 crore this quarter, and it now stands at INR 465 crore. Our reduced leverage has led to a large reduction in our interest cost and has taken our interest coverage ratio to 3.8. We are excited about the journey ahead. With a portfolio of market leading brands, we have built multiple growth drivers ahead of us. We will grow the retail channel aggressively by expanding into new towns and by also driving up productivity. Our offline wholesale business is well set to grow profitably. The online channel continues to scale, powered by new category launches, omnichannel linkages and many other drivers. Our new categories like footwear, innerwear and kidswear also continue to grow rapidly. While we have multiple drivers of growth, our focus will be driving profitability. As our brands scale, we expect to see strong operating leverage across the portfolio. We also expect our channel profitability to go up, driven by internal efficiency. Our continued efforts on working capital management should help us convert our growth into healthy cash flows. We see this as the beginning of AFL 2.0. I would like to now hand it over to Shailesh Chaturvedi to take us through more details. Thanks, Kulin. I'm glad to share that in Q3, AFL has become a tax positive company. AFL has a uniquely powerful portfolio of marquee brands, which are unique, relaxed and casual appeal that's so right in the post-COVID work from home environment. The company is at a very opportune moment to grow these brands profitably. Profitability remains a key focus for us. Q3 was a INR 1,000 crore quarter for the company, registering more than 30% year-on-year growth. You know that with seasonality in the industry, Q3 tends to be the biggest quarter with festival and peak winter business. The highlight of this INR 1,000 crore scale was impressive performance of retail channels. Let's look at the retail numbers. Strong 40% like-for-like growth, leading to impressive growth of 40% in the quarter. Achieved on a very high base of the festival. The retail contribution of AFL revenue has gone up to nearly 45%, which is an increase of 7% in the revenue mix. Retail markets were seeing robust demand. There was good festival Diwali season. There was timely onset of winter, and there was a buoyancy with travel, all supporting demand in the market. This robust demand was met by a very good retail execution by the team that led to healthy improvements in full-price sell-throughs. The season was executed meticulously in terms of merchandise appeal and assortment, timely launch with adequate freshness in stores. What really made the difference was strengthening of back-end retail processes that delivered sharper execution. In line with unique global retail practices of our international brands like U.S. Polo, Tommy Hilfiger, Calvin Klein, Sephora, AFL invested additional resources in back-end in buying and merchandising, visual merchandising, loyalty, CRM, and service training. This execution ensured that the store launches were of very good quality in the market in a competitive landscape. To ensure that these gains are solid, efficient and sustainable, we will continue to invest behind retail processes, and we are confident of continued good execution going forward. This season also saw new upgraded retail identities for brands like U.S. Polo Assn., Arrow, Sephora, Tommy Hilfiger, and Calvin Klein. With these new retail identities in place, we should be able to ramp up retail expansion next year. Retail is a high gross margin channel, and good growth here has increased overall gross margin climb up to 46%, a good jump over recent quarter. Retail performance was also supported by restarting of advertising and visual merchandising investment. In COVID times, it was not justified to invest, but now we have activated the brand plays in our brands. While retail improvements were in place, we continue to strengthen our leadership position in online channels and deliver 20% growth. At a run rate of nearly INR 1,000 crore per year, online revenue contributed to 25% of AFL revenues. For online growth, we continued our focus on online SMU lines, which have become a big business, and we connected 60 more stores with Omni linkages, taking the total number of stores with Omni capabilities to more than 800 stores. We opened 4 more fulfillment centers for faster and more efficient servicing of online orders. I just also want to give you some color on our largest brand, U.S. Polo Assn. Q3 was a great quarter for U.S. Polo Assn. The brand recorded a revenue per month in excess of INR 125 crore with a growth of nearly 40%. It delivered double-digit pre-Ind AS EBITDA, developed a new retail identity and opened a store in Bangalore with it, launched a new advertising campaign with Bollywood actor Arjun Rampal, and delivered fantastic online consumer sales with improvement in U.S. Polo Assn. ranks at all key portals, including top brand performance at the main fashion vertical. Overall, a good launchpad quarter for U.S. Polo Assn. for accelerated profitable growth next year. The revenue growth from two key retail channels that we've discussed, retail and online, was 70% of our overall revenue, which was up from 65% in the same quarter last year. These two channels put together grew by 42%, signifying a solid momentum in our sharp focus as high priority channels. Another contributor for INR 1,000 crore revenue was profitable growth of MBO channel that grew 50% over last year's same quarter. With clear eye on rights controls and strong processes, we have given the right amount of trust to the MBO channel, backed by our own capabilities in common sales structure and brand structure. We've made sustained efforts this year to reduce debt. With capital raise, divestment of loss-making businesses, and sharp focus on execution, we have seen sharp reduction in debt levels that have fallen to nearly INR 465 crores, half of what it was last year at end December. Collections from the market have also been above plan, leading to debtor days coming down below 60 days, which is a drop of more than 20 days over last year's same quarter. As mentioned earlier, we have met our guidance on stock turn performance with turns crossing 4. Supply chain project is also underway, and which will continue to provide the company with solid, sustainable improvements in stock turns moving forward. Stronger balance sheets and significantly lower debt levels have helped us reduce finance costs. These efforts have led to significant reduction in interest cost, thereby helping us achieve a significant milestone of becoming a PAT positive company. With evidence of buoyancy in business, AFL started its investment in future so that the current momentum sustains. The company has started investing into brand advertising that had been significantly reduced in the last two COVID impacted years and initiated investment into transformation projects to support growth and improve efficiency in the near future. It must be reiterated that these expenses are needed so as to ensure recent improvements remain solid and sustainable. Coming to market conditions as on date, most markets have opened up. In January, business was impacted by Omicron wave, but recent recovery has been faster. With its stronger balance sheet, AFL expects business to be back to normal by March 2022 in its normal rhythm. This financial year has seen big transformational changes at AFL. The company fought two rounds of COVID waves, strengthened its balance sheet through capital raise, saw rapid recovery and good growth of business with sharp execution and stronger focus on brands, and has significantly deleveraged its balance sheet. Now we look forward to the next financial year, where AFL will gain operating leverage from bigger scale and internal efficiencies. With that, I would like to now open the floor for question and answer. Thank you very much, sir. Ladies and gentlemen, we will now begin the question and answer session. Our first question is from the line of Sagar Parekh from Deep Financial Consultants. Please go ahead. Yeah, good afternoon, sir, and congratulations for good set of numbers and good to see we are in the black finally. I actually missed the U.S. Polo Assn. number that you gave. Can you repeat that number? You said 40% growth for the quarter for U.S. Polo Assn. Yes. U.S. Polo grew by 40%. Okay, what is the absolute revenue number? See, we don't give exact number, but our run rate that I mentioned was at INR 125 crore per month kind of a run rate with a 40%+ growth. Okay. We have We can't extrapolate this, right? Because it will be like. I'll just repeat some of the comments that I made on U.S. Polo Assn. I mentioned that Q3 was a good year, a good quarter with monthly run rate of INR 125 crore, a growth of 40%, a pre-Ind AS double-digit EBITDA. Then there were a lot of other, you know, milestones like new retail identity, opened a store, its rank in the online portals improved. Overall was a very, very good quarter for U.S. Polo Assn. Right. If I just add that then about we would have done about INR 370-380 crores kind of revenue from U.S. Polo for the quarter. Which means that we are at about 37%-38% of contribution towards sales. U.S. Polo would be such a large portion of our sales, right? See, U.S. Polo Assn. is the biggest brand and probably the number one focus for us. Right. Right. In terms of this 40% L2L growth that we spoke about for the quarter, could you give us some color in terms of how different brands have performed in the retail channel? See, we again resist, you know, we don't prefer to give brand-wise color. We can say that, you know, most of our brands, because the demand was so strong that, you know, this number is like-to-like, the retail number. The overall growth is 60% and the season was very good. Our execution I mentioned in terms of launch, assortment was good. Most brands have done really well this time. If I have to single out one brand or two brands, I would say U.S. Polo has done really well, because it grew very well. Tommy has done really well. You know, a lot of our brands, B, Sephora, we had good Diwali season with very good like-to-like across. Okay, got it. My last question would be on the minority interest. If I look at the P&L, your minority interest profit number seems to be very large. Basically, the maximum profits that would have come would have been from either U.S. Polo or sorry, not U.S. Polo, either Tommy, CK or Flying Machine, right? Is that the correct reading? Yeah, I think you're on the right direction. Yeah. Okay. Which out of the three would have been contributed to the large minority interest? See, we again don't share brand-wise details. You know, I'm just saying that if you look at, be it U.S. Polo, be it Tommy, a lot of our brands have done well. That's how we became that positive company. Okay, got it. Thanks. Thank you. Our next question is from the line of Gautam Rathi from CWC Advisors. Please go ahead. Yeah, hi, this is Nishid here. Just a couple of questions. I missed the channel breakup you shared, right? Could you just help me with the channel breakup, which is how much is retail, how much is MBO, how much is digital and LFS? If I look at the contribution, the biggest gain in the Diwali festival season we saw from Diwali from the retail and the retail contribution for this quarter went up to 44%. Online is at close to above 25%. Between these two focus channel, that is online plus retail, we have done nearly 70% of our revenue, which is up 5% over last quarter, same last year, same quarter. These two channels have done well. MBO also has grown 50%. This quarter, we Sorry, sir. We are not able to hear you clearly. Your voice is muffled. Are you there, sir? Yeah. No, it's not clearly audible, sir. Participants also will not be able to hear you clearly. We'll just disconnect your line and call you back. Ladies and gentlemen, we request you to please remain connected while we reconnect the management line. Thank you for your patience, ladies and gentlemen. We have reconnected the management line. Hi. We were talking about the channel mix. I mentioned that retail- Online. Online, 25% is what you said, and you were talking about LFS and MBO. We're seeing that MBO channel also grew well. Overall, you know, contribution from retail and online grew very well. MBO also has grown. In department store, we haven't recovered fully yet. Part of that reason is that we haven't supplied stock to department store adequately. We've been very, very tight on inventory. We were having anxieties about the wave three. That's one area where we need to up our game, and that we plan to do in spring/summer 2022 season. Shailesh, just a follow-up. You know, 70% retail plus online. If you were to think of it, you know, pre-COVID, if you were to just compare it pre-COVID, you know, what would this mix be like, right? Yeah. You know, if I break down online has doubled in the last 2 years. From what the online business was to where the online business is, it has doubled in revenue, and it has gained significant share of overall revenue mix. As far as retail is concerned, retail also at the current 44%. NNNOW Q3 retail mix tends to be a little higher because of the festival. But even if I take early 40s as a sort of a steady retail number, it is still. It is also higher than what it used to be in the past. Both these channels have fully and more than recovered. Our retail has grown over pre-COVID level by almost, I think, 30%. Pre-COVID, 30% growth in retail channel also, and online also has doubled since, you know, COVID last two years. Basically the biggest drag currently, which currently also continues to remain a drag is the LFS channel, right? See- Because MBO also you're saying has started to come back and grow this quarter. No, see, you know, what happens is that, you know, that channel is coming up and now we've reached almost 90% of the pre-COVID levels in that channel also. We expect that very soon. I think the stock, our servicing, our delivery of stock has to improve. We've been extremely paranoid about the inventory control. Retail has done really well. A better performing channel eats up the inventories. We are very confident that in spring/summer we will see, you know, regaining of that gap also. It's not like a very large drag or so. It's at 90% of pre-COVID level. LFS is 90% of pre-COVID level? Yes. Yes. Okay. MBO, what would that be pre-COVID? We have grown in MBO channel also over pre-COVID, Nishid. Okay. Yeah. You know, I think I must emphasize on the MBO channel that, see, we wanted to be very tight on the trade channel, the process control, discount control, profitability. You know, I mean, we've been very sharp on execution with the MBO channel, and we're very happy that, with the due controls and processes in place, the MBO channel has now started to grow. One of the reason of that growth has been our new sales structure. We have combined our sales structure and, you know, we have opened branches, so we are going closer to their markets. New branch in Delhi, new branch in Bombay and in south in Bangalore. We are building new capabilities to service MBO channel with tighter controls and better profitability. No, I think that is great to hear, because in a way what you're saying is it was always a very profitable channel, but it used to consume a lot of it had some kind of an issue on the cash flows. You are saying now you have much better controls for the cash flow, and it will continue to. It started growing again, right? That's the right way to think about it. Yeah. We are quite happy with the progress of MBO channel and it will remain a you know low-teens percentage kind of thing. The bigger piece is with the online and the retail, which will be almost like 70%-75%. But in that low-teens numbers, MBO should grow with higher profitability. Perfect. Shailesh, this quarter we had. Our other expenses went up by almost INR 75 crore, right? You alluded to the fact that you started reinvestments in the brands again. You know, would love to get some color from you. You know, how should we think about other expenses? You know, what percentage of other expenses will be variable cost, like royalty and other costs which will increase with sales, and what percentage is fixed, which will give you some kind of an operating leverage going forward in the future? Let me break down into two parts. One, part of the increased expenses are variable, like you rightly said. Because as the business has grown, you know, really well this year to INR 1,000 crore top line with 30% growth over the same quarter last year, obviously the variable linked to that, franchisee commission, royalty to the licensor, you know, and wherever we have a minimum guarantee, rental, et cetera, all that goes up because that's linked to the scale, and we are happy to give that because we are getting a higher scale. The other things are more sort of a discretionary to a point where we believe we need to invest behind this for sustaining the current gain. You know, we have seen a very good, you know, upswing in our business, but we just want to ensure that these are solid and sustainable. Some of these costs are, to me, it's largely the marketing expenditure. You know, in the last 2 years, we couldn't advertise much. It was not justified in the COVID sort of times. Now when we saw the evidence of you know good improvement from September and October, then we decided to up the brand play because now we want to focus on these 6 brands and grow profitably with them. We needed to sort of get back to marketing and advertising. Take example of U.S. Polo. We had not advertised in last couple of years because of COVID, but now we signed with a famous Bollywood superstar and a supermodel of India, Arjun Rampal, and we did a campaign with him, starting with end November, including with the winter jackets, and that led to very good upswing in the business of jackets this season. We have had to increase advertising so that these gains remain sustainable in the next year. Also, there were small expense on the transformational projects that we have done on supply chain. You know that we are committed to increase our tons beyond four, and we have a supply chain consultant working with us to help us, you know, take this whole project of increasing stock turns going forward. That's a project that will continue for a year plus, and the marketing spend will come. See, the way I would look at is once we get a higher scale, once we don't have COVID in our lives, and once these marquee brands grow the way they are growing, the way the US Polo has grown, the way, you know, Tommy is growing. Once these brands grow, then the scale will bring in, you know, operating leverage. And then with a higher scale, these expenses will come down. It's a call we needed to take to invest into future so that these gains remain sustainable and solid and we do a brand play in these times. Sure. Any possibility of quantifying some bit of it or do you think that's not possible? I would say, you know, the transformation projects will continue for a year. I can tell you a number that, you know, if we had not done sort of a brand play and just kept advertising at a very basic sustainable level, we would have saved INR 10 crore or so. In this quarter, we spent that kind of money higher to invest into the future. Sure. That was very helpful. Thank you so much. Well, all the best. Thank you. Our next question is from the line of Mythili Balakrishnan from Alchemy Capital. Please go ahead. Hi. A couple of questions. I just wanted to understand in online, how much of it is coming from our own site versus marketplaces? See, the way we look at our business is how much of our online business is servicing consumer directly, where we have a full control on experience from merchandise assortment to the pricing to the delivery, et cetera. What we call as the direct to consumer business from us to the consumer directly, whether it comes from our own website, nnnnow.com, or comes from, let's say, a portal like Myntra. NNNOW, we track this combined business of NNNOW plus the marketplace, and we internally call it the D2C, because this is where we manage the entire consumer experience. This business is almost like 30% of our overall digital fees. When we deliver, you know, 25%-30% of our overall revenue, that percent of that online total, we get nearly 30% business from the direct to consumer. That's where we build a large marketplace with its own inventory, its own fulfillment. We started last year in a big way on omni linkages, and we have more than 800 stores now that are linked with, you know, omni and then there's a online/offline networking happening there. That's the level at which we are comfortable sharing the details, Mythili. Got it. In terms of U.S. Polo Assn.'s start, when did it start? Like, could you give us a sense of how much of the sales would be full price? Yeah, you know, in this year, there were 2 reasons we delayed the EOSS and the industry also delayed the start of the EOSS. Point number one was because of the COVID wave two in the April-June quarter, the launch of the end of season at that point of time in July started late. The fall holiday season started a bit late, so there was no need to discount the typically mid-December when the fall holiday season EOSS used to start. Industry saw the need, and we all saw the need to not discount at that same date calendar because we had fewer weeks of full price. Second reason and a bigger reason was that we saw very, very buoyant demand in the market, like I mentioned. Diwali was very strong. Winter wear, winter season had set in on time and was of good intensity. We saw a lot of travel that helped, you know, our retail upswing. We delayed the launch to answer your question, instead of middle of December, where it normally goes towards the end of December this year. If you really see, most of the business in October-December quarter, barring the last week to be full price, most of the business would be full price in this quarter. Got it. I also wanted to get a sense from you on the payable side, right? We are sort of at this INR 1,000 crore number, and it's sort of high. Just wanted to get a sense from you that, you know, do you see this coming down as, you know, we sort of pay off some of this? Or do you think that this is the level at which your vendors would be comfortable with? Actually, you know, our payables have come down as the size of the business. There has been, I would say, a steady progress. We had a meeting with our vendors in this quarter. We took them through what the new AFL with the new improved balance sheet is looking like. I would say that payables situation has improved significantly. I would also request our CFO, Piyush, to give some more color to that. Over to Piyush please. Hello. Can you hear me? Yes. Sure. NNNOW, the payables are to a large extent correlated with the turnover. As we buy, the turnover is high and buying will be high, so the payables will be high. The important thing is how many days of payable right now we have. We have less than 100 days, that's number one. Number two, if you say how much are overdue, which we call stretch, now if I compare with the stretch of the corresponding previous year, it is just one-fourth. Okay. I mean, just to summarize, I would say the payables situation is not bad. In fact, it's better. It's good. We feel good that we're able to manage payables with our well, improved situation. We should maintain the, you know, current status. Got it. My last question is on the Arrow. You know, it's a brand which has sort of struggled a little bit in the past. We have sort of relaunched it and, you know, tried some different things. So just wanted to get a sense of what has been the market response. See, this year, product received very good response from Arrow. For Arrow, it was a very, very good response. The growth also over the last year has been good. But I would still say that, you know, Arrow will take some time and we are expecting. There is a lot of improvement in its profitability and in the sales structure. But the way the brand is structured in COVID, and we've been very, very tight on the inventory, we expect it to reach its, you know, logical conclusion, which is a mid-single digit EBITDA in the next financial year. We are happy with the progress, but there is still a lot to sort of execute and do better on Arrow. Got it. That's all from my side. Thank you. Thank you. Our next question is from the line of Pritesh Chheda from Lucky Investment Managers. Please go ahead. Yeah, sir. Sir, with, you know, with our company, there has been, you know, more than two rounds of capital raising that has happened, and we have run the business in a certain format. Incrementally, how do we see the capital allocation or the capital side of management by the company? And when we are looking at the working capital cycle, the key part there is obviously the inventory. So we have reached 4x inventory turns this quarter. How do we see these inventory turns moving, you know, forward, let's say a couple of years from now? Or a couple of years from now, what should be our strategy on the capital allocation side, sir, on the capital structure side? I'll take the question in two, three parts. Start in the reverse order, inventory. We are very happy with the progress that we made on the inventory turns. We had guided that by end of this year we should cross 4, and we have, in this quarter, crossed 4 turns. We also have a supply chain project going on with an external domain expert, part of a transformation project that I mentioned, where we want to grow the stock turns further in a more sustainable, solid way. We are committed to, you know, high stock turns, improving stock turns, and that will be the heart of our working capital strategy to make sure that the turns are good and the inventory in the market is very fresh, which helps our like-for-like and the overall growth. The second part of the capital structure also, you will see our focus has been on these high conviction brands. You know, we rejigged our portfolio and focus on these marquee brands now, which are very, very well suited for the COVID times. Idea is profitable growth of these brands so that these businesses throw cash. Even in this quarter with an EBITDA of INR 106 crores and an EBITDA and a PAT positive level, the business has thrown operating cash flow. The whole idea now going forward is to grow with these brands and grow with the cash flow generated from these brands. The idea would be to have very, disciplined, capital structure, focus on, you know, debt levels, focus on inventory turns, and growing the business by profitable growth of the fantastic portfolio brands that we already have. Okay. When you say when you grow from the cash flows of this brand, so we ideally will not see the balance sheet expanding significantly in your next growth phase. Is that the conclusion we should take? I think focus is, like I said, on profitable growth, cash generation from business, and I can request Kulin. Kulin, you want to throw some more light on this, please? Yes, I think that's exactly the way to look at it. As we have been telling the market now with six high conviction brands, all of which are positive EBITDA and as operating leverage kicks in, you know, profitable growth will come in, and with the working capital turns becoming tighter, lot of that growth will lead to cash flows. We do not expect balance sheet growth. In fact, the business should start throwing up cash with this strategy. Okay. We can see a drawdown in debt as we move forward. Yes. We intend to reduce leverage in the years to come. Sir, one bookkeeping question. Between the reported results that we have, which is post-Ind AS, what will be the differential between the post-Ind AS and the pre-Ind AS at the EBITDA level? Actually, it's it'll be around 3 to 4 percentage points. 3% to 4%? Okay. Yeah. Yeah. Sir, where are we on the Flying Machine brand after its you know brand investment with Flipkart, I think, if I'm not mistaken? Yeah. Where are we on the Flying Machine journey? Yeah, sir. Go ahead, sir. No, no. Please go ahead. Sorry to interrupt you. Please go ahead. Yeah, just one more clarification I want to do. Amongst the brands that we own, where do we have a less than 100% ownership now? Flipkart is one, and how about the other brands? Yeah. Let's take this in two parts. First is on Flying Machine. When last year we did a strategic deal with Flipkart Group, it opened a lot of doors for us on the online world. We wanted Flying Machine, which is a youthful jeans brand, and a value and the only value brand, you know, we have established value brand in our portfolio. And with that objective, we went into the partnership and now it's opened doors and, you know, with partnership with Flipkart, which is a leader in that segment. Flying Machine is doing really well. Even this quarter, the growth on online is more than 50%. On the big days, you know, online has a lot of big days, and Flying Machine does very good numbers. It's a leading ranks of brands on Flipkart Group portal in the online. We're also doing quite well. In fact, we are very happy with the progress and the you know mutual learning that we have between us and the Flipkart Group. We get a lot of insights on the online business from their side. This business is ramping up. We have you know strengthened the team. A new CEO has come on board. Flying Machine is doing good, and we are very happy with the progress of Flying Machine. Second question was on the ownership of different brands. We have a joint venture with PVH. That's an American multinational company. It's an equal JV where Tommy and CK brand sit. It's an equal JV between us, and then we have, like, you know, a relationship with Flipkart Group for Flying Machine. Sorry, sir, I missed actually the second answer which you gave. We have relationship with Flying Machine, and then we have JV on? We have an equal JV, 50/50 JV, with PVH Corp. It's a PVH. It's an American group which is listed on the New York Stock Exchange. It is the owner of brands Tommy Hilfiger and Calvin Klein. We have an equal JV with PVH for Tommy Hilfiger and Calvin Klein, 50/50 basis. Okay. These are the three Calvin Klein, Tommy Hilfiger, and Flying Machine are the three brands where we have less than 100% ownership. Yeah, 50/50 JV and yeah. Yeah. Okay. Thank you very much, sir. Bye. Thank you. Thank you. Our next question is from the line of Vaishnavi Mandhaniya from Anand Rathi. Please go ahead. Yeah, hi. Thanks for taking my question. Two questions. One is on the working capital front, at least on the inventory, what kind of investment should we see in inventory going forward, especially since you mentioned that inventory was running tight and you couldn't supply to LFS and things like that? You know, LFS business also is trending well now, and it's the right time to sort of open the tap a little more wholehearted. We believe, you know, we are at a stock turns of higher than 4, and we have a stated objective of ensuring the turns in the near future remain close to 4 or above 4. Based on the size of the business, and we expect the business to grow, for the higher scale, the inventory in proportion to the turns will go up, but we're not expecting any deterioration of the stock turns. Okay, got it. With our inventory turns going up and basically freshness in our inventory increasing, you know, better full price sell-through and better gross margins, and at the same time, online channel contribution increasing to double in terms of the absolute revenue versus what it was pre-COVID, how do we look at the gross margin going forward for the company? You know, the inventory freshness is a double advantage, inventory turns, so the whole ROC, the capital efficiency and also the very big added advantage of having fresh stock in the market, right? That helps the lower discounting, it helps with higher gross margin. Also, retail is a higher gross margin business, and there is a thrust to improve that gross margin also. If I really look at, you know, we made a significant increase in this quarter in the GP, and we believe that we will continue to, you know, drive the margin because profitability is a very key focus area for us. I think GP will continue to rise at its own pace. Also, I must say that there are quarters where turns are higher, there are quarters where the GP is higher based on the channel mix. Q3 is actually the best quarter in our seasonal, our industry with its own seasonality. We are at a high, you know, highest stock turns and et cetera. Both on the stock turn as well as the GP side, we will continue to, you know, be in the mid-forties and above. That's our objective on the GP side. Okay, got it. Okay, thank you so much. Thank you. Thank you. We'll take our next question from the line of Aliasgar Shakir from Motilal Oswal. Please go ahead. Yeah, thanks for the opportunity. Couple of questions. You know, one is on your inventory. Shailesh, you made this comment that you know, we've been very, very focused on inventory, and there was some of the growth in LFS and MBO channels were probably given up to ensure we're very conscious. I mean, just want your comments on you know what measures are we taking to ensure that you know, our inventory, tight inventory control may not hurt our revenue growth going forward? You know, I mean, how do you see this panning out? No, no, I think that's a very, very good question. You know, you have to see the context of what I was saying, that we had anxiety about wave three coming in, you know, so we were paranoid, you know what I mean? We didn't know when the wave three would hit us, et cetera, so we were very, very tight on the inventory side. We have seen what happened. See, in the COVID times, the biggest focus is inventory. How do you manage freshness, and how do you keep the inventory under control? Now, hopefully, COVID is behind us and now we are looking at a different background completely. As we stand today, recovery is fairly good. We expect that business will become normal by March. In the changed scenario, we will take different calls and while we will still remain very, you know, conscious of stock turns increasing and in our business, discounting and high inventory is really the bane of our industry. We will always be cautious and, you know, prepared on the inventory side. Of course, we also want the higher growth. We also want the leverage that comes from bigger scale, and we are very conscious that we would love to grow channels that are yet to be, you know, gone to the pre-COVID level, whether it's LFS or anything else. We will take the prudent decision. It will be a ball that we will juggle between growth, which we want because it has its own advantages and it brings in profitability. At the same time, we don't want, you know, to make any mistakes on the inventory or on the freshness side. Understood. This is very helpful. Just a related question here is, could you just share typically, you know, the time, it takes for a particular product, you know, from order to store and, you know, I mean, what is the flexibility you have to, you know, maneuver here? It's again a very, very pertinent question in our industry. We work on many bricks. One brick is where we do a seasonal roadshow, book the order for the market, which could be 4-5 months in advance. At the same time, we also do things like flexible manufacturing. We can deliver goods in 45 days. We don't have, like, one rhythm like what used to happen in our industry. The whole idea is to be more agile and alert and respond faster to the changing market demand dynamics. We work on part of bricks on fashion that we book in advance 4-5 months. We also work on a regular basis with our core and essential products which don't get discounted. We also work on monthly flashes, where we bring in monthly, you know, collection closer to the season and market, look at what's selling, trending well, where are the gaps. We fill in through those monthly flashes. We also, especially on the online world, respond to the things which are selling fast and work on a very fast, flexible manufacturing where we can deliver goods faster. We work on multiple methods to reach to the market. Understood. This is very, very helpful. One question just on your, you know, footwear. You know, you mentioned that footwear within U.S. Polo has done very well, particularly the sneakers. Can you just share a few things over here in terms of, you know, I mean, which are the other brands which are doing footwear? You know, how big is overall footwear in our overall portfolio? You know, what is the growth trends we are seeing? Maybe if you could also share if, you know, we have any specific, focus in footwear to have, you know, specialized footwear-driven EBOs or, you know, what are the growth outlook here? Footwear is a key focus area. You see our strategy, we have a stated objective of growing adjacent categories in our these high conviction brands. U.S. Polo is the biggest brand. We have launched adjacent categories like kids, womenswear, footwear, innerwear. Look at another brand in our portfolio, Tommy Hilfiger. It has very large adjacent categories from kids to watches to wallets, small leather goods. We are very keen to extend the appeal of our focus brands into related categories. Footwear is very, very relevant for casual, you know, semi-formal, you know, actually the relaxed brand like U.S. Polo. We put investment behind footwear ahead of time a couple of years back, and now we are seeing good traction. U.S. Polo Assn. sneakers especially are leading ranked brand on the online platforms. We are also adding footwear in our stores of U.S. Polo Assn. because it leads to higher like-for-like growth for stores and also improve the sales density, which all brings in additional gross margin for our retail channel. Footwear is a very, very exciting business. Our team has done a very good job. It has doubled its revenue in the last two years during COVID, you know, and has improved its rank in online world. Margins are also good. In fact, the ROC metrics, the cash metrics are also, cash conversion metrics are also very good in this business. We are putting adequate wholehearted investment to grow the footwear category. We are increasing assortment. We have open footwear, we have sneakers, we have, you know, moccasins, et cetera. We are looking at all possible categories that fit into U.S. Polo Assn. brand appeal and growing footwear business. We can look at other brands also extension. Tommy Hilfiger already has a footwear business. Calvin Klein also has a footwear business. This will remain an area that we'll keep a close eye on. In the meanwhile, we are very happy with the progress that U.S. Polo Assn. footwear has made. Understood. This is very helpful. Can you share what would be the size of footwear in the overall portfolio? See, we again, I'm not comfortable sharing the exact number, but it's really contributing well to the store. Very good share in our stores and also online, the revenues are very good. It's a leading brand. It's a top brand online, it wins awards, et cetera. Got it. This is very helpful. Thank you so much. Thank you. We'll take our next question from the line of Pratik Poddar from Nippon India Mutual Fund. Please go ahead. Sir, we've seen a sharp increase in employee costs and even other expenses adjusted for the INR 10 crore investment which you called for. Anything to read into it? I mean, I would repeat what I said, with the evidence of good growth and recovery in September, October, we needed to make upfront investment in the brand play. Because we clearly wanted that buoyancy in our business should sustain, and we needed to take a, you know, a strategic decision to invest now or wait. Then we took a call that, no, these brands are very important and we want to invest ahead, so that the gains and the traction of these brands sustains and improves in the times to come in the near future. Also we have some transformation project going on, like supply chain. I mentioned we have a domain expert working with us. It's likely to be a 1.5 to 2-year project. We are going all out to make our company efficient on stock turn. It's a process that goes from our vendors to our warehousing to the way we replenish automatic stock to the store. It goes, you know, across many parts of our chain. These are all very strategic, strategically important initiatives. In COVID, our hands are tied. Now we decided as the markets are recovering, we needed to up the brand play. Got it. Sir, if I were to analyze this quarter's revenue, you know, you had earlier guided for high single digits pre-Ind AS EBITDA margins on the EBITDA side. That will take some time. NNNOW, you would need a higher scale to get to high single digit pre-Ind AS margins. See, I would put down the things in two, three parts. Point number one is the Q3 revenue INR 1,000 crore. Q3 is the biggest quarter. It's a seasonal industry, and it is the biggest quarter. So, you know, it INR 1,000 crore reflects a certain, you know, scale, not evenly, but it's a seasonal business. Second part is that, obviously, in the last two years, the scale is impacted by COVID. You know, we expect the leverage on the scale, operating leverage will come from bigger scale as the COVID goes away. We have an objective of growing our top line between 12%-15% net of the COVID impact. So we are very clearly saying that we want profitable growth and a certain, you know, sustained growth of our businesses. At that level, the leverage comes in, and then also the way our retail and the online business is growing, we expect, you know, there'll be additional, you know, profitable growth. We are, you know, committed to, you know, EBITDA, and some of our brands are already double-digit, I mentioned U.S. Polo. Early next year, you know, our EBITDA will improve further. As far as the power brands are concerned, I'm sure in 12 months we will see, you know, double-digit EBITDA from that portfolio. As the scale kicks in, as the efficiencies kick in, our balance sheet has been de-leveraged, our interest costs have come down. You know, there is a lot happening, and we are really looking forward to, you know, next year where hopefully there'll be no COVID. Very much, sir. Thanks. Thank you. Before we take our next question, we'd like to remind participants to ask a question, you may enter star and one. We'll take our next question from the line of Hrishikesh Ojha from Robeco Capital. Please go ahead. Hi, sir. Sir, my first question is that what would be your current market share? See, you know, in our industry it's one of the most difficult question to answer, because it's a very large industry and very large 90% game is unorganized, and then there are conversion from unorganized to organized, play at a different price point, different segment. We do get exact, precise information from some of the channel. Like, we get information from department store channel. We do get some data from the malls also. We get a sense. Online world, we get information. I can only say that, brand portfolio is market leading brand, with fairly good market share. But I can't put a specific number for you. Okay, no problem. Sir, my second question is that if you could share your margins on nnnow.com. Again, you know, we don't, you know, give out very specific business related, you know, on a particular business, whether it's U.S. Polo or NNNOW. If you could ask us some underlying thesis, then we would love to throw some more lights on NNNOW. I think what we can possibly at this point share is that it's a positive unit economic business. In fact, it's a double-digit channel level profitability, but we wouldn't be able to get into very, very specific numbers on it. Oh, okay. No problem, sir. No problem. My last question would be what is the, you know, the return on capital employed are we targeting in a medium term? Again, very good question. You know, this is a key North Star for us, ROCE. That's where the eventual focus will be. We're going step by step, reviving channels, reviving sort of working on power brand margins, and then cutting down on the, you know, capital employed and making working capital very efficient, increasing stock turn. The whole, if I have to say, what is all this leading to is ROCE, right? I mean, that's what the end game is to improve ROCE. Currently, we've just become profitable, and the journey would start from where we are in the last quarter. This quarter, we have delivered decent ROCE, but we want to see the numbers sustained. Our, you know, near-term objective is to reach double-digit ROCE. If I have to sort of speak my mind that eventually someday we should aim for higher ROCE than that. We are working. It's not that, this is our North Star. We are working hard on that, and this will take us a year to two years to reach, what our goalpost is. All the efforts on working capital control, improving stock turns, improving margins of our brands, channel efficiency, all are directed towards finally achieving the ROCE target. Okay. That was great, sir. Thank you very much. Thank you. Ladies and gentlemen, that was the last question. I now hand the floor back to Mr. Ankit Arora for closing comments. Over to you, sir. Thank you, everybody, for joining us on the call today. If any of you have any further questions or any questions have been unanswered, please feel free to reach out to me offline, and I'd be happy to answer them. Thank you, and look forward to interacting with you next quarter. Have a good day. Take care. Have a good day. Take care. Thank you. Thank you, members of management. Ladies and gentlemen, on behalf of Arvind Fashions Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.