Ladies and gentlemen, good day, and welcome to Arvind Fashions Limited Q2 FY 2024 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, Head Investor Relations and Treasury. Thank you, and over to you, sir. Thanks, Ashia. Hello, welcome everyone, and thank you for joining us on Arvind Fashions Limited earnings conference call for the second quarter and half year ended September 30, 2023. I'm joined here today by Kulin Lalbhai, Vice Chairman and Non-Executive Director, Shailesh Chaturvedi, our Managing Director and Chief Executive Officer, and Girdhar Kumar Chitlangia, our Chief Financial Officer. 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 strategic thoughts on our second quarter's performance. He will be followed by Shailesh, who will share insights into business highlights and financial performance. At the end of the management discussion, we will have a Q&A session. Before we start, I would like to remind you that some of the statements made or discussed on this call today may be forward-looking in nature and must be viewed in conjunction with risks and uncertainties we face. A detailed 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. Thanks so much for joining us for the Q2 results. Quarter two has been a strong quarter for AFL, where we have achieved our highest ever sales, EBITDA, and profit after tax. In spite of tough market conditions and a shift in the festive calendar, we grew our sales by 7%, propelled by the retail and MBO channels. The significant improvement in bottom line has been driven by strong like-for-like sales, good full price sell-throughs, and improvements in our gross margins. Our working capital cycle continues to improve with a 10-day reduction in gross working capital days. In quarter two, we focused on re-energizing our brand through large investments in marketing, where our investments were around 100 basis points higher versus last year. We will continue to invest heavily behind our power brands in the years to come. I would also like to inform you that AFL has divested its Sephora business post the closure of this quarter. The brand has been divested to Reliance Retail at an enterprise value of INR 216 crore. With this move, we have completed our portfolio rationalization exercise. Our stated goal has been to build a portfolio focused on high return on capital and strong cash flow. We are very proud of the way in which we scaled up the Sephora business and wish the brand the very best for its future journey. With this divestment, we will retire our debt and focus our management bandwidth and capital in scaling up our five high-conviction brands. While the current market conditions are challenging, we are optimistic about the prospects in the second half of this year and are hopeful of growth being higher compared to Q2 and H one levels. Our focus on profitable growth will continue, and we expect margin improvements to continue in the quarters to come. I would like to now hand it over to Shailesh to take us through the specifics and more details about our financial performance. Thank you, Kulin. Good afternoon, everyone. Amidst soft market condition, AFL has delivered encouraging results with a growth of 7% in revenue in quarter two, despite shift in festival calendar. This quarter's business can be split into two parts. The first part saw the July-August end-of-season sale, and the second part, the fresh season in September. We had delayed end-of-season sale in June because of good sell-throughs, and then we saw energetic trading in July and August with double-digit like-to-like growth. September business saw a small negative like-to-like because of shift of festival dates to October. Overall, AFL delivered a healthy 9% like-to-like retail growth, with fantastic overall sell-throughs in spring/summer 2023 season. With less number of full-price festival days, retail discounting went up by nearly 3%, but we saw very good sell-throughs and managed the inventory levels very well, with reduction in inventory by two days. I must also add here, like Kulin mentioned earlier, that Q2 saw the highest ever quarterly sales, the highest ever quarterly EBITDA, both in value and percentage, and as well as the highest ever PAT for AFL in a quarter. Since there was a sense of slowdown, we had prepared our response through various dynamic measures, including product innovation, higher investment in advertising, and tight cost control. Premiumization of products for clear differentiation is a key theme here. Arrow pushed business of its premium line, 1851, and Autoplay wrinkle-free shirts strongly. USPA launched super premium polo T-shirt line and higher quality jeans line, which saw very good sell-throughs. We also launched very successful capsule collection with Muhammad Ali brand in Flying Machine. Tommy Hilfiger and Calvin Klein continued with a strong journey in super premium segment with fantastic growth and profitability. This quarter saw a one of its kind mega event in our top brand, U.S. Polo Assn. We launched the famous Legends campaign in Bombay with a global standard event in presence of Mr. J. Michael Prince, the global CEO of USPA brand. Taking the brand, brand idea of twinning forward, we showcased two legendary pairs twinning in USPA. One pair was with brand ambassador Arjun Rampal, with his fashion model contemporary, Milind Soman, as legends of fashion modeling. Given the brand's association with sports, we chose the second pair from tennis, the legendary Lee-hesh pair of Leander Paes and Mahesh Bhupathi. This Legends event received enormous media coverage just before the season and was followed up by impactful national media releases. We also launched the first brand website from a brand from our company at uspoloassn.in, and also tied up for USPA womenswear line with upcoming star, Palak Tiwari. Similar efforts were also seen in Arrow, where we released campaign with Hrithik Roshan, which was a directorial debut for the famous actor. We also promoted Flying Machine brand regionally in north. USPA brand also saw first time mass media campaigns for adjacent category like footwear and innerwear, which were received extremely well by consumers and trade fraternity. We have continued to focus on our growth drivers like store expansion, premiumization, and wholehearted marketing investment and development of adjacent category. We have made significant progress on build up of adjacent category in USPA brand, also in Tommy Hilfiger and Calvin Klein businesses. In USPA, adjacent categories are now more than 25% of revenue, and this business is growing very profitably in double digits. Both Tommy and Calvin Klein have very wide range of accessories, including watches, kidswear, innerwear, small leather goods, et cetera, and this business is nearly 20% of retail business, is growing in high double digits. Based on success with these brands, we have now started focus on adjacent categories for other brands, including recent launch of Flying Machine footwear and small leather goods in Arrow. We increased advertising spend in Q2 by almost 100 basis points to keep our brands salient and to fuel growth. Despite this, near 100%, near 100 basis point increase in advertising, our EBITDA has grown in Q2 due to tight control on overheads and efficiency in sourcing and our decisive focus on building profitable scale of our five marquee brands. Adjusting to other income in Q2, our EBITDA margin has expanded by more than 150 basis points in Q2, despite higher advertising and despite soft market conditions. H1 saw EBITDA margin expansion by 100 basis points to 12% in line with our guidance. We continue to keep tight control on balance sheet items, and Q2 saw 10 days reduction in GWC, with eight days reduction in debtors and two days reduction in inventory. Overall, inventory freshness has remained strong, helping our gross profit, which has gone up to 49.5%, an increase of nearly 5% year-on-year because of efficiency in sourcing and higher share of retail channels. We are confident that consumers will continue to vote in favor of our market leading brands and look forward optimistically to the second half of the financial year. [Foreign language], we can now open it up for question and answer session. Thank you, sir. We will now begin the question and answer 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. The first question is from the line of Mr. Himanshu Nayyar from Systematix. Please go ahead, sir. Yeah, hi, team. Good afternoon, and congratulations on a great performance. Sir, to start with, if you can, let us know what explains the significant difference in growth trajectory in the power brands and emerging brands? And within emerging, what. I mean, is it Calvin Klein, which has been driving this significantly higher growth? See, in emerging brands, you are right about Calvin Klein. The super premium segment has a higher energy, and both Tommy CK are doing very well, and Calvin Klein is part of the emerging brand. So that growth is because of Calvin Klein's fantastic performance. Hello? Hello, sir. Are we connected? Yes, I am. I think we lost the management. Okay, sir. Give me a pro, I think, let me take that question. This is Kulin here. I think as Himanshu was saying, Calvin Klein is driving the emerging market, emerging, brands revenue. In the case of power brands, one of the impacts this season is because of the festive, shift. So a lot of our wholesale booking has moved, a month, and that is why for our wholesale channel, quarter two has a slightly lower, you know, growth compared to quarter two of, last year, where the festive impact was a positive impact in Q2 for the wholesale channel. So that's one of the reasons why power brands is, is having a lower, revenue trend compared to emerging brands. Understood. Understood. And secondly, if I look at the minority interest number, even that seems to have moved up significantly. So does this imply much higher profitability in Tommy CK, or maybe a reduction in losses in a few of our other tail brands as well? I think the minority. Yeah, sorry, Shailesh, you're back? Yeah, go ahead. Yeah, yeah, back, Kulin. Thanks, Kulin. Yeah. We lost the line for a moment. The minority interest is largely linked to the Tommy CK business, and the super premium segment has done well. These brands are market-leading brands, and their profitability has gone up. So that's exactly the reason that you mentioned, Himanshu. Okay. And final question would be on this transaction that we have done exiting Sephora. I believe we would have already got in the consideration. So, I mean, are we looking at now, I mean, advancing our debt reduction plans as to what would be our guidance be now in terms of becoming debt free? Hi, Himanshu. Yes, you are right. You know, the objective that we are heading towards is to reduce the debt, use almost the entire proceeds to reduce the debt. And, as we speak, the end quarter net debt was INR 476 crore. And, we are hoping that, by As of now, we might be around INR 260 crore-INR 270 crore of debt. Great, sir. Great. That's all I had from, for now. I'll jump back into the queue. Thank you, and all the best to the team. Thank you. The next question is from the line of Mr. Shreyansh from Swan Investments. Please go ahead. Hello, are you able to hear me? Yes. Congratulations on a good set. So my first question is, so from what we understand is Q1 and Q3 are retail-heavy quarters, and Q2 and Q4 are wholesale heavy. And you also mentioned that, there was some postponement in wholesale sales in Q2. So what I'm trying to understand is, why have our other expenses gone up so much? Because, since it is not a retail-heavy quarter, we would have expected some, gross margin benefit to flow through to your EBITDA. See, now, if you look at the other expenses, they are in line with the retail channel. In this quarter, the retail channel has grown more than 15%, while you're right in a sense that this is a more wholesale quarter. But even in this, because of the good performance in July, August, in U.S., the retail contribution has gone up, the revenue share by 4%, and this, the retail channel has grown more than 15%. And a lot, the similar increases in the commission and other variable expenses come below. So our other expenses, if you look at, is that out of INR 60-odd crore increase, nearly the INR 45 crore increase has come from the variable, which is commission plus royalty plus supply chain cost. Also there is an increase in advertising this time because, you know, we took a decision to invest heavily behind advertising, so the balance increase in other expenses, it will be increase in marketing cost. Okay. And my second question is, sir, when I look at your emerging brands, so obviously we've done very well on the revenue bit, but just on the margin side, I wanted to understand QOQ. I think last quarter, con call, you had mentioned that, you know, Aéropostale and Ed losses are mostly behind us now, and CK obviously is doing well. So margins should sustainably be at the levels that we saw in Q1. So I'm just trying to understand QOQ, we've seen some degrowth. So what is the reason for that, and how should we look at this number? Is it gonna be that variable, 11 to 6, and then again, 6 to 11? How? Emerging brands have really done well in quarter two. The EBITDA margin has gone up by almost 3.5%, 300+ basis points. So the way I would look at quarter two is that emerging brands have done well in sales, and also the EBITDA has grown really well. Now, you know, our business is highly seasonal, and, you know, really is not right in many ways to compare quarter one to quarter two. I think the focus should be on comparing quarter two to last year's quarter two, because this quarter has EOSS and, you know, other peculiar aspects of the season. So the way I would look at is that emerging brands continue to do well. Two reasons: one is the good performance of Calvin Klein, and second is the cleanup that you mentioned. So that that benefit come through. And we will hope to, you know, even in this uncertain market condition, we hope that emerging brands continue to, you know, do really well, the way we've done in quarter one and as well as in quarter two. Okay. My last question is, so how do we define a power brand or an emerging brand? What is the thought process, when you put a CK in an emerging brand? Because CK, when it is doing so well, I think it should be a part of a power brand and, Flying Machine should rather be an emerging brand. Just wanted to understand, how do you bifurcate these brands when you think of power and emerging? Shreyansh, you know, this was done in the past where Calvin Klein was still a small business, and you are very right that in last 2-3 years, this business has really outperformed as one of the coolest brand in the country, and it's really grown in scale and in, you know, in terms of profitability. There'll be a time when we will soon probably classify it as a power brand. We are still falling for, you know, transparency of analysis and for you to sort of, you know, to see the data in the right perspective; we still kept Calvin Klein now with Sephora's exit, which was also part of, you know, emerging brands. We will relook at the portfolio, and we will soon come back with some new thought process. Sure. So just on the power brands bit, you know, last quarter, we grew about 1.5%. This quarter, we grew by about 5%. So from our understanding, we are doing pretty well in USP and Tommy. So on consolidated basis, our growth has been slightly lower. So just wanted to understand what has been the growth rate for Arrow and FM, if you can just help us understand the trajectory there? See, you know, you have to look at power brand business in the light of two things. One is there is a softness in the market, which impacts all the brands. Second is a shift on the festival dates, where last year, Diwali was earlier, and this September saw a lot of festival dates and billing. And we have now, you know, pushed that from quarter two to that festival season has moved to the quarter two in October. So all the brands, you know, got slightly impacted, so there's no brand specific data here. When I look at the number of Flying Machine and Arrow or U.S. Polo, there is a decent growth in the current market condition, all the three brands, and all the three brands got a little bit impacted because of the change of the festival calendar. And some bit, you know, will get captured in Q3, and some, you know, we'll have to fight the slowdown in the market conditions. All right. I'll get back in the queue. Thank you. Thank you. The next question is from the line of Mr. Priyank from Vallum Capital. Please go ahead, sir. Yeah, hi. Thanks for the opportunity, and congratulations, team, for the fantastic performance. My question is on Arrow, sir. If you can help us qualitatively, how has been the operational performance on Arrow? I reckon we have taken a lot of steps to improve the profitability over there. Are there any some more strategic steps left for us to get this brand to double-digit EBITDA margins? You know, let me answer. You know, let's look at Arrow is in two, three parts. One is that during COVID, it became very negative, you know, loss, profit, loss-making brand. And we did a lot of efforts post, COVID from changing merchandise to marketing very specific to new retail. And we made a lot of efforts to grow that business, and last year there was a swing in EBITDA of almost INR 80 crore in Arrow, and it became, it broke even, and it's been now profitable brand for last three, four quarters. This quarter also has remained profitable. Now, you know, in the current market slowdown, Arrow has continued its growth. It's grown high single digit in revenue, and also its EBITDA has grown. And I was looking at the EBITDA number. This quarter, EBITDA is the highest in the last eight quarters for Arrow. So there is a continuous progress in the Arrow business. Now, still in the early and the low single digit EBITDA profitability in Arrow, and like I said in the previous investor call, now our whole journey is to build the scale further and take it to the 10% EBITDA, which could take two years or thereabout, our guesses and based on the market conditions. I think if I have to say one thing that we need to do now to take it to that level would be, you know, opening many more stores because it's still upscale brand still, and we need to expand its EBO reach and also grow a little more online share. So I think it's about scale, and then the scale leverage will come. The KPIs on sell-throughs and gross margin and many other KPIs are really green, and we need to now scale up the brand. Got it. Got it. Very clear. Kudos to the team for taking a decision on Sephora. My question would be, since you have taken this strategic decision, when can we expect such strategic decisions for other few brands? Because we are now clear on our communication that we want to focus on the five core brands. When can we expect any such decisions for non-core other brands which are yet continuing few losses for us? Let me say upfront, we are extremely focused in energizing these five brands and make them big scale, profitable brands. So we have no plan now for any further action on any of these brand. Brand, the single agenda is to, you know, energize these brands' profitability, scale up them to, you know, a profitability that we've been guiding and then grow the company at a certain scale and with a certain profitability. So, we don't have any other action on AFL, and we are very committed to building, AFL, into a bigger and more profitable company through these five brands that we have. Sure, sure. Just a quick little question on. Sir, how would how much would be EOSS as a sales composition in trailing twelve months? If you can help us. And how has that been trending as a percentage of sales over the last two years? You know, our sell-throughs have been, very good, so, we do probably industry-leading sell-through in our season, and last summer season was good. Now, if you want any specific information on the sale data, et cetera, we can get back after the call, and you can connect with Ankit on this. Perfect. Perfect. Just last question from my side, and then I'll get back in the queue. Our channel checks have suggested that large formals market leader has stopped participating in the trade channel aggressively, and the competitive intensity has been slightly lower in the formals and on the wedding wear side, especially on the menswear. So just wanted to get your sense, would we be gaining market share would we be gaining shelf space in the MBO channel in the coming quarters? Is that the strategic thing that we are also looking towards it? Let me just say simply that MBO has been a good performing channel for us. Even this quarter has grown more than 15%, and we have, you know, expanded distribution in MBO channel with all our brands. So in that sense, you know, we would have surely gained market share. But one more thing I want to say is that all the growth in MBO, we have been very, very tight on the hygiene of the business, and we have really kept focused on profitable growth. You know, we don't want a situation where, you know, the debtors or aging of inventory becomes a problem. So, we are ver y focused on the quality of sale, and that's very important with the MBO channel and our governance on, you know, the stock health and on the data is very, very critical for this channel. So, we are happy at this point with the hygiene in MBO channel. The growth have been good, and also the standards have been maintained. Thanks a lot for answering all the questions, sir. Thank you. Thank you. Participants who wish to ask questions may press star and one on their touchtone phone. The next question is from the line of Mr. Ankit Kedia from PhillipCapital. Please go ahead, sir. Three questions from my side. First, we have seen good growth on retail and MBO channel. What is the decline we are seeing in online and LFS channel? Because these two channels also account for more than one-third of your revenue. And given that the other two channels have grown by 15%, clearly, these two channels would have seen a, you know, high single digit decline in the system. You know, Ankit, like we said, there is an impact of the festival calendar, and in the couple of channels that you mentioned here, that shift. Like, for example, take online, a lot of big portals have shifted their power events, which happened last year to September, to October this year. And we have the October numbers that some of, you know, those businesses have been recovered in October. So in that sense, the shift of our dates and also the Puja festival in the east or the Diwali dates across the country, that shift has impacted the department store. But we feel very comfortable that department store, our market share and our growths are good. And also online, there is a little bit of restocking in that channel, so that we're keeping an eye on. But our focus has been building our B2C business, our B2C business, where we do the marketplace and through our own website now, we are building, and we have seen 65% growth in Q2 in our own controlled, where we offer the pricing and, you know, experience and the assortment. So we are really building our own muscles on B2C side, which is showing very good growth. We are building our omni network regard store, which is also in a very encouraging state. And one, this, you know, in many ways, this quarter is not really comparable to last year quarter in some of these channels because of the shift of the festival date. Also, yes, we also admit that there is a bit of a softness in the market, and because of those two, you will see that there is a small decline. But you know, if I look at medium term, we will feel confident of these channels. So you have to add September and October together, and obviously last year, Diwali was also in October, now it's pushed to November. How has been the early trends in the market for October and early November, if you can help us understand that? Because a lot of the other retail companies are talking of some softness, but even green shoots, in the demand are leading to Diwali. See, I can say that as we see the current, there are still many days to Diwali left, and the peak, weekends are still ahead, big days ahead. But whatever the, you know, the days that we follow, the business has been sluggish, and maybe it's because of cricket or otherwise the overall slow- Participant, please hold on. The management's line has been disconnected. I'll try to reconnect back with them. Please hold on. We have the management on the line. Sir, please go on. Ankit, I was- Yeah. Yeah, Ankit, I was talking about Diwali being little sluggish till now, and we are hoping that the second half of the Diwali calendar might pick up, but let's see. So from a full-year guidance, which we used to have, you know, 11%-13% growth, is it possible that will be blown down to high single-digit growth? Including Sephora, because Sephora will not be there from November, but adjusting for Sephora. See, you know, we have a certain sales guidelines, 12%-15% in medium term, and it's based on a certain set of growth drivers that we have, and I spoke extensively today also about adjacent category. Second growth driver is our store expansion. We opened 46 stores, and in the first half, we opened 91 stores. It's on track. Our like-to-like growths are very healthy, 9% in this quarter, despite slowdown. That like-to-like growth also is working. In digitalization, I said B2C and omni linkages are working. B2B online, a bit slow in the short run. So most of our growth drivers, including premiumization of brands and categories, new categories, all look very green to me, and they're all firing. The market is a little soft, so based on the, you know, in this medium term environment, where we are looking at growth of between 12%-15%, I'm sure we'll have some quarters of very, very high growth, and we will also have some quarters where the growth may be low. But we are very confident that in the medium term, we will continue to, you know, grow at 12%-15%. And I also believe that H2 could be better than H1 because we have more festival dates, and we have wedding dates and winter wear, winter season coming in. Let's see. It's uncertain, but that's our sort of optimism cautiously. So we believe that in the medium term, the growth drivers, we will stick to our guidance. In the short run, we will see, because markets are very uncertain, and we are still looking at growth. But I also want to qualify one point here is that we've been very, very focused on the quality of growth. So look at our profit growth is always higher than the sales growth. So we have always, you know, looked at growth, whether it be the MBO, MBO channel, I said with high governance. We want to focus on, you know, quality of growth. We want to ensure that our profit growth is higher than the sales growth, and we are still very confident that the medium term, we will meet our guidance. There will be some good quarters, and there may be some slow quarters. Shailesh, on your, you know, comment on store opening. If I look at last year, you opened 175 stores, but the net opening was only 5. This year also, we are talking of gross opening of 91 stores. Can you just help us, what is the net store addition, happening? And are the store closures behind us now or there's still rationalization, happening of loss-making stores in the system? You know, at any point of time in physical world, there is always a churning down of 3%-4% of the stores, and that will continue at any point of time. It's sometimes higher, sometimes lower. So we are at a normal stage right now. I don't have exact data right now, but we can connect with Ankit on the store closure, et cetera. But I could say that we are on a, you know, regular phase. There's no extraordinary event happening currently. Shailesh, just a feedback. You know, there are more than 20 retail companies listed, and you are the only ones who don't share with us, channel-wise revenue, neither do we get, overall, retail numbers of stores, you know, the company has today. I'll appreciate if, you know, disclosures can be marginally improved. It will help us analyze the company better. Ankit, a very, very good suggestion. Thank you for that, and both on the channel-wise and on the store count, we take your feedback, and we will come back with those details soon, Ankit. Thanks for all that feedback. Thank you. Thank you, and all the best. Thank you, Ankit. Thank you. The next question is from the line of Mr. Himanshu Nayyar from Systematix. Please go ahead, sir. Yeah, thanks for the follow-up opportunity. Just had a couple of questions on Flying Machine. So whatever efforts and measures that we have taken to sort of energize Arrow seem to be now giving us good results. But do we have a similar level of confidence on Flying Machine also ramping up and turning around, both in terms of scaling up as well as profitability? You know, Flying Machine is maybe a season behind in Arrow in terms of the energy that we are putting. We started in spring, summer 2023, in the last season, with a very new imagination of the brand. We had a new. We launched a new logo, a new, you know, propeller, new font for the brand, new web advertising. We are very focused on selling to the Gen Z customer in a damn hot way, and the effort has just started one season. I'm happy to report to you that there are some green shoots while still very early in the recovery, and you look at Arrow also, it's been many, many season. It takes time in, you know, in these environments with uncertainty to grow. I can say that we have seen a lot of green shoots in terms of, you know, better sell-throughs in Flying Machine, and that sort of helps us to reduce discounting. It's very early days still, Himanshu, but we believe we are going in the right direction, the way we went in the right direction with Calvin Klein earlier or with Arrow and now with Flying Machine, and it's our own brand, and we are very, very committed to scale it up to its logical, you know, scale. We're very ambitious on this brand. Just that it's a very early stage of reimagination of this brand, and we'll keep you posted as we move the brand forward, Himanshu. Got it. And the second and final bit was on the Flipkart stake that we sold off to Flipkart. So, can you provide a timeline as to when that equity will converted and so that we can know exactly what sort of stake Flipkart would hold in Flying Machine going forward? That event has happened, and, you know, it's a significant minority stake that has got transferred to Flipkart Group, so that activity has happened. Himanshu, Ankit here, to just give you, a little bit more details on that. So the—As Shailesh mentioned, the event has already happened because that was supposed to be done as of, based on the financial performance as of March 2022. Post that event, Flipkart, of course, has an option to convert those, you know, CCPS into equity, so that's, that's with Flipkart. But from our purposes, the entire equity stake ownership, along with the formula and everything else, has been closed. It's only a, you know, this, you know, kind of a point, which is what is with Flipkart, which is when they want to kind of do that. But from our side, from a As far as the question is concerned on the percentage number, and that's the reason the classification also has changed from CCPS, which is part of other liabilities, to equity, and you know, that really defines the you know, the entire structure of the transaction. Okay, but, but we are not in a position to give out a number right now, Yeah. On how much? Confidential, you know, based on the discussions with our partner, you know, you will, you know, kind of get to know that number when they exercise that option- Sure available to them in a time period defined at their end. It's a significant minority, that's what best I can hint it. Understood. Understood. Got it. Thanks, and that's it from my side. Thank you, Manju. The next question is from the line of Mr. Jatin Sangwan from Burman Capital Management Private Limited. Please go ahead, sir. Congrats for the amazing set of results. My first question is around Aéropostale and Ed Hardy. What was the absolute amount of loss that we incurred on Aéropostale and Ed Hardy? And till how much time will we keep incurring these losses, and what are our strategies to minimize these losses, or are we also looking to sell these brands? So, you know, from an operational point of view, Ed Hardy and Aéropostale are now silent brands in our portfolio. We are not producing any goods. We are not holding anything at our end, and we have a, like we have guided earlier in the investor call, that we have a certain minimum royalty to be paid for number of years. This year, that royalty that we are paying, what we call as tail brands, you know, the brands that are not, you know, part of these five marquee brands, it's around INR 15 crore, and it will drop to less than INR 10 crore next year onwards. Got it. Second question is on Sephora. What was the loss due to Sephora in this quarter? You know, it's a very minor, insignificant number, not material number, I must say. We don't give brand-wise data, but it's not very large number. Okay. So last year we had around loss of INR 20 crore for Sephora in FY 2023, so that means Sephora was is now close to breakeven, was close to breakeven for us. So, just to clarify, I think you are referring to two different numbers. You're referring to a PBT loss of last year versus EBITDA comparison, so that's not the right comparison for you to do. No, no, I'm asking PBT loss, PBT number for Sephora, this quarter? Yeah, sure. So, you know, from a Sephora standpoint, the business was closer to about breakeven, as what Shailesh has mentioned multiple times. And of course, because it was a co-co retail business, it was a negative PBT business, and that continued to be in the similar trajectory for the first half of this year as well. Okay, thank you. Thank you. The next question is from the line of Mr. Ritesh from Molecule Ventures LLP. Please go ahead, sir. Hello. First of all, congratulations for nice margin upliftment in this brand. Just I have a couple of questions. Those are: so we decided to open, like, 200 FoFo stores this year. Can you give brand wise breakup, which brand will have most of the addition or that sort of? Yeah. The expansion is across the brands and, we can, Ritesh, connect with you and give more, details. The Power Brand obviously, have a larger, number of stores because that's where, like a USPA, as a leading, you know, men casual, leader brand, we have a very large number of stores. So, we open more stores, but it's across all the brands. And we can, Ritesh, share the details, and we got the feedback from Ankit, earlier, and we will keep that in mind, but we will provide the details to you, Ritesh. Oh, okay. Thank you. So my next question is: What is What would be our aspirational margin in Power Brand segment, or should we consider this 13 or 13.2% as base case? So, let me split, Ritesh, this into two parts. Our first stage, guidance was that we want to hit double-digit, you know, pre-indebt EBITDA, and grow, EBITDA every year in the short term between 100 basis points to 150 basis points, based on the market condition. Now, as far as this step is concerned, we are now almost, we are close to 13%, you know, post-indebt EBITDA, and, you know, the difference we've been talking about in the investor call, we are very, you know, knocking distance or, you know, of that number that we have said, and if the markets were slightly better, we would have hopefully reached that number in this quarter. But we are very close to, that number, and in Arrow and Flying Machine, we have some journey to travel. So that's the first step that we guided, that we want to be a double digit EBITDA in Power Brands, and we are very close to it, frankly. Where, very, very soon that 13% will go, and we will continue to grow at around 100 basis points. Now, if your question may be more medium term and, you know, where we want to, you know, reach now, I would say our aspiration is on a certain ROCE percentage. Our aspiration aspiration is on certain cash flow that we want to generate to reduce our debt levels further and, you know, whether it's a near zero, debt level or very, very low, that kind of, number. So when I look at the ROCE, ROCE, you know, matrices and work backwards to EBITDA, then our, you know, aspiration will be higher and will be closer to the kind of number that you mentioned, Ritesh. So that would be a medium term. But I think we need to first achieve our first stage, EBITDA margin in these uncertain times. And once we reach that, I assure you that we have plans to then take it to the next level of EBITDA to deliver the kind of, you know, the targets on ROCE and returns and debt levels and cash flow that we have kept for ourselves. So what are the particular levers that we should keep in mind, you know, for the, just to track about the upliftment of margins or ROC, which you mentioned? Yeah. So, you know, there are 2-3 things that will help us in the short to medium term. First is this whole rigor on operations. We want to push our sell-throughs. We want to push our discounting lower, which we've been doing in the last, you know, 4-5 quarters. We have really upped our sell-throughs. Our discountings are under control. So that, you know, lower discounting flows as a higher GP, and you look at our GP last 3 quarters. Now we are steadily above close to 50%, and that number has gone up, and we hope that it will continue to increase further. So that's the one territory from the, you know, from the efficiency of our operations. Second, there's a lot of effort is going on to achieve the sourcing efficiency. We're working on many large levers to source even better. Also, as our brands are growing rapidly, that also helps us to, you know, reduce our sourcing costs. There's a lot of science behind that. So we also believe there is a gain coming in from the sourcing benefit. Third side is the typical scale leverage. As we gain scale, we grow all the growth drivers, then our overhead, if the last two, three quarters we've been gaining, even this quarter, there is a small, you know, gain in the scale leverage despite, you know, market condition and the change of the calendar, and we continue to gain that scale leverage going forward. These are the, you know, some of the points and the, you know, the besides scale leverage, lower discounting, growth of the businesses, discounting and the sourcing cost coming down. I think some of those things will help. Also, we are seeing a very good traction on the premium lines of our brands, and premiumization is a key driver for us, and that's where, you know, we will see, upliftment. And largely then there are, you know, efficiency coming from the channel side as we grow our like-to-like, then the, retail profitability or the channel margins become better. So there are multipronged strategies to grow that, but I think somewhere, if I have to say, broad themes are larger scale, better efficiency of operation on both product side and on the, channel side, both online and offline. So those are the, some of the drivers we believe will take us to the kind of targets we have for higher margin in our brands. So coming back to the brand-wise profitability, right? We did a phenomenal job in, you know, turning around Arrow as such. So what kind of, again, aspirational margin we do have for Arrow for this year, and similarly for Flying Machine? See, you know, as far as, couple of our brands are already double-digit, pre-indebted, right? So now coming to Arrow and Flying Machine, both together, if you look at it, are very early stages of, EBITDA, margin. Both are subscale. There is opportunity to, increase their scale. And, you know, we are talking about EBITDA, like I mentioned earlier in this call, early low single-digit, EBITDA margin pre-indebted, and we need to take this to 10%, and it will come through efficiency, having the right KPI of the brands, and then scaling up. Arrow is one step ahead of Flying Machine in that, and both Flying Machine and Arrow, we need to take the businesses in next 2-3 years from low single-digit EBITDA to our aspiration is to hit 10% EBITDA in these brands also. Pre-indebted level? Yeah, everything what I said was pre-indebted. Yeah, very good. So, one more thing about the power brand itself. So what about USPA? So, the momentum has continued for us, which we did last year, or, we can, you know, expect some tapering down of the momentum? No, U.S. Polo has done well, given the slowdown in the market and the calendar shift. We're quite happy with the strength of this brand. It is the leader brand in the men casual. It is the top brand in the country. And we are, you know, focusing on taking the appeal of the brand forward to extension. I mentioned the adjacent categories are growing in high double digits and very good share, almost 25% of the U.S. Polo business. We have categories like womenswear, footwear, where we are leader. Footwear has grown more than 20% in U.S. Polo. We have just launched womenswear line with Palak Tiwari, I mentioned. We have innerwear, so small leather goods. So there are a lot of categories which are being pushed in U.S. Polo and with good consumer acceptance. Also, we will back the brand with very high level of advertising and marketing investment, and I spoke about the Legend campaign, which everybody, you know, in the industry and the consumer side noticed. We really spend wholeheartedly our overall, yeah, you know, the advertising went up by almost 100 basis points compared to the last year, same quarter. We continue to, you know It's a very special brand, a very large scale, profitable brand, and we will leave no stone when the global CEO, Michael, came recently for the Legend campaign launch. He also mentioned it's the fastest growing market for U.S. Polo Assn. in the world. It's the top three market for U.S. Polo Assn. in the world. We have a very special position for this brand in India, and we will continue to capitalize on that strength and invest and grow this brand further. Very good. So coming back to, you know, emerging brand side, right? So, last quarter, you mentioned about, you know, discontinuation of one of our brand. Was it Ed Hardy or Aéropostale? If you can just, say. See, you know, this portfolio, there are two brands that we are in the, you know, very advanced stages of talks, you know, closing the commercial transaction because we have minimum royalty on these brands going forward. One is IZOD, and the other is Aéropostale. So now, you know, IZOD, we closed most of the financial, you know, expenses and other things last year. Aéropostale, we've just sort of done a negotiation and a deal with the parent company, and by next year, the Aéropostale, you know, royalty will also cease. We've got a new deal done with them, and these two brands now are in that sense, inactive. We don't produce these brands, but like I said earlier, in this portfolio of tail brands, we will have around INR 15 crores of EBITDA, or INR 15 crores of royalty payment this year, which will drop to INR 10 crores from next year onwards. Then how long it will last? Mr. Ritesh. It's just couple of more years, Ritesh. Okay. So sir, one more last thing. So, Mr.- So yes, just so I can put- Please wait for the question two for the follow-up questions. We have other participants also waiting in the queue. Okay. Thank you so much, sir. We have the next question, from the line of Mr. Varun Pratap Singh from ICICI Securities. Please go ahead, sir. Yeah, thanks for taking my question, and, congratulations on a good set of number in a tough time. So my first question is on, this, category and brand extension into womenswear. So just wanted to, pick your mind, with regards to how are we thinking about the womenswear segment or category, given, that this segment has a different set of nuances altogether, right from product, development to the way, the product is sold at the channel, level, et cetera. And also, I mean, what are our aspirations, I mean, broad, broad, aspirations, into this very segment? That's my first question. Varun, thanks for your good wishes. You know, as far as the womenswear business is concerned, we do womenswear business in Tommy Hilfiger and Calvin, largely on the accessory side and a little bit of apparel side. U.S. Polo also, our womenswear business in two parts: one is the accessories and the other is the apparel. So we sell footwear of womenswear for U.S. Polo very successfully in online portals. So you go to Myntra, you'll see handbags and footwear and doing really well. It's a profitable business at this early stage and with very good KPIs online. So we're very happy with the business of footwear and handbags that we've recently done in U.S. Polo. The other side now is to extend it to the apparel. There is a global line that U.S. Polo does, and we have understanding of the women apparel. It's very early stage, Varun, right now. So what we are doing right now is to piloting the womenswear apparel line in online space. Currently, there's no offline distribution for the U.S. Polo womenswear. We are working with our partners, and, you know, there is a large set of young consumers, online women, and we are, you know, using that catchment to sell. And slowly and steadily, based on the KPI, we'll extend it to other channels. So right now, we are in very early stage, and we don't want to talk because some of this will be competitive also. So you will hear a lot more about the womenswear in times to come, Varun, but right now, it's very early stage. We already committed ourselves to the accessory business, handbags and footwear. You can see it doing really well. In apparel, we are, a couple of seasons behind, and we are testing the womenswear apparel line in U.S. Polo currently. Understood, sir. Very clear. Sir, a second follow-up on this would be, when we choose online as a platform to start this very line. So if you can give some insights with regards to the unit economics, and especially on the cost of doing business online, compared to cost of doing the same business in the offline space. For example, we would have entered into a large format store, getting some shelf space out there and, you know, kind of venturing out or would have started to do this business. Some color on the difference in the cost of doing business, compared to a large format store, which is also a proven method of selling our product compared to an online platform. See, Varun, womenswear or any business, we do online, offline, I must say that our focus is on profitable growth. We are not gonna do any business where we will lose money. And after the initial, you know, modeling and based on all the KPIs and the, metrics that you mentioned, once we have a green signal and we have a tick box, then only we'll expand the businesses. So at this point in time, also, we keep doing a lot of, trial in many business categories. And, you know, once something passes our test on profitability and future profitable growth, only those categories are launched. So even womenswear and online, our KPIs are good. And I think, see, in this, the two thing we focus is on the discounting one and also the stock turns. At this point of time, both on stock turn as well as on the discounting on the online platform, womenswear of U.S. Polo apparel is doing really well. We are happy with this. We just want to see it for a couple of seasons so that we see it's sustainable, and then we will grow it. We will always be focused on profitable growth. That's very clear, sir. Sir, actually, my question was that, I wanted to understand that what was your basic reasoning for choosing an online platform and not a large format store, for example, a Shopper Stop, with regards to kickstarting the business? Yeah. So, you know, we have a very large young women shopping online, and you see from our own Sephora experience also, we saw a lot of discovery today happened online, especially for young women that we are targeting. So it was a very easy decision to first prioritize on the online, you know, channel, because it's easy to experiment. Also, you don't split your inventory, so there's a large pool of inventory in a marketplace. When you go to physical stores or department store, anywhere, your stock gets cut sometime, and then it leads to, you know, cut sizes and discounting. And I think, you know, the speed of experimentation is higher online, so it's easy to then experiment for young women online. So it was an easy decision in that sense, Varun. Very clear, sir. And just last, one last question, if I may. What would be our total revenue contribution from all the category extensions, for example, footwear, et cetera, as on today? So Varun, you know, the category extension has happened in two sets of brands. One is U.S. Polo, our strongest brand, and in Tommy CK piece. So in U.S. Polo, the extension, which is children's wear, women's wear, inner wear, footwear, which is a very large business, all these put together are now touching 25% of the brand. And these growth rates are also in double digit. So that's our USP piece. Then second piece in the Tommy Hilfiger and Calvin brand, where we've been selling watches or children's wear or underwear or small leather goods like belts and wallets and eyewear, et cetera, for many, many years now. That business in retail is close to 20% of the contribution, and that's also growing at high double digit right now. So a high-teen percentage. So in Arrow and in Flying Machine, we are testing the adjacent category. It's still early days, so we've just done footwear launch in Flying Machine with online and doing very good response in that value, attractively priced segment. And in Arrow, we've just done, besides suits and blazer, we've done launch of small leather goods like belt and wallet, and we will continue to extend the accessories in Arrow as we take the business forward. So that's the piece, and in both U.S. Polo and the Tommy CK bucket, adjacent category have a good share of business. Understood, sir. Very clear. That's it from my side. Wish you all the best, and wish Happy Diwali to everyone. Happy Diwali to you, Varun. Thank you. Thank you. We request the participants to restrict their questions to two per participant to ensure the management is able to answer your questions. The next question is from the line of Mr. Rajiv from Dam Capital Advisors Limited. Please go ahead, sir. Yeah, good afternoon, sir. Thanks for the opportunity. So, my question is on the standalone bit, which is a INR 200 crore revenue. That is entirely, Arrow Wholesale, right? Or is there anything else in that? That's right, Rajiv. That's right, yeah. Yeah. And, and in the base quarter, you had, the footwear bit as well, the USPA footwear bit. So, what is the clean number in the base quarter, let's say, like, like? I will have to just check that, Varun. U.S. Polo footwear is what we had moved effective, January itself, from Q4 of last year, so that's not anymore there in the reporting quarter going forward. Sure. And just an extension of this, so usually Q2, and which is a wholesale heavy quarter, usually it's 30% of the entire business. That means this wholesale bit, the Arrow part itself is close to 66.50 crore kind of business, right? And assuming that, you know, your retail is also 20%. So it is already an INR 800-INR 900 crore kind of size in terms of the brand itself, is it? No, it's so it's less than that, Rajiv, Arrow business. So your Q2 is not 30% of the entire wholesale bit? In a sense, is that because we see that in Madura, their wholesale historically has been like that, their Q2, To correct you, Rajiv, wholesale, which is basically, if I were to classify non-retail, would have been closer to about 60% of our business in Q2. No, no, I'm talking only about this, this Arrow bit and, not, not the entire thing. I'm saying this INR 200 crore, if we were to annualize, this will become, what, INR 600 crore, INR 650 crore on the, on the wholesale, right? The Arrow wholesale, this particular standalone entity. So as Rajiv, as Ankit said, I mean, wholesale is about 60% of the business, so even if you annualize, you will not get INR 600 crore. Okay. Sure. And in terms of. Yeah, that's more of it, yeah. Thanks a lot. Thanks, Rajiv, huh? Thank you. The next question is from the line of Mr. Ankit Kedia from PhillipCapital. Please go ahead, sir. Sir, a couple of follow-up questions from my side. Sir, what is the size of the U.S. Polo store today? And, you know, given that, adjacencies are only increasing and with kids wear and women wear, assuming one year down the line, you want to open them in the stores, are we looking for a larger size stores incrementally in U.S. Polo, as we open the stores? Ankit, you are absolutely right. You know, the store size from 1,500-2,000 sq ft, we are now taking it to higher level, including, you know, attempt at opening even larger, larger stores than that. So, with so many new categories coming in, possibility of someday womenswear coming in, so there will be need for a bigger space. And if I look at last two months, we opened a lot of big stores in U.S. Polo. So from a unit economics, right, what the previous participant also asked, right? Do you see the throughput or the margins in these adjacencies are higher to reciprocate the rentals which will pay for these larger stores? So, you know, our adjacencies are very profitable, and, in many cases, footwear and all are even more profitable. And it's a large scale now, almost, you know, close to INR 300 crore business. So, that said, also, when you look at from a offline retailing point of view, the beauty of the adjacency categories, they don't take too much of space. So footwear does a decent percentage of our revenue of, retail space from a small wall, or an underwear, just a small gondola, or, you know, a belt and wallet from a just a standalone small gondola. So, typically, adjacency category is done well, they will be accretive from margin point of view, also from, sales per square foot per day point of view. Sure. And the second question is, you know, it's been now 1.5 years we have moved to consignment sales, right? So, and we can see the full price sell through, inventory being fresh, and your inventory turns, you know, being better. Now, you know, our check suggests that we also opening more factory outlets, in the market. So how frequently is the supply from the stores, going to the factory outlets, and how does that, supply chain work, you know, to get a better understanding of, you know, this consignment? Sure. Sure, Ankit. And, you know, the factory outlet is, you know, realization also. You know, we typically, you know, the other methods were to liquidate to jobbers at lower realization, also sell online OSM, but sometimes, you know, the cash conversion may be slower there. So we build this outlet channel, and that attempt is just to enough to, you know, liquidate what we get back from the market. We're not, like, trying to make a separate, you know, business out of this. So we have, you know, after the season, we take back twice a year, spring or autumn winter, and then we, you know, send the goods back to the outlet. So that method is just to liquidate in a very efficient, with a lower discounting, better margin for us, and also in retail, you know, we get the money next day morning in the bank. So that's the idea. It's just that the inventory is so, you know, so optimum. Are we, you know, are losing sales by, you know, having such low inventory? Or do you think this 90 days, 85, 90 days is optimum inventory at the store level? No, no. We have adequate inventory, and in these uncertain times, you know, we are adequately placed. And, you know, inventory, we can push higher. So, you know, we can, if we run out of inventory, then we can push things higher. And we saw in COVID recovery also, the demand was very high compared to what market industry had anticipated, and we did push higher inventory quickly in the market. So in our industry, typically, higher inventory is a problem. Lower inventory is a lesser problem. And if we, as you rightly said, if we run out of inventory, we can, you know, produce goods and send it to the market quickly. Sure. That's helpful. Thank you so much. Thanks, Ankit, huh? Thank you. In the interest of time, that would be the last question for today. I would now like to hand the conference over to the management for closing comments. Thank you everyone for joining us on the call today. I understand some of you may have follow-up questions, but in the interest of time, we'll have to close this call. If any of you have any further questions, please feel free to reach out to me separately, and I would be happy to take them offline. Thank you so much for joining on the call, and look forward to interacting again next quarter, and wish all of you a very happy and prosperous Diwali. Thank you, sir. On behalf of Arvind Fashions Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.