Ladies and gentlemen, good day and welcome to Arvind Fashions Limited Q2 FY23 Earnings Conference Call. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Ankit Arora. Thank you, and over to you, sir. Thanks, Sima. Hello, welcome everyone, and thank you for joining us on Arvind Fashions Limited earnings conference call for the Q2 and half year ended September 30th, 2022. I am joined here today by Kulin Lalbhai, Non-Executive Director, Shailesh Chaturvedi, Managing Director and CEO, and Piyush Gupta, Chief Financial Officer of Arvind Fashions Limited. Please note that results, press release and earnings presentation has been mailed across to you yesterday, and these are also now available on our website, www.arvindfashions.com. I hope you had the opportunity to browse through the highlights of the performance. We will commence the call today with Kulin providing his key thoughts on our financial performance for the Q2. He will be followed by Shailesh, who will share insights into business and financial performance. At the end of 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 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. Very good afternoon to you all. Thank you for joining us for the results. Q2 was a landmark quarter for us, where our strong execution helped us achieve record revenues as well as profitability. AFL saw an industry-leading growth rate of 46% year-on-year. This was led by strong like-for-like growth of close to 25% in retail and the MBO channel doubling in its revenues on a year-on-year basis. The strong top line growth was accompanied by even stronger bottom line growth with an EBITDA margin expansion of 2.7%. The bottom line performance was driven by high productivity, lower discounting and operating leverage. USPA has been a star performer for us this quarter and is poised to become one of the largest casual wear brands in the country in FY 2023. Our hard work on working capital control is yielding results with meaningful reduction in net working capital days to 36 days during the quarter, thereby allowing healthy free cash flow generation. This quarter has been noteworthy, with the company achieving the milestone of going past the double-digit ROCE target, which we had set earlier this year to deliver annualized ROCE of around 15% in Q2. We remain excited with the continued momentum and buoyancy in customer demand, which positions us to continue focusing on improving profitability further. I would like to now hand it over to Shailesh to take us through the specifics and more details about our financial performance. Thanks, Kulin. Good afternoon, everyone. With nearly 1,200 crore top line, which is the highest ever in a quarter at AFL, and this INR 136 crore EBITDA, we saw a very good quarter in Q2 at AFL. The growth in top line is 46% and growth in EBITDA is nearly 90%. The result is backed by some good execution of brand promises and activities in the market, both online and offline. We saw upward sell-through in FS 22 season, and the good work on sell-throughs has continued in FS season also, where we have maintained good sell-throughs and have continued to reduce discounting. The result of this good execution is very healthy, nearly 25% like-for-like growth in our retail and increase of nearly 3% in gross margins. There's a scale momentum at AFL, and many of our businesses have become big, enabling growth in margins through operating leverage. USPA, U.S. Polo Assn., our biggest brand, crossed INR 1,000 crore NSP at end October and has now clearly established its leadership in casual space. Footwear is another adjacent category that has fired with business at two times pre-COVID numbers and a growth of more than 50% in Q2. Our portfolio footwear business is likely to cross INR 250 crore NSP mark in this year with healthy profitability and market-leading position. U.S. Polo footwear is now the leading player in its segment in all key fashion portals and recently won award as the best footwear brand in its category on Myntra. Arrow has also gained further momentum, has now grown at 50% in Q2 and has delivered positive EBITDA. Tommy Hilfiger and Calvin Klein have also grown really well at 50% with very healthy EBITDA margins. Q2 also saw growth across channels. Retail has grown 70%. MBO trade channel has doubled its business in this quarter over last year. Online is a very healthy 26% of our revenue mix and has delivered business of more than INR 100 crores per month in this quarter. I'm also excited about growth in southern markets, which has been a focus area for company, and in this Diwali, we saw vibrant growth of business in key southern markets. The revenue growth is supported strongly by omni linkages, and we've added 300 more stores in our omni network. Stores with omni linkages see a high single-digit sales contribution coming through the omni route. This scale and gross margin improvement has come on the back of a wholehearted refresh of our key brands, which we have improved in terms of brand appeal, energize consumer-facing touch points, and have developed smarter designs. Our focus remains improvement in profitability, and I'm happy to share that we have delivered close to 15% ROCE in Q2 on an annualized basis. In the previous quarter, we had achieved high single-digit ROCE, and now we have reached close to 15% milestone in journey of reaching more than 20% ROCE in the medium term. The increase in gross margin of nearly 3% has flowed into EBITDA margin, and AFL has delivered EBITDA of INR 136 crore in this quarter, a growth of 90% over last year's same quarter, an increase of nearly 2.7% in EBITDA margin percentage over last year. This improvement in EBITDA is due to reduction in discounting, higher sell-through, higher freshness of inventory, operating leverage, and improvement in Arrow profitability. The business has delivered a PBT of INR 45 crore with a very healthy cash generation. This has resulted in net debt reduction to INR 383 crore. Through strong execution and tight controls, we kept inventory in check, and the inventory days have come down by 6 days right at the start of the season. We are aiming for more than four stock turns, and in Q2, we have delivered 4.2 stock turns. There is overall focus on deleveraging of balance sheet and besides maintenance of net debt level, despite a healthy 50% growth in top line, our net working capital has come down by six days. Both inventory days as well as debtor days have shown healthy reductions. Q2 also saw strong collection from the market with tight controls on trade policies. PBT of INR 45 crore has resulted in a PAT of INR 18 crore after minority interest. Lastly, I want to call out our mega brand, U.S. Polo, and its strong performance. Q2 saw the highest quarterly revenue by U.S. Polo. Now it's a INR 1,000 crore NSP brand at end October. Its NSP grew with whopping 45% like-for-like retail. Its adjacent categories, including footwear and kidswear, have grown at more than 50% in the quarter, helping the brand continue its double-digit pre-Ind AS EBITDA margin trajectory. In last one year, we have spent a lot of efforts in brand refresh in U.S. Polo Assn. You may have seen the new ad campaign on the concept of twinning, featuring Bollywood actor Arjun Rampal and his family. We saw use of Indian celebrity for the first time in U.S. Polo Assn. campaign. We also refreshed the brand store identity and energized product designs, including its denim division. We are very excited about prospects of dominance of U.S. Polo Assn. in the casual wear space, and we'll continue to wholeheartedly invest behind this brand to support its re-engineered profitability and growth. I see a growth momentum in our brands in the season ahead, and AFL should cross INR 4,000 crore top line this year. Our focus will be to further improve EBITDA margins and ROCE through profitable scale build-up, sharp execution of brand activities in the market, tight control on trade policies, and deleveraging of balance sheets. Thank you. Thanks, Shailesh. Seema, we can open it up now for Q&A session. Thank you very much. We will now begin with the Q&A session. Anyone who wishes to ask a question may press star and one on their touchtone phone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We take our first question from the line of Mr. Sagar Parekh from One Up Financial. Please go ahead, sir. Yeah. Hi. Good afternoon, team, and congrats for decent performance, and good to see, you know, numbers finally taking shape, so congrats for that. A few questions from my side. Firstly, on sequential gross margin reduction, that could be purely because of this EOSS coming into July. Is that the reason? Sagar, hi. Hi. You know, our industry is very seasonal. You rightly said that Q1, which was largely a full price season versus Q2, you know, the GP% has gone down, but we are happy to say that our EBITDA at a pre-Ind AS level has gone up sequentially. From our Q1 EBITDA, pre-Ind AS operating EBITDA to the operating EBITDA Q2, the Q2 EBITDA has gone up actually, while the GP%, yes, have come down because of the EOSS discounting. For all the other leverage in our expenses which have not grown at the same pace, our GP% has gone up by 15%, and because of that our EBITDA has gone up by close to 1.3% pre-Ind AS. It's a similar post-Ind AS same number. Sagar, our EOSS discounting is a reality, and we don't really compare sequential EBITDA margin. We are happy to say that our Q2 operating EBITDA is higher than Q1 EBITDA. That Q2 to Q1 EBITDA higher of 1.3%, as you said, is also because of higher other income, which is INR 20 crore this year. So if I remove the other income, still the EBITDA is higher on a quarter-on-quarter basis? Yeah. I reconfirm, outside of other income also, our EBITDA margin in Q2 is higher, Sagar. As far as that other income is concerned, it's just accounting Ind AS, you know, entry. It doesn't have a bearing. Our pre-Ind AS EBITDA has gone up in Q2, whereas normally it tends to come down. This year, because of, you know, the market competition and good performance, it's gone up. I can give you a little more, you know, color to that so that this whole question gets addressed, clearly. See, there is a GP drop in this quarter compared to last season, but that's because of U.S. Our GP went up by 15% in this quarter compared to last quarter. I don't want to again and again compare Q1 versus Q2 because it's not fair. Since you asked that question, I'm sort of saying that the GP has gone up in value by 15%, where our expenses compared to Q1 have not gone up at the same pace. Because of that, our EBITDA, operating EBITDA has gone up. It's got nothing to do with the other income or Ind AS. I'm talking of operating, business EBITDA, Sagar, yeah. Understood. This other income of INR 20 crore, anything to read here, except because it seems to be on a higher side. Yeah. It's just accounting practice, whatever is asked for the accounting rules. Out of that INR 20 crore, INR 14 crore is account of Ind AS 116 adjustment, which is basically to reassessment of leases and fair valuation of security deposits. There is a INR 6 crore coming from the interest income and there are some small provision of write back. Frankly, Sagar, don't read too much into the other income. Our fundamental business operating margin in Q2 has gone up, but it's unfair to compare Q2 margin with Q1. I think the right way to compare is Q2 to Q2 because there's a large seasonality in our business, Sagar. If I compare H1 EBITDA with reported EBITDA before other income of INR 208 crore for H1 FY 2023, how much would be pre-Ind AS? In the past you have mentioned to about 4% to 5%, 4% I think is the difference between post and pre. Fair to say that we would be at 6% EBITDA pre-Ind AS on H1 numbers, on INR 2,100 crore. 11% EBITDA, you know, post Ind AS in H1. No, there's. There's a difference of close to 4%. Got it. It's about 10% just correcting because, it's. I'm talking about before other income. I mean, that's accounting entry. Uh. It's 11% post Ind AS. Yeah. Okay, fair enough. This is my last question. If I so this year, as you said, you will finish the year with about INR 4,000 crores of top line. Where would you like to see the margins, pre-Ind AS, I'm saying, and in FY 2024, as you have in the past indicated that we would like to grow our top line at about 12% to 15% on a steady-state basis going forward. How should we think of margins on a sustainable side, pre-Ind AS EBITDA, as we move ahead in FY 2024? See, if you look at Q2 power brands, we are at close to 13.1% post Ind AS EBITDA. We are very close to, you know, the trajectory of double-digit EBITDA in power brands. Our first focus on profitability is to reach that stated guidance of reaching a double-digit EBITDA in our power brands, you know, in now earlier we used to say 12 to 18 months, now 12 months, because we made that journey in last six months. Sagar, I think our first goal on profitability would be to reach a double-digit EBITDA profitability for power brands in the next 12 months. We are confident that whatever we're doing through the scale leverage, through efficiency of our execution, reduction in discounting coming from higher sell-through, improvement in some of our brands' profitability. Overall, we are guided towards that, and we'll have to work hard towards that. We are, you know, very committed to that journey of reaching double-digit EBITDA in power brands in the next 12 months. As far as the growth momentum, currently obviously you've seen our growth momentum is very, very strong. It's industry leading. Our guidance on the top line growth is around 12% to 15%. Currently it looks more like closer to 15% because there is a strong growth momentum in our brands. All these six brands are very powerful market leading brands. That will help us to reach the kind of top-line growth we are looking at. All the growth drivers, be it, you know, digitalization, online business, be it, adjacent category growth, be it, same-store growth, through better execution, and also the expansion into the small tier towns, all are now, you know, becoming very live and green. We are confident that we should be in that 12% to 15%, you know, growth path in the short run, more like 15%. Okay, great. I have few more questions. I'll come back in the queue. Thanks. Thank you, Sagar. Thank you, sir. We take the next question from the line of Mr. Ritesh Choudhary from Molecule Ventures. Please go ahead, sir. Hello? Hi. Hi. First of all, congratulations on a very nice set of numbers, and it's actually good to see margin shaping up upward. My question is regarding there were several news articles floating around for the sale of Sephora. What is the substance in this news? Friend, we never, you know, respond to market speculation. We have to focus on running the business. Mm-hmm. You know, no comment from our side on that. Okay. Fair point. Well, that was it. Thanks. Thank you. Thank you. We take the next question from the line of Jay Shah, Phillip Capital PMS. Please go ahead, sir. Hi. Congratulations to the management for walking the talk and boasting a good set of numbers. I'm actually relatively new to the company, so if you don't mind, could you just throw some light that when it comes to these brands, what part of the supply chain do we control? Like, do we control the entire manufacturing itself? And even if it's that, then what are the geographies that we cater to with these brands? And even the manufacturing, is it like everything that is done domestically or we do even, you know, source something from other geographies? I think, let's break down our six brand portfolio into three brands, U.S. Polo, Arrow and Flying Machine. Now, Flying Machine is our own brand. We own the brand. We started this as a first denim brand many decades back. Arrow and U.S. Polo are licensed from international giants. In these three brands, we do the complete designing as well as production, sourcing, end-to-end everything we do. And we pay royalty on Arrow and U.S. Polo to the principal. But this is internationally known as a licensing model, where we are licensed to design, produce, distribute these brands in our territory. Now, Flying Machine is our own brand, we can do what we want across the world. Arrow, we sell in India. We have couple of stores in Middle East. We have three stores in Dubai. We have rights for many other countries, some small part of Africa. The focus frankly remains on India. It's the largest opportunity, and we have some other geography. U.S. Polo, which is our biggest brand, also is a license. We design, develop the brand and very large adjacent category in this. We have footwear, kidswear, womenswear, innerwear, and we sell all channels in that. We sell in South Asia. We have business in Nepal. We have business in some neighboring countries, but focus again remains on India. That's about the three brands. There are three more brands, which are international brands. Tommy Hilfiger and Calvin Klein is a joint venture with the principal. It's an equal JV with PVH, Phillips-Van Heusen of U.S., headquartered in New York. We've been doing the business of these brands, Tommy, 2004. We have a very strategic long you know perpetual kind of a license on Tommy. Calvin also has a very long-term contract with PVH. There we source goods from their line. The principal does the designs and the selection of the vendor, and after that we take the goods directly from the vendor into our system. And then we pay the royalty to the principal. There is a lot of localization through the help of the principal because they see India as a very big opportunity and we are a high duty and depreciating currency regime. We have gone and done very healthy percentage of localization in this brand higher than any other international brand of similar repute. It's a very unique relationship and a very unique supply chain that we do, and our gross margin performance is very good in this brand. We are market-leading brand. The final brand is Sephora. We are a distributor there, and we source with multinational brand mega brands, you know, likes of the MAC and the Dior and all, Huda, Pixi. We import them and we retail. The role with Sephora is more of distributor in India. Does that answer question? Anything specific, more details you want, I'm happy to sort of throw some more light on that. No, no. That was really helpful. I just wanted to know that, in the geographies that when you say that you have all the rights from designing to distribution, so then it is on your purview that, you know, you can even get it manufactured from a third-party player also, right? I mean, you would take care. There are global guidelines on production. You know, we have to be vetted. In fact, Arvind, our own manufacturing standards are very, very high, and we vet the factory on a lot of parameters, so that they meet any international parameter because Arvind standards are very, very high standard, AFL standard. We produce in the approved factory that we approve. Sometimes, in Tommy, CK, we source from approved vendors by the principal. Okay. Would it be safe to assume that the next lever of growth would primarily all be focused on India, like, and not the rest of the geographies as much comparatively? Right now, India is a very big opportunity, and in time, to be sure, we will take the brand even more strongly. In the short run, our principal focus is to expand in India, and we see huge opportunity in small-tier towns, like I said earlier. We have a lot more to do to really exploit the large potential. It'll take us many, many years to, you know, reach that potential, but we will always be open to other territories wherever we see opportunity. Okay. Thank you so much for all the answers, and all the best for the future performance. My pleasure. Thank you. We take the next question from the line of Mr. Kunal from Alpha Capital. Please go ahead, sir. Hello. Hi. Yeah. Good afternoon, sir. Am I audible? Yes, sir. Yeah. Thank you for giving me this opportunity. My first question is related to Arrow brand. Just wanted to know the progress in Arrow, just using one of the metrics, that in FY 2020 there were 286 stores of Arrow, and in 2022 it's down to 212. About 74 stores have been closed, I assume, in last two financial years. What is management strategy for Arrow going forward? And could you just let us know the pre- and post-Ind AS EBITDA margin of Arrow specifically? See, Arrow has been a big focus for us in the last two years. COVID was not kind to many formal brands, and we had to really adapt the brand to the new realities of post-COVID world of work from home, and we increased the proportion of its smart casual line called Arrow Sport. We made the brand little more ceremonial. We got a new logo on the brand, a vector design. We signed up with Hrithik Roshan as a big mega Bollywood celebrity to create demand for the brand. We created a new retail identity in which we have started opening doors. Arrow has now, you know, turned around really well and is one of the fastest growing in our portfolio. In the first half, it has doubled the NSV. Q2 is more than 50% growth in the Arrow business. Also, if I see the fall holiday, the current season, the improvement in sell-through in Arrow is significant, almost like 10%. It's like one of the highest in the industry. Because of this increase in sell-through, because of lowering of discount, linked to that, Arrow has now turned around. It's become EBITDA positive, and it's a very good news. We are very excited about the brand where it is. With this energy that brand has, we are getting now a lot of demand from the trade to open more stores of Arrow. I'll be targeting that how fast we can open the next 100 stores for Arrow. It may take us probably two years, but we are very committed now to take the distribution footprint of Arrow forward with a position of strength where we have done well on the current distribution. Like-for-like growth in the business has been very, very healthy. Sell-throughs have been very healthy. The brand has become a bit more positive, and this is now the right time to accelerate and open many more stores. Maybe a year from when you ask this question, our store count would have gone up significantly higher. We are very excited about what the short-term future holds for Arrow as a brand. Okay. Thank you. Sir, my second question is for U.S. Polo Assn. Sir, could you just tell me what is the sale of adjacents as a percentage of overall U.S. Polo Assn. sales? Also the management said, once in their earlier con calls that, stock turns and margins are better in footwear segment. Sir, if you could just give me, the quantification of what are the stock turns in footwear segment. Let's start with the adjacents category. U.S. Polo, we have a lot of adjacents category. This is one adjacents category, where we have invested ahead of the time. We started with footwear business with a separate dedicated team. We set up an innerwear team, separate dedicated team again. We have a very large kids business in U.S. Polo, and now we're launching other accessories as we speak, things like belt and wallet and, you know, women line of footwear, et cetera, et cetera. Accessories, adjacents category is close to, you know, I would say INR 250 crores. This season we will cross INR 300 crores of NSV of adjacents category, it'll be north of that actually. We are hoping that number could touch INR 500 crore NSV mark in next two to three years because there's a lot of energy going behind USPA and its adjacent categories. Coming particularly to the footwear, see, if you look at our footwear portfolio, U.S. Polo Assn. is the largest part of that footwear portfolio. We have good healthy footwear business in Tommy Hilfiger also, and we are looking at, you know, designing some footwear line for some other brand as we speak. This business this year should touch close to INR 250 crore of NSV. Bulk of it will be from U.S. Polo Assn., which will be north of INR 200 crore NSV mark. It's a fairly healthy double-digit EBITDA business. It's grown really well. In fact, the Q2 numbers is almost 2 x the pre-COVID number. In Q2, growth is upward of 50%. Like, this is a, you know, a business which is doing really well, and it's a market leading position. It has an online first mind. So on all the fashion portals, you look at Myntra or Ajio, it does very well. Last week there was an event in Myntra for annual performance, and I'm happy to share that U.S. Polo Assn. footwear won the best footwear brand in its segment. So we won that award for footwear. The turns on that business are quite healthy. It's a profitable, fast-growing category and we want to, you know, grow the footwear and other accessories, adjacents category like the innerwear and small leather goods and kidswear strongly. Yeah. Thank you. Sir, it would be just really helpful if you could just give a ballpark number of what is the stock turns in the footwear segment. Just any ballpark or casual number would be fine. See, as a company, we are at 4.2 turns, and I can say that the footwear enjoys a slightly higher turn than that. Okay. Okay. Yeah. Thank you. It will be, you know, crossing five kind of turns already. You know, it has a slightly higher, stock turn than the company stock turns. I mean, does that answer your question or you want me to be a little more, specific? No, it answers my question, sir. Okay. Yeah. Okay. Thank you, and all the best. Thank you. Thank you. We take the next question from the line of Naysar Parikh from Native Capital. Please go ahead, sir. Yeah. Hi, thank you for the opportunity. My first question is on the channel mix and how are the channels performing, you know, especially the MBO channel where, you know, we had faced some problems in the past. Can you just give a sense of what is the mix by channels and the growth in them? Yeah. You know, Q2 obviously has seen kind of growth we have delivered across channel. There is energy and our brands have done well. Typically, if you look at our largest retail channel is retail, which is close to 40%, and based on the quarter and the seasonality, it can move from 37% to close to 45%, but around 40-odd% at an annualized basis is the retail channel. The second-largest channel is online. In Q2, it was at 26%. This is a channel which has grown at 20% CAGR post-COVID. We've like done around INR 100 crore plus monthly rev run rate in Q2 also. This is around 25%, and it has grown at around 20+% CAGR in the past. We have two other big channels, department store and the MBO. The trade channel. The trade channel tends to be at around 15 odd percent. Currently, in Q2 it has done higher because we do the primary fill-in, you know, for the season in September after the EOSS. This quarter the numbers are slightly higher than 15%, but that's where it is right now, in terms of 15%. A similar number is expected from the department store channel. That's the overall sort of mix we enjoy, and we have a small export and institutional business. This is how the overall channel has come across. Got it. Okay, thank you. My second question is on, you know, the online channel. Do we have any plans to, you know, launch or acquire any kind of online first brands? You know, given that, you know, that is the focus area for many people. Is there any plan on those lines or the idea will be to just lease the brands? Very, very focused on our existing brands and, we have these 5 apparel brands and a core of 6 brands. We want to very single-mindedly stay focused on these businesses. We see huge opportunity for growth in the next, many years in these brands to grow at 12%-15%. We don't see any possibility of growth opportunity in our own, existing brands and make them bigger, more profitable. That's our focus. You've seen our last one year, we've demonstrated how, you know, sharply we have, you know, done our capital allocation and sharply defined our portfolio. Currently we don't have any plan for any, digital first, brand, any acquisition or build up. That's not on our card. In each of our businesses we have a very large, healthy online business. From wholesaling to the portals to, you know, our own NNNOW.com, to marketplace model to Omni linkages, we are very committed to online as a dominant channel, and we want to grow that channel profitably, aggressively. We don't have any plan to do any other online for separate brand. Got it. Sir, if I can ask one last question. You know, if we look at our minority interest, you know, that has made INR 10 crores of PAT, whereas, you know, we as a whole company have made INR 18 crores. We've made only INR 8 crores excluding Tommy Hilfiger and Calvin Klein, right? Which, as a margin, is obviously low. How should we look at that? You know, when do we see, you know, obviously it has improved, but, as a margin it's still low, compared to TH and CK. How should we think about that? Naysar, Ankit here. I think you are looking at the wrong numbers. The total PAT reported for the company consolidated is INR 28 crore. Out of that, INR 18 crore is excluding PVH, which is after the minority interest. This quarter we have had a landmark quarter where we have meaningfully improved our PAT margins if you really look at it. On an overall consolidated top line, despite having added top line number of INR 1,182 crore, I have done about close to 1.5% PAT margin for AFL after minority interest. It's INR 28 crore, with INR 18 crore coming from AFL after minority interest and INR 9-10 crore coming in from PVH. As to what you would have seen, Naysar, I would just kind of really highlight the fact that our bottom line profitability has been on an absolute exponential upward trend over the last four to eight quarters. Our first journey was to improve our PBT, which is what we did in H2 of FY 2022. Then since then we have been improving our PAT profitability as well. That's the journey and our steadfast focus on improving bottom line profitability along with our EBITDA margins and as what Shailesh Chaturvedi highlighted on growth of 12% to 15% CAGR moving forward. Got it. The INR 10 crore is for PVH and INR 18 crore is for the other four brands. Usually, right. That's correct. All right. Thank you so much, and all the best. Thank you. A reminder to all the participants. Anyone who wishes to ask a question may press star and one on their touchtone phone. We take the next question from the line of Yash Mandawewala from Mandawewala Family Office. Please go ahead, sir. Hi. Congratulations on a good set of numbers. Thank you. I'm just seeing a provision for, you know, slow-moving inventory about INR 47 crores. In the cash flow statement, can you just provide some more color on this? See, you know, we have tightened our policy on inventory. You know, one of the reason why our GP went up is because we have kept our inventory very fresh, and our GP does well when the inventory is fresh. We've gone a little more conservatively and tight on our policy, and we've started keeping a little higher provision. It's a graded provision and based on aging, but we have created a little bit of a war chest pool going forward, and that's what this value will represent. It'll help us to liquidate inventory fast and keep the inventory fresh so that we'll have a positive impact on our GP. Perfect. Thank you. The second question is, can you just provide some more updates on how the festive season has been? Has it been a bit softer than your expectations, so October, Diwali season? See, this season, that is the fall holiday season, is going as per our plan. We launched the season on time. We saw, you know, the festival season start from Onam in Kerala, then to Pujo in East and some parts, then Diwali now and then, you know, we are heading into the winter season, wedding season, and then Pongal in January. The season, there's a buoyancy in the market, and our brands are very, very strong. The season is going as per plan. Our sell-throughs are as per we had planned, and we hope to end the season as per our plan. Okay, great. Thanks a lot, Shailesh. That's it from me. Thank you so much. Thank you. Thank you. We take the next question from the line of Mr. Hrishikesh Ojha from Robo Capital. Please go ahead, sir. Hi, sir. Thank you for the opportunity. Only one question from my side. If you could provide some outlook on the debt side, please. Sorry, I missed your voice. Can you repeat, please? Sure. Sir, if you could please provide some outlook on debt. Yeah. You know, if you really see our debt position, our net debt is at INR 383 crore, which is slightly lower, around 40 odd crore. We have always guided that our debt level, despite the very large growth that we're doing, will be similar to what they were last year. We expect from now till the year-end, they will move sideways. Similar levels as last March, last year March level. Okay. Thank you very much. Thank you, sir. We take the next question from the line of Sagar Parekh from OneUp Financial. Please go ahead, sir. Yeah. Thanks for the follow-up. Just one on the Sephora. While you may not comment anything, but just wanted to get your sense that at what, you know, point will you eventually decide to exit the business as you have done in the past for all the other- You are forcing us to say something. We don't comment on such speculation. These are No, but is there a thought for you to, like, probably look to sell eventually or look to exit this venture or there is no thought process at the moment? I don't want to comment on that side. Just please pardon. Sephora is a business where we run 26 stores, and we've done really well. If you look at the Q2 numbers, like-for-like in Sephora is probably the best in the industry. We're delivering one of the highest sales densities in the mall. Ask any mall which is the best performing store and sales density, Sephora will be right there. We've done a fairly good job when we took over Sephora from other distributor, and it's been a core part of our business, and we'll continue to sort of engage with women consumers in its premium offline driven appeal. That's what Sephora's role is in our portfolio. It's a beauty brand for our portfolio. Okay, got it. My last question would be on the Arrow. You mentioned that you are looking at overall power brands reaching double-digit pre-interest EBITDA in 12 months. On Arrow specifically, once the portfolio reaches that double-digit, like Arrow would be on a lower side and probably U.S. Polo and Tommy would be on higher side. Is that like a fair understanding or even Arrow can possibly reach about double-digit? Arithmetically, you're right because Arrow will also reach double-digit EBITDA. We are very committed. It'll take maybe a year more or one and half years more to reach there because it's just broken even where brands like U.S. Polo Assn. and Tommy Hilfiger are already double-digit PBT and EBITDA. Right now it's just broken even at early stages of EBITDA. We see acceleration at a higher pace in Arrow going forward, and it should also reach. Very committed to Arrow reaching double-digit. When the overall portfolio reaches 10%, maybe Arrow is much probably less, but it should also then soon reach double-digit EBITDA. Our ambition on Arrow also is the same to reach double-digit. It may take two to three years. Right. Flying Machine? Similar. Flying Machine also at a scale where we will need to, you know, double the scale. It's now just little south of probably INR 500 odd crores. The journey of these brands will be interesting when we can grow them in the next three odd years to INR 1,000 crores with new categories. In Flying Machine, we are focusing a lot on jeans and new categories being developed, including footwear, including innerwear, including kidswear in the next one to two years. It'll take some time, but we are started thinking on adjacent category. We're also looking at some regions where it can grow faster. We can look at, you know, some channels where it can grow faster. There's a lot of, you know, energies going on to see how we can grow the brand from a slightly right now sub-scale in that sense to a scale where we can talk about a very, very healthy EBITDA. Right. Flying Machine and Arrow will probably take some time to reach double digit, maybe two years out or maybe two and a half years. You're right, and we are committed to that. You know, compared to Tommy Hilfiger and U.S. Polo, they may take a little longer time, couple of more years. Okay, fair. That's it from my side. Thanks. Thank you. Thank you. We'll take the next question from the line of Mr. Nishid Shah from Ambika Fincap Consultants. Please go ahead. Yeah, hi. This is Nishid Shah. Thank you for the opportunity and congratulations on the good set of numbers. Thank you. Listen, my question is pertaining to our U.S. Polo store which we opened in Chennai, which was one of the largest store which we have opened. And, if I'm not wrong, this is because we are weak in south markets. Can you just tell us how has been the response and how we look the southern market going forward? Very good question. You know, U.S. Polo is strong in South also now. U.S. Polo is an INR 1,000 crore brand. It's strong across channel, across markets. Relatively, yeah, I mean, you can say a little more division, but you know, there are pockets like Telangana extremely strong. Bangalore city, very. We opened five stores in the same week in Bangalore. We opened, like you said, in Express Avenue, which is probably one of the biggest, most important mall in South. So we opened a very large store, and I'm happy to share that, U.S. Polo now is the third biggest brand store in that mall. That mall has all the brands and, you know. So USPA become a, like a top three, revenue store in that mall. I'm very happy with the progress there. If you go to the store, it looks quite nice. The standards of retailing are very, very high. From here, it will only go, grow faster and forward. U.S. Polo now opened a lot of stores in Kerala, Telangana, Andhra. Bangalore, we have opened five stores, Express Avenue store. When we want to go even stronger in southern markets, I think, U.S. Polo will be the first brand that will take us into that leadership or the strength position in South. U.S. Polo is doing very well. When you say that we are trying to go into Tier 2, Tier 3, what kind of store size would that be? See, you know, we are very clear that their store size will be similar to the current store size, maybe the smaller version of the current. We are not looking at a necessarily different format or a different smaller store, et cetera, because what we have realized that the well-to-do, affluent and even higher middle class consumers in these smaller towns, their aspirations are very similar to the big metros. They otherwise, if the offer is different, then they end up going to the big metro to shop. That's a learning in all our brands that we want the consumer to shop in their own hometown and not go to the nearest metro to shop. Our offer will be very, very competitive to an urban metro center in these towns also. Right. Do we intend to open more U.S. Kids separate stores, or you plan to, you know, merge everything in one and open one large stores going forward? No, in fact, we are open to both the formats, but I think kids separate store is a very interesting opportunity and some of other brand like Tommy Hilfiger, we opened very large number of kids stores, the largest in the world, in fact, number of stores that we have in Tommy in India. U.S. Polo also exploring that route and we'll be open to. You know, we have a multi approach, whatever works. Couple of stores we'll continue to open family stores together, but definitely there is a scope of opportunity for kids standalone store in U.S. Polo brand. Right. Great. Thank you for the opportunity. Thank you so much. Pleasure. Thank you. A reminder to all the participants, anyone who wishes to ask a question may press star and one on their touchtone phone. We take the next question from the line of Mr. Shreyas Jain from Suman Investments. Please go ahead, sir. Hello. Thank you for your voice. Sir, I just wanted to understand how has been the response for womenswear in USPA? Sorry, Shreyas, we missed that. What did you say? What, what's the response in USPA? How is the womenswear response for USPA? You know, we had discontinued women's line in USPA couple of seasons, especially during the COVID. We are now restarting the efforts on U.S. Polo womenswear and it's on the drawing board, very early days of the effort. In time to see, in the couple of seasons, you will see we relaunching the womenswear. If today you go to any of our store, you'll not see womenswear. Got it. Why I'm asking you is, because fundamentally womenswear you need a lot of SKUs to stock, right? You somewhere mentioned on the call where you plan to get into footwear for women as well. What I'm trying to understand is, the need for higher SKUs and design will that not actually lead to balance sheet again getting bloated and higher requirement for working capital going ahead? Yeah. So we'll do it very smartly. That's why we are very cautious right now. We are, you know, prototyping our thought process. Footwear is a different opportunity, and online much easier to, you know, sell. We test launched women's wear in last one month. Initial response is very good, but still early days for us to comment. Apparel will follow after that. Right now I'm not able to comment on what you're saying about the width options, et cetera. We are on the drawing board, and we'll come back with hopefully a smart plan. A large part of the stores that they're opening would be company-owned, company-operated or are they franchisee stores? We have a asset-light franchisee model-led expansion plan. You look at our CapEx, not too much of investment going. Most of our stores, majority of our stores will be franchisee stores. Okay, all right. Will you be selling inventory on an SOR basis or once sold, we don't take it back? How is that? How is that? How does that work? We have many models. We have consignment model also, we have outright model also, and it, you know, changes from franchisee to franchisee, market to market. Okay, all right. Somewhere in the presentation you spoke about a model where you want to like sell products which are not sold at a discounted price. What is that model like? You plan to open stores for that? Yeah. The outlet industry has very large outlets, you know, physical stores which are linked to omni-channel, and we didn't have that. A year back we went ahead with that model, and now we have these stores which sell our five brands, only our five brands dedicated to the five brands we have. I don't know which city are you from? Bombay. Mumbai, okay. We don't have a store in Mumbai yet, but like for example, Bangalore at the airport and at Marathahalli we opened large, you know, 3,500. These are pure outlet model. There's no other model there. It's not, you know, other brand. It's our own five dedicated brands, and it's doing very well. It's an efficient way of liquidating old inventory in a controlled manner. This model is really working well for us, so we opened 20 of these outlet stores. By March we should have close to 30 of these stores, which will help us liquidate old inventory at a faster pace in a very efficient way, a good margin. All right. That helps. Thank you so much. Thank you. Ladies and gentlemen, that was the last question for the day. I would now like to hand the conference over to Mr. Ankit Arora for closing comments. Thank you, everybody, for joining us on the call today. If any of you have any further questions which have remained unanswered, please feel free to reach out to me separately, and I'll be happy to answer them offline. Thank you for your time and look forward to interacting with you again next quarter. Thank you. On behalf of Arvind Fashions Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.