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. Thank you, Michelle. Hello, welcome everyone, and thank you for joining us on Arvind Fashions Limited Earnings Conference call for the third quarter and nine months ended December 31, 2023. I'm joined here today by Kulin Lalbhai, Vice Chairman and Non-Executive Director; Shailesh Chaturvedi, our Managing Director and CEO; and Girdhar Chitlangia, our Chief Financial Officer. Please note that results, press release, and earnings presentation had been mailed across to you yesterday, and these are also available on our website, www.arvindfashions.com. I hope you had the opportunity to browse through the highlights of the performance. We'll commence the call today with Kulin providing his key strategic thoughts on our third quarter's performance. He'll 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 this risk 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 today for the Q3 results. AFL continues on its journey of profitable growth, even though the overall demand environment continues to stay subdued. We grew our sales by 5%, which shows the resilience of our business model and the strength of our five marquee brands. The highlight of the quarter was the 150 basis point lift in our EBITDA margin, even after we invested 130 basis points higher in marketing costs. This was made possible due to better gross margins, lower discounting, and tight control on expenses. We continue to strengthen the balance sheet with reduction in gross working capital of five days in quarter three. This quarter's growth was largely driven by the retail and MBO channel. Our growth was impacted due to a degrowth in our online B2B channel. Our growth in the offline channels for the year-to-date remains at double digits. As a strategy, we are pivoting our online business towards the marketplace model, where we hold the stock and have full control over pricing and visibility. In doing this pivot, we have a one-time destocking of our B2B online channel, which affects our primary billing. While this affects short-term revenue, it lays the foundation for a healthy online channel. Our B2C online channel, on the other hand, has almost doubled, leading to strong tertiary consumer sales growth in the online channel. The negative impact on revenue growth for the online channel may persist for another quarter or so, after which the channel will revert to normal growth rates. While the environment continues to remain soft, we remain confident of the inherent strength of our brand and the growth drivers that we have put in place to scale up our business. We will continue to stay focused on our path of profitable growth and expect to further expand our margins and significantly improve bottom line in the medium term. 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, Girdhar and Ankit, and good afternoon, everyone else on this call. With an NSV of INR 725 crores and EBITDA of INR 150 crores in Q3, AFL has registered revenue of INR 3,165 crores in nine months of this financial year and EBITDA of nearly INR 400 crores. Revenue growth is 5% in Q3, with a two-year CAGR of 12% growth in NSV. EBITDA growth in Q3 is 18%, and two-year CAGR growth in EBITDA is 21%. The quarter had started with trading for Diwali Festival, but that got impacted by Cricket World Cup. Seven-odd weekends featuring India Cricket saw like-to-like decline, resulting in overall flat like-to-like growth during Diwali Festival period. The industry followed it up with early end of season in mid-December to liquidate inventory. Since that, AFL inventory managed tightly. We resisted the temptation of participating in this early EOSS, which helped us lower discounting by 1% in Q3 over last year's Q3. With the strength of our brand's seasonal winterwear products and continued casualization favoring our brand, offline channels have grown double digits in this YTD as well as in this quarter. The performance of retail channel is especially salient, where we are on course to meet the plan of our square foot expansion. The margin from retail channel has also increased because of lower discounting, especially in our key brand USPA where discounting is down sharply. MBO channel has also grown more than 15% with healthy margins. This offline growth of double digits is driving EBITDA gains. Online B2C has also doubled in revenue this year through various efforts, including buildup of exciting online exclusive collections, healthier stock levels, and required marketing support. Besides the impact of India Cricket during Diwali, we also saw lower business from online B2B wholesale, which has declined sharply this year because of our strategy to destock this channel for healthy and controlled consumer experience with tighter control on discounting, as explained by Kulin earlier. AFL growth is in double digits even in these muted market conditions, but for this sharp decline in B2B online channel linked to destocking there. Our growth will continue with investment behind growth drivers like store expansion, premiumization, wholehearted marketing investment, and development of adjacent categories. Once markets improve, we are keen to see growth moving towards 10%-12%, and even 15% if things go right. Our key brand USPA saw very healthy business in this quarter with reduction in discounting, growth in kids' business of nearly 20%, large investment in marketing through highly visible legends campaign, and opening of two iconic large-sized flagship stores like the one in Goa and Jayanagar High Street in Bangalore. The quarter saw healthy growth in EBITDA for USPA. Most channels grew well for Arrow also, and we further invested into marketing campaigns with Hrithik Roshan. We saw emerging leadership of Arrow in key categories including blazers, formal shirts, formal trousers, and two useful Arrow New York lines. The quarter also saw a rollout of more stores with a new retail identity in Arrow, for example, at Mall of Asia store of Arrow in Bangalore. Flying Machine refresh is going on, and efforts are underway to grow this upscale brand through distribution expansion and product upgrades for higher sales and better profitability. Key channels like value department stores and MBO channel have shown enthusiasm already for this new all-star of FM, and this brand refresh for FM will continue year 2024. The premium portfolio of Tommy Hilfiger, Flying Machine, and Calvin Klein continue to outperform with very healthy growth and margin profiles. These brands continue to set benchmarks in the industry on key retail KPIs. Our revenue growth could have been higher if we had participated in early EOSS, but we made a choice of focusing on profitability and discount reduction given our tight control on inventory. We also made a choice of increasing marketing investment by 130 basis points in order to support growth and keep our brands top of mind, which shows investment in marketing over investment into discounting. Our decisive focus remains on profitable growth through sales improvement, full-price like-to-like growth, and reduction in discounting, all leading to increasing GP and better EBITDA. EBITDA has grown value by 18% and increased of nearly 150 basis points with EBITDA margin of 13.3% in Q3. EBITDA has grown due to efficiency in sourcing, lower discounting, and better channel mix. We continue our sharp focus on balance sheet re-leverage, ensuring tight control on working capital, and saw further five-day reduction in GWC with gains coming from reduction in debtor days. We saw a reduction of nearly INR 70 crores in inventory value as markets consumed inventory in festival time, and stock turns remained close to guidance of four turns. In these muted market conditions, we count our blessings through double-digit revenue growth in offline channel, doubling of online B2C business, EBITDA growth of 18%, positive like-to-like growth in retail, reduction in discounting, and further tightening of working capital, resulting in ROCE of higher than 15%. Thanks, Shailesh. We can now open it up for Q&A. Thank you very much, sir. We will now begin the question and answer session. Anyone who wishes to ask questions may press star and one on their touchscreen phone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use only hands 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 Priyank Chheda from Vallum Capital. Please go ahead. Yeah, hi, team. Thanks for the opportunity. A fantastic cleanup done on the internal portfolio as well as on the P&L. Kudos to the team. My first question is, how should we view the two contrasting data points, one on the SSG for our retail network, which is muted at 2% while our wholesale MBO channel has grown at 15%? How should we view these two contrasting data points is the first question. To the existing question on the same, is the strategic decision to do away with higher discounts to our customer, are we compromising on our customer loyalty who has till now been habituated to buy at a discounted price? These are the two questions on the strategic part. Thank you. I just want to address the discounting bit. See, our Mantra has been profitable growth, and anything we do, we have to look at in the light of growth in EBITDA of close to 18%. And we've been managing our inventory very, very tightly. So always the question is on how do we get the best realization for that inventory we are holding. And if you look at our 2% like-to-like growth in market, one is, yes, markets are muted. It got really impacted by the cricket in Diwali Festival, and those are big days of retail. And that's why when I look at the industry number, our numbers are probably on the sort of better side, and it could have been higher if the Diwali was not impacted also, the EOSS decision impacted. We believe that this 2% has come on the back of last quarter where we had grown 9% like-to-like and previous year same quarter, we had grown by 12%. So you have to see in that context that on that 12% like-to-like, we've grown further 2%, and we've been continuously growing at a healthy pace. Discounting is something we want to avoid as much as possible because it goes against our business rhythm, because we need to do a certain number of weeks of discounting, and the new season has to come at a particular time. So anything earlier breaks the rhythm, and we lose margin. So we are very clear that we don't want to discount. And our brands, we have invested very heavily. Our investment has gone up by 130 basis points in marketing. Our brands are very salient. Our sales through is fairly healthy, industry-leading. So we didn't see the need to discount earlier, and we believe our consumers' equity is very strong. They are very top of the mind. Our full-price sell-through, our EBITDA growth, our realization, premiumization, a lot of indicators give us the confidence not to take shortcuts and focus on the long-term profitable growth. As far as the MBO channel is concerned, see, the like-to-like and the full-price sales are very similar. MBO also has grown at 15% because of large distribution expansion. So it's a multiplying factor of new distribution as well as the like-to-like growth in those channels. And also, EBO, our sales density are much higher. On that base, further increase becomes a little difficult. MBO channel, we are increasing our sales density as we go. And also, large expansion is happening, which is resulting in the 15% growth. Tertiary growth, if you look at MBO, they are also similar, healthy. But sales density-wise, EBOs are higher than MBO, and MBO will also catch up with higher growth there. Got it. Very clear. It's very clear on the strategic decision that we have taken to clean up the online B2B channel, which is clearly visible with the lower sales. So is a large cleanup done, or is there something more to come up which we should read? Because it's one of the significant sales contributors to your whole of the revenues, which is online B2B. See, it's kind of a courage to do the right thing. We believe that online should be played through a marketplace model as explained by Kulin earlier. And we are building that business very aggressively through marketplace, through our own website, through omni linkages. And that business, fortunately, is really growing. It's doubled in the YTD this year, the B2C part. As far as B2B is concerned, since COVID days, that business has grown. And now we believe the time has come to destock that business. The consumer sales on B2B are still healthy. In fact, in Q3, even in B2B, while our primaries are down significantly because of destocking, our consumer sales are in double-digit growth. So we are very careful about growing the online channel. We are committed to that. Just that we believe it's better done through our own marketplace, through our own control on pricing and discounting, and through our own assortment that we believe in, and we can do a better job of. So B2B is a short-term issue. In lockdown, we are looking at how we grow the tertiary sales with online channel. And we may have one more quarter, at best, two more quarters of pain with B2B wholesale. But it will actually move towards B2C growth and our channel partners. And we both are all aligned on this, and we will grow the tertiary sales of our brands on online space also. Perfect. And just a last question on a very broader portfolio perspective, which is all now a clean power brand with more than INR 4,000 crores of sales, right? How should we view in terms of what should be a sustainable SSG if you can mix if you can break down with ASP or a mixed change plus a volume growth for a sustainable SSG we should view? And as well as if you can touch upon, there is a portfolio like CK, Tommy, USP, which has a very industry-leading KPIs on a retail KPI. So which are the areas that we would have to work on for our other two brands in the coming years if you can highlight also on that part? Thank you. See, if you look at the last couple of seasons, we've been delivering really the industry-leading like-to-like growth. I mentioned last quarter, we had 9% in muted condition. Previous year, in Q3, we were at 12%. Last year, Q4, we were at 18%. We have really pushed the same-store growth agenda at full-price season quite aggressively. And markets are done. And when a big season like Diwali gets impacted like cricket, then the retail numbers are in that month, and yet it impacts the overall numbers. But we have been committed, and we are seeing that between 5%-7% should be our target. We actually, last two years, we've been growing at much faster pace than that. This quarter, we are 2%, but we have seen industry are flat or maybe slightly negative. So we continue to put the rigor in retail for same-store growth, right from the whole storytelling that we do, the way we do the layout of our store, the way we frame the stock, the way our visual merchandising happens, how the whole science of categorized assortment happens, the marketing support, consumer offer. So a lot of efforts are going behind. I just wish the market improves a little bit, and then that 5%-7% like-to-like growth is possible. Also, I would say that this should be the base expectation from big brand and smaller brand. It could be even higher like-to-like growth because they may have lower sales density. So a brand like U.S. Polo may be close to INR 2,000 crore, but the market size is very large. So there's no need for us to worry about future growth. This brand can continue to grow at rapid pace from here onwards, and we'll continue to open larger stores. We'll continue to invest wholeheartedly behind marketing to keep the brand salient. And all other if you really look at the science of like-to-like, it's all about walk-ins into conversion into basket size. So the walk-ins, if we keep the brand salient and the store experience good through word-of-mouth, walk-ins keep happening. As far as conversion is concerned, the store layout and the consumer walk-in and category assortment, adjacent category expansion. Earlier, they were not buying underwear. Maybe they are buying underwear now. Earlier, they were not buying footwear. They are buying footwear now or tomorrow, women's wear. We continue to meet all the usage occasions of a consumer and also the age groups of the consumer so that we can convert the consumer at a percentage which is higher than the industry. Then all these efforts also help the basket size that not just a T-shirt in U.S. Polo, they may buy jeans also. They may buy underwear also. They may buy footwear also. So all the science behind walk-in into conversion into basket size, we are really working really hard towards driving all the aspects of retail science. We want to continue to grow better than industry as far as the same-store growth is concerned. Just on the key retail KPIs versus the stronger brands versus the two other brands like Arrow FM, where is the further work and energy required to be done in coming two years? See, what happens is a weaker brand may have a lower sales density, sales per square foot per month or year, and it could have a higher discounting. So those are the two things. Broadly, there are many more things, but I'm just saying the walk-ins could also be lower in a weaker brand compared to a larger brand. So those things, and we need to just push the agenda on sales density as well as on reduction of discounting. And it's gone through many things through new store identity, new product category, better product. So like I said, we look at all the science of it. And in weaker brands, we need to push the SSPD higher and reduce the discounting. Got it. All the best. Thank you. Thank you. Thank you. Ladies and gentlemen, in order to ensure that the management will be able to address questions from all participants in the conference, please limit your questions to two per participant. Should you have a follow-up question, please rejoin the queue. Thank you. The next question is from the line of Varun Singh from ICICI Securities. Please go ahead. Yeah. Thank you for the opportunity. My first question is on now that we have got just five brands, which we call as power brands and maybe promoted Calvin Klein from emerging to power. How are you thinking about capital allocation among these five brands to drive growth? Yeah. So I think what you are seeing, the adjusted portfolio is the result of a capital allocation strategy that we have shut down many businesses to focus on few marquee brands. And these are the brands that we all believe in. And we're going to invest wholeheartedly behind each of these five brands, whatever it takes to build. And we have the required financial sort of strength to push the agenda. So now, since we have five power brands, and each one is very uniquely placed. So if you look at Tommy CK and certain segments, U.S. Polo is in a different segment, and Flying Machine and Arrow are also very uniquely placed. So we have a very differentiated five brands, and there's nothing which is stopping us to invest wholeheartedly behind each one of these five brands. We have done the capital allocation strategy, and that's how we have reached this shortlist of highly focused, decisively focused five brands. Now we will invest wholeheartedly, whatever it takes, to build these brands and revitalize the growth of these businesses. My question is more related to the marketing spends to drive growth. How are you, I mean, for example, going to make a decision with regards to drive growth, maybe whatever city that we have given the overall consolidated revenue, or you want to drive it as an individual P&L-driven investment into each of the brands? So if you see, our investment in marketing used to be 3.5% of NSV in that zone. Now we update to about 4%. That increase has happened across the brands. Now, the base of each brand is different. U.S. Polo, 4%+ will mean a lot more growth given the scale and size of that brand. Flying Machine, which is subscale, will need a higher percentage of NSV even with a lower growth of spend behind marketing. So that's a decision we take because there is a minimum threshold of marketing required to make an impact. That's what we will do. Now, if I have to say, "Man, let's with only INR 1, and then INR 1 has to go to one brand," then we would put behind U.S. Polo because at the end of it, U.S. Polo is our marquee brand, and it's very, very important for AFL. This is where if there is an unlikely situation where I have to make a decision among these five brands, then I would make that decision favor of U.S. Polo. But I don't see a need to reach that stage. We will invest behind marketing, and we have increased to 130 basis points in this quarter during muted market condition because we believe it's important to keep these brands salient and grow these brands through higher marketing investment. Okay. Got it. So my second question is on the large-sized stores that you made a mention, given that retail is incrementally becoming a more important channel, and it is likely to become even more important going forward given that the only maybe linear growth, which is more under our control. So given that context and given our aspirations of adding maybe if not all, maximum, franchisee-owned, franchisee-operated stores, I understand the customer experience in large-sized stores is superior. We have more real estate available to maybe put more categories that we are venturing out. But still, having said that, large-sized stores also create I mean, it comes with the baggage of the obligations of higher rental, higher CapEx requirement. And as a consequence, the necessity of the business to be dependent on customer footfall, I mean, it cuts both ways, right? If it goes right, we enjoy more leverage benefit. If it goes wrong, the downside is also incrementally much, much higher. So I mean, what is the need for going for larger-sized stores other than the category? I mean, the more real estate and categories that we need to put that as a reasoning. And in this context, if you can give some competitive, successful examples, if not from India, maybe even globally, is also fine. See, we are looking at only a certain number of large-sized stores, and we are not saying that every store will be large-sized stores. So like U.S. Polo, our current visibility is that we want to open the next 10 large-sized, these 4,000+ kind of sq ft stores. And these have been identified in very, very key locations where as a brand, we want to make a statement. And it's a very competitive decision. And also, we want the brand to remain top of mind in the key location in the country and for long-term assets that we are building. So it will be a very carefully modeled. We already done last two years a lot of stores, modeled at large scale, and we have seen good results. And now we are rolling out. So rarely we do something where we have not modeled and seen the success, and then based on those success parameters, we open. So we'll open only a certain number of stores, and they become very important for image and for, like you rightly said about the categories, the women and kids and adjacent categories, etc., coming in. So whole lifestyle of the brand can be displayed in these chosen few lifestyle stores, which are also on franchisee system, FOFO, where we have like-minded partners who are building that business. And we have good experience of running large scale among our portfolio of five brands. So we are very confident about that strategy. Also, we link these stores with Omni connectivity so we get online visibility also. We go out of way to push all our categories and make sure the sales density is comparable to our slightly smaller store so that the stores remain profitable. Whatever we have seen till now of large-scale stores, they are fairly profitable stores, and they are in key locations and with high sales density. We are rolling out. We believe in that strategy. But not all stores will be large. There will be a limited number of very well-chosen stores like that. Got it. Got it. In that context, how many stores you would have closed in the current year? And the reason that I am asking is also, I mean, for example, last quarter, you highlighted or maybe guided that U.S. Polo stores would be maybe larger size from the current 1,500-2,000 sq ft model. Therefore, I was having this maybe if not concern, seeking to understand that if not larger than 2,000 means maybe 3,000. So when you say 200 more store additions going forward, if not in FY 2024, so a bulk of it would be a 2,000 sq ft. And as you mentioned, 10 stores in U.S. Polo, 4,000. So I mean, in this scheme of things, basically, how is your this store evolution strategy? That's my last question. That's rightly said. It's a store evolution. So I give you an example that in Indiranagar, High Street, in Bangalore, we had a store of a certain size, and then we decided to make a bigger store. So we had to shut down the old store. So let's not look at it as a shutting down of store as more as a relocation of the store to a bigger and more prominent location. We have done exactly the same in Goa also. And we keep doing this across our brands. So this right word that you use is the evolution of the retailing standard as more and more categories come. And we've added denim as a big category. We're adding women. We've added kids. We have added footwear. We added innerwear and belt and wallet. And the need for square foot in Bangalore, U.S. Polo, is increasing. Same is for Arrow and Flying Machine and Tommy and CK. So we are increasing the size. And for that, sometimes we have to shut down the previous store as we find a new store. So it's not so much as a store closure strategy. It's more as a relocating evolution of the store to a better, bigger store with higher revenue and hopefully higher profit also. And that is done as a case-to-case basis. I can't give you a number. We continue to look for right now, maybe we're looking at 15 locations in the country where we want to open a bigger store for U.S. Polo alone. And as we find something, then we shut the old store, and when we open the new store, and that evolution happens. Got it. Got it. Sorry, just one question if I may squeeze in. What is the revenue contribution from non-apparel side of the business? I mean, this is very. Currently, that adjacent category, especially in U.S. Polo, is now hitting close to 15% of the revenue. It's growing very rapidly. Okay, sir. Thank you. That's it from my side. Wish you all the best. Thank you. Thank you. The next question is from the line of Palash Kawale from Nuvama Wealth. Please go ahead. Hi, sir. Thank you for the opportunity. Congratulations for the healthy expansion in margins. Sir, my first question is on gross margins only. Do you think that gross margins that you have achieved in the first nine months are sustainable? Yeah. Yeah. Hi. The gross margin that we have achieved in the first nine months. We are seeing that as of now, it is going to be on a sustainable basis because the trend on the cotton prices continues. We have also maintained a very high level of discipline and a control on discounting. So all these put together will ensure that we will deliver sustainable basis in gross margins. Okay. My next question is so for the first nine months has increased by around 14% versus 5% increase in overall revenue. Any brand which you would like to point out which is responsible for this or any comment on this? If you look at YTD, we are CapEx. We are at INR 61 crore. This quarter was INR 26 crore. So we are at an annualized rate of INR 80 crore-INR 85 crore of CapEx. Now, the only place our expansion plan is very asset-light. So most of our store expansion is on a FOFO basis with franchisee. Except that in Tommy Hilfiger, we have taken over close to 25 stores, which got that accounting happened in quarter three. And that is one change from a thing. There's no other major change that is happening from CapEx point of view. Girdhar, you want to add anything? Ankit, you want to add anything? So Palash, I think your question also was on CapEx as well. And maybe Shailesh just added a bit of flavor on OpEx. We understood kind of that. You would need to kind of also understand the piece around the channel mix change playing a role here as to what we really said. When you grow retail, Palash, of course, the franchisee commission expenses, which of course flow through the gross margins. And that's the reason which is where you're seeing a trend going up. So that also has a role to play in other expenses going up. And of course, you would have seen Shailesh speak at length about advertising expenses being higher on a YoY basis also from a last year's standpoint since we have invested significantly in advertisement. There will be more than about 100 basis points on a YTD level where advertisement increase, which is forming part of other expenses than OpEx, which is what the line item you are seeing. Yeah. Thanks, Ankit. Thanks for that. And if only one question that I could squeeze in. So you had discussed about focusing on margin expansion and return on capital. But what would be those levels for margin and return on capital after that? You can say that now the focus would be on growth. Now you can push the pedal there. So what would be those levels? If you really see that the profitable growth of a brand is critical. We've been extremely tight on balance sheet. You will see on our inventory days, in terms of our debtor days, we have maintained the hygiene possible. When the working capital is tight and the brand hopefully will go much faster pace profitably, then it'll generate free cash flow. That's how we want to grow our ROC. I think we have now crossed 15%. Medium-term, we are looking at a ROC of more than 20%. That's the first benchmark. We believe that if we grow at the guidance that we have given and the kind of margin expansion, we are seeing at least 100 basis points every year in EBITDA. So if you really do the math, then we are confident that in the medium term, we will be above 20% ROC. Yeah. That's it from my side, sir. Thank you. Thank you for your answers. Thank you. The next question is from the line of Sagar Parekh from Vanak Financial. Please go ahead. Yeah. Hi. Hi, sir. Thank you for taking my question. So the channel mix that you have given in the quarterly sales breakup in the presentation, if I look at retail so last quarter, I am assuming would also have Sephora within the retail channel. Am I right on that? No, no. We've removed the Sephora data. It's like-to-like. Oh, it's like-to-like. Okay, fair. Okay. So then like-to-like, then the growth is what? 3%-4% only, which includes 2% L2L, and the rest would be new store additions? See, yeah. I mean, also the annualization kicks in. So the retail growth in this quarter is 10%, double-digit, and 2% is the like-to-like growth plus quarterly year open more than 12 months annualization of that. And then the new store that we opened has all added up to 10%. Oh, okay. Got it. Yeah. It's 10%. Fair enough. And secondly, did I hear it correctly? You said U.S. Polo grew by 20% for this quarter in your opening? No. I mean, what I said is that the discounting has come down in U.S. Polo, and margins have improved. I didn't say 20% increase in U.S. Polo. Okay. Fair enough. No, what we mentioned was adjacent category, that kids wear. Maybe you would have read somewhere the kids wear. In my opening comment, I mentioned that the kids category had grown at 20%. I get it now. So I think that was about kids. Kids. Okay. Okay. Just U.S. Polo kids. Yeah. U.S. Polo kids. Yeah. Okay. But you said 15% is the overall contribution of revenues from adjacent categories for all brands put together, including Tommy. U.S. Polo is where the highest share of adjacent category happens. It's a large business among innerwear, footwear, kids wear. On that large scale of U.S. Polo, the adjacent categories are now more than 15% of the revenue for U.S. Polo. Okay. Fair. How much is the debt number as of end of December after the Sephora sales? Our net debt is now close to INR 225 crores. So then next year, basically, we can be debt-free, right? Because you have INR 80- INR 85 crore of CapEx, and you're talking about 100 basis points margin expansion. So next year, the entire growth is all AFL-related expansion largely. So basically, your free cash flow will be very strong next year. So then we can assume full debt repayment by next year? We will. That's our medium-term aspiration. And we have gone to media also. We said we have a desire in the medium term to be a debt-free company now. We'll see. We are generating some free cash flow even now this year. And we don't have major need for CapEx. And that's why the profit is going into free cash flow. And we'll see how it goes. It's also a function of how much capital we require for growing the brand because that's the first agenda that we want to grow our brand profitably to their potential. And then whatever else supplies come, we surely use it to pay down our debt, whether it'll become zero debt. I don't know. Girdhar, you want to come in? I mean, Ankit, you want to comment further on the net debt whether it'll reach? See, as Shailesh said, our aspiration is basically to be debt-free in the medium term. Any surplus cash that we will generate, obviously, will be used to pay off the debt. Okay. Sure. That's it from my side. And all the best. Thank you. Thank you. The next question is from the line of Abhijeet Kundu from Antique Stock Broking. Please go ahead. Yeah. Hi. Thanks. Thanks for taking my question. And congrats on the good side of results. My first question was on discounted, sorry, discontinued businesses. You have said that the royalty for Ed Hardy and Aeropostale, that will accrue as profit to you because those losses will come off. So that INR 39 crore is in this quarter. So I mean, the brands are dormant brands, or we have discontinued or have we discontinued the sales? I mean, possibly. When that Sephora transaction happened, we had two brands which were dominant. They're not active. But we are paying royalty for them as per the legal contract, which is the Ed Hardy and Aeropostale. So we're not doing any production or sale or business of that. But we had a certain legal as per the contract commitment. This was coming to close to INR 10-INR 12 crore a year for the next couple of years. And this year, that figure was around INR 15 crore. So what we have taken what we have done is that we have taken the present value of these future royalty expenses and plus some other expenses linked to these brands. And that we made the provision of INR 39 crore there. So technically, we are not selling these brands anymore. So no royalty has to be paid. No expenses have to be. But these two brands are coming for renewal in two years, right? So Abhijit, Ankit, let me just clarify that for benefit. See, these brands, we had already made dormant because we were very decisively allocating capital towards the five power brands, which is what Shailesh has spoken at length. We were not investing behind these brands because there is no sales. But of course, there is a minimum commitment on royalty, which is what we have given. And we have mentioned this on the call earlier as well in Q2. And so the expense on account of that is what we have made a provision netted off against the gain on the Sephora transaction sale is the number which is what you are looking at. There is not going to be any further drag coming on the profitability of these five marquee AFL brands going forward on account of this minimum royalty commitment, which is what we had to pay for the next two years pertaining to Ed Hardy and Aeropostale. Okay. Well, I mean, how should we account for it? So say for FY 2024, the discontinued operations profit from discontinued operations, so Sephora would be INR 100 crore? I mean, like that, or it will be just INR 74 crore only? Your estimation is correct. So there is no NSV coming in from Ed Hardy, Aeropostale. It was very, very marginal. So the only NSV, which is what was coming in, which is what has been discounted as far as the question on anything is concerned, is only Sephora. And your estimation is broadly in line with the number, which is what you just mentioned. Okay. And my second question was on it has been asked earlier, but still, two things in that. One is the accelerated store expansion that you have talked about of 200 stores, 200, which will essentially be more of EBOs. So in this, one is what would be the CapEx requirement, INR 85 crores of CapEx requirement that you are saying for one year, per year? Or one is that? Yeah. Annual. You're right. Annual INR 85 crore per annum. Second is that we are talking here about the gross space addition, the net space addition. How should we look at it? I know you also said that it is difficult to say that. The color on what would be the net space addition would help us to derive the overall sales growth because there would be an element of the same store sales growth, and there would be an element of the store expansion, which will play out over the next two years. How should we see that? I would put this gross addition, net addition into two parts. One is, see, there's a regular business. In regular business, typically, 3%-4% of distribution gets shut because those markets become not good, or the store is not viable. We make mistakes, or something else happens. Market is very dynamic and moves. So that's a normal 3%-4% of your distribution. You do cleanup on an ongoing basis. That's a reality of our life. Some malls become ineffective. Some high streets become ineffective. It takes three weeks, etc. That number happens. So what we track more than the number of stores because when we shut, there are smaller stores, maybe larger numbers. But we open larger, bigger number of fewer stores. I think the emphasis on square footage internally, we look at how many square foot or what is the target on square foot that we are looking at. That's the target we are looking at to grow forward more than the store number. Store numbers are also important, and they indicate eventually the square foot expansion. Our internal KPI is more and more on square foot expansion. The plus-minus of the store, evolution, transfer, closure, etc., keep happening. We are very keen on having a certain high-quality square footage in our brands. Right. And what would be the targeted one? 10% of that 3%-4% will go off to 7% of the sq ft addition, something like that? If you look at our square foot expansion, it's more like 175,000-200,000 sq ft. It depends on the markets also. So it's in that zone that we are targeting right now. Okay. Got it. Thanks. Thanks. Thank you. That's all for my side. Thank you. The next question is from the line of Niraj Mansingka from White Pine Investment Management Private Limited. Please go ahead. Thank you. Just a few questions. One, what was the growth in the square footage on a YoY basis? We have opened more than 120 stores. We can just check the number, and I can just confirm. Do you have the data on that? We'll have to just check the exact data. Niraj, I can circle back separately on this. The reason I asked you that, what we said is more of a gross number of opening of stores, right? What is the net number of stores? If you can give that on a regular basis also, and now also, it will be useful because that shows how much you have actually added on a net basis rather than gross. We'll take this as feedback, and we will ensure that data is made available on a regular basis. Right. What is the number for the quarter? How many stores you might have added on a net basis? We added more than 20 stores in this quarter and more than 120 stores in the year. So that's the number we have currently. We added 31 stores in Q2. 31 stores. Yeah. 31 stores. Okay. Okay. So please let us know the net stores in future so that that is a more realistic way to look at rather than the gross number. Okay. The second question is on the revenue growth. Can you share what is the revenue growth for each of these brands, like Polo, FM, Tommy? We don't share brand-wise data for competitive reasons. A lot of our brands are licensed. Our global partners also are very sensitive to that. The industry also, our competitors also don't share. We give enough color so that we mention how the brands have done and how they're growing. We've not given in the past a very specific brand-wise sales number or EBITDA number. Got it. But can you give some color on which is the highest growing brand and how is the lowest one? Just wanted to have some color on that, actually. We know on what yeah. The Tommy CK business, as a very premium portfolio, they are growing faster because there is, people say, K-shaped recovery or premiumization is working well right now. People are buying a little more differentiated products. Last couple of quarters, we've seen a higher growth in premium categories in Tommy Hilfiger and CK. Also, the premium parts of Arrow 1851 or premium parts of U.S. Polo also have grown well. As far as the lowest growth right now, FM is under a new refresh. We are waiting for a lot of piloting to happen in FM. Once we see the fruits of that piloting we are doing, we will expand. Right now, the growths are lowest in FM and the highest in Tommy CK. Okay. And the last question, can you just share some color on what you are doing so that what you shared about refreshing the brand on FM, can you share what you are doing and how you want to compete with other brands which have taken over your market share over years on that? So if you look at FM, it's a very strategic asset in our portfolio owned by us. We don't pay any royalty in that. And it's our own brand which we have a partnership with the Flipkart Group. And that partnership also gave us a unique edge in online space, understanding of that space. So when we looked at the brand, we said, "Let's refresh the brand." This is one of the first jeanswear brands, maybe the first Indian jeans brand in the country. And we have done refresh of CK. We've done refresh of Arrow. And then we said, "Now do it for Flying Machine." So what we did is that we said that the Flying Machine will be a brand which will be built on four pillars. One pillar is jeanswear. Now, it's a very large market in India, especially in the EBO channel, etc. A very large business happens in the jeanswear. And FM is the first authentic heritage jeanswear. So we said that's the first pillar. Second pillar is youthful. And we look at how India is a very young country. The Gen Zs are becoming important. Millennials continue to remain important. So we said this is a brand where youthfulness, the appeal to Gen Z and millennials may be very, very important. Third part, we said it will be kind of a value proposition that will be attractively priced for the product that we give, not the cheapest in that sense, but it will be attractively priced. So the third pillar that we have decided to focus on Flying Machine was to focus on value proposition. And the fourth was a more emotional pillar that we said in a young country where social media is very important. We want to target online imagery of young customers where they are nobody, but they should feel like somebody really hot. And this expression of that fire emoji that people get—people crave for that emoji coming as a reply to them on social media, the fire emoji. So the being hot and the internal phrase we use is damn hot. And we're saying that the fourth pillar will be that it should look like damn hot, and it should solve the problem of somebody towards his journey as Flying Machine will take it from anonymous person to somebody damn hot. So those are the four pillars. In terms of execution, how we are doing it is that we first changed the logo of the brand. We changed the font of the brand. We got a new propeller, the new font. We got a new color scheme. We got a completely new merchandise architecture, which is targeted Gen Z customer so that the product also looks damn hot. We got a new retail identity developed for Flying Machine that we opened in Commercial Street, High Street in Bangalore around a year back. And now, we are using these pillars of new merchandise direction, the new retail identity, new ad campaign, which is focusing on being damn hot. We are trying to excite the young customers, Gen Z plus millennials, so that they feel that they are damn hot when they wear Flying Machine. Now, it's an early journey. We're testing a lot of these things. And what we have seen is that the EBO channel and the value department stores have already got very enthused by what the new avatar of Flying Machine is. Also, we've renovated almost 12-odd stores with a new identity. We've seen very good like-to-like growth or double-digit like-to-like growth in those stores. It's still early days. We see a full effort another year to get everything right to build it. But that journey has started. And if you see the vision is also for Flying Machine to be an INR 1,000 crore brand, it will also have to have all the extension categories that we talk about. And we are very keen that we will add 3-4 new extension categories in Flying Machine. And we'll build distribution. We'll build new product categories and expand through MBOs value department store and as well as through our EBOs eventually. So that journey has started. Got it. Got it. Just you said the 12 stores that you have renovated have seen a very high double-digit growth. Yeah. Okay. Good. Thank you very much. Thank you. I mean, since you asked a specific question because typically, when you're early stage, if you want to keep quiet and keep doing the right thing, and once we see a model work, then we talk about it and expand it. So it's a very early stage of we're seeing green shoot, but still, it's early days of the recovery for Flying Machine. Right. Thank you. Yeah. Thank you. Thank you. The next question is from the line of Jatin Sangwan from Burman Capital. Please go ahead. Thanks for taking my question. I noticed that depreciation has increased to 80. I guess that was because of addition of Tommy Hilfiger and Calvin Klein on COCO model. So if you put a breakup depreciation by ROU assets and by PPE, and the same for interest, breakup by lease liabilities and interest due to borrowing. So Jatin, Ankit here, just want to kind of clarify. Interest is a very small portion quarter-on-quarter. It has increased only by about INR 2 crore, which is generally on account of our India-centered spend because of our COCO stores. Yes, your observation is absolutely right. On the depreciation side of it, it has increased by about 7-odd crore. There is a one-off in the depreciation on account of COCO store conversion, which had happened in PVH, which is what we've been speaking to you all about. Since the entire documentation and lease signing of all those COCO conversion stores were done in Q3, and hence, there is a one-off charge and a cumulative impact in Q3 to the extent of about INR 5-INR 6 crore in this quarter out of that INR 7 crore. That will come down this depreciation number by about 3-odd crores, INR 3-INR 4 crores from Q4 onwards. So there is a one-off cumulative impact in depreciation on account of that. Sure. If you were to give the break-up also, depreciation by ROU and similarly for interest. Interest on our borrowing usually is around INR 18-INR 20 crores. The rest is interest on lease liability. On depreciation, that number on fixed assets is about INR 15-odd crores. The rest is depreciation on ROU assets. Okay. Sure. And what's the gross debt number that we are carrying as of December 23? You asked about the gross debt number, right? Yes. Gross debt number. Yeah. So that will be under INR 350 crore. Okay. Sure. What was the similar number on September 23? I will have to just check that. Our net debt number was INR 476 crore as of September. You can look at the reported balance sheet, which is what would have been part of the H2 financials. Okay. Sure. Thank you. Thank you. The next question is from the line of Ankit Kedia from Phillip Capital. Please go ahead. Sir, my first question is regarding the MBO. You mentioned that the tertiary sales are in line with the retail like-to-like growth while we have reported 15% overall growth. So I just wanted to know how much are the MBO contributions in the quarter YoY growth? And over the next two years, what is the aspiration for the MBO contribution? And of the four brands which we have, if U.S. Polo is the highest contribution or Arrow, what would be the other two brands like Flying Machine or the other brand versus the leader? So how much of the depth we can increase by and also the width from the MBO channel? So MBO is growing. In the Q3, it's grown at more than 15%. Also, if I look at the YTD data, also it's grown double digits. Growing well now. It's a function of, like I said earlier, expansion, annualization, and like-to-like growth. Also, the MBOs are working at a lower sales density than our EBO. EBO are at much higher sales density. So the growths are higher in MBO because there's a scope to increase the sales density. And by putting our own manpower to build more category assortment, correctly reducing category, putting the right category, we also our sourcing has been very efficient. Our OTs have been very efficient. So we've been launching the season really on time among the best in the industry. So MBO channel is benefiting from better sourcing and better supplies also from our side. So that's the growth picture. If you see aspiration, again, it's a very large market. The market share of different brands or companies will be still not that low and huge ability to grow and go to newer towns with the MBO channel and every other channel EBO also. So I think there's a secular growth possible in MBO channel. We will be very careful on hygiene. That's very important for us, that the inventory level at the MBO channel as well as the better situation with the MBO channel, we are very, very careful, watchful, and we are growing with very good hygiene. That's very, very important in terms of our aspiration. As far as the scope is concerned, U.S. Polo is a leading brand. That's the first brand we take to a new city or to a new counter or new MBO channel because the desire for that brand is very high. It's a very large brand. Country is leading, probably the biggest man-casual brand in the country. So every MBO counter wants that brand first. Tommy CK has a little more exclusive reach because that price point doesn't work everywhere. So that's a very careful expansion of Tommy CK thing. Arrow and Flying Machine both show very good potential to grow the MBO channel further. In the last two years, we've really expanded the Arrow MBO channel significantly. As the model started working, we started expanding. FM, we are doing that. The last number I remember is in the Spring-Summer 2024 and the Fall-Holiday 2023, the previous season and the current season, we are opening almost 90 shop-in-shops in Flying Machine between the two seasons. We'll continue to expand as the brand starts proving itself in the MBO counter, and we continue to grow. Overall, I think it will grow at a healthy pace. But I think the important thing is to maintain the hygiene of inventory and the collection. Specific number, I was looking at the number of counters we are present in MBO today. Over the next two years, what will be the counter addition? I'm sorry. I don't have specific data on that. Like somebody mentioned earlier on the store count, these are the areas that I think we will take this as a note of better information sharing with the investors. This time, please excuse me. We will come back with this kind of information. Sure. Sir, last quarter also, same feedback was shared with the team. Sir, my second question is regarding discounting. Now, if I go online on U.S. Polo or the footwear brands and other brands, discounting is very high in online channels. Obviously, you're moving away from online B2B where the discounting is higher. So how much inventory is still in the system where if a consumer goes online and sees the discounting, it remains high versus the store where you are actually controlling the discounting? And over the next two years, where do you want the online B2B business to be positioned or reduce the inventory out there? So if you look at our aspiration, we would want our B2C model with the partnership with these portals that are key marketplaces. We want it to be close to 75% of the overall business. Currently, it's inching towards 50%. So that's a scope to sort of convert the business towards more and more B2C. And our aspiration should be as high as possible because then we assort the product very scientifically. And also, we manage the experience and the pricing and control the discounting. So that's one part of it. Now, as far as the current discounting on B2B portal is concerned, let's look at two ways. One is that we are destocking. Like Kulin mentioned earlier, and I also elaborated that we are very keen to destock. And the consumer sales are growing, but we are reducing that stock level. It's a couple of quarters where the destocking will get done, and it'll reach a BAU level where the inventory should be. Also, I want to explain to you that fact that when the discounting happens, the large part is what is known as OSM, the old season merchandise, which we pull back from our physical stores and other distribution. Online is a very efficient way of liquidating OSM, what you will be doing in outlets, etc. Online, one side is a very efficient outlet model. And that model continues as OSM merchandise. Also, we do some online exclusive merchandise that's called SMU, which B2B people pick up and sell. But a large part of that online exclusive merchandise, now we are doing in B2C with our own marketplace. We're building that business with our own control and our own sense on pricing. So that process is on. That strategy is being implemented. Initial primary billing hit we are taking. And I think in a couple of quarters, this will stabilize. Sure. And Sir, my last question is regarding U.S. Polo kids and footwear. We have seen a very healthy growth in both these categories from a U.S. Polo side. So how many counters or how many EBOs today are both these categories present? Or you think there's scope to now it's only on consumer demand, or there's still penetration remaining for both these categories? Yeah. So we started the journey of adding footwear to all the stores. And now, the majority of our U.S. Polo stores have the footwear. And it accounts for a healthy share of U.S. Polo stores. And you'll see in every key U.S. Polo store, you'll see footwear being present. As far as kids' wear is concerned, it also opens up opportunity to open exclusive stores of kids' wear in future. So we'll look at that version also. Also, footwear is sold through our own we have a footwear chain where we do multi-brand stores. But also, pilot is happening. And we sell footwear through those stores also. So you'll see our expansion will happen. And clearly, that feedback on how many stores it's present, etc., we will provide that information. Sure, sir. Thank you so much, and all the best. Thank you. Thank you. The next question is from the line of Rajiv Bharati from DAM Capital. Please go ahead. Yeah. Good afternoon, sir. Thanks for the opportunity. Sir, what part of this 120 gross additions are COCO stores? Very few. The number will be less than 20. In terms of this depreciation increase YoY, is it safe to assume that bulk of this can be attributed to your COCO conversion on the TH side? Yeah. Like Ankit just explained in the previous question, that accounting happened in Q3. That's why there's a one-off INR 7-odd crore depreciation compared to the Q2 has happened. Now, it'll come down by INR 3-INR 4 crore as this stabilizes. Our expansion is based on an asset-like model. In Tommy particularly, we have taken over almost 25 stores. Some new stores will open on a COCO basis because of the capital efficiency there and the increase in ROCE. In Tommy, we'll continue to open COCO stores. But other than that, they will be only on very specific occasions. Bulk of our retail expansion in other brands will be on a COCO basis. Sure. And because when I see the minority interest part, which is for your Tommy CK piece, which is, I think, -2% decline. And if I adjust this depreciation difference, it seems that you have grown 15%-20% profitability on Tommy CK combined. I mean, is that number right? We are growing at something similar to what you are saying. Okay. Sure. Great. That's all from my side. Thanks a lot. Thank you. Thank you. Ladies and gentlemen, due to paucity of time, that was the last question for today. I would now like to hand the conference over to Mr. Ankit. I understand that some of you have. Mr. Ankit, I will wrap up your comments. Over to you, sir. Thank you, sir. I understand some of you may have a few unanswered questions. But management had a paucity of time, so we'll have to close this call. Thank you, everyone, for joining us on the call today. If you have any other follow-up or any more questions, we can take that separately. I'm always available to answer those. Thank you so much for your time, and have a lovely evening. Thank you, members of the management. Ladies and gentlemen, on behalf of Arvind Fashions Limited, that concludes this conference. We thank you for joining us. You may now disconnect your lines. Thank you.