Ladies and gentlemen, good day, and welcome to the Campus Activewear Limited's Q4 FY2023 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. Before we proceed on this call, let me remind you that the discussion may contain forward-looking statements that may involve known or unknown risks, uncertainties, and other factors. It must be viewed in conjunction with our businesses that could cause future results, performance, or achievement to differ significantly from what is expressed or implied by such forward-looking statements. The Campus Activewear's management team is represented by Mr. Nikhil Aggarwal, Whole Time Director and CEO, Mr. Raman Chawla, CFO, and Mr. Piyush Singh, Chief Operating Officer, Mr. Krishna Kumar, AVP Investor Relations. I now hand the conference over to Mr. Nikhil Aggarwal, Whole Time Director and CEO, for his opening remarks. Thank you, and over to you, sir. Thank you very much, and welcome everyone for joining our fourth quarter of FY 2023 earnings call today. FY 2023 has been a pivotal year in our journey to realize our vision to create India's leading sports and leisure footwear brand. Delighted to share that our annual performance has been broadly in line with our growth expectations, despite the inflationary macro environment and demand contraction that we have witnessed in the rural and semi-urban areas. Both our businesses, that is, trade distribution and D2C, are shaping up well, with the trade distribution crossing INR 800 crore milestone and D2C surpassing INR 650 crore milestone during this fiscal year, while delivering an aggregate growth of 24% overall during the year. During FY 2023, we sold more than 23.5 million pairs at an aggregate level, thereby clocking a net income of more than INR 1,484 crores and a year-on-year growth of 24% versus FY 22, which was INR 1,194 crores. Both trade distribution and direct-to-consumer channels have delivered a profitable growth of 10% and 48% respectively versus FY 22. With an annual sale of 23.5 million pairs in FY 23, we registered a year-on-year volumetric growth of 22% in comparison to FY 22. Not only volume, ASP has also grown by 2% from INR 620 to INR 631 in FY 2023. Despite witnessing a K-shaped recovery curve post-COVID, wherein tier two, three, four, and semi-urban and rural demand centers witnessed a downtrading phenomenon. These centers normally contributed 68% of our FY 2023 sales. Balance sheet demonstrates a position of strength with robust return ratios, such as ROCE and ROE, of 23% and 24% respectively. We are sincerely thankful to our end consumers, our channel partners, all our investors and stakeholders, and our passionate team, which has helped us in delivering this performance, which earmarks the underlying strength and resilience of the brand. As always, we thank you for your invaluable support and investment. I would also like to put on record our outgoing CFO's, Mr. Raman Chawla's, last day in the office would be as of 31st May. We would like to take on record his contribution to the company over the last several years. We thank you, Raman. We are noting the incoming CFO, Mr. Sanjay Chhabra, to join us from the first of June. Also, there has been another elevation in terms of Mr. Piyush Singh. He has been elevated from the role of the Chief Strategy Officer and Investor Relations Head to a Chief Operating Officer and Investor Relations Head as of immediate effect. With this new role, he will be now responsible and looking and handling basically all the sales channels, including the trade distribution and not only D2C. Finally, the PNL linked to all the sales channels. We're looking forward to, you know, leading a very good growth from here on with these new roles coming in. Thank you. I hand over to Piyush now for his remarks. Thank you, Nikhil. Greetings to everyone. Adding on to what Nikhil just said, while sales growth and market share enhancement is of prime focus, our endeavor is to ensure margin protection above a certain threshold, which has been the essence of Q4 FY 2023. In Q4 FY 2023, our D2C business has demonstrated robust growth of more than 15%. Our trade distribution business also is on a surf path to recovery, with year-on-year degrowth narrowing down to almost 10% for this Q4 FY 2022, which was on account of a higher base driven by pent-up demand and delayed macroeconomic recovery in non-metros. In Q4, while being cognizant of market dynamics, we tried offsetting input cost inflation and transit increase in direct costs with sales mix and premiumization. Our endeavor is to utilize this downward impact with potential price increase, conversion cost optimization, and enhanced operating leverage in our coming quarters. We continued our planned investments towards brand building, D2C network and infrastructure expansion, and talent acquisition, which is the key to our growth in the coming quarters. All of which is expected to generate margin accretive impact in the subsequent quarters. In all our distribution channels, category cohorts, and pricing segments, we have demonstrated robust growth, both in terms of volume and value, despite sluggish macroeconomic recovery impacted by supply chain disruptions and inflationary trends. Basis price segments, our sales trend in Q4 FY 2023 has exhibited sustained premiumization vis-à-vis FY 2022 full year, wherein sales contribution from semi-premium and premium categories have increased from 64% in FY 2022 full year to 70% in Q4 FY 2023. Similarly, on a category basis, revenue mix across men and women and kids and child have improved from 84 in favor of men and 16 in favor of the rest in FY 2022 to 80/20 in FY 2023, respectively. On a full year basis, revenue from operations increased almost 24%-25% year-on-year to INR 1,484 crores in FY 2023, as compared to FY 2022 full year revenue of INR 1,194 crores. While material margin in FY 2023 stood at INR 730 crores, at almost 49.5% vis-à-vis FY 2022 material margin at INR 590 crores, which was also at 49.5% compared to our net sales. FY 2023 EBITDA stood at almost INR 256 crores as compared to FY 2022 full year EBITDA at INR 244 crores. FY 2023 EBITDA margin stood at 17.3% versus 20% in FY 2022. Margin compression in EBITDA is largely on account of sustained investments towards human capital, brand building, and retail network expansion, which are expected to generate positive operating leverage in the coming quarters. Net profit during FY 2023 full year stood at INR 117 crores, with a margin of almost 8%, as against PAT of INR 108 crores in FY 2022, with a PAT margin of 9%. We continue to maintain a close watch on our input cost and are confident of restoring our trend line growth trajectory and margin profile in the coming quarters. I will now hand over to our CFO, Mr. Raman Chawla, to take you through more details on the quarter four and FY 2023 performance, especially on the balance sheet side. Thank you so much, Piyush. Good afternoon, everyone, welcome to quarter four FY 2023 earnings call of Campus Activewear Limited. During the quarter under review, Campus as a brand focused on preserving bottom-line profitability while ensuring requisite investments in future capacity and brand building, essential for sustained growth and margin expansion. Revenue from operations stood at INR 348 crores in Q4 FY2023, versus INR 352 crores in Q4 FY2022. Our net profit for the quarter stood at INR 23 crores as compared to INR 23 crores in Q4 FY2022. On the balance sheet side, our net debt, excluding the lease liabilities, has come down from INR 174 crores at FY2022 end to INR 157 crores as of March 31, 2023. Our net debt to EBITDA ratio has marginally come down from 0.7x in FY2022 to 0.6x in FY2023 end. Our working capital days have gone up marginally from 98 days in FY2022 end to 134 days in FY2023 end, on account of the front loading of inventory, while awaiting clarity over the BIS inventory norms expected to come in effect from 1st of July 2023 to ensure the season readiness. That said, despite a very challenging macro environment, our receivable days have stayed constant at 39 days of the sales outstanding throughout the year, exhibiting sales and channel discipline. Similarly, we maintain a very robust ROCE at 24% and return on equity at 23% as of FY23 end. With this, let me conclude and hand it over to the operator for question and answers. Thank you very much, 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 telephone. If you wish to withdraw 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 Chirag Shah from CLSA. Please go ahead. Yeah, thank you for taking my question, and congrats, Piyush Singh, for the elevation. Hi, Raman Chawla as well. My question is, you know, on the channel contribution, in the last four years, Nikhil Aggarwal, we have also gone through a transformative change, right? How do you see this shaping in the future? How should we think about the channel contribution? Of course, the share of online has gone up very sharply. Will this be a even more prominent channel going forward? How does the EBO channel also move? Second, Raman Chawla, I think on inventory and working capital, if you can just throw a little bit of light around what are the measures that we are taking to improve the overall working capital cycle. Nikhil, if you can just also spend some time on slide 26, which is basically the prime vectors going forward in terms of growth, and just explain that a little bit in more detail, please. Hi, Chirag. You know, thanks for your questions. In terms of the channel splits, you know, while D2C has done extremely well and both the online and EBO channels have grown consistently at a CAGR of more than 150% over the last few years, we believe that distribution, you know, is evolving in India quite rapidly, given, you know, how the Udaan and EGOs of the world, and the OTO platforms have also shaped up. Going forward, we believe that, you know, this is one of the reasons why Piyush also has been elevated, and we wanted to bring in all the sales channels under one roof in that sense, and this should bring in a lot of efficiency into the system eventually, is what we are targeting. We are looking at good growth in terms of distribution as well as in terms of catching up on the distribution side, especially from our south and west markets, which have traditionally, you know, which has done really well over the last 2 to 3 years. The north and east markets, which are our core markets, they have suffered slightly, especially in distribution on account of lower demand and low and macroeconomic environment. We believe that to be a short-term pain. Going forward, I see that the split should somewhere sort of stabilize at 50-50 eventually over for both the channels, be it distribution and D2C. Right. Yeah. Any other questions, please? Chirag, you asked a question on the inventory and the working capital. Right. Essentially, as I mentioned, in my opening comment, our current working capital level is at about 138 days. Essentially, the two big elements: number one is all around the DSO, which is we've maintained it despite a very soft micro or a soft macroeconomic environment. As far as the inventory is concerned, essentially, there are two aspects to it. We generally build up our inventory during the first quarter and the second quarter, really for the season readiness. Also there is a big change is also likely to come, which is on the BIS, and we are holding inventory also a little bit because of that. On a full year basis, while we do not give any guidance all around these numbers, but working capital continues to be an important area in terms of efficiency and priority for them. Raman, as channel mix shifts, how will that impact our working capital cycle going forward? Nothing really drastically that much. Although for the, you know, D2C channel, there is a bit of a higher inventory requirement because we deal in pairs versus, let's say, in our traditional distribution, where we deal in cartons. On an overall basis, I think, it doesn't affect too much there. Hi, Chirag, Piyush this side. Just adding to what Raman just mentioned, adding more flavor to the components of working capital. While Raman has covered the inventory piece, as D2C grows or accentuates further, our receivable days, we don't see any detrimental impact on those because the marketplace income kind of offsets any outright business that we are running. Similarly, as our COCO model on the EBO side offsets anything on the franchisee side, because we are looking at a balanced rollout across both D2C online and offline. We expect the same kind of channel discipline to be maintained across all our formats, be it trade distribution, be it the D2C online or D2C offline or key account verticals. With the DSO days trending or receivable days trending at closer to 35, anywhere between 35-45 days, as we have seen over the quarters. Inventory, certainly the position would improve from here on. We have taken a cautious view because BIS comes into effect on 1st of July. Anything which is manufactured on 30th of June or prior to that is exempted from the regulations. As we see more clarity on the norms which needs to be followed for ascertaining the testing parameters or the testing requirement for BIS, it's only prudent for us to have the requisite inventory cover in place in order to avoid any demand side shocks coming our way. That's, we believe that's a prudent move to have a transient buildup in place. Far as payables are concerned, payables are very much in line. It stays in the territory of 90 to 95 odd days, so far as all our vendors are concerned. I mean, net aggregate, we expect working capital cycle to be closer to 90 odd days and improving from there on. Eventual expectation is to bring it down to, say, 80 to 75 days in the medium term. Perfect. That's very useful. Now. Nikhil, on the prime growth vector... Sorry. Yes, on the growth vectors, I'll take that up first. There are quite a few things that we currently have in the pipeline, given the current macroeconomic scenario. Given the K-shaped kind of recovery that we have seen, wherein metros and Tier Ones have seen a premiumization of the portfolio, while Tier Two, Tier Three, and from there on, semi-urban and rural, have seen some kind of downgrading. We believe that we need to address the portfolio gap that is currently there in our portfolio in terms of affordable price points, on the triple-digit price points, starting from INR 609 to INR 999. Uh, you will very soon you'll see a portfolio pillar coming in from our side offering similar quality standards but as a sub-brand within Campus. Uh, that is very much necessary for us to address this market and this kind of scenario. Second, um, is, uh, the extension of the product portfolio, uh, which, uh, which you have seen over the last, uh, couple of quarters in terms of the launch of our casual range. The pilot has been, um, has been satisfactorily successful for us, and we, we believe in expanding the portfolio further on, because we believe that this will, uh, add a meaningful chunk to our overall addressable market, uh, from here on. Uh, and this is the casual range that we have, uh, spoken about. On top of it, uh, we are also building layer of periphery- Ladies and gentlemen, we have lost the management's connectivity. Please stay connected while I try to reconnect them. Give me a moment. Ladies and gentlemen, the line for the management has been connected. Over to you, sir. Hi, Chirag, Piyush again this side. I'll just quickly summarize. Yeah, hi. We have concrete action plan across pricing, product, channel, and markets. We have already covered the pricing piece, where we'll be very soon introducing our Challengers sub-brand, in order to address the lower end price points, the triple-digit price points from INR 699 to INR 999. From a product portfolio expansion perspective, while kids and ladies remain a key focus area for us, it's a low-hanging fruit. On top of it, we will accentuate our casual range and on the pedestal, we'll also expand the premium open footwear collection from here on, in order to address any product portfolio gaps. From a channel standpoint, we are looking at holistically transforming our core markets, where we have witnessed some degrowth during this K-shaped recovery, especially states of Uttar Pradesh and Bihar. We'll be doing a deep dive RCA in these states from a trade distribution standpoint, we'll be transforming trade distribution from here on. From a markets perspective, while India stays as a core focus for us, we have started looking for similar opportunities across some markets on a very, I mean, on a very selective basis, so to say, in terms of exports as an opportunity, in order to de-hedge any macro shocks that may come our way in the coming quarters. We'll be giving you more color around this in the subsequent quarters, while we gain meaningful traction across both markets and channels perspective of our overall strategy. Perfect. That's super helpful. Thank you very much. Thank you. The next question is from the line of Aliasgar Shakir from Motilal Oswal. Please go ahead. Yeah, thanks for the opportunity. I hope I'm audible. I am actually out to this garden. Mr. Shakir, I would request you to kindly use your handset. Okay. Is this better now? Yes, sir. Please proceed. Okay. Question is, on, you know, first of all, on your distribution network. You know, 2 years before the, you know, I mean, around the IPO, we had started, you know, appointing small distributors. You know, we had mentioned that the revenue per distributor, therefore, had come down. Now, the strategy seemed fair on the part of the company, as you know, this would reduce the dependence on per distributor. Last few quarters, you know, there has been pain in this segment. Do you reckon this strategy in some way needs to be revisited? You know, I mean, I'm also asking from the point of view that the, this segment of, you know, revenue has seen lower growth. Do you read something related to this strategy, or it's more on the industry factor which has led to this impact? Hi, Ali. Nikhil here. No, you know, this is exactly the strategy that you laid out, this is how we started with about two, three years back. You know, overall, this strategy has generally done quite well. You would appreciate that even in distribution, in the west and the south markets, we have seen growth. It's only the north market, especially the states of UP and Bihar, where we've kind of seen a kind of degrowth, that is entirely due to the macro. That is not to do with the kind of distribution setup that we have there. Rather, on the flip side, the number of distributors that we have increased, while they may be smaller in size for now, but we do see a lot of potential in growing them very fast. That is, you know, the strategy, because we are able to now capture a larger number of retailer footprint over pan-India basis versus a bigger distributor in a bigger city, let's say, that would cover. I hope that answers your question. Got it. This is very useful. Second question is just on, you know, the outlook and your commentary and, you know, what strategy we are adopting. You know, you mentioned that, you know, some northern parts of the country are seeing more accentuated impact. Can you just I mean, kind of zoom in and tell us what really are the factors that is leading to this? Is it any specific, category of customers that are seeing more impact, you know, industry-wide? You know, what do you see as a lever for this recovery? Do you see this, you know, raw material price cooling off, maybe to some extent passing off these prices, you know, to the customer will help? Just if you can share, you know, what are your thoughts on the current situation on the ground in April, May and beyond, and what is the strategy we are adopting to revive growth there? Sure, Ali. We believe these are the same factors, you know, what we are going through and witnessing in the market is being witnessed by the other FMCG players in the industry and the other footwear players also. It basically... We believe the discretionary- ... spend of our TG has sort of come down because of the higher interest rates and the inflation that we are coping up with. This has been true for, you know, majority of the FMCG companies. While there has been a bit of an anomaly on the premium segment, because, you know, they have not faced that kind of impact on inflation, and they are basically spending. We have seen a significant impact in the TG, where, you know, they are highly dependent on their monthly income, right? That's the kind of impact we've seen. Piyush, you may want to add something. Hi, Ali. Just to add to it, from a strategy standpoint and from an actionable standpoint, while we have seen Campus premiumizing over the years, we have also witnessed that during this macro environment, inflationary macro environment, especially in tier two, tier three, and semi-urban centers, people have started down-trading a bit. While that part of the portfolio was no longer adequately serviced under Campus, we are not intending to bring down Campus price points. We are trying to introduce, or we'll be very soon introducing a newer sub-brand under the umbrella of Campus in order to address those price points, so that there is adequate coverage across the entire pricing spectrum or the ladder, which continues to serve these markets also. We believe, by doing so and, by extending the umbrella of Campus, we'll be able to capture this growth which has, which has so far eluded us, on account of down-trading. Got it. While we will continue on our focus agenda of premiumizing under the flagship brand. Got it. Understood. This is very useful. Just last question is on this new quality control standard, which is being, you know, implemented from July. I mean, how do you see that impacting us? Should you see any near-term impact because of that? Maybe in the long term, because this market is very unorganized, and especially in some of the northern region, where market is very unorganized, do you see long-term any, you know, benefits structurally for yourself? Yeah, absolutely, Ali. We see, you know, a lot of the organized players in the industry benefiting from this move. We actually appreciate this move by the government, because this will deter and definitely impact the, you know, lower quality goods being imported from other countries. That is, you know, very positive sign for the domestic industry in India. At the same time, there is still, you know, some clarity yet to be received from the government, which we believe should be coming any time now. That will throw more color on the specific requirements in terms of testing procedures. At Campus, we believe that we are adequately covered because we anyways operate on very high quality standards. We are very much covered in the BIS standards immediately, I believe, from day one of implementation. Just to be safe, we have also built up a cover in terms of inventory, in case there is some, you know, BIS standard that we might need to cover, you know, after the implementation. Got it. Any risk of revenue disruption because of this in July or maybe inventory going up? Too early to comment on. While there could be certain teething issues, by keeping this very factor in mind, we have built up the inventory cover to a satisfactory level, that while we deal with any curveball that might come with introduction of a newer standard within the overall BIS protocol, we want to ensure that, see, there is minimal or no revenue disruption or any demand-side shock that could come our way. Got it. Thank you. That's very helpful. Once again, congratulations, Piyush, for your elevation, and, you know, wish you all the best, Mr. Raman, for your new endeavors. Thank you. Thanks. Thank you. Thank you, Ali. Thank you. The next question is from the line of Harsh Shah from InCred Capital. Please go ahead. Yeah, hi. Thanks, and, hi, team, thanks for the opportunity. First of all, congratulations, Piyush, on being elevated as the Chief Operating Officer. My first question is that we spoke about investing behind human capital, and the press release also suggests that our current ESOP policy has been terminated. Was this more planned or abrupt? Do we have any other ESOP policy in place, or are we in the process of contributing a new one? Hi, Harsh, Nikhil here. We have terminated the old, the first policy that was actually launched after TPG came in. This is ESOP 2018 policy. This is the one that's been closed now, because it's been fully, you know, vested and since a long time, we've not had any comments on this policy from any of the stakeholders. This is the one that we closed. Currently, we are still running three ESOP policies. One is ESOP 2021 plan, and the other two is, one is ESOP Vision Pool, and the ESOP Special Grant. We have three current policies that are going on for all our top-performing employees. Got it. Got it. Thanks on that. Secondly, because of this splitting up of distributors and even what we gather from our checks, is that, we have also disallowed our distributors to sell footwear of other brands, even though they are of different categories. Correct me if I'm wrong here. Has that resulted in distributor attrition, which is higher than normal by any chance? Because our distributors count- No, not really. If you look at FY 2023 and FY 2022, it's the same, at INR 425. Yes, our idea is not to now, you know, continue to increase the number of distributors. We're also consolidating, you know, the number of retail touchpoints that each of these distributors service. Our idea now is to increase the wall share and the sales at each and every touchpoint, rather than increasing the distributor, you know, on an ad hoc basis, in each and every territory. Now we have a sufficient base of 425 to 430 distributors, which is a very decent base to get us good growth over the next one or two years. This addition of retail outlets, will that be predominantly in West and South, or even in our, or do we even see some scope of adding outlets in our core markets of North and East? Hi, Harsh, this side. The predominantly, the addition of outlets will be more across Central India, West India, and Southern India markets, because these territories are the ones which we have recently navigated. Now, on your previous question, adding on to what Nikhil just said, idea is to help the distributors understand and appreciate the kind of return on investment opportunity that they have with a brand like Campus. It's worthwhile for us to educate them and help them appreciate the fact that they can make a very robust ROIs on their investments with this brand, with the kind of brand pull that we command across our core and emerging markets. While there is no such hard and fast restriction on them to keep other brands from other categories, it's only prudent for them to understand and appreciate the opportunity and deploy more and more of their capital towards something which is more accretive, more ROI accretive than anything else. Got it. It's more of an education process rather than a strict binding condition on them. It's not a binding. I think basically, let's say, if a distributor wants to sell, let's say, couples of VKC Lakhani, they can basically, because it's not a competing category with us. Yes, they can very much do that. They are free to do so, while our endeavor is always to educate them and help them understand that in a sports shoe category, they can earn far better ROIs compared to any of the other open footwear categories. Got it. Piyush, during our IPO prospectus, we had disclosed the geographical salience of trade channels, right? What would be that salience for, let's say, specifically for MU and e-commerce now, between, let's say, west, north, south and east for FY 2023? First of all, I'd like to address this on an aggregate level, and then maybe we can spend more time on the specific channels. At an aggregate level, we have started mimicking the share of the overall industry on a pan-India level. Our revenue contribution from North and Central India is close to 55%. South India contributes 10%, West contributes around 20%, and East contributes 15%. From an e-commerce standpoint, this makes us more holistic in nature in terms of a pan-India contribution, wherein North and Central contributes roughly 40% for us, and remaining three territories contribute 20% a piece. Our trade distribution network has more or less a similar kind of a footprint as the overall industry or our aggregate numbers. Okay, got it. Just last question, on this Challenger brand, which we are planning to launch, right, by when do we expect the launch, firstly? I mean, optimistically, in the coming quarter, we'll be doing a small pilot across some of the selective territories. Then we'll be during the festive season, we are planning to go more broad-based across on a pan-India level. Okay. Depending on the outcome that we get during the pilot phase. Okay. Will this be more targeted, only towards distribution channel, or will the salience be like, across both, e-commerce and distribution? See, anything that we do at a company level is meant for all the channels. It's not channel selective or channel agnostic in any sense. It's more, based on, it's more targeted, towards specific cohorts, specific markets, towards addressing a gap that we see in our current portfolio. I mean, customer these days is channel agnostic, and hence our offerings would also be more omni-channel in that aspect. Okay, got it. What would, let's say, on a long-term sustainable basis, would this, the brand we are launching, would the margins be, more or less similar to our overall margins, or will it be a little bit diluted on gross and EBITDA level? I mean, that's always the endeavor, but too early to comment. That's why we are conducting a pilot first. We don't want to do anything which is margin dilutive in nature, while offering the best quality and the best product to our end consumer. Okay, fine. Thank you so much, Piyush. Thanks, sir. Thank you. The next question is from the line of Bharat Gianani from Moneycontrol Pro. Please go ahead. Yes, thanks for the opportunity. Just to understand more on the volume front, in quarter 4, we have seen the volumes grow to be a flattish kind of, and that's a bit of a deterioration from the Q 3 levels. Just to understand, like, have you lost any market share in the sports and the athletic wear category, since you earlier in the conference call highlighted that you have seen the consumers down trading? Just to check whether in the overall industry have you lost market share? Hi, Bharat, Nikhil here. On the contrary, actually, we might have just grown our market share slightly because this macro environment has been specifically tough for the entire footwear industry. This has also been validated by the Bahadurgarh Footwear Association when they released an article wherein they've mentioned that in the first 9 months or the 10 months of the, FY2023, they've lost about INR 2,500 crores of sales on a base of INR 20,000 growth this year. There's actually been a degrowth in that sense, especially in the unorganized segment. You know, in that sense, we've grown at 24%, so we've, I think, demonstrated very, very, you know, robust performance given the macro environment. I mean, directionally, Bharat, we have certainly gained market share, given we have grown by almost 24-25%. Looking at the commentary on a broad-based basis, we understand that the industry has either stayed mute or have slightly de-grown during 2 or 3 quarters of the previous financial year, which gives us a lot of confidence that directionally we have built upon our existing market share. Okay, okay. My question was specific to the second half, actually. I guess you have kind of not lost actually. Yeah, another question is on the any guidance on the margin, because we have seen margins coming off in this fiscal end, specifically in quarter four. What would be your long-term guidance on the margin, given that you have you are introducing a sub-brand within Campus at a lower price point? Overall, any direction on the margin profile will be improved? Thanks, sir. Bharat, our material margins have largely stayed closer to 50%. They have trended in the direction of in the ballpark of 49%-51% over the last many years. We expect material margins to stay the same. Beyond material margins, there is a conversion charge that happens, which leads to a gross margin profile of anywhere between 36%, 37% to 36%-38% for us. Any increase in minimum wages, any increase in contractor charges gets transmitted with a lag, but directionally, we have always stayed in this ballpark. Beyond that, we expect operating leverage to kick in as we gain more and more scale. While our EBITDA margin is currently closer to 18%, we have normally trended anywhere between 18%-20% in the near medium term. We expect this recovery to happen in the near medium term, as price transmission happens over the coming quarters. While I mean, we don't want to give you any hard guidance around this, but our expectation is to stay closer to this territory, which we have navigated over the last five, seven years. Okay. Okay, thanks a lot on this. Thank you. Ladies and gentlemen, in order to ensure that the management will be able to address questions from all participants in the conference, kindly limit your questions to 2 per participant. Should you have a follow-up question, please rejoin the queue. Thank you. The next question is from the line of Rahul from LionRock Capital. Please go ahead. Hi, can you hear me? Yes, sir. Please proceed. Yeah, hi. A couple of questions. One is, in 3 Qs, you guys mentioned that direct to D2C volumes were up, I think, 45% or 46%. If I hear it correctly, you mentioned that this was up 15-ish% in 4 Q. I just wanted to understand how we should read into this. Secondly, I just wanted to understand a little bit better in terms of your growth outlook, specifically over the next 12 months. As Piyush would be taking over all the channels, you'll be rationalizing your trade distribution. You know, historically, you have always talked about growing volumes at the overall company at mid-to-high teen. Do you see the macro as well as all the internal work you are doing, supportive of that? Or do you think 20, fiscal 2024 would be more of a kind of a restructuring kind of a year and, you know, where you'll be working to set up the growth, set up the company, set for growth in future years? Hi, Rahul. I'll take up your your second question first. With Piyush coming in, the idea is that we wanted to bring in a lot of efficiency in terms of also on in the inventory levels, because, you know, now we will have a central pool of inventory rather than having it channel-wise. One is that. Second would be that there would be a lot of efficiency in terms of central planning, again, you know, under one roof, rather than having it channel-wise. There are a number of buckets that we see this move will significantly should impact the performance of the company going forward. There could be some, a quarter or two of, you know, handholding time, but beyond that, we should see some, you know, improvements coming in. On the growth side, you know, historically, we've performed at almost a 25% CAGR over the last five years. This year also, we've done 24% in an exceptionally tough environment. We believe that, you know, we have sustained very good growth. Yes, we have done that on the basis of letting go of a little bit of margins because of higher marketing expenses and some of the conversion costs that have gone up due to the increased labor expenses that we could not pass on to the end consumers this year. Going forward, as soon as the macros, you know, get better, we are expecting to see some resurgence in the second half of this year. From there on, we should be back on track with the growth and the margins immediately. Piyush, you may want to add something. Hi, Rahul. I mean, just filling in for the first half of your question around, I believe that was more around B2C growth, tapering down from 14%+ to almost 15% in the Q4. I can assure you that's more transient in nature. We have seen, we are seeing a very good 1Q so far as B2C is concerned, and you'll witness that change in trajectory in the coming quarter for financials. That was, I mean, it was done more on towards some consolidation that we had done on the B2C side, but nothing to flag out. You would still expect, you know, the growth. We still expect a robust growth profile in our B2C segment, and the resurgence in our trade distribution also, with the improvement in macros. Our view is second half of this current fiscal year should be the pivotal time for this macro environment to improve. Thanks. Thanks a lot. Thank you. The next question is from the line of Akshen Thakkar from Fidelity. Please go ahead. Yeah, just couple of questions. One, around the, you know, BIS implementation. What do you think is the, you know, driving factor behind this? Is this just regular sort of government intervention to ensure quality, or is there, like we saw in toys, where something similar happened, where there was, you know, impact on imports? If that were to play out, just broadly, we don't import directly, but we do import, you know, parts of the shoes. Just generally, what your thought is on how you are placed competitively. Could there be a, you know, like in toys, for example, particularly we saw a large disruption. I don't know if that's something that you think could happen in this industry. That was question one. Then, Question 2 was, I think Piyush mentioned that you're looking at trade distribution changes in North, particularly in UP. You know, just maybe talk through what are the key things that you're trying to achieve over there. Those two questions. Thanks. Sure. Hi, Akshen. I'll take the first question first around the BIS thing. While we are highly supportive of this move by the government, we believe that it'll give a lot of impetus to the domestic industry, because BIS is not only getting implemented across finished goods so far as footwear is concerned, it's also getting implemented across the various components, SFG and raw material that you import from overseas. See, the overarching idea that we can see in terms of government's vision is, they want to promote some especially human capital-intensive industries in order to make them export ready as a China plus one strategy. The overall impetus on quality is more driven with that vision, that we should eventually result in we should actually lead to the creation of an industry which is, which is, you can say, kind of ready for us to earn some foreign dollars, rather than being import dependent on some of our neighbors for raw material import and all. From an industry standpoint, we believe that this is a big plus for the domestic players, because eventually the cost of doing business, so far as import is concerned, is expected to go up, largely, I mean, holistically across the spectrum, be it raw material imports, be it CKD imports, or be it full-fledged footwear imports. We believe that in the near medium term, this is going to give us some tailwind, while more clarity is awaited from the government on the implementation of the BIS norms, but that's the directional favor we have received so far. Akshen, because our raw material imports is limited to not more than 15% of the overall purchasing that we do, we are not looking at any significant impact in terms of margins because of this BIS implementation. I mean, anyway, since we have the setup to kind of get that imported material certified in our own labs... Yeah. - which some of the international players do not enjoy as a competitive advantage. That's on the BIS side. Coming to your other question around distribution, see, in some of the territories, North India-based territories like UP, BR, we have seen that cake of kind of recovery, where people have started down trading due to lack of discretionary income, in specifically in the states of UP and BR. For that, we have taken a two-pronged approach. One is addressing the portfolio gap that we currently see in our current set of offerings with Campus as a flagship brand. We believe that people have downgraded a bit in tier three, tier four markets. This is, while, it's a, it's a good market for us, UP has been a stronghold basin for us. We don't want to vacate these price points, and hence, introduction of portfolio fillers, which are not margin allocated in nature, first of all. Second, in terms of our overall distribution capabilities, we believe that, it's time for us to do some bit of a consolidation, because earlier, see, it's a cycle that you usually witness. Once you have to penetrate further in a saturated market, you appoint smaller distributors in order to get access to those peripheral counters. Once you have gained enough access with your feet on street, getting acclimatized to these counters, there comes a time when you need to consolidate the overall distribution headcount in these markets in order to ensure that there is adequate capital available with your partners to deploy in these markets to go further and gain wall share. It's a cycle, which we go through in every five to six years, where you first consolidate and then you decentralize, and then you consolidate again. Hence we are at that turn or that crest of the cycle, where we need to consolidate again in order to deploy more money, in order to go for, in order to penetrate further and gain more wall share. That's why it's a twin prong strategy, right product and adequate capital in order to go deeper into the market, because smaller distributors have helped us cover the width. Okay. one last question, for your D2C portfolio, online specifically, could you just help us with what the growth for this quarter was? This quarter, we have witnessed around 10% growth in D2C online. That was more of an aberration because our B2B businesses were restructured, especially the O2O business that we speak about, the AJIO business and the Udaan. They have seen some impact of the slowness of trade. We have kind of substituted them with other high growth businesses within the D2C portfolio, which you'll see in the coming quarter. Sorry, will that impact on Ajio and Udaan be lingering? They have pivoted. They have repivoted in terms of their overall strategy. Earlier, they were more focused on the B2B side of the business, wherein they were servicing the retailers. Now they have repivoted and kind of consolidated the business with the overall JioMart business and have transferred our account to that. Earlier we were not doing business with JioMart, so now the B2B flavor has shifted to B2C now. The transient impact during the months of February and March was the one when they were not conducting any business, and hence there was a slight blip in our growth. Okay. Q1 onwards, that growth should normalize? Yeah, it's back on track. Now they have consolidated internally. They have repivoted in terms of their strategy. It was more partner-driven rather than anything happening at our end. Sure. One last. I'm sorry to interrupt. Mr. Thakkar, there are many other participants who are waiting for this. Sure, I'll fall back into. Thank you, sir. The next question is from the line of Ronak Vora from AUM Fund. Please go ahead. Hello? Hello. Hi, Ronak. Yeah. Slightly on a longer term is what I want to understand. In terms of revenue, what would be the whole difference in the organized and unorganized footwear industry as of today, and how is the whole mix trending going ahead? Hi, Ronak. The overall industry expect that the sports and athleisure industry expected about INR 12,000 crore, of which roughly 50/50 is split, where INR 6,000 is organized and INR 6,000 is unorganized. This is the split currently, but it's fast, you know, converting from unorganized to organized at a very fast pace. And the overall industry, you know, if we take out the anomaly of this year, of FY23, it's otherwise been growing at about close to 15%-16%. This is the fastest growing category, and formals actually is on a decline, that, in that sense in India right now, currently. My second question is on the margin front. I want to understand what kind of margins do we own in kind of each trade channel from, say, B2B to, from B2C and in our e-com and EBO stores? Right. Generally, margins are consistent, you know, amongst the channels. There is slight variation because of the dynamics of the channel specifically. On the distribution side, we basically roughly work at about 17%-18% kind of EBITDA levels. On the D2C side, on the online, we have about 200-300 basis points higher margin because of a different construct of the channel-specific partners. On the EBO side, again, we work on a 24%-25% core wall EBITDA. This is broadly, you know, the numbers that we've been doing for the past 2, 3 years. Okay. Mr. Vora, any further questions? No, thank you. Thank you. The next question is from the line of Mehul Desai from JM Financial. Please go ahead. Yeah, hi, sir. my first. I'm sorry to interrupt, Mr. Desai. Your voice is muffled. May we request you to kindly use your handset, please? Is this better now? Yes, sir. Please proceed. While you did allude that, you know, D2C online, 1, 2 growth should be fine, can you give similar commentary on trade distribution? Are we seeing moderation in the decline rate in trade distribution channel in 1Q so far, versus 10%-11% that we have seen in 4Q? ... that's the first thing. When do you do you see this channel coming back to growth from second half only, or you see that coming earlier also? That's the first question. Second thing, second question is, how big is this INR 699 to INR 999 market which you are, you know, trying to address through a sub-brand? Third question is typically a bookkeeping question to Mr. Raman. If you can just give reason on, you know, quarter-on-quarter decline in staff cost, and what are the elements that have driven higher other expenses on a YY base. Yeah, that's all from my side. Yeah. Hi, Mehul, Piyush this side. I'll take your first question first on how we see this trade distribution channel coming out of the woods. We believe that quarter four this year has been the inflection point where narrowing of degrowth has kind of completed. We don't expect to wait till second half of the fiscal year for growth to come back to the channel. While we are not at liberty to share the numbers right now, but we believe that in the first half itself, you will start witnessing growth in the trade distribution specifically as a channel, right? While D2C will maintain its own pace that we have demonstrated over the last year, that's the endeavor. Now, coming to your third question around reduction in employee cost. That is a one-off, because last year we had ESOP impact coming into play in Q4 of FY22, on account of two grants happening in terms of Special Grant and Vision Pool Grant, which is not there this year, and hence the delta that you have seen. Now, coming to your second question around how big is the market between INR 699-INR 999. Based on industry estimates and our own calculation, we believe that it's, I mean, ballpark, it's a INR 1,000 crore growth market, wherein we believe that INR 500 crore-INR 700 crore is the relevant addressable market for us. It's a sizable one for us, and, given, we enjoy roughly 20% market share, so makes, all the more sense for us to not leave this market unattended. Sure. Just on staff cost, while I got your explanation on a YY basis, but on quarter-on-quarter basis, I mean, was it Q3 to Q4 also there is a steep decline? Is there something to read there or? Not really. Nothing. Okay. On the other expenses, if you can explain what, where, I mean, how much would have been driven by AMP or any other elements that you would like to highlight? I'll take up the other expenses piece, because that is, that certainly demands some more clarity, given it's a consolidated lump sum number. There are four main elements to it. One is the increase in conversion cost. Now, conversion cost on a year-on-year basis has gone up by roughly INR 30-35 crores for us. Largely on account of back-to-back increases in minimum wages across our assembly plants in Baddi and Dehradun. While in this current year, we'll be able to and to a certain extent, in while we have started transmitting this impact, but this transmission happens with a lag, as we have mentioned in the last couple of quarters also, with price increase in our newer portfolio as and legacy portfolio. Hence, the catch-up that we have played over the last two quarters. First impact is that. Second is because of maintaining our advertisement cost at 6.5% over the year. Despite seeing some, I mean, despite seeing some moderation in growth and finally clocking in only 24%, we didn't cut down on our marketing expenses because we believe that it's a long-term investment. Third element in here is our online commissions, which are largely in line with the growth of our marketplace business on the B2C online side. Fourth is increase in our freight cost, which is largely in line with the inflationary trend and the growth that we have witnessed so far. These four major components, cover almost 90% of our other expenses. Understood. Understood. Got it. Last one, booking. What are the CapEx plans? I mean, if you can just give the CapEx outlook for FY 2024? We don't expect any major CapEx outflow happening in FY 2024, specifically. The only thing that we have done in FY 2023 and is acquisition of one of the factories from Marico in Paonta Sahib. From a strategic aspect, we believe whenever we'll do a capacity expansion, this area suits us well, given its proximity to both Baddi and Dehradun. The expansion would only start once we outrun our existing capacities, which are, I mean, which are comfortable in nature, in terms of servicing our current growth expectations for the next 12 to 18 months. Sure. Thank you so much, Nikhil. Thank you. Good luck for the FY 2024. Thank you. A request to all the participants: Kindly limit your questions to one per participant. Should you have a follow-up question, please rejoin the queue. Thank you. The next question is from the line of Alok Shah from Ambit Capital. Please go ahead. Hi, Nikhil, Piyush, Raman, and team. Thanks for giving this opportunity. The question is on, essentially on the scale-up of purchase increases in the Challenger brand. In that sense, can we assume that, you know, the focus will be more on volume growth than on the ASP growth? Not really. I mean, hi, Alok. See, first of all, it's just a portfolio filler. Let's not, let's not start looking at it, from a different lens altogether, whether it will be EBITDA accretive, dilutive, or all that sense. It's just an opportunity that we see that we are unable to fulfill or do, complete justice with within the flagship brand of Campus, because Campus is on a premiumization journey. We do believe that this is, a decent in the market for us, to not vacate at this point in time. All said and done, this is going to be a filler in the end. From an ASP standpoint, from a volume standpoint, or from an overall margin standpoint, we don't, I mean, While we will do a holistic pilot in the coming quarter, we don't expect this brand to cause any blip to our overall growth plans or our overall outlook of P&L and balance sheet. Got it. The point was to get a sense that, say, for example, in the next 2, 3 quarters, we see a recovery, you know, like in the UP, Bihar, and, you know, the whole that sort of belt. How do we internally focus on, you know, pushing the different brands or sub-brands, at different price point? Would you let the market, you know, forces determine the percentage share of each and every price point? Would you have a brand conscious strategy? That's what I was just trying to get at. Yes, I mean, we are always respectful of market forces in play, and we believe that this is not a tactical move, so to say, because the unorganized to organized shift is anyways happening in the country. With BIS also coming into play, cheap Chinese imports will be curbed to a larger extent, and hence, it's not just about how the macro environment looks currently and comes across as a tactical play. It's a very well thought through strategy. We have spent a good amount of time while deliberating on this entire approach internally before giving a green signal to the entire launch plan. Because, see, if you see at BIS also, imports will become significant. What has happened in toys, we expect something similar on the lower end of the spectrum to happen in footwear as well, and cost of doing businesses will obviously go up. That economic strata will obviously shift from unorganized to organized, so you need a brand to handhold those first-time consumers before we pass on the baton from this challenger brand to Campus eventually. It's about owning the customer life cycle journey. It's a thought through strategy. We believe that it's here to stay while it's, it'll play the role of a navigator, but the mothership will always be steered by Campus. Alok, I'll also just like to add that. Yeah. you know, there is a complete focus in terms of premiumization, as we've always done. Campus has done extremely well as a brand in terms of premiumization. Even this year, we are planning to launch a significant more number of designs in the 2,000 plus category versus even FY 2023. you know, we are continuously witnessing a very good offtake of Campus in the premium category, especially from 1,000-3,000, where we've gained a significant revenue share versus last year. Ultimately, the idea is we cannot crystal ball. I mean, we can't do any crystal ball gazing in terms of how and when the macro would improve. We can only get directional signals. Endeavor is to stay prepared for whichever way the market goes. We should have the right offering for the right consumers, whether they downtrade, uptrade, at the right price points, and should offer the best value proposition to our end consumers. That's how we'll stay relevant in the business, and we can offer sustainable growth. Okay, perfect. Thank you. I'll get back in the queue, and congrats to you for the promotion. Thank you. Thank you. Thanks, Alok. The next question is from the line of Akshen Thakkar from Fidelity. Please go ahead. Sorry, my questions have been answered. Thank you. Thank you. Ladies and gentlemen, that was the last question for today. for today's Campus Activewear Q4 for FY 2023 Con Call. On behalf of Campus Activewear Limited, that concludes this conference. Thank you for joining us, and in case of any further queries, please reach out to Campus Activewear's Investor Relations team at ird@campusshoes.com. I repeat, ird@campusshoes.com. You may now disconnect your lines. Thank you.