Now on the conference, over to Mr. Rushabh Ghiya. Thank you, and over to you, sir. Good morning, all. Thank you, Lizann. Welcome everyone to our annual investor and analyst conference call. We do hope that you are staying safe and keeping healthy in these uncertain times. I have on call with me senior leadership team from Avenue Supermarts Limited, Mr. Neville Noronha, MD and CEO; Mr. Ramakant Baheti, Group CFO; and Mr. Niladri Deb, CFO, Avenue Supermarts Limited. We hope you've had a chance to look at our presentation, which was uploaded day before on the exchanges, and it's also available on our website. We will follow the usual format, with Neville taking us briefly through the presentation. Post that, we will open up the session for Q&A. Just before that, I would like to draw your attention to the safe harbor statement for good governance, and I'll then hand over the call to Neville. Over to you, Neville. Thank you, everyone. Thank you, Rushabh. Good morning, everybody. Hope you all are staying safe and also your loved ones are keeping fine. Like every year, I will take you all through the presentation quickly. Then open up for Q&A. I'll do my best responding to every single question, time permitting. Okay. I'll go by the page number. This is the presentation uploaded on the exchanges. I'm on page number five, key updates. I thought it's nice to start the presentation by giving you an update of Q1 that has just passed by. Everything that's mentioned on this page, except point number two, which we added newly, is part of what we released in Q1. What we're trying to say on this page, which effectively tells us how we are doing as a business, which is primarily organic sales for stores which are two years and older, which is primarily the point number two, where we are saying that two years and older stores are already doing 91% of sales in the latter part of June. What is interesting to note there is, I had alluded about it briefly in my update for Q1. We are now giving you more statistics that in states where regulation has been eased much earlier, we are already doing more revenue than 2019 for two years and older stores. That's a very positive sign for us, and that has been a consistent direction that if stores are operated with at least 10 to 12 hours of operations per day, but more importantly, caveat being that they should be opened in the afternoons and evenings. If I'm open at, say, 6:00 A.M. - 6:00 P.M., doesn't help as much as it's opened at least till 8:00 P.M. or 9:00 P.M., the sales comes back. That's a very positive sign. We still have primarily one state where restrictions are still a bit tough, and hence, that state is taking more time for business recovery. If you go to page six, this basically talks about the mix of sales. Obviously, because of COVID last year, throughout the wave one and even in some states after that, there was a huge restrictions on selling non-essentials. The mix change is primarily because of restrictions of non-essential sales. Food, obviously, in fact, had a positive growth rate vis-à-vis last year. That's why it shows 57%. Non-food FMCG, which is basically your shampoos and detergents and all that, didn't perform in line with foods for a simple reason is opportunities to go out significantly reduced, and hence consumption for those categories reduced. If you look at this data in context of Q4, I think what we saw was general merchant apparel business came back. It was business as usual in Q4 of last year. Again, with second wave Q1, we again had a huge hit, and business was literally shut for almost a month in quite a lot of cities. That is about the mix. Page seven, same as usual. We continue to do what we've been doing for so many years. Given an option, open stores in cities where we already exist, and also there's a calibrated approach to going to new cities and new states. It's business as usual. We opened 22 new stores, and we also converted two existing stores into fulfillment centers. I'm sure there'll be a lot of questions on e-commerce, so I'll take those questions later. Just to give you a perspective, we did this more as an experiment in Mumbai because there was inherent demand, and we couldn't scale up our e-commerce demand by going to a greenfield new setup. Because we had two existing stores, we said why not try this and do e-commerce there. We only picked up those regions where we felt that there's a store close by and a lot of that revenue that is lost is recouped by these stores which are closer. That's why we selected two specific stores. That is one in Kalyan and one in Mira Road. Go to page eight. Like we had spoken in the last analyst meet, primarily because of COVID Wave 1 and practically everything shutting down for the first quarter, our store openings for FY 2021 was not very good. We had forecasted that. We also said that we'll make it up for this year, but at that time we never imagined a second wave. We are still catching up and hoping that if there is no further disruption, we should hold on to what we had committed on store openings for a combination of last year and this year. Which of 59 stores is what we had said. Go to page 10. Again, if we go to the first slide which is bills cut, obviously because of COVID, the number of people walking into the store significantly reduced. Interestingly, what happened also is people bought more per trip. That was a good sign, and that was also one of the key reasons why we could keep our costs under control. Business became more efficient for us in spite of the lower footfalls. Like-for-like growth is negative 13%, and that again, happened because of COVID. This is for stores which are two years or older. Again, primarily because of COVID. Like I commented, which is also mentioned in the first slide that I spoke about, last 15 days of June has been very promising and states where relaxations were declared much earlier are already in the positive. We added 1 million sq ft this year because of the 22 stores, so more or less the sizing of each store is more or less the same, approximately 50,000 sq ft per store. The reasons for that is what we have mentioned earlier also, that larger stores is working out better for us, and that's why we like this size of stores to operate. Obviously, the last slide on this page, revenue per square feet again came down, because of COVID. It fell 16%. Go to page 11. The first slide on the top left is again, basically revenues. EBITDA and EBITDA margin again got hit, obviously because of the revenue impact. We had new stores adding, and then we had overall revenues going down. I still think, considering the circumstances, delivering a 7.3% EBITDA is still not bad. Also a PAT margin of 4.9%. In general, quite happy with how the business was run, and especially to our employees who did a phenomenal job in managing the business in such trying times. I'm personally very happy with the way we run the business. Go to page 12. Top left, inventory was a very interesting area, but it also kind of showed or kind of reflected the capability of the buying team and the basic fundamental of the whole business in terms of what are the kind of articles we have, what we sell, how do we churn them. I think we've done a good job here. The incremental inventory of 36.5 is something that's nothing to worry about because, again, when business comes back, we come back to our regular inventory days. I think no issues there. We've not had any major write-downs on inventory. Fixed asset to inventory turnover ratio, again, huge drop. Drop because we continue with our aggressive store addition plan, and it's just a simple arithmetic of lesser revenue and more addition of assets. That's why it's gone from 4.1 to 3.1. We don't have any debt. Right, Niladri? Yeah. Any comment from Niladri on 296? The INR 296 debt that you see on the right-hand top corner is largely the Ind AS 116 restatement of lease liabilities for the stores and pieces we have. On a borrowing basis, our borrowings are nil as of now. Thanks for that, Niladri. Thank you. Obviously, the last slide on this page is return on capital and return on net worth. It's 9.9% and 11.5%. Here again, this is an impact of [ASME] purely and the consequent profit reductions that we saw because of COVID. Here again, my counter to that is Q4 was great. We recovered, we bounced back brilliantly well. Again, Q1 went down because of the second wave of COVID. Again, we are seeing a sharp recovery in certain states where everything has opened up for shopping. Page 13 is just a lot of details on the standalone consol. What I would like to go to is, I'm sure everybody is more interested, is on page 14, which is the e-commerce business. These are the numbers we have delivered. I'll spend a little bit of time here on page 14, the first Avenue E-commerce Limited business. Obviously, we've more than doubled our revenues. These were revenues primarily from Mumbai city. We started other cities much later. Revenues are great. The business did phenomenally well during COVID. In fact, while the top line and the revenue numbers look good, we also got a lot of flak from the customers because we couldn't service them the way they would want to. The demand was super high. We tried our best to whatever extent we could. We got excellent insights on the business. Again, kudos to the team for running it really well, very efficiently, kept the costs under control. What's, again, for me, personally, very satisfying is that we've kept our costs under control. We've spent just about the same amount of money that we did at a significantly lower revenue, which is very promising. Again, preempting question on this area, I think we have a very long way to go. While we are more positive on this business, and we're positive simply because customers want this. Any city, any place you go, there is a section of consumer shoppers who wants grocery at the doorstep or wants grocery closer to their doorstep, and that's why the model that we built. And within the framework of what DMart stands for, we are going to pay reasonably good attention to this business. So that's my comment on the e-commerce business. And with that, I am done with my presentation and open for questions, Rushabh. Thank you so much for listening to me. Thank you, Neville. Lizann, we can open the floor for Q&A. Thank you. Ladies and gentlemen, we will now begin with the question and answer session. Anyone wishing to ask a question may please press star and one on your touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Avi Mehta from Macquarie. Please go ahead. Hi, team. Hi, Neville. Thanks for giving this opportunity. My first question, as expected, is on e-commerce. I wanted to basically understand your thoughts on how you see this space evolving through the pandemic, and especially do you see this changing the way the customer looks at offline retailing? Would you revisit the offline store sizes? If you could give your thoughts on this, please. Good morning, Avi. It's more or less the same, Avi, as what we spoke last year. Our view is both will coexist. India, again, per capita incomes are such that the basic cost structures on one side, which is the commercial side, and the consumer profiling or the consumer need as the other side, have still not evolved to an extent that we feel that offline will grocery. I'm talking just about grocery commerce or grocery retail. We believe that offline also has humongous potential. We are going to straddle both sides, Avi, the offline as well as online. We'll continue to focus our attention on offline, building the business. It's a profitable business. It's a business we understand, which has been built or fine-tuned over almost two decades. We will do both, but primarily all our investment focus, attention will be on the offline business. Also in large towns of India, we will look at e-commerce grocery the way we are doing right now. That's our view. That's my limited view. I don't want to comment on anything else. Whatever, simply put, is my limited understanding on so many other things that are happening. You have instant grocery retail, you have marketplace retail, so many other things, digital convergence. I don't understand all of that. We understand grocery retail, we understand DMart, we understand the DMart customer, and we are looking at it as an alternate channel for more convenience for a particular type of customer who would not want to come to stores that often. That's the way we are looking at this. Would it mean that for a geography-wise kind of focus, so cities might see more focus on online or e-commerce versus Smaller towns, Tier 2, Tier 1 would see more offline. Is that how I should read your comment, sir? Yes. We will be focusing on online more on large towns, which we've always said, that large metros, large towns, and we straddle from that direction. When I say large town, what do you define as a large town, right? Somebody may say even a one lakh population town is a large town. What we are trying to say is that we're going to address this opportunity from a metro perspective. Let's see how it's doing in Bombay, Bangalore, Hyderabad, right? Let me then try Ahmedabad. Let me then try Baroda or Surat before Baroda, actually, considering the population. Yeah. Within that, we say, "Okay, fine. Do I have some risk capital to even try maybe another couple of cities?" We'll do all of that. Our view is this opportunity is in large towns. You straddle it from very large town metro, make it work there, and then go slowly to the other cities. Sir, does the second part also hold true, that the offline would then also be lesser in the larger towns and it'll be more in the smaller towns when you see additions? Okay. Again, I think this is what I constantly get asked, and I counter it by saying, why do we need to see it as a binary? Why is it that if e-commerce grows, we feel that it's going to be a threat to modern trade? Not really. Because what's the modern trade's penetration in the market? You have to look at that. In a metro city also, what could be the modern trade penetration? 30%, 35%, 40%? You still have a 60% opportunity left. Today in a Mumbai city, for a brick-and-mortar business, actually, it's not online that is a threat. For us, it is the availability of real estate that is a barrier. I could be 2x of my current revenue in Mumbai if I could easily find a demand property, a kind of property in more locations in Mumbai. You know? Okay. Okay, sir. Okay. Sorry for taking a longer time on this, but my second question, sir, if I may, was on the near term. Now, you are at almost a 9% SSS decline in the last 15 days of June, and you've highlighted in the results as well that it takes about 45 days of uninterrupted operations to reach back to normal. Does that imply, and please correct if I'm reading too much, that we would be back to normal probably by only third quarter, and that's when we see growth? If that is the case, if that is what you're feeling, would EBITDA margin normalization also be in a similar kind of time frame? I cannot comment on that, Avi. What we can say is that because bulk of the revenues comes from one particular state, and there the restrictions are still ongoing. That's what's distorting the overall company numbers, right? really cannot comment on that specific thing. Sir, would the second part be true, that EBITDA normalization would be linked to sales normalization? Would there be a divergence because you are doing a lot more cost? No. The biggest contributor to improved EBITDA is top-line sales, and within that, non-essential sales. These are the two important criteria. Both of these, you can deliver them or bring them to normalcy only if the number of hours of operation is reasonably good for the store. Okay. Let me put it this way. Consumers want to come and shop, right? It's just that regulation, to an extent, hampers that as of now in certain states. From a fear standpoint, there's no fear anymore, is our sense as of now from a consumer shopping perspective. Because, in fact, the non-essential side in other states where things have opened, actually, there is a surge. There's a reasonable surge of buying there because of pent-up demand, right? Okay. It needs some relaxation from a operations perspective, store operations perspective. Sorry if I may ask further, when there is a surge, is there an increase in competition as well, competitive intensity? It's too early to comment on that. I don't think many operators will think about competition, meaning price discounts or whatever, because the inherent pent-up demand, right? People just want stuff. They haven't been shopping for a reasonably long time on the non-essential side. I don't see it as competition. In fact, if there's anything, the unorganized sector has got disrupted quite a lot, especially in the non-essential side, which is a good sign for operators like us. Anybody who's organized is going to see a reasonably good bump on non-essentials, discretionary buying. Perfect, sir. Perfect. Just one comment or a request, if I may say. I saw in the annual report you have actually followed through and have not shared any message. I would just request if you could pen or share your thoughts in any form, whether a letter or something, it'll be great. It's always useful to understand your thoughts on- You're talking about the CEO message, right? Yes. The AR. He's asking you to write. Yes. I'm asking you because you said in the last two annual reports, you would stop, and you've actually done that this time. I wanted to request you could please do it in any form. If not in the annual report, any other form, any other medium, but we would love to hear from you. Thank you. Thank you for that, Avi. The only reason I didn't write is because I have written a lot because of COVID. In fact, last year's AR comments was reflection of this year, right? I wrote it last year because obviously we write it around July. Yeah, but I've said that if there's something very meaningful, I will definitely write. Yeah. Okay, sir. Thank you very much. Thanks for this opportunity, wish you a lot of luck. Thanks a lot. Thank you. The next question is from the line of Abneesh from Edelweiss. Please go ahead. Yeah, thanks. My first question is on the fulfillment center. Any more markets you want to do this kind of a pilot project? There was a store which was there in, say, 4 km, 5 km radius, but any sense of some loss of market share? Because always the consumer is also quite lazy in India, because e-commerce is available in Mumbai everywhere. Any market share loss data you could point out because of this? These two stores where we shut down? Yes. Abneesh what we saw broadly is if the alternate store is in a reasonable distance and has capacity to service, at least 40%-50% of the revenue comes back to those stores. Around 40%. Provided those stores have the infrastructure or the capability to service. That's one data point I can tell you. Another data point is, again, Indian consumer is very different from others. I think if there is one reason why people don't travel long distances, it's purely because of the infra ability. The time taken to travel is the problem, especially during weekend. Otherwise, people don't mind traveling a little bit more distance to get great value. That's the insight I would like to give you. Any more markets you're planning this? We've launched in Hyderabad and Bangalore as of March, and we are looking at a few more cities. Pune, sorry. We are also in Pune. I'm sorry. Pune, Bangalore, Hyderabad, and we're looking at a few more cities. If you keep a track of the market, you'll know that we're doing some more cities, too. Yeah. No, my question was on the fulfillment center getting closed and getting converted. No. Any more cities you're doing that? No. Abneesh. Shutting stores to do FC? Yes. No. Like I said, we did Mira Road and Kalyan just because of paucity of time. There was huge pressure, huge demand, and we wanted to kind of monetize that demand, not just from a revenue perspective, but also it will give us good insights, good learning. Yeah. The trade-offs were just maybe 40% or 50% revenue loss for just these two stores, and that's why we took that call. I don't think we will do that anywhere else as of now, at least, as we speak. Abneesh, in addition, we are also there in Ahmedabad. Right. Yeah. Now, you always discuss and for the customer also, the lowest price proposition for Avenue Supermarts is extremely strong. Now, of course, with JioMart, Flipkart, Amazon, Grofers backed by Zomato, BigBasket backed by Tatas, I'm sure lowest price proposition would have deteriorated versus, say, two, three years back. Last analyst meet you had discussed you give freedom to the local store management, to address any specific issue on this front. Could you discuss how often that step was needed? Second, any sense you can give versus three years back, how the situation is? How much are you the lowest in terms of pricing in any basket? At an entire basket level, doing a thorough analysis, I would not be able to comment, Abneesh. Like I said, even last year, our systems are very agile. Decision-making is pretty low in the hierarchy. Store managers can decide for themselves what they want to do. Our systems and our processes are aligned to reduce prices, is to maintain our positioning in the market. In terms of comparative intensity of competition, I don't think there is anything meaningful to talk about there. Everybody, all retailers are focusing to get their overall business back on track. I don't think the time has come yet about discounting or being aggressive on pricing and all of that. We don't see that anybody has come reasonably close to our pricing yet. Your concern is as good as ours. Obviously, if there's a business that is working well by cutting prices, maybe a few other retailers will also copy that or do that. We will see. We always said that we'll compete, and we'll try to maintain our positioning as the best value retailer for a shopper. The freedom to the local store manager, was it something which was quite commonly used in terms of pricing? Yeah. From the very beginning, that's how we worked. Last question on e-commerce and the delivery. Three questions there. Free delivery beyond a threshold, any thought process there? JioMart, there is that facility at INR 10 or INR 20 also free delivery. Second is franchising DMart Ready. Is that an option which is possible? If you could discuss these two, and there's one more question I'll ask on this. Okay. Either ask the third question or I'll answer these two. Yeah, essentially, third question is again on DMart Ready. when I see your store in DMart Ready, it's quite small in that small store, you are selling pouch milk, which is essentially extremely low margin. is that more to popularize that product, popularize that store and as a concept to the customer? Because again, you need refrigeration, you need space, and customers can buy that off the shelf. He doesn't need to actually order and then come there. again, the full delivery thing is not getting popularized. The store is getting popularized. what is the thought process? Is that a long-term thing or more of a short-term marketing initiative? Okay. I'll go one by one. Free delivery is something I don't think we will offer for home delivery. At the same time, we have now executed a cutoff. We don't charge more than INR 79 now for delivery, the max. Yeah, that's the first question comment. Franchising, we haven't thought about it yet, and for the simple reason is you will do franchising if there's money to be made, right? First is that, is the model right for us? Are we making money? Then, is the franchising, what is the trade-off? That is, okay, you want to take away a lot of the day-to-day operational rigor to an entrepreneur, local entrepreneur, and so that you scale up fast and things like that, so many other things. I don't think we have still come in our business building journey to think about that or even, or if we are thinking, implement that in the near future. We have to first make the model work. Yeah. That's our response on franchising. Lastly, pouch milk in the DMart Ready store. It's an idea. Like this, we run multiple ideas throughout the year, hundreds of such ideas, right? Obviously, milk is a footfall driver, loss leader. Everybody in India uses milk extensively, right? Pouch milk is the way to go because of the value. Yeah, so that's the reason. Just to popularize the model, because, see, we were the first guys who came under this concept, and it looked very weird on a shopping street, you are a DMart Ready store, and there's some guy with a computer and nothing to sell, right? How do you generate curiosity about the model? Especially when it's so unique and stands out. That's when the thought came, "Okay, let's start selling milk," because then somebody is coming into the store, and then there is some conversation, some engagement happening. "What is this? What do you What do you do? There's nothing to sell. What do you do?" DMart as a brand is very popular, right? "There's DMart, but there's nothing to sell." We could get into meaningful conversations with customers. That was the whole idea of having milk there, and it came as an afterthought. We did it after we launched it, right. Like that, it's just an idea which has worked reasonably well for us, so we're continuing to do it. Even though it's like you said, it's terrible business. The gross margin itself are terribly low, and then you have refrigeration, wastage, all of that, right? It is a loss leader primarily. Sure. That's quite helpful. That's all from my side. Thank you. Yeah. Thank you. Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants in this conference, we request you to limit your questions to two per participant only. If time permits, we can come back in the question queue for a follow-up question. The next question is from the line of Latika from JPM. Please go ahead. Hi. Thanks for the opportunity. I'll continue on the e-commerce bit. If you could talk a little about how are you thinking at the margin profile. PBT losses were fairly stable, and that's a good outcome given the sharp scale-up on e-commerce sales. I'm sure you would have seen a mix changing between store pickup and home delivery salience as well. As you expand into more cities, as you scale up in existing metros, what would you want to target? Would you expect these losses to remain in some kind of a range-bound manner? If you could comment on that, please. Latika, I'll respond to both. Pickup versus home delivery, we don't have any preference. We allow the customer to choose. Customer behavior gives us insights on how we have to tweak the model or offer or give our offering from an assortment perspective. We don't have any specific agenda per se. Whatever helps us expand our revenue, yeah. On losses, all I can say is, as we speak, what I've seen over the last two years, we are quite delighted with the way the e-commerce team has run the show, and I think what you guys need to look at from a losses standpoint is it should be in perspective with the overall business. I mean, we are a very capital risk-averse organization per se. There is not going to be any high expenditure in this area. If the overall business does extremely well, maybe our aggression on this area will be more, but within the context of how the overall business is doing. That's extremely important for us. See, for us, again, is that end of the day the model has to be a working model, a replicable model, and that is what we are looking at. I think that comes from the DNA of the firm, right? Even if we take more time in building it in a manner that we at least don't lose money. Then expanding it will be super easy, super fast, right? That's how the DMart business has been built. That is the way to look at it, to be very honest, and I think we are making reasonable progress there. I hope I've answered your question, yeah? In some manner. Just another bit which I wanted to clarify is on DMart Ready isn't a separate subsidiary. Is there a thought that you could potentially, at some point, look to get a partner which is more clued on digital, or you want to run the show on your own considering your expertise in grocery retail? I have no comment there to make, Latika. I think we have a brilliant team who's running it very well. We never had that thought or that reason to look at right now, but I don't know about the future. No comment currently. I think we are- Last bit to this is that a lot of data would be coming your way on the e-commerce shoppers. Any thoughts of collecting data on the offline side in terms of any kind of a loyalty program or anything of that sort? That's the last question. Thank you. Sure. We don't run a loyalty program. Our basic philosophy of the business is all customers are the same, treat everybody equally. I've commented on this multiple times. It seems a bit non-intuitive to do this, but we aren't harnessing data much. Our data is only to the extent of, okay, so and so customer, so and so address, and they're all functional. It's just used for functional use, but nothing else. No loyalty programs. All right. Thanks. Thank you. The next question is from the line of Arnab Mitra from Credit Suisse. Please go ahead. Yeah. Hi, Neville. My first question was on DMart Ready. I had actually an opposite question to the earlier one, which is that you mentioned that you obviously want to have a perfect model which works at a unit economics level. You've now done this business for a few years. Do you think the model now works at a unit economics level? If that is the case, why is your rollout still a little slow? Because we are still a very profitable company, and with the large changes happening in digital adoption, would it make sense to significantly accelerate expansion, even if it means slightly higher losses, as long as you're confident of the model working at a unit level? Yeah, good question, Arnab. Maybe that feeling will come maybe a couple of years later. We are not yet there from that standpoint, that, okay, I know Bombay is working in a particular way, and hence, let me burn cash in other cities and crunch the time. I think we're still maybe a couple of years away from that. I get what you're trying to say. I don't think that confidence level is still there right now. While we made good progress from, say, last year, this is very important from a perspective also about once the country stabilizes from COVID, right? Once COVID is completely sorted out and there's no further fear of the pandemic, how are we trending on revenues? What is consumer insight, what's happening to the business, stuff like that. That's extremely important for us. Yeah. I get what you're saying. That's- Sure. The next question was, I don't know if you will be able to answer this, but whatever business you're getting in DMart Ready, do you have a sense, is it incremental business over what you would have done from the store? Is it the same consumer now ordering from, or is it a replacement business that you're seeing, which is a majority of this business? I am not sure if you have data enough to know this thing. Yeah, good question. I think it's a fantastic question, and this is what we've been tracking in Mumbai. The right way to answer it is it's neither, Arnab Mitra. Because Mumbai has far more potential. We could have maybe 100 stores in Mumbai, but purely for the lack of locations. To the extent that we are doing more revenue in Mumbai from the e-commerce business, we aren't losing revenue from the stores. The stores were doing reasonably well. There's a caveat there, now because of COVID and Maharashtra having not relaxed norms yet, I don't have a very clear opinion on that yet. In general, I would say that it is overall top-line accretive, even though you have online business in Mumbai. What is interesting is also that the profile of shoppers in e-commerce is slightly different. They're more aspirational. The mix is better. Like, for example, we're selling Davidoff Coffee on e-commerce. We don't sell Davidoff Coffee in brick and mortar. It's quite interesting from that standpoint. The beauty of e-commerce is it allows you to take bets without losing anything. You just buy 12 pieces or two dozens of something and keep it in your warehouse, and you list it on the website or the app, and you get your outcomes at very low cost. That's phenomenal. That's not as efficient even in the brick-and-mortar business, as much as it is here. These are very interesting insights we're getting. Yeah. Okay. Thanks, Neville. That's it from my side. All the best. Yeah, thank you. Thank you. The next question is from the line of Manoj Menon from ICICI Securities. Please go ahead. Hi, Neville and team. I actually only have one question, but request multiple facets of this, hopefully if you could help us with. This is actually on inflation in general. What we see as, let's say, agri inflation or food inflation or even crude-linked inflation in FMCG basket, et cetera, from the conceptual understanding that for a retailer like you, it's actually good. Question number one subset is that even the right assertion to make? The reason I'm asking is that even the assertion level clarity from you is because of the limited listed history, we've not really seen this level of inflation, let's say, in the last few years. Right. Just your understanding of the long term. That's question number one. Question number two, within this, let's say, take the case of an edible oil where there is a 50% inflation for the housewife. What is the consumer behavior? Again, the conceptual understanding is these are maybe relatively less price elastics. Basically, I can't reduce the quantum of oil which I consume just because the price has gone up. Again, your thoughts on many of those such categories. One is on the price pass-through, the second is actually on the volume. How do you see consumer behavior part? The third one, in your vendor negotiations, how does this work? I mean, let's say, if the vendors are also under a lot of their gross margin retention or reclaiming pressure. Is it a per unit negotiation or still a percentage negotiation with your vendors? Thank you. Yeah, thanks, Manoj. The recent communication that I get from the category team, specifically on FMCG products, I haven't seen. Maybe it's temporary, maybe it's sporadic, only certain categories. Like you said, yeah, some of the price increases are quite large. I do not know what will be the impact overall from a consumer behavior when this is across multiple categories. We will see. I'll give you one insight, specifically on edible oil, that since you mentioned. We've seen these edible oil price increases and these huge surge multiple times. This is not the first time. Like a 30% price hike or a 40% price hike over a period of a month or two, which happens typically in sunflower. What we have seen is that there is a rapid migration. Okay. Consumers move from sunflower to the next cheap available oil. That's the insight we've got always. It always happens like that, right? If cotton seed is cheaper than sunflower, there's a huge migration there. If soya oil is cheaper than sunflower, there's huge shift towards soya. Yeah, that's what typically happens from a consumer behavior standpoint. That's my take on inflation. In general, like you said, inflation is good for a value retailer. The reason being is, to respond to your third question, all our negotiations are percentage. Yeah, it's a margin is based on percentage. Obviously, when percentage is the same and the value goes up, it's valuable for a retailer. It gives us more leverage to create better value for consumers. Yeah. You can play both. Your overall absolute margins get enhanced. At the same time, you get more leverage to cut prices further, okay, compared to any other retailer. For a value retailer, inflation is good because we can deliver better value. I hope I've answered all three questions. Hello, Manoj, are you done with the questions? As there's no response from the current participant, we'll move on to the next. That is on the line of Kunal Shah from Jefferies. Please go ahead. Hi, Neville. This is Vivek from Jefferies. A couple of questions. First, your stores have always attracted a lot of footfalls and crowding has been the feature. How do you think about in the post-pandemic world and until things normalize, do you think that will have an implication on the throughputs at the store level? Vivek, like we mentioned in the update, right? Page one of the update that we uploaded in the exchanges two days back or yesterday. On a longer term, what will happen, we do not know. Like I said, whichever states where there was relaxation announced much earlier, revenues have come back. Right? That's our view. Other than that, I cannot comment. Longer term, maybe we'll comment after another two or three quarters pass by. Okay, I see. Neville, couple of times you have mentioned this issue about real estate. Now, in the context of whatever is happening to, let's say, commercial real estate and all, are you finding it easier to, let's say, lock in properties both for DMart as well as DMart Ready stores? Yeah. Considering whatever softness of real estate or whatever, it has a, I would say, reasonable to marginal impact, not a very positive impact for our business. Prices don't reduce so much because we look for prime real estate, we look for clean titles, all of that, right? Those are in short supply. For us, times like these when markets soften, deals happen. Deals happen faster, like any commodity, right? Transactions increase because people fear the prices will further go down. That's it. That's the only advantage we have. Our view of anything that we do is, say, for a DMart store, we do a deal with an understanding that it should open in the next two years or worst case, three years. Right. We don't try to build a land bank per se beyond that. Anything beyond that. Whatever the balance sheet permits us to do within the limits of risk, we try to accelerate our acquisitions. DMart Ready, same issue. When they are all leased properties, we are very particular about the location and all of that, and they don't come at a drop down prices. There are maybe a 10%, 15%, 20% discount maybe because of the pandemic. Otherwise, it's business as usual. It's difficult to get good real estate in India. It takes time. Got it. Last question on DMart Ready. You made a very interesting point about Davidoff Coffee and the fact that you can just run some of these experiments. In some ways, do you also think that DMart Ready, while it's a separate business for sure, but in some ways it also could be an experiment factory for your base, brick-and-mortar DMart store? Any learnings that you are taking back into DMart stores? Absolutely. It's mutual. Will assortments and all have undergone change because of DMart Ready? I know we are in the middle of pandemic, so there may not have been that much opportunity. is that something which you think you will harness more as we go forward? See, it's very complicated because not necessarily what sells on e-commerce will also sell in DMart. We learn from each other. That's what I can say. It's very dangerous to say, "Okay, this works in e-commerce, let's do it in brick-and-mortar." Not really. Because you are addressing different consumer subsets, right? What is the beauty about e-commerce is that you can manage multiple cohorts at the same time because of the nature of the business. I can't do that in a brick-and-mortar business because it occupies a lot of real estate, which is not very efficient. Right? I hope you get what I'm saying. For example, a store is in a very expensive real estate, whereas a fulfillment center need not necessarily be in expensive real estate, right? Yeah. To that extent, it's different. We learn from each other. Got it. Thank you and wish you all the best. Thank you. Thank you. The next question is on the line of Sunita Sachdev from UBS Securities. Please go ahead. Hey. Hi, Neville and Rushabh. Thank you for the opportunity. Let me go back to the brick-and-mortar business. I wanted to know more about what you're thinking about your private label strategy. I know it's a slightly wide question, but any insights into fresh staples, non-food, FMCG, and general merchandise would be appreciated. Hi, Sunita. On private label, again, it's the same story. We are focusing and looking at this opportunity as a long-term opportunity. We have a team which works on this. We're building our own label, but obviously at a much, much slower pace. All I can say is the pandemic helped the private label business relatively better than the overall franchise. Maybe it's because of the value that private labels deliver to consumers, and maybe after some time, once the fear and the anxiety reduced and people were looking at tightening their expenditure, looking at alternatives, and within that, we saw more trials for private label. The private label business did better. If I look at the full year period. That's an interesting sign. It's also because of the way we are approaching private label. We're not going whole hog, trying as many categories as possible. The direction to the team is to focus on quality. It has to be at least equal in quality to a major brand. I think those efforts are helping us. Any comment on which categories you've nicely given foods, non-food, general merchandise, apparel in your presentation. where is more of your private label salience in across these three? Okay, I've commented on this before. When we talk private label, we talk only branded FMCG private label. All my comments just now was purely on branded FMCG private label. In apparel and general merchandise, it's different. We focus on basic low unit price products, and we don't see private label per se having any advantage there. We work with manufacturer brands. My comment is primarily to address FMCG brand categories, because that's where the cost arbitrage is available. Right. In your stores, obviously you have extremely regular, extremely loyal customers. Any metric on private label that you could share with us in terms of what is its percentage of basket or how is its market share across some of the major categories that you can share? Nothing meaningful, Sunita, to comment. Like I said, that there's still some time. See, I've commented about this before. Even within the branded FMCG sector, even if certain categories have large margins, you have a local disruptor who comes in, cuts prices and brings in- You know, and sells products. It's a bit tough to play this game to play this space. It's been a long way. All right. My second and last question is on your B2B businesses. I know we usually don't comment on these, but it's well known that there is a profitable B2B business also which goes on FMCG. How big is that now, and how is the growth in that business going on? We don't do any B2B business, Sunita. No, not at all? No, we don't. Okay. not like cash and carry. I think you probably may commenting on a separate subsidiary we had formed, but there's no action there. Okay. No action there. All right. Thank you, sir. Yeah. Welcome. Thank you. The next question is on the line of Aditya Soman from Goldman Sachs. Please go ahead. Yeah. Hi. Good afternoon, team. Just a couple of questions. Firstly, on store expansion, you indicated that you've seen some acceleration in deals. If you were to open, let's say, 50 or 70 stores a year, what will be the main hindrance? Is it something that you could even do over the next three to five years, opening, say, 50 or even 70 stores a year? Hi, Aditya. The same, we have spoken about this earlier, Aditya, that real estate is tough. We are trying to do our best. Having a large team, ensuring that due diligence is done well, and then also building capability from an operations perspective. All of this is work in progress. We are all working hard towards doing that. Now, if you want a pointed response from me on that, are we ready as a capability to open 50 or whatever number of stores per annum? Of course, we are. The point is, like we always commented, real estate is very complicated in this country. If those elements work in our favor and we're able to acquire and have decent inventory of real estate, we can accelerate store additions over the next two to three years or five years. I understand. Very clear. No, I think the point I was also coming from was that you obviously have more clusters. When you initially started, the number of clusters available itself was fewer. Now, as you've opened up in more states, there are more clusters available. As an absolute number, that number of new store adds should be going up, right? I mean, that assumption on the base level is correct. I mean, that's all I want to check, not specifically numbers. Yeah. Let me know if I've answered your question, but in general, I have spoken about this earlier, that we look at opportunity from a population perspective. All one lakh plus population cities, and in general, every one to two lakh population, one DMart store is reasonably okay to operate. All right? If you do that math, then you look at the overall one lakh plus cities in the states that we operate. We have a decent run rate from an opportunity perspective. The opportunity is there. The opportunity is awesome. We can still have around 1,200 to 1,300 stores in the cities that we operate already. These are all one lakh plus towns. We are in 96 cities. If you just aggregate all these 96 cities' population, and you divide it by, say, 100,000, broadly theoretical, but that gives you a broad perspective in terms of how many stores can you add. When I divide it by 100,000, the only hindrance there is you'll have to bring in an error factor only for cities like Mumbai or Bangalore or Hyderabad, because you can't have one store for every 100,000 purely because of real estate availability. If you take those numbers out, still there is a huge opportunity, and this is only for cities we operate in. If I look at the entire country, I mean, the picture again changes. The opportunity goes up to some 2,300 stores. It's huge. The opportunity is amazing. It's just that we have to do our stuff right. Right. No, that's very clear. I think that's something we do. in terms of the opportunity you talked about beyond your cities, I mean, we see no presence in East India. Is that something that you'll be looking to tackle over the next few years, or it's still more medium term? You're asking about East India, right? That's right, yeah. I don't know. We'll see. We've reached out to AP. Odisha is on the border. We look at it from a supply chain standpoint, and then that's how we progress. Again, this is a comment which I always give, 80/20 or 70/30. 70% to 80% of our investments will be in existing states. We like to do that because that creates a moat. That gives you amazing operational efficiencies. We'll continue to do that. Within that, if it means that we need to go to Odisha, why not? We will go. We need to go to Uttar Pradesh. In fact, we are already there. More. Yeah, we will do that. The point is more money, more investments in existing markets. No, very clear. just one last one on private label. You indicated, obviously, that you're gradually ramping up private label. When you think of the gross margins here, do you just think of a gross margin at the DMart level, or do you think of two levels of gross margin, one for the product and one for, I should say, DMart level? Come again. I missed the question. Yeah. When you think of gross margin for private label, do you just think of it that it should be 15% gross margin like you make for DMart, or do you think of it as two level, one as a gross margin for the product and then a gross margin separately for the retail business? We look at the gross margin within those categories, Aditya. FMCG is not at 15%, 16%. It's lower because it's a mix. We operate FMCG at a lower margin. What we look at is within each category, we look at what margins these categories operate at. Based on that, we have our own modeling of what we should make on private label. Before you think about margins on the private label, you actually first have to address the ECP to consumer per 100 g. If the brand is selling at, say, INR 10 per 100 g, what price should private label be? Should it be nine? Should it be eight? Should it be seven? That's the first question to ask. Then you decide, okay, what's the cost of making this product at the same quality? Based on that, then you decide, okay, what should the margins be? it's these two or three things that you need to evaluate and then decide the margins you need to keep. obviously, you're getting in this business simply because you have a product at a price cheaper than main brand and giving you margins better than the main brand. That's why you end up making more money on these categories. Fair enough. I think your last point answers the question. Thanks a lot. Thank you. The next question is on the line of Anand Shah from Axis Capital. Please go ahead. Yeah. Hi, team, and thanks for the opportunity. Just couple of questions. Look, firstly, I just wanted your thoughts on the GT transformation. We're obviously seeing the return of GT here. Apart from e-commerce, and especially given what JioMart and Udaan are doing in terms of the digital transformation here, do you see any threat at all from the GT side of coming back very strongly? Because that obviously is a much larger domain than e-commerce. Have you at all seen that impact in any of your markets? Anand, our response to that is, it's great if that's happening, and it's bringing the capabilities to a much higher level for GT, which is very good. From a perspective from our business, again, I would repeat the same thing, saying that the market opportunity is too large. Everybody's going to do well. Yeah. Yeah. You don't see at all that the conversion or acceleration because, let's say at the top level, the pie is large, but the argument top-down is MT and e-commerce will gain because the conversion essentially is happening. If GT, for whatever reasons, sort of holds its ground, then the conversion sort of will not accelerate to that extent, and that could make the entire MT expansion more competitive. I haven't got your question. Competitive, like GT will get more competitive to us? No, as in MT itself, if the conversion doesn't accelerate because like whatever 8%, 10% penetration of modern trade going to 20, let's say in 10 years, if that doesn't happen, and MT, for whatever reason, stays in that 10, 15 bucket only, then MT itself would start getting a lot more competitive within the existing players because you want to grow and expand. Our view is defining our business as MT and defining the Kirana as GT and all that is a nomenclature we have done for our own simplicity of communication and understanding. What do you define a Kirana guy who becomes like an MT? He puts in his technology or POS and self-service. He also is an MT, right? If the entire industry evolves to be a better operator, good for the industry, good for everybody. Also remember that GT Kirana operates on the principle of convenience and not really value or price. We are positioned on the principle of value. I think we'll coexist. It's not an either/or. I hope I've answered your question. No, got it. Yeah, pretty much. The second question was more on cost. If I look at general cost, let's say other expenses or staff per sq ft on a quarterly basis, you've done a commendable job. It's pretty much been range-bound every quarter, even though your revenues have obviously scaled up from Q1, Q2, Q3, Q4 last year during the pandemic. If you can highlight just what you've done on cost structure, because this really seem to have sort of come down from peak on a per sq ft basis, even though we keep seeing progressive increase in our revenues. How are we able to do that, is your question? Yeah. The initiatives you've taken or any line items you want to call out where there's specific reductions are happening. A lot of our costs are variable costs. It's nothing much. It's part of the DNA, the way we work. It's part structural, the way the business operates. Frontline also operates on a lot of attrition on a month-to-month basis. You have the ability to moderate your costs far better if management is very tuned and focused on, "Okay, how are revenues moving? So what should we be doing and not doing for this month or next month?" and stuff like that. Like we've always said, we are very agile. The operations team is very empowered and very focused on all these things, trained very well to manage all these things. That's how it happens. The inherent nature of the business. Less revenue means less transportation costs, less logistics costs. More or less, these are quite variable in nature, and that's how we are able to manage our costs better. Okay. Just one last question on your balance sheet side. We did see a sharp jump in CWIP to almost INR 1,000 crores. Seems you're obviously accelerating your real estate expansion here. This will be at all incremental to the 59 store guidance that you're seeing, or this will be more in that direction? I cannot comment on that. Balance sheet is balance sheet, what you see there, right? We generally don't give guidance, but just that because of COVID, we just wanted to reassure everybody that the real estate acquisition continued with the same pace. There was no impact on the real estate side of the business because of COVID. It's just that there's been postponement due to delayed construction activity. That's the only thing I can comment on. Yeah. Store acceleration, I get it. I mean, in the sense it's been delayed and you are focused there. On the pipeline building on the real estate side, because we do see CWIP going up to over INR 10. You haven't done that in the past, wanted to get your thesis within the store acceleration around building that pipeline or you do not want to answer? I cannot comment on that. You can make your own- Okay. No issues. Thank you. Thank you. The next question is from the line of Garima Mishra from Kotak Securities. Please go ahead. Yeah, hi. Thank you so much for the opportunity. Neville, any consumer behavior trends from your stores that you think will sustain post-COVID as well? The trends are what we've commented earlier, Garima, that basket values increased with lesser footfalls. That's one trend we saw. Another trend we are seeing is it's not just about COVID, but in general, whenever there's inflation, people downgrade a lot. That's the second. Third is a trend we are seeing recently. We do not know whether it's the tightness of the wallet or it is restricted times to shop. Even the non-essential is very need-based shopping, right? To that extent, discretionary spending has not come in the non-essential part of the business in states where there is restrictions on timings. These are the indicators I can give you. At the same time, cities where it's open, everything is open, sales are happening well, non-essential sales are doing very well across. Do you think, I mean, post-COVID, and we've had maybe a couple of months in between, where restrictions have been relatively lesser. What I want to know is that this basket size expansion, I mean, is it something that you think will normalize extremely rapidly or some impact of this COVID-related hoarding mentality or whatever you may call it, going to the store a little lesser. Do you think some of this is going to remain basis, whatever little you may have seen during the last year? Too early to comment, but my broad assumption is it will come back to normal. I mean, maybe a 5%-10% differential. The right way to look at it is vis-a-vis demonetization. When demonetization happened, how much of the cash business went back to credit? That's a good indicator to look at consumer behavior. Once everything was okay and fine, cash came back. Yes, it had a maybe 5%-10% higher bump which sustained. That's it. I mean, very marginal, I would say. If you take that as a cue, I think it will be very marginal, but people will come back to their old ways of shopping behavior. Okay, understood. The next question was on real estate. You mentioned earlier in the call that real estate availability, in some sense, could constrain to what your actual growth potential could be. In the past, you haven't been very open to leasing, but why not explore this more to grow faster? Garima, it's a misunderstanding to say that, "Oh, if I lease, I will grow faster." We are not a 1,000 sq ft, 2,000 sq ft, 5,000 sq ft. We need large stores. Large stores are not easily available. while the opportunity to grow increases, maybe instead of, say, 30 stores, we'll probably have 35 stores, maybe 38 stores, something like that because of leasing, but that's it. It will not allow you to do 3x or 2x of your current run rate just because you're saying, "Okay, I'm going to lease now." I'm saying that for a simple reason is we are still out of the reckoning in a mall. Mall operators generally don't like us because of the rentals that we ask for, right? We've always been saying that a retailer like DMart brings in footfall, so you should give it to us at a price better than anybody else. I thought that in eight to 10 years, that maturity will come, what I've been talking about is the last 12, 13 years, but it's still not happened. We still don't get invited by the mall operators. We don't go there if we don't get a good enough price. The mall part is off. Just standalone. Yeah. To that extent, there's a limitation. Okay. Understood. The last question is really more on your product procurement. Is it safe to understand that the larger you grow, the more proportion of your products you would be sourcing directly from companies than their national or regional distributors? Yeah. Logically, yes. Makes sense. It makes sense to do it that way. All right. Got it, Neville. Thank you so much. Thanks, Garima. Thank you. The next question is from the line of Amit Sachdeva from HSBC. Please go ahead. Hi. Thank you for taking my question. Neville, I have this question on the network rollout potential, which many people have already asked, but let me just attempt my bit as well on that. If I were to look at the three things here, real estate availability and procurement cycle, store size as our choice of format, and third, obviously the organizational capability, which is like supply chain or training of people and leadership, et cetera, and that whole package that comes with it. If I ask you one by one, if real estate and other things were not a problem from organizational point of view, how much stores you could have opened? Could you do, given your size, is there a limit that organizational capability places on it, like 70, 80, 400 stores? Amit, never thought about it like that. I've not really thought about it like that. Honestly, no. Sure. let me just stretch it a bit that why, say you obviously, the last two, three years, if I notice the store sizes have been very large, I think 50,000 sq ft- 60,000 sq ft, which is a great thing because we are getting a real estate, you might as well get a bigger one. I'm sure that many smaller store, like 10,000 sq ft- 15,000 sq ft store must be also running great throughputs for you and economics as well. You would know those stores very well yourself. why not have an open mindset about, let me have larger format stores, but also maybe supermarket style stores as well, and go deeper into India, rather than having to go with that, owning the real estate large store. that's a great model. why have that sort of thinking, if you can clarify? Third, obviously, if you can, maybe store sizes can be flexible, then rental ability can be easy, and maybe penetration could be deeper. Because, I believe that network rollout, are we constraining it ourselves? That's the question. Yeah. that's a brilliant point, Amit, and honestly, we are not fixated to the 50,000 sq ft thing, right? in a large town, obviously 50,000 sq ft stores are not easily available. We are very happy to sign even 20,000 sq ft stores. If they make sense to us, we do it. It's not that we don't do it. our view of markets is whether it's 50,000 sq ft or 20,000 sq ft, they're not very easily available, but we're not averse to it. We do smaller stores also. 20,000 sq ft also is what we do. Sure. Where I'm coming from, Neville Noronha, is that if you model the entire India footprint, real estate, urban market centers, I'm sure the large format will be just one format, and largest format will be maybe supermarket format. Why not play aggressively as a tactical strategy rather than having to sort of pursue one line of thinking? I'm saying that eventually they will exist like that. There should be a very aggressive quest for seeking those. That's the kind of where I'm coming from. I'm not really pushing it too much, but that's where I was coming from. The hope is that network rollout obviously accelerates by dealing with all these constraints. Yeah, fair point. Like I said, we ideally prefer 20,000 sq ft and above. Probably you are nudging us towards 10,000 sq ft. We have a couple of 10K stores also, and if it's a very compelling reason to even do a 10,000 sq ft store, we do a 10,000 sq ft store also. Like I said, it is not. Okay, let me answer this way, Amit. It's not that we're rejecting stores which are coming to us, which are around 10,000 sq ft- 20,000 sq ft or 10,000 sq ft- 30,000 sq ft. No, we're not. We're evaluating it on its own merit, and if it makes sense, we go ahead and do it. Okay, sure. Got it. No, very helpful, Neville. Second, if I may quickly ask about the e-commerce integration with your own model. You obviously have offline driven model, which you understand very well, execute really well. The cost economics are perfected over time, perfectly understandable. e-commerce is new complement or enabler for you to serve the convenience kind of customer, which has emerged even more post-COVID. If I were to ask you what is the economic reality of these two services, whether this e-com business should be like a arm of the store nearby or is like a, from an organizational structure point of view, where how the incentive structures run and how the execution happens, shouldn't it be more efficient if stores were the main economic center of that endeavor or it should be run separately? My sense is that it could perhaps be more deeper if store were to own it rather than a separate subsidiary doing its own thing. I don't know how to think about that. Yeah. Amit, if you could refer to my call of last year where we spoke about this, so I'll repeat that again. Again, I know where you're coming from, but globally, all retailers are doing this. Why we are not doing it is for a simple reason is, we don't have the infra. Our asset utilization is already very high scale, right? If you look at the value per ton of India versus the rest of the world, and then you compare it with the turnover per square feet we do, our assets are already operating at very high level of utilization, and it cannot be disrupted to service a e-commerce customer. It'll create dissonance, and it will bring the productivity down. Yeah, and that is the reason why we decided to run e-commerce separately. Yeah. Unlike you go to a large retailer in the U.S.A. or U.K., there is inherent opportunity to utilize the assets better. Yes, indeed. That's where I was coming from, actually. Thanks so much, Neville. Very clear. Just last bit, if I may, Neville, is that about, for example, a global role model shape, because obviously retail has evolved in Western markets for the last 50, 70 years, and got perfected, several models have come in German retailers, European retailers, and U.S. retailers. If I ask you, who's your role model? At least there are many role models for different things, but how do you role model your organization or is it unique and, or you're shaping the product portfolio, cost economics, everything, from best practices already established. Can you enlighten us a bit? How do we think about that? My favorites haven't changed. I like Costco, I like IKEA, I like UNIQLO. These are the top three. There are many more, but top three which come to my mind. It's just not about one thing, multiple things. Culture, assortment, simplicity. It's awesome. I love these three. These are always top of my mind. I think this all revolves around fundamentally culture. The way they think, products, people, business, partners, employees, it's awesome. I just love it. We are shameless copycats. Anything we like about any of these companies, we just go ahead, and obviously apply thought, why it makes sense, and then go ahead and implement it. Yeah, these are role models personally for me. Okay. Excellent. Thank you so much, Neville. All the best, and thank you for taking my questions. Thanks, Amit. Thank you. The next question is on the line with Sandip Patodia from Fundsmith. Please go ahead. Hi, Neville. One quick question around, if you could comment on the impact of COVID on the resiliency of your process and system-oriented decentralized company culture, and in Q2, what you answered previously around you see the culture as the fundamental force behind retailing. If you could talk about what, if anything, has changed and whether resiliency of your culture has improved, and any insights on that front. Sandip, nothing much has changed. I think it's the same. People are committed, people are doing their job brilliantly well. In fact, if I think about the second wave versus the first wave, even though the second wave had more casualty in the country, I think our team was actually more confident on the second wave. There's a caveat there, Sandip. The caveat is we have a very young force. Retail, we typically have people, Actually 97%, 98% of our front-end employees are below 30. All young fellows, and we all know that COVID doesn't hurt or impact young people. It was absolutely zero fear among our people. We took all the necessary precautions. The COVID cases in our ecosystem were very low, relatively, to the country. That was the inherent advantage we had during this time. we were very liberal for everything. Anybody's calling sick or whatever, we ensured that nobody had any pay cuts. Everybody was comforted. In fact, we had a central command system created with quick development of certain apps to ensure we get real-time updates on all those who are COVID positive, ensure timely medical care, things like that. Having oxygen concentrators on standby for our people, stuff like that. I think great culture is culture which doesn't get shaken during tough times. you get the best out of people during tough times. I think second wave also, my sense is we were more confident to deal with it. let me put the business side of it also. We were more confident as a business model. First wave, we didn't know what will happen to the business. In the second wave, we were very confident. Our calls and our decisions to even shut stores were more aggressive. We say, "It's okay if the store is shut for a week, two weeks, three weeks, it doesn't matter. Business is going to come back." Because we saw that in the first wave. Our decision-making capability with confidence was also there. These are the top-of-mind thoughts that come to my mind. When front-end staff see management or their senior leaders taking very decisive, specific calls, keeping safety of their fellow employees and customers as number one priority, I think it builds more confidence in everybody. I think that's the difference I would say that we saw second wave versus the first wave. I'm addressing this question in this way because the first wave, I wrote a lot about how people reacted to the pandemic, our own employees. Second wave, I think, was a breeze from a management perspective. Wonderful. Thanks for that insight. Just one more question. I guess your DMart Ready or e-commerce initiative, you come at it from a brick-and-mortar perspective, as in you're brick-and-mortar trying to build this out or see whether it works from a unit economic perspective, whether you can scale in the future. Most of the e-commerce operators come at it from a tech perspective. They have expertise on technology front and come at it from that. Do you think that limits you in the sense, how is your team built in terms of capabilities around technology, whether you've hired a lot of people with that expertise, and any thoughts on that front? It's a brilliant point. In fact, that's something that plays on our mind all the time, that a brick-and-mortar retailer comes with legacy baggage. Always talks about cost, talks about ops, and sometimes tends to look at technology as one ancillary part of the whole business. We are very aware of that limitation that you bring to the table. The fact that we run this as a separate company with a separate CEO, allows us to bring in that dimension of giving extreme importance to technology. We are aware of that, and I hope that we build products on the tech side which are as good as any other operator in this space. I get what you're saying. Our only direction, Sandip, is this, that build few things, but do it really well. We'll not have a lot of the shiny disco balls, bells and whistles around tech for e-commerce. The basic transacting system, the basic app, the basic search, the way the journeys are, navigation are, we want to be the best in class. Just do that really, really well. Make the entire shopping journey super good. That's the direction that I have given to the team. Point taken, and that's something that's on top of our minds. Understood. Thank you for that, Neville. Good luck. Thanks. Thank you. The next question is from the line of Prasad Deshmukh from Bank of America. Please go ahead. Hey, good afternoon, Neville and team. I have a couple of questions. The first is actually a follow-up of the question that was asked just before this. When you do, say, a benchmarking, how do your tech and app-based abilities compare with, say, other e-commerce food and grocery peers, like say, BigBasket? When I'm saying tech, I mean customer interface, backend server abilities. If you have done any senior hires since the change in strategy for DMart Ready in the last year. That was my first question. You're talking about how do we change prices? No, no. It's more like customer experience perspective on your app versus, say, other e-commerce players. Is there any benchmarking that has been done? If you have made any senior hires since the change in strategy, the DMart Ready strategy last year. Yeah. The second part I cannot comment on. On the first part on benchmarking on across the applications, is what you're saying? Customer experience and your backend server capabilities. Okay. Overall, the application or customer experience, all of that, there is a team who runs it, and we ensure that on every parameter, we are as good as anybody else. Right? That's a continuous process. Yeah. That's our ability too in the previous question also, that from a tech standpoint, we have to ensure that the journey for every shopping customer on the application is top class, frictionless operation throughout the journey of shopping. Yeah. Whether it's search to eventual checkout, and even post-checkout. Right? Till the point you get the item delivered. Yeah. How is the journey? Also if the customer has to reach out to us. Yeah. If there is any returns, any issues. Every single element of that entire journey or touch point of communication, we try to ensure that it is super smooth, super good. Yeah. From that standpoint, there is a team that works on this diligently to ensure that we are among the top two, top three players in the city from that standpoint. Got it. The second again is a follow-up on private label. While I understand probably the margins in private label are very similar to what you get in branded, how does the working capital cycle work in private label? Yeah, good question. By the way, margins are not similar. Margins are relatively better than brand companies for private labels. Otherwise, we wouldn't do that business. Working capital is a very good question. We generally tend to hold more inventory in private label products than in brand products for obvious reasons of production cycles, minimum order quantities, and stuff like that. Yeah. That's why, like I said, that you need to ensure that every element on the private label piece is working, only then we get into those categories. What's my minimum order quantity? The minimum order quantity should not be more than X number of days of sale. My running inventory holding should be within the limits that we have for those categories, stuff like that. Write-offs have to be minimal, packaging has to be great, all of that. Yeah, in general, your inventory holding is more than for a branded product. Okay. Just to clarify, is this a negative working capital business for you? No, it's not. Our policy is the same. We pay quickly, right? It can't be negative working capital. Okay. Last question on, again, DMart Ready. Here, just wanted to confirm if all your orders after charging for this INR 49 or 3% of sales, whichever is higher, on the per order basis, are all the orders contribution positive at the gross level? Yes. Gross, yes. Okay. Thanks a lot, Neville. Welcome. Thank you. Thank you. The next question is from the line of Sheela Rathi from Morgan Stanley India Private Limited. Please go ahead. Hi, Neville. Thank you for the opportunity. I have two questions. My first question is, you have talked a lot about the tough bit with respect to acquiring good real estate. The question here is that over the last 12 months, have you seen if there are any acquisition opportunities that have got created with respect to some small and modern retailers which you could think of acquiring and get the problem solved with respect to adding more stores or adding more real estate? That's my first question. Hi, Sheela. Our view is, we're not very confident about acquisitions per se, as we speak. Let me put it this way. If growth is our objective or store addition is our objective, is acquisition of another company the right way to do that? No. I would not say that would be, if I look at the landscape today in the country. I would rather add stores in my current setup by doing this organic method of store acquisitions. Okay. My second question is, earlier the DMart Ready delivery charges were higher, which was INR 49 or 3%, whichever is higher. What was the thought process behind reducing the delivery charges? Yeah, we've capped it to INR 79 now. You don't get charged more than INR 79. What was the reason to cut the delivery charges? Anyway, you were seeing higher traction with consumers on your online bit. Good question. It was simply because, A, people are complaining like hell, okay, considering the confidence of context, and B, we took that call where it didn't tilt the trade-off to the consumer angst to vis-à-vis the loss to bottom line it tilted towards the decision to say, "[Non-English content] Let's knock it off." In general, the home delivery side of the business was anyways doing well for us, so then we took a call to cap it off. Yeah. One final sub-question on that. Lastly, you mentioned that home delivery and pickup were about 50/50. Is the number still similar or has there been any change? Yeah, good question. Tough to comment now because we just come out of the second wave of COVID. What I can tell you is whenever COVID was intense, it tilted significantly towards home delivery and the pickup point contribution was lower. As the first wave kind of settled down and people are comfortable, again, it went back to 50/50. Again, the second wave, again, it tilted towards HD. In general, it's kind of 50/50. Thank you. Thank you. The next question is from the line of Hiren Dasani from Goldman Sachs Asset Management. Please go ahead. Thank you for the opportunity. I just had a slightly different question on your ESG related practices, and if you can maybe spend a few minutes on highlighting some of the things what you are doing. I'm coming from the perspective that if I look at some of the external rating providers on this parameter, I'm sorry to say, but you rank very poorly on environment and the social related parameters. Part of those poor ratings is maybe lack of meaningful disclosures in your annual reports and in the other published documents. If you can just highlight what you're doing and if you can also increase the disclosures meaningfully on many of the practices, that would be really helpful. Yeah. Thanks for that feedback. There's a honest admission that we need to do more in terms of disclosures. I think we need to explain more about what we're doing on this front. We've got this feedback from multiple other analysts community earlier also. We are working on that. We are doing reasonably good work there, especially on the environmental side. The AR speaks a lot about what we do there, especially around renewable energy. We do a lot of work there. I personally look at that myself to ensure that we can convert as much as possible from the usual sources of energy to renewables. That's one thing. On governance, I wouldn't want to say much. It's for you to judge based on what we do, what we say, stuff like that. Social, I think it's more to do with disclosures in terms of how much we should be writing. Maybe it's also a limitation because of the culture we have, but that's not an excuse. Where we talk less, we don't talk enough. Point taken, feedback noted, but we do a lot of work even on the social side. For our own employees or for communities within the cities we operate in. We do a lot of work with the municipal schools of Mumbai. A lot of information is there in the AR. Like I said again, feedback noted. We'll make more disclosures there and speak more about what we do. Wherever we see an opportunity to do more, we'll do more. Yeah. Sure. What I see that the meaningful difference between the industry leaders or at least industry average scores versus where you are scored are in few points on sustainable sourcing of raw materials, privacy and data security, or on the product safety and quality. I think those are most of the disclosure issues. If you can have a separate document on your website later on also. These things, it would be really helpful. Fair enough. Point taken. Thank you. Thank you. The next question is from the line of Swagato Ghosh from Franklin Templeton. Please go ahead. Yeah. Good afternoon. Thanks for taking my questions. I have two quick questions. Firstly, just wanted to know, maybe divesting some stake in the DMart Ready subsidiary to- Sorry to interrupt, Mr. Ghosh. Sir, your audio is not clear. Yeah, I hope it's clearer now. Much better. Thank you. Yeah. first question is I wanted to know management's thought on bringing in some growth capital by divesting some stake in DMart Ready. Probably that can lead to much higher value generation, even at a lower stake for us. any comments on that? Whatever the business needs, we are able to fund from the parent company. Beyond that, I don't have any other comment to make right now. Okay, sure. The other question is, you said that you do not have a loyalty program per se, but I'm sure you must be collecting customer data on mobile and email IDs, et cetera. I just wanted to know what is the level of digital engagement and outreach to our existing offline customers, and whether there was a ramp up in those engagements in the last 12 months to bring them back to the stores? We don't have any specific data on offline customers, and we don't engage with any offline customers digitally with any specific customer-related data. We don't have any customer-related data from that standpoint for offline shoppers. Okay, you do not also publish the discounts going on, et cetera, digitally to these customers? No, we do not. Okay. Would we be having then this data that how many of our DMart Ready customers are unique to Dmart Ready as in how many of those customers have never shopped in our offline stores? Would we be having this data? No, we only have the DMart Ready data, but it is very need-based. We use it only to make deliveries to the right addresses, call the right telephone numbers so that the order fulfillment is appropriately done. Right. On the offline store level, aren't you missing a trick here by not collecting any data and not engaging with them in any way? We haven't been doing it since the very beginning, and it's not that we're saying, "Oh, we didn't do it earlier, so we won't do it." Considering our model, we don't see value in doing that. Our basic philosophy is run the business well, create very strong word of mouth. All old-fashioned, I know. Not appropriate for today's tech world, but that's the way we are. Okay. you're saying you're open to changing the strategy if you find merit in it? Absolutely. If business tells us that we have to change, we'll change. so far it's working for us, so why change? Sure. One last question is a bit of a basic question. The two fulfillment centers that we opened by closing our stores, I just want to understand why couldn't we have done a partial closure and converted that to fulfillment center? Because you yourself said that a 50,000 sq ft store and a 20,000 sq ft store both can act as DMart stores. I'm just trying to understand why couldn't have downsized the store, like the front-end store, and have that store still there, and maybe utilize a part of the store as fulfillment center. Why did we have to close the store altogether? These are not very large stores that could allow us to run both together. Otherwise, we would have done what you said. In fact, one of our fulfillment centers is like that. It's on top of a store. if space is available to run both, why not? only if it's a very large construction. Otherwise, no, it doesn't make sense. Fair enough. Thank you, and all the best. Thanks. Thank you. The next question is on the line of Mahesh Kabra from Purnartha Investment Advisors Private Limited. Please go ahead. Good afternoon, sir. Query I have is about our employee number. I'm assuming the disclosed number in the annual report is of standard company. Why is it down YOY or contractual employee? Just give me a minute. Let me check the number and get back to you. Sure. You're talking about the contractual numbers being lower? Yeah, it's down from 38,664 to 36,869 year-over-year. Okay. basically, it's a reflection of what we really need because like I said, the efficiency got better because basket values have become higher. to deliver the same number of revenue, the relative reduction in the headcount has happened. This is in spite of addition of 24 new stores, right? Yeah. Yeah. 22 net stores. Yeah. Another question was about you have 39 distribution centers, which were 36 last year. of the three, two are the fulfillment center converted or all three are new? Come again on the question. Okay. You have 39 distribution centers. Yes. Which was 36 last year. The addition of three distribution centers includes two fulfillment center or fulfillment center are separate? That's separate. This is for ASL, right? Exactly. This is Avenue Supermarts Limited for the Brick & Mortar business. Okay. I just wanted to confirm that. Yeah. Fulfillment center is under AEL. It's a separate subsidiary. Again, coming back to your employee strength, that shows roughly almost equal to your billing size improvement is the improvement in your employee productivity, is it? Yeah. High. Yes. Like I said, when basket value is going up, COVID pandemic, attritions were reasonably high at the front end. my front end management calibrates headcounts accordingly. yeah, it just gets more efficient because lesser footfalls and per basket value being higher as such. Another thought or an explanation I had thought myself, I just wanted to confirm that with you, is that has got something to do with the fact that some of our stores were working under constrained working hours, even in March last quarter? Yeah. multiple levers operating. Mm-hmm. Okay. Thank you. That's it from my side. Thank you. The next question is on the line of Nihal Jham from Edelweiss. Please go ahead. Yes. Thank you so much. Good afternoon, Neville, Niladri, and the entire team. Three questions from my side. You mentioned in your offline business that general merchandise is a big driver of profitability. Now, traditionally, e-commerce doesn't have this category, given the lower gross margin and also the focus on discounting that is generally seen. Just wanted to understand how is the path to profitability that you're generally seeing, especially, say, in a city like Mumbai, where you have been present for more than three years. Nihal, I'm sorry, there was some disturbance at our end. Could you just repeat the question a little loudly? Sure. Am I audible now? Yeah, this is better. Yes. I was asking that in case of the offline business, it's known, and even you mentioned that general merchandise is a big driver of profitability. Now, traditionally, as we understand on the e-commerce side, there is not that significant a contribution, and given that gross margins are lower, and also the focus on discounting that is generally seen in e-commerce grocery. How is the path to profitability that you see in this business? Also, if you could share your experience that you've seen with a city like Mumbai, where you've been present for more than three, four years. This is a specific question for e-commerce, right? Yes. Specific for e-commerce. We just cannot comment on what will profitability be. Will there be profitability? We just cannot comment on that because, see, our profitability for e-commerce is a function of your top-line gross margin. Our focus currently is to make running the operations at a reasonable cost, which makes sense to us. Our objective is currently to be competitive there. See, top-line gross margin is a factor of market forces. How you run e-commerce is in your hand. Applying the same principle of DMart Brick & Mortar, that if we talk about our operating cost prowess, can that prowess be transferred to e-commerce? Keep away the technology cost and all of that, how do you run the e-commerce business in an efficient manner is the question we ask ourselves. How do we have a competitive advantage there? That's the way we are approaching the business. If I have the competitive advantage in terms of running this business at an efficient cost, I think half the battle is won. At the same time, overall company level profitability is a factor of top-line margin their assortment and all of that, which is a completely different game and more long haul. That's the way to look at the business. In the shorter term, how do I run the business at efficient cost? In the longer term, how do I manage my assortment mix in a manner that you get competitive advantage which is hard to copy. You have to play both. Understood, Neville. Just to follow up on that, so say if DMart Ready was only operating in Mumbai and we had not made the investments in new cities, would it have been a model that may have reached profitability by now? It's difficult to comment on that. Sorry, come again. I was asking that, say, if DMart Ready was only operating in Mumbai and the investments into the new cities had not been made, would it have been a model that may have already touched a breakeven or turned profitable? I cannot comment. Sure. No worries. Neville, the second question was that you regularly keep mentioning on the EDLP strategy. Now, over the last year, anecdotally, I do notice that a lot of competitors are coming close to matching prices. Obviously not that they are still there. I know you also mentioned last time now that you do keep a regular tab of prices. I just wanted to get a sense that if you do see such aggressive pricing action, do you want to take the steps of keeping that disparity or it is something that you're okay with one, two competitors end up matching some of the basket values or even going lower in some of them? We'll compete. We've always said that we'll compete, we'll continue to ensure that our prices are lower. Like I said, we are on a point, you also get to create differentiation because, see, a lot of the items that we sell are something that even your trackers don't pick up. We observe all these benchmarking trackers that keep being seen. Those are just 20%, 30% of the revenue of what a retailer like DMart does. You still have a huge chunk of business where it's very hard to compare apples to apples. Yeah. I've spoken about this in detail even earlier, that you have general merchandise, you have apparel, these are very complex categories. You really can't do a benchmarking per se. Okay. Every retailer creates its own differentiation, and that allows you to operate with decent margins. Yeah. Considering all of this, I think, and we've seen this before also, earlier also, all discounting is very sporadic from that perspective. Yeah. very limited to branded FMCG products. Why I'm excluding the durables and all of that, the expensive stuff, is because we don't do business there. otherwise, you have the apple-to-apple discounting comparisons there too. we don't do that business. otherwise, most of the comparator is on FMCG branded products. yeah. we will continue to operate at a pricing which is meaningfully cheaper to consumer shoppers than anybody else. That is a position we'd love to hold. Helpful, Neville. Last question. You mentioned on wholesale cash and carry was postponed because of the pandemic. Any plans of considering that as things normalize? No, not now. We're still looking at stabilizing our current business and focusing on our current business. Sure. Thanks. Thanks, Neville and team. Thanks. Thank you. The next question is from the line of Swati Mehta from Hill Fort Capital. Please go ahead. Hi, Neville. I hope you're well. I had a couple of questions on the DMart Ready business. The first one is, basically, as the scale of the business doubles, what were the major changes that you had to make from a capability point of view? I know you touched upon this last time in the analyst meet that you were going to make some big announcements. Whether you're happy with it, because as customers, we just felt that during the second lockdown that just happened, the experience could have been a little better given that we had the time to prepare during the first wave. That's the first question. Yeah. This is specific to DMart Ready, right? Yeah. Specific to DMart Ready. Fair enough. Feedback taken on doing it better in the second wave. Again, from a DMart standpoint, when I look at the numbers, we did far better than the first wave from an e-commerce business perspective, because if I look at the revenues. What happened during the first wave was everything collapsed. We couldn't even service our regular orders because for the first 15 days, people stopped coming to work and stuff like that. That didn't happen in the second wave. In the second wave, by that time, we had double the capacity, say, in a city like Mumbai. We had two additional fulfillment centers. In fact, we added a third also, stuff like that. From two fulfillment centers, we moved to five. The point is that, again, at the second wave, the demand again was very high. You can't service the entire demand. You will have a section of consumers or shoppers who will be very dissatisfied. we all know, even if you dissatisfy even 1% of the shoppers, the noise it creates on social media is huge. an e-commerce shopper is a very demanding shopper, demanding customer. that's why the noise created, the negative feedback that is created gets. otherwise, I think, and again, you need more fulfillment centers. More fulfillment centers you have, more closer it is to the consumer market, better it is. You are able to service more orders, you are able to service faster, earlier, with better availability. that's it. even after having these five fulfillment centers we have, it still falls short. Now, the point to make is that what happens post-COVID? What happens three months later? Will we continue to have the demand that we're having today? Those are the questions we have to ask and respond appropriately and then do investments appropriately. that's it. That's the point. as far as announcements are concerned, the announcements were about new cities, which we've already done. Bangalore, Hyderabad, and even Pune, Ahmedabad. These are the cities we are operating in. Got it. I think that's very useful. The second point that we wanted to understand better was that there's, as you mentioned, roughly, again, relating to DMart Ready, the INR 800 crores of sales is primarily from Mumbai area, and does that mean you were the largest player in the city? Can you share some more color if you have any data on the market share for Mumbai, e-grocery? No, I have no clue. I don't know what the market share is in Mumbai. Who and how much, I don't know. Okay, got it. Next question was, so this is on the own label piece. Our understanding, at least with the fact that the supplier ecosystem for own labels is not super strong in the country. As we see more and more D2C brands come up. They've been talking a lot about the improving manufacturing capabilities in India, and these are for FMCG products itself. Have you felt that, and if yes, does that change your view on how quickly you want to scale up? This is taking into consideration all the other points that you mentioned on private labels with respect to the pricing and so on, but from a supplier ecosystem point of view. Okay. Your question is how is private label playing in the e-commerce setup and in the context of D2C brands? Is that the question? Yeah. Do you see the supplier ecosystem really improving? If yes, does that change your sort of speed at which you will take this up? Okay. our view is everybody will coexist. first let me talk about D2C brands, which is very interesting and very evolving sector and what we are understanding from it. we have two types of D2C brands. Some who want to be on an e-commerce platform, some who don't want and want to run it through their own e-commerce websites, or they're very particular about what website they want to sell from. Yeah. those are the challenges we face with certain D2C brands. Obviously, because everybody's, a lot of people's perception of DMart is, "Oh, it's a middle class, so not so sexy place to be in. So I don't want to erode my brand image," and stuff like that. those are the challenges we face. otherwise, niche brands have amazing potential in the e-commerce platform. That's our broad view. Right? They do reasonably well on the e-commerce platform. Private label, again, I would say it's too early to comment, but it's not bad. It's at least the ratios or the sales of contribution vis-a-vis brick and mortar is either equal to or better. They're doing reasonably better to brick and mortar stores. Right? That's the insight on private labels. At the same time, D2C brands mostly are niche. They are a great margin maximizer opportunity. I do not know about how will they compete at scale. That probably time will say. My view is all three will coexist, private label, D2C, and the big brands. Yeah. They all- Sorry. Have different needs. I just want to clarify. Never mind. Can we incorporate some of these D2C learnings within DMart when we create our own labels? No. D2C is D2C. What should I say? They are marketing geniuses. Their D2C brands are successful because of deep insights. When you're talking about private label, you're talking about straddling the entire franchise across multiple companies, multiple categories. In the general course of business, yes, you learn from everybody, but end of the day, what is the principle of private label? Equal to in quality, cheaper in price to consumer, and better margin for the retailer. Right? When you bring all these three together, I think the simpler the category or the simpler the product formulation and driving efficiency is the way. So they're different. D2C, I cannot replicate. I'm very clear about that. D2C is special. I know. Just one last question from me, which is, so for the products that we sell in a DMart Ready store, are they retailed on the basis of convenience or value? Good question. It's a discovery for the consumer, well, shopper. In general, I would say the home delivery. Let's put it this way. I can't give a straight answer. The way the idea of coming into DMart Ready was, how can we bring in a model where there are consumers who like DMart, but probably don't like to come into the DMart store for whatever reason, right? How do we give them the DMart experience at the DMart prices? That's our attempt through the DMart Ready model. Whatever that means. For some consumers, it may be convenience, for some it will be price. Yeah. That's the way to look at it. Thank you. That's all from me. Thank you. The next question is on the line of Aliasgar Shakir from Motilal Oswal. Please go ahead. Yeah, thanks for the opportunity. I have a couple of questions on your online business. When you see your online business, certainly if you see over last year, you've almost doubled. When you see your competitors in the last three, four years, they've gone up six, seven times. You mentioned that maybe you will probably kind of take another couple of years to see a few things and then probably ramp up. What is the tipping point that you see that will make you far more aggressive in online than you barely making a fraction of some of your online peers? If you can just share your thoughts there. Second point on the same, related on online, is DMart Ready. When we think of online, it's a mix with our DMart Ready-driven growth. Is there another model that you think you would want to try maybe at a later stage, or you think your growth on online will be driven by only DMart Ready? That's on online if you think first answer. Yeah. The first question is, if Bombay DMart Ready breaks even, our speed of acceleration will be better. We will accelerate faster. Yeah. That's broadly the point on what does it take for us to accelerate. On any other model, I think it's still too premature. We want to fix this model first before thinking about some other model. Like I have commented earlier also that marketplace is an area we will not get into. That's it. Just- Sorry. Yeah, sorry. Go ahead. I think if we fix this, the DMart Ready business itself, it's a crazy opportunity, right? Just getting this right is good enough for us for a reasonable amount of time to accelerate the expansion. Can you share what is really being the hindrance? Is it scale? Is it volumes? Because some of the other players in similar regions are doing multiple times of scale probably. Is that correct? I don't know about the others, but for us, for this business to make money, and I've commented this even last year, is top line. If we get the top line, we can make this business make money. Intensity of sale. Yeah, intensity of sale on every UOM, unit of measurement. If this intensity of sale is in order, we can make this work. As a consumer, I can say, maybe DMart Ready today may not be probably in the top two or top three preferences for a consumer. It could be probably just purely because of the promotional campaigns done by some of the other online players. I don't know what could be other reason, but I'm just thinking from the point of view of when you say volume or sales is your key factor, then how are we ranking in terms of in consumer's mind as a top online operator? You have a good point. I don't have a very clear answer to that, to be very honest. If you look at the e-commerce space, the obsession on consumer satisfaction is at the cost of losing a lot of money. Yeah. Obviously, if you see our P&L and balance sheet for this year, obviously, you've seen that there is a huge focus on ensuring that the losses are in reasonable limits. When you have those kind of limitations which comes from the DNA and culture of the firm, there's going to be a trade-off. You are going to compromise on certain areas. The point is, as a company, are we comfortable with that? Of course, we are. Yeah. If I want to be in the top one, top two from a consumer rating perspective, then obviously the burn rates will be much, much higher. The point is, we neither want to be the top, neither want to be the bottom. I am a functional service. Today, even if you look at, let's for a minute take digital away. Look at the DMart business. Now, I'm delivering very functional service. I am not giving you top-class experience when you walk into my store. I'm just giving you great products at good value. Everything else is very transactional. The point is that moment I move that on the digital side, probably because the competitive context is in a particular order that I look relatively more bad from a consumer experience perspective as a package. It's too early. Let's see what time says. Yeah. Is my product assortment and is my value compelling enough for the consumer to kind of ignore a little bit on the other parts of the experience? Let's see. Let's see with time. Some of the online players who are perceived to be big loss-making entities, haven't they all turned pretty much closer to breakeven or profitable? It could be just because of the COVID factor, where their investments in marketing could have been much lower. A lot of them have actually turned profitable. I was just thinking from the point of view that when you achieve scale, doesn't that itself give you enough ability to maneuver with pricing and a lot of those things that could kind of make you much more competitive? I'm sorry to just harp on this point, but this loss-making factor that is being looked upon as an online, as a vertical, isn't that really changing for a lot of online players with scale? I haven't seen any other online company financials, so I cannot comment on that. Everybody knows that with the pandemic, the revenues have gone up significantly. Now, how does that add up in the overall scheme of things over a period of time? I think time will tell, right? We'll see. Right. Okay. Quick two questions. One is on DMart Ready. Today, DMart Ready is seen as a vehicle for online growth. Do you see that probably as an opportunity for you to drive daily business? Sorry, come again on the question. I couldn't get it. I'm saying DMart Ready today is seen as a vehicle to drive your online business. Can DMart Ready drive growth through the daily format in specific cities, probably? The daily format being the regular format? No, I'm saying basically the format which has typically like 1,000 sq ft, 2,000 sq ft format, where it's like a general grocery kind of a daily format store. Okay, that way. No, we haven't considered that yet. We need to understand that the FMCG business in India, I think that's one critical point to note. We've seen the last 10 years how the convenience format has evolved, right? Convenience works well if the gross margin of the business is reasonably good. India doesn't give you decent gross margins. FMCG business doesn't give you decent gross margins to make that business profitable in the brick-and-mortar stores. Yeah. To that extent, we are not very confident about selling FMCG or grocery in the daily format in the way that you are talking about. Got it. This last question on private label. I see a change probably in your, maybe I should say, stance or your unleashing on private label, which is significantly increasing versus earlier where we were not so aggressive on private label, thanks probably to COVID. Where do you think you can grow this private label? Do you think that this is only as a vehicle to improve your margin, or do you think private label as a category can actually be a very good vehicle to even increase your customer breadth, probably? Yeah, good question. If you look at all global retailers, everybody started private label with a me-too, better price, better margin principle. Depending on your confidence in managing that category with your own internal team, then you begin to have differentiated products, especially on the food side. Local taste, local stuff. Those are the opportunities for the future. Yeah, we also see it that way. Like I keep saying, it's a long haul. Okay. Well, thank you. That's really it. Lizann, can we just take a one-minute break before we go on to the next question? Just give us a minute, please. Sure, sir. Okay. Yep. Rushabh just interrupted me to make a clarification on the store openings. There has been a slight understanding gap on store openings. I'm just reiterating what we had said in last year's analyst meet, where we said that this year that passed by. 2021. The 2021 period and the 2021-2022 period combined, we said that we'll open 59 stores. That was the guidance we are giving, and that is what we are retaining. Which effectively means last year we opened 22 stores. 22 stores. 37 should open ideally this year. Yeah. I just want to clarify that. We aren't giving any guidance beyond that. Yeah. 39 basically is a sum total of two years. Yeah. Not for one particular year. Yes. That's why the interruption. Yeah. Lizann, we can go on to the next question please. Thank you. The next question is on the line of Percy P. from IIFL. Please go ahead. Hi, sir. This is Percy Panthaki here. I just wanted to understand how your store does in a particular micro market on an average. In a particular micro market, let's say within a 2 km radius of your store, I know you don't have this data, but if you were to just guesstimate, what kind of market share within the grocery industry of that catchment would a DMart store typically have? Percy, cannot comment. We've never done all this analysis. I don't know. Okay. Secondly, you mentioned that the opportunity is that for 100,000 population, you can open one store. Does that mean, if you were to look at currently your number of unique customers transacting annually per store, would that be like 25,000? Because 100,000 population would mean 25,000 households. Is that what you mean really? I mean what I said, 100,000 population town, one DMart store works. That's it. This is purely based on I put up that store, I observe it for a year, it's doing good revenue, it's giving me profit. That's it. Beyond that, I do not know whether it's 25,000 households or 15,000 households. Okay. This is based on your actual experience in a particular couple of towns or three-four towns that it is there? Nine cities. Sorry. Nine cities below. Nine cities below 100,000 also we have a store. Okay. They also do reasonably well. one to 500,000, we have around 55 stores. This data is basically this. This is hard data. We have a store there and this is that. Yeah. Would those stores not have significantly lower sales versus the country average? Could be. Could be. I've spoken about this also again earlier, that lower the pops you are at, cheaper the real estate and lower the pops you are at, lesser the revenue. End of the day, ROIC, right? That works. Correct. Yeah, no, the reason I ask this is I was doing some math. Basically, your revenue per store approximately on an average is INR 160 crore. If I take, let's say a reasonable amount of, let's say each transacting household spending about INR 2,000 a month, so about INR 25,000 a year. You really need a much larger population, or rather transacting households to support a particular store. Even within that, you would have a certain market share within the catchment. You won't have 100%. That math works out very differently for me. I don't know what is the reason for that. Have you considered repeat buying in the same month by the same household? Yeah. INR 2,000 a month, if I consider per month per household for a guy who transacts with you, that would be, let's say, INR 25,000 a year of value, and INR 160 crores is your total sales per store. In that case, the number of households required to support is actually coming much higher, right? Yeah. I think the catch is people buy more often. Look at anybody's home. Probably your own home. Is INR 2,000 enough for a month? It may not be enough for a four-member family. I think that's the catch. That's one. You tend to buy more. Okay. Understood. Fair enough. Secondly, wanted to ask regarding your sort of approach to store expansion. You have always stated that you would rather go for a slow and steady kind of approach. Isn't there a sort of total finite opportunity? I know there is a big market share gain from unorganized, which can happen over a period of time. Say, within a particular catchment, because people don't want to travel more than 2 kilometers, 3 kilometers at a max. If there is another sort of big organized player who opens up in that catchment before you, doesn't that really reduce the attractiveness of that catchment for you? Far, it hasn't affected us. In a lot of cities where we opened, there was existing retailers operating there. It hasn't affected us yet from that perspective. Maybe in the city they might be there, but in a particular micro market, in a particular 2-kilometer radius, has there been cases where 2 large organized retailers are present and when the second guy comes in, there is no impact on the first guy's sales? There is an impact. I can speak about us. Suppose I will operating somewhere and somebody else comes close to me. Okay. My business does get impacted for the first few months, but then it comes back. See, that's why I keep saying that the market opportunity is too large. Far, no problem. Okay. Lastly on DMart Ready, any kind of idea you can give in terms of how the rollout will progress over the next three, four years? Let's say if we take a longer-term period like, let's say five years, how many cities do you think we can have DMart Ready in? I cannot comment. It's purely a factor of how we perform in Bombay and how the business progresses in Bangalore, Hyderabad, and Ahmedabad, Pune. Basis that. One year at a time, that's the way we are. We don't give predictions for next year for the brick-and-mortar business. I can't predict about what will happen years, five years down the line. Really don't know. Play by the ear. That's the principle we operate on. No, that's all from me. Thanks. All the best. Thanks. Thank you. The next question is from the line of Amol Gogate from Carmignac. Please go ahead. Thank you, Neville, for your time today. Always very interesting to hear your thoughts. I wanted to understand, from what I can hear, there seems to be still some hesitancy in rolling out DMart Ready, and it seems like it's certainly much lesser than what it was, say, 18 months ago. It seems to be linked to your thinking that you need to get Mumbai right. Isn't that a brick-and-mortar way of thinking about the business? On the e-commerce side, companies are a lot more aggressive, prepared to expand, mainly because there's a possibility that there are others who would get to the customers faster than you. How do you think of the lost opportunity? Also, in light of the potential lost opportunity, why the hesitancy in expanding as fast as you can? I wouldn't agree that there's more hesitancy than 18 months back. In fact, we're more aggressive now than 18 months back. That's why we've gone to these new cities. Let me put it this way, that these large cities have populations which are significantly higher. If we address these cities in a far meaningful way and invest some more money to ensure that we get more shoppers to shop on the application, that would be a better way to address the market opportunity. Why we are taking this two, three cities at a time kind of approach. Time will tell whether we are right or wrong in our approach. Now it seems like we are being too conservative, but that's the way we are. Can't help much about that. We won't go whole hog across all cities. We'll see how we do in Hyderabad, Bangalore, Ahmedabad, and a couple of more cities that we're planning to do, and let's see. If I may just ask follow-up. Not even expanding to other cities, but even Mumbai, clearly from your commentaries, looks like you know that DMart Ready has a lot of opportunity in Mumbai alone, but you seem to be waiting to get the model right. Am I right in understanding that? No. Mumbai, we are going whole hog. We are seeing a pent-up demand. We are setting up fulfillment centers to fulfill that demand. Mumbai, we are going all out, to be very honest. Okay. That's good to hear. Mumbai is a 2.2 crore population, MMR, the entire Mumbai Metropolitan Region. It's a large population. Okay. For the other cities, is it lack of people that you have? Obviously from a funding perspective, you said the parent company can fund that initiative even in the other cities. Anything else that kind of constrains you from rolling out faster? No. We are at the right pace. No issue there from a funding perspective also, or people perspective. Got it. Thank you. Thank you. The next question is on the line of Sameer G. from ICICI Securities. Please go ahead. Hi, this is Sameer from ICICI Securities. Sir, I had two questions. Coming back to the last quarter performance, what we saw was a sharp contraction in gross margin. Now, I understand that this quarter there would have been a higher mix of essentials and staples, but that would be true for the base quarter as well. Is there anything out of the ordinary here that we are missing on this gross margin contraction just for this 1Q performance? Yeah, good observation, Sameer. I'll tell you what happened. In the first quarter of last year, it was new for everybody, right? There was complete shutdown and essentials were completely shut. We had done a slight calibration of margins in the essential piece last year. That's why it's not comparable to first quarter this year. First quarter this year, we didn't touch anything there, and non-essentials were again shut. That's why there was a slight erosion on margin. That's it. Because we're pretty confident that whatever happens, things will come back, right? We're not too paranoid about margins per se. We let it be the way it is. Second is we didn't have any major one-time costs like we had last year, right? We paid significantly higher wages for people to come back to work and stuff like that. That's the reason. It's a good observation. Yeah. That's our response to this. Thanks, sir. That clarifies. On the e-commerce bit, just one question. Is it completely run separately? As in the same product on a DMart store, is it available for a different price or a different deal on the e-commerce format, or is it the same, at least in the similar catchment? It's legally, operationally, all sides, it's a separate entity running a separate setup. Technology, everything is separate. Everything runs independently. It has an independent CEO. His name is Vikram Dasu, who runs it. The broad ethos of what DMart stands for is what basis which the business runs, right? There is a lot of pricing and purchasing and buying, merchandising synergy that is transferred to that company, to that business. Otherwise, if you ask me piece to piece, item to item, is it the same price? No. It runs independently basis the principles of DMart, right? From an assortment standpoint, it is a subset of the DMart assortment. You will not find everything that is there in DMart in a DMart Ready store, right? Based on some analysis, some logic, we list a certain set of products in DMart Ready. There is a reasonable number of articles which we sell in DMart Ready which we don't sell in DMart store, right? That's why we wanted this business to be run separately because it has a different go-to-market principle, right? That's how it is run. I hope I've answered the question. Yeah, sir. Very clearly. Only thing is that because you're running it with the same brand in the mind of a consumer, isn't it creating some sort of distortion or maybe, if I may use that term, a little backlash for the brand if there are differential prices for the same product on different platforms offered by the same company, at least in the mind of a consumer? That's a great point. Basically, look at it from a consumer standpoint. What does DMart Ready stand for? It's the app, right? How the app is communicating or responding. If it's a typical DMart shopper, he will buy stuff that he would otherwise buy from DMart, which generally is available on the app. Right? The ethos is that pricing has to be similar meaning same levels of discounts. You're delivering that to the DMart shopper. Right. At the same time, there are certain shoppers who would want something else, which is delivered to her through the search. Only if she's searching DAVIDOFF Coffee, she gets DAVIDOFF Coffee on her screen. Right? If she wants Nescafé. It is mutually exclusive. There is no distortion in the positioning of DMart. Got it, sir. Just one final follow-up on that. Is the whole MMR, the Metropolitan Region of Mumbai, being serviced by DMart Ready, or is there still some spaces left out? As you said, you're still opening more fulfillment centers. There are gaps. Certain regions, certain areas basis the physical reach, but more in the non-BMC limits. BMC limits, we are covering almost every pin code unless we have a specific locational challenge that a vehicle cannot reach, or it's not appropriate to go and do business there. Otherwise, entire of Mumbai city is covered. MMR, obviously, we have challenges in certain parts because of distance. Those are the gaps. Otherwise, more or less, MMR is covered. Thank you, sir. That answered all my questions. Thanks for this. Thanks. Welcome. Thank you. The next question is from the line of Amnish Aggarwal from Prabhudas Lilladher. Please go ahead. Yeah. Hi, Neville and team. Just a couple of questions from my side. My first question is on DMart Ready, where we first started these stores as a pickup point and then delivery. Do you have any plan to convert these DMart Ready outlets? First of all, how many outlets we are having, and do we have plan to convert them into neighborhood stores? Since Big Bazaar closed, we don't have any organized retailer who has gone into this neighborhood kind of format in India. Secondly, when we are giving the guidance on the number of store openings this year at on 59, which is your carryover from last year. How are we prepared that beyond say FY 2022, so we will be still sticking to say 40 per annum, or we have plans to go to much higher numbers, looking at the fact that you are saying that there is a potential in the existing cities itself of 1,200-1,300 stores? Amnish, I would like to clarify once again, the guidance for this year is 37 stores, not 59 stores. Okay. Yeah. That's one. Second is, as of 31st March 2021, we have 290 pickup points. Okay. Of which 276 are in Mumbai. Bulk of it is in Mumbai. About converting the pickup points to a convenience format, we spoke about it earlier, I'm repeating this again. We do have some pickup points that are relatively larger. We do sell some stuff there. That is more to focus on making it more margin accretive. That's it. Not really a whole lot convenience store. I would recommend you go and have a look at it and then make your own interpretations. Yeah. What was the last part of your question? Store guidance. Store guidance. Store guidance, see, we don't give guidance. I'm repeating this again. Last analyst meet, I gave guidance because of COVID and its relevant disruptions, and hence we said that, okay, pre-COVID, we opened 59 stores over two years. We said 59 in the same following two years, which is last year, 2021 and 2021-2022. We opened 22 stores last year. We are saying we will open 37. 35-37. See, we've also closed two stores. 24 stores have already been opened in the 2021. The grand total for the two years should be taken as 59, and not for one particular year. I hope that clarifies, Amnish. Yeah, absolutely. What I was more keen to know was that in terms of the ability of the management team to handle the store openings. Any clarity on that in the medium term, that how much of that we can handle? How many we can handle? This question Amnish asked earlier, I cannot comment on that. All we can say is that whatever the real estate team can give us, we are reasonably well-equipped to handle, to open stores. What that number is, I would not like to comment. All I can say is we are building reasonable capability on the operational side or the project execution side to ensure that we have a decent pipeline of store openings in the future. Okay. Neville just one request that if we can share on a quarterly basis the, you can say, the P&L of our e-com business, so that will be very useful. I don't think that would be possible. Why not is we'll discuss internally. Okay. Thanks a lot. Thank you. The next question is from the line of Binoy Jariwala from Sunidhi Securities & Finance. Please go ahead. Hi, Neville. Thank you for the opportunity. My first question is, in the last year, when the sales were still recovering in quarter two, quarter three, we saw that our EBITDA margin already hit 8% and 9%. Now, I understand that you might have done some changes in the way you operate the business, extracted some costs out of the system, which is more structural in nature and will not come back. Just would like to know from your perspective, would you like to take this as an opportunity to go further down on your gross margin? The way I always respond to this is 15%-16% gross margin is what we look at. Right. Top line gross margin. We'll never earn more than that. Now, how much lesser should we earn is a factor of competition and all of the other things. The broad principle is not more than 15%-16% gross margin, 15% just for simplicity's sake. We'll never earn more than that. We will always focus on our business from a cost perspective to ensure that we run the business as efficiently as possible. Obviously ensuring that we don't cut corners. Employees, wages, compensation, talent, quality, all of that has to be top class. No compromise there, but still run a very efficient ship. Whatever profit comes at the bottom line is the profit that comes. For us, the first two parameters are more important. Then competition. If competition makes us earn lesser gross margin, so be it. We'll compete. Yeah. That's the way to look at it. Okay. The second question is on inventory level. In quarter four, in your commentary, you said that you have a problem of plenty inventory because you were optimistic on the business prospects. Has that inventory now normalized? Yeah, totally normalized. It's become all right. Well, we didn't know how long the lockdown will be and stuff like that. Things have rapidly come back to normalcy. Like I've commented, states which have relaxed norms much earlier are doing phenomenal sales. They're doing all well. I think all the worries are gone. We are perfectly okay on inventory. In fact, we may end up having shortage of inventory. It's really crazy times actually. The way we are yo-yoing between situations in the country because of COVID, it's crazy. Inflation, stock outs, excessive inventory, flight of labor, coming back, multiple things happening. Right. A very basic question, pardon my ignorance on this. Let us say you're now setting up stores of the average size of approximately 50,000 sq ft. These are typically G+2 kind of structures or maybe even G+3 structures. Initially, when the crowd is still gathering pace and it's still coming into the store, you said earlier that you typically start the store partially, not completely, right? As the crowd picks up, you open up the additional floor or so. My question is that in your retail area, when you mentioned that this is about 8.8 million sq ft of retail area, there will be stores which you've not completely opened up. While counting retail area, do you take the entire retail area of the store or only the retail area which is operational? Only operational. Only operational. Okay. Just for clarity purpose, you're saying that, let's say it's a G+2, and you started G+1, then you will only count G+1, right? Yeah, broadly, yes. Okay. Neville wanted to share one observation with you. On DMart Ready, when we're looking to order, there is a waiting period of 3 and 4 days. Is there any internal target where you want to lower this waiting period? Waiting period is a factor of demand. If demand is excessively high, the waiting periods go longer. What we have done is, one jugaad we have done is, now we don't take orders beyond a particular number of days. That's the only way to cut the waiting time, because otherwise you open it for seven days, you get orders put over seven days. Number one. Number two, also to understand that there is a set of customers who don't see it as a waiting. They actually voluntarily select a period of their choice. You have to also look at it from that perspective, right? Point taken. These are the challenges we are facing. The internal conversations we are having is how do we ensure that we deliver 100% of orders within 24 hours? If there's an opportunity to deliver within 12 hours, can we? If there's an opportunity to deliver within six hours, can we? These are conversations we are having, but like I said, point taken. If you look at global e-commerce, grocery retailers especially, they also have slots for a longer period of time because they want people to plan their grocery shopping. You should not just see it as waiting time. There are some people who want it on a weekend, on a particular time slot, date slot, things like that. You have to look at it both ways. Right. Understood. Last question is, some land has been acquired in the subsidiaries with approximately of INR 18 crore in FY 2021. Which subsidiary has this been acquired in? This is the grocery side, I think. I think it's in the ARTL business, which does the grocery processing. We bought some land there to build out some manufacturing capability. Understood. Thanks. That's it from my side. Thank you. The next question is from the line of Varun S from IDBI. Please go ahead. Yeah, thank you for the opportunity. Sir, two questions. First, on real estate acquisition, just wanted to understand that, in the long term, will it be okay if we match long-term assets with long-term liabilities, which is the long-term debt, or how are you thinking about funding the acquisition of land going ahead, I mean, over and above the cash that we generate from operations? Sure. Later. Yeah. If we need to raise debt to buy real estate or to help us in expanding our business, of course, we will do that. The point is that it's a factor of two things. One is, most importantly, is my company capability good enough to open stores at that run rate? Number one. Number two is, what debt is the right debt without having any risk to the balance sheet, right? Both are equally important. In general, if you ask me only just about, oh, will you raise debt to open stores? Of course, why not? We've done that in the past too, right? Sure. kind of you're not averse to taking debt also going forward for funding acquisition. Great. the second question- Acquisition of what? Real estate? For the real estate, yes, absolutely. General acquisitions? Right. sir, my second question is, you already mentioned about that DMart is not averse to opening 20,000 store, and we also have a couple of 10,000 stores. Sir, I just wanted to understand that on the maximum store size front, is there any kind of limitation that we thought of that, okay, this is the maximum size, and we don't want to go beyond that, like more than 150,000 sq ft size of stores on an individual basis. My reason for asking this question is, DMart can use same principles of price disruption to kind of penetrate into lot more categories. for example, consumer durables or for example, we don't sell bicycles, et cetera. I don't know which all categories, but there is huge amount of optionality in terms of categories that we are tapping, especially on the non-food side. This large format store and category evolution or tapping new categories, so how do you think about it, sir? Yeah. The main thing is relevance, right? How relevant is your model to the category you operate in? That has to be retained. We like to work in categories which are simple to understand, simple to explain, easy to carry, things like that. At the same time, as the country's economy evolves, if say, for example, per capita incomes increase consistently at 7% to 10% every year, that automatically over every three to five years creates enormous opportunities. Okay? Now point is, when those opportunities get created, how do you align those opportunities to your model, and what are the ancillary relevant categories that you can enter into? This is a continuous activity we do with the buying team. It is their job to do that, to review that, and we keep doing small trials, small pilots, and then we decide, okay, sure, let's do this subcategory, too. In general, your point taken, but we are very particular about, okay, what are the things we should not be doing. It's a very fluid situation. I don't have a very clear-cut answer. I'm just giving you the broad ethos, the principle of how we do that. That's why owning property, owning real estate, and building slightly more gives you that future leverage, that future dexterity to try these new things. Yeah, absolutely right. Sir, on maximum store size, any commentary on that? No, I cannot comment on that. It's logical, right? You don't build unnecessarily large stores just because you own the real estate. I don't think that's a very prudent way. We are very prudent with our capital and with decisions like these. I can't give you a number we won't build beyond this size. Right. Just to answer this last question that on customer experience. We talked a lot about online customer experience, but in the offline space, with the business that we know quite well, and as you rightly highlighted that a lot of customers who do not want to go to offline DMart stores. These are need to be exclusive set of customers. In the offline customer space, sir, what are the things that we are obsessing for to improve customer experience? Because long customer queue is one of the main problems. I don't see DMart using too much of tech to solve for this problem. For example, customer doing a self-checkout kind of stuff. If you can throw any highlight on how we are obsessing about customer experience in the offline DMart stores. We follow a principle of 4RQC. 4RQC is right product, right price, right place, and quantity, and then quick checkout. That's the basic ethos on which the company operates. For us, the principle of customer experience revolves around 4RQC. That's it. Yeah. If I give you the right product at the right price, it's at the right price board and the right quantity. Then having a quick checkout, that's it. For me, [Non-English content] You won't find anything else in DMart. Yeah. Sir, quick checkout, any tech related thing that we are doing? Let me come there. Now, the specifics about quick checkout is a very interesting journey, interesting story. What happens is, if you notice that the ratio of number of checkouts to the trading space DMart has would probably be one of the highest in the country, probably globally also. Okay. The problem is that as many checkouts I add, I get more and more crowd in the store. Right? Beyond a point, there's a limitation of a brick-and-mortar store. You can't break down walls and put checkouts in the open, right? The challenge is, that's why during peak hours that we do have queues. Okay? What do we need to look at? You need to look at a technology, how fast can it be, how good your software is, how quickly can it checkout, how good are your scanners. We constantly evaluate and invest in technology to ensure that this is super fast. There will be 20% of the time in a shopping area that you will have queues. Also remember that in a brick-and-mortar retail store, these queues are only during weekends and only in that three-hour, four-hour window. Otherwise, it's super smooth. There's no queue, practically. Understood, sir. Thank you very much for all your answers. Yeah, thanks. Thank you. The next question is from the line of V. Srinath from Bellwether Capital. Please go ahead. Hi. Just want to understand, how does adding sq ft to existing stores work? Do we build out the store like G+3 and then keep it empty and add later? Do we construct newer floors? When we do that and when we add floors, do general merchandise kind of get a higher indexation or increase in assortment from general merchandise? If you could kind of shed some light on how adding square feet to existing store works. Sorry, Srinath, sir, we are not able to hear you. I think there is a disturbance that keeps happening. Yeah, can you go on mute while we respond? You can unmute once you've completed. Yeah, that's good. This whole conversation that is tilting towards adding square footage, this is coming through multiple questions. These are more edge cases. In general, we are relatively close to what we want to operate the store at. Okay? It's not that we build later. The building is already made, but we don't operationalize it in certain cases. Yeah? The store is built, the building is made. Right? That's to answer the first part of the question. The second part of the question is obviously, when you have larger stores, your ability to sell higher margin products becomes far better. Yeah, general merchandise and apparel has a better platform on which it can be sold. That is kind of margin accretive. It has on better margins. Yeah, got it. No, given that we have a lot of standalone buildings, do we tend to add square feet to existing stores in the first place? No, we don't. We haven't come to that stage yet. Not really. Very rare. Maybe you're asking this question because you must have noticed it in very few locations, but that's very rare, if it's from that perspective. Got it. On DMart Ready, just wanted a couple of questions in. In the non-Mumbai markets, are we looking at the same format where we're going to set up significant number of pickup points and kind of have that touch delivery as well as pickup point experience, or are the newer markets slightly more indexed to a delivery business? The second one is the last mile in the delivery operations in-sourced, or are we using an outsourced operator for that? Yeah. Wherever we are going, whichever city we are going, we are going with the pickup model also. It's pickup plus home delivery both. We are doing the delivery ourselves. To the doorstep, everything is owned by us. Yes. We would like to own the entire experience. Got it. You had alluded to it about five, six questions back about shortening the time span of delivery. What are the bottlenecks that we are facing, especially in the pickup point side of the business, say, to get. Right now, Swiggy is from their dark stores doing it about 45 minutes. Given that we have pickup points, fixed infra set up, even if we do three, four drops a day from our distribution center, just want to understand, what are the key bottlenecks for us to significantly reduce lead time? I'm only talking about Mumbai because that's where we have density of operation. Okay. let's look at it from perspective of this concept of instant grocery, right? If you're talking about it from that perspective, we don't even want to compete there, right? Promising in 45 minutes and all that's not the business. No, I'm more talking about, say, if I order on a morning, then probably pick it up from a pickup point in the evening or something like that. Significantly shorter lead times than what we have. In the delivery business, I can understand we have a limitation of feet on street, but what would be the limitation for the pickup business? Morning to evening is doable. It's a factor of our own capability and capacity. Yeah? Today, we are unable to do it because of the distance between the pickup point and the fulfillment center. Okay, let me put it this way. If I have a point of delivery, whether it's pickup or home delivery, which is within a two- to three-kilometer radius of this fulfillment center, I can probably even deliver it in six hours. Yeah? The challenge is, say, in a city like Mumbai, till a year back I had only two FC, fulfillment centers. Some of them had to travel 20 km one way. You have to even optimize your delivery routes, right? Because of those challenges that you would want to first populate the slots in a manner that is more beneficial for DMart than the consumer, because you want to optimize your delivery routes. that's why you couldn't offer those conveniences of quick delivery. you are able to do that with scale. As you get more and more revenue, you know that this pin code, you generally get this many orders per day, and hence you can then crunch the time from order to delivery. Yeah. it will happen with time as you get more and more revenue. Basically, as we add larger fulfillment centers, as the depth of the revenue goes up, we'll be able to shorten lead times as well as kind of maintain logistics so that we get a cost advantage. Is that a right understanding? As long as you add more fulfillment centers, not larger fulfillment centers. More fulfillment centers and the travel time between the FC and the destination has to be short. Perfect. Last question from my side is, we've been hearing that real estate transactions have been happening. If you could kind of give us a sense of more than deal availability, deal throughput versus, say, a year or so back. How has been the acceleration? Say, assume 100 was the deal throughput last Jan or just before the pandemic struck. Do you see a significant improvement in the deal throughput that we are seeing, especially for our expansions that are likely to be for the next two-year window or three-year window? Let me put it this way. I've mentioned this again last year. I'm saying the same thing again now. It has been better than previously. Yeah. The deal pipeline is better. How much better? I cannot comment. You will know as we open stores. Okay. Thanks a lot. Thank you. The next question is on the line of Ashish Kanodia from Ambit Capital. Please go ahead. Yeah. Thank you for the opportunity. In some of the stores, I noticed that you have a quasi shop-in-shop kind of a model in your footwear segment. Just wanted to understand that what led to that having a separate shop-in-shop, and what has been your experience altogether with that model? Shop-in-shop basic principle is what we can't do, we bring in a partner. That is the principle. The partner does it better than us. That's it. That's the whole principle. It serves a particular unmet need for a consumer, which I cannot. In footwear, what is it? The biggest challenge of footwear is inventory because of design. Obviously you need a footwear expert to do that. That's why we have that in the footwear side. Let's take Mithai. Classic Indian Mithai. Obviously, a Chandu or a Ghasitaram or a Tiwari is far better to manage that, and that's why they are there. That's the principles basically, that you are serving an unmet need which you can't do, and then the vendor's expertise has extreme high value if he runs it himself rather than us. That's it. Sure. That's helpful. Secondly, currently in say a Bangalore, Hyderabad or Ahmedabad or Pune, how are you fulfilling the orders for DMart Ready? Because my understanding is the fulfillment centers are all based out of Bombay. Is that correct? No. Grocery cannot run like that. That's the principle in marketplace maybe. In grocery, you have to have the fulfillment center in the same city. Currently you have fulfillment center across all the five cities? Absolutely. You can't run this business otherwise. Sure. Got it. That's very helpful. Thank you. Welcome. Thank you. The next question is on the line of Shireesh Jain from Pax Capital. Please go ahead. Hello. Thank you for the opportunity. I wanted to ask, you keep saying that you are happy the way you are and you don't really want to change much because today this is what works for you. I want to assure, how do you make sure that you're not ignorant about the disruption around you? Because the change of disruption is pretty high. How do you make sure you're not ignorant about those facts and you are moving with time? Just about that. The fact that we entered the e-commerce business itself is an indicator that we're not keeping our eyes shut. Other than that, like I've said earlier, I'm saying this again, if you guys think that we are missing out something, please tell us. Happy to hear. Tell us these are the three things we should do, these are the four things we should do. Very happy to listen. At least if there's an area that we've not thought about, your advice or your few comments will help us think about it. When we say we are happy to do what we are doing is after listening to everybody, after evaluating the opportunities and then saying, "Okay, of these ten things, seven