Good day. Welcome to the Avenue Supermarts Limited investor call. As a reminder, all participant lines will be in the listen-only mode, and anyone who wishes to ask a question may enter star and one on their touchtone phone. To remove yourself from the question queue, you may press star and two. Should you need assistance during the conference call, please signal an operator by pressing star, then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Rushabh Ghiya. Thank you. Over to you, sir. Thank you, Michelle. Good morning, all. Welcome to our annual conference call. I have this morning with me our senior management team, Mr. Neville Noronha, our MD and CEO, Mr. Ramakant Baheti, Group CFO, and Mr. Niladri Deb, CFO, ASL. We will follow our usual process, where Neville will take you through the investor presentation, you know, which was uploaded last week. Before I hand over the call to Neville, I'd just like to draw your attention to the safe harbor statement, and then I'll request Neville, to first take you through the presentation, and then we'll open up the floor for Q&A. Over to you, Neville. Thanks, Rushabh. Good morning, everyone. As it is, every year, I will give more time for Q&As. I'll run through the presentation, which has already been uploaded. On Page 5, like we mentioned, our general merchandise and apparel contribution has been lower than the past trends. While food and non-food FMCG are more or less trending on similar lines, there has been a higher impact on the downward side on the general merchandise and apparel sales contribution, and consequently, that's why our gross margin margins have reduced in the recent past. Our cluster-based expansion strategy continues. We've constantly focused on this lever of operating leverage, which comes by having more and more stores in the same region, and it continues. We added 20, 40 stores in this period, and I mean, it's the same, more of the same. Page 7, DMart Ready. This is our e-commerce business model, which is housed under Avenue E-commerce Limited. We added 10 cities. These are the additional store city locations have not added to that extent in incremental revenues, because the structure of format in which we operate are more like a pilot. Hence, we are still a more of a work-in-progress approach to the new city operations. We continue to believe that grocery e-commerce has tremendous opportunity in very large towns and densely populated or vertically densely populated towns, and we continue to have that belief. Hence, to that extent, our focus will be more dominant on the large towns of the country. Page 8. Again, it shows the trend line of number of stores that we opened. Financially, that 2022 shows 50 stores because that was more of an overlap or on period openings of 2021. 2023, we opened 40 stores. I've spoken a lot on our real estate strategy and the reasons why we cannot accurately predict how many stores we will open in a year. Our intent and objective is obviously to maintain a run rate of the past. That's, that's the broad point of view there. When we go to operating and financial summary performance, again, the format, the structure all remains the same. Total Bill Checks are more from INR 18.1 crore to INR 25.8. Like- for-l ike growth for we do Like- for-l ike, for two years and older stores, that's in 24.2%. I think the more critical point to note is, which I mentioned in my comments for in the quarter ending Q4, where I had said the Like- for-l ike for 6 months was, I think, 11%. Yeah. That's the more comparable number that that has least COVID impact, and it's a more comparable number. The Like- for-l ike was 11% for the end of last financial year vis-à-vis the year prior to that. we added 1.9 million sq ft, and revenue from sales, obviously, per square feet are at INR 31,000. This is primarily because the store sizes are larger. We are quite satisfied with the recovery, except for, I'm sure there'll be a lot of questions on general merchandise and apparel contribution. Other than that, I think we're pretty confident of the business. All COVID-related issues are behind the back. We're very bullish on the business, and we continue to focus in this area. We believe that there's huge, huge opportunity, you know, to do better and better in the business. Yeah. INR 31,000 revenue per sq ft is more a factor of larger stores being opened in the recent past. Otherwise, from an ROI perspective, overall performance perspective, I think we are placed pretty well. Page 11, again, is the same, more of the same. We've done INR 41,800 crores of revenue. EBITDA is 8.7%. of 6.1% and net cash flow of INR 3,113 crores. I think it's quite stable and we're quite pleased with the what we have done. Again, Page 12, days inventory, that's an interesting data point. It's come down from 36.5, then 33.3 days to 8.8. I think I'd like to spend a little bit more time there. I think that's the beauty about a model. The ability to be agile and flexible, it's automatic, right? If general merchandise and apparel, which tend to have more inventory, if that's not doing too well, the inventory by itself also gets corrected. Because the contribution of food FMCG and non-food FMCG increases, and hence, the mix of inventory also changes. That's why the number of days have come down. On fixed asset and inventory turnover ratio, again, we are slowly inching back to our pre-COVID numbers. It's getting better with time. Obviously, return on network and return on capital, these are all, you know, self-explanatory numbers. I think we are the trend lines everywhere is coming back beautifully to pre-COVID levels, and we are quite happy with how we are trending on that front. I will jump to not Page 13, but Page 14, which is a more interesting slide. Page 13, I mean, it's all self-explanatory. I'd like to spend some time on the e-commerce business. The— What is interesting here is that, our view is that all the worries that we had about how much money we are going to lose and how this business is going to trend, is actually 90% gone. We're quite confident with our ability to run the e-commerce business, and we feel that it's not an either/or. The e-commerce business or the DMart retail business, as can draw out its own path and build the business on its own. Having the tech mindset and approaching the market from that standpoint, point of view. you know, and probably another 2 to 3 years will tell us, you know, what will be the cost side and the margin side, impact on this business. The one thing I feel about grocery is, the grocery business, if run well on the e-commerce side, cannot lose too much of money, unlike the marketplace. I think that's a huge positive for us. I mean, all the anxiety that we had about how much money this could lose has actually gone. We know now that it can't lose too much of money. How much money will it make? I mean, that we cannot comment. Broadly, I can say it will be driven by what are the gross margins we'll make in this business, which is quite challenging. The cost of operating the e-commerce business will be little more or probably relatively more, I'll not say little more, relatively more than running a brick-and-mortar business. The fact that the order is being taken for the customer and being delivered to the customer at a more convenient location, either at her home or closer to her home, is going to cost more than running a brick-and-mortar business. That's the broad view that we have. From that standpoint, I thought I should comment on the e-commerce business. The Food Plaza business is basically all the food services. We see an opportunity there. The Food Plaza business helps in making the brick-and-mortar business more stronger. Similarly, the Elant Retail business, which is again, a subsidiary which manages all the Staples business. We also believe that that's another area that has immense potential and opportunity to make the brick-and-mortar business stronger and stronger. We've also started our pharmacy business, which again, the whole principle is it complements well with the brick-and-mortar business, and hence, we're also paying attention to that side of the business. With that, thank you for listening and open for questions, please. Thank you very much, sir. We will now begin the question- and- answer session. Anyone who wishes to ask a question may press star and one on their 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, please wait for a moment while the question queue assembles. We have the first question from the line of Avi Mehta from Macquarie. Please go ahead. Hi, Neville. Thanks for the opportunity. I wanted to, you know, first start with the general merchandise apparel segment. In this quarter, you had highlighted specifically, the general merchandise has recovered. It seems that the apparel is yet to bounce back. The question that I had is: Would you believe that online players like Myntra or offline players like Zudio are able to wean customers from our apparel offering? What are we doing? Is that a concern for you? If you could just spend some time to help us understand what is missing or what is hurting the growth in this segment? Thank you. Thanks, Avi. Yeah, so I would state in two ways, I, or probably, yeah. Let's see, let's look at it this way, external and what's internal. I think externally, we all know what's going on. I think the whole country has suddenly figured out that this is a space that, you know, has a huge opportunity, and you have a lot of players who are competing into this space. Typical, on 1,000 plus and below price point, more focused around INR 500, INR 600 price point. Obviously, earlier, that segment, you had fewer players. Obviously, that's one area, definitely. Okay? There's a lot of activity happening, and people are getting more choices, and when they have more choices, obviously, it has an impact for us. We're also seeing, and that's kind of a compliment for our model, is that because we drive so much of traffic, I think there is a clear mandate, is what we see, that a lot of these formats open very close to the DMart stores. So that's the second thing. They're both external, yeah, which is happening. Internally, I think, probably apparel, is so may not be the best aligned category, compared to, say, a Staples or a general merchandise. I think from an aspiration standpoint, you know, for a supermarket or a value retail grocery retailer, apparel may not be seen or perceived to be that aspirational compared to a general merchandise or buying food or, you know, all of that. That's the accepted norm. If you do any psychology, consumer psyche testing on all these aspects, it clearly comes out. Now considering that, considering, you know, what's happening in the market is getting more efficient, what is it that we need to do internally? That's where my question is, I think we need to do a lot more work internally. I think from an internal structure standpoint, you know, people standpoint on the apparel, category management standpoint, I think there has been some misses, some opportunity misses, or the quality of thinking that is needed on what we should do is. It has got a bit lost, and I think we need to work really hard there. Our view is that we have to make, we can't be what somebody else is trying to be. Okay. We are very clear that we are a first grocery format. Okay? Within that, how do we position apparel? I can't be a lifestyle discounted retailer of apparel, a specialty value retail. I can't be that. I am a grocer first. Within that space, what is it? What is the opportunity I have? I think there is still a huge opportunity to address in the basic segment. Okay? We are working on it. But we are approaching it from a perspective of what anything that's very low on high fashion, but very, very basic, great value, immense value, applying the principles of DMart. Like I always say, that if you want to wear a T-shirt, to be worn at home, or you want to wear nightwear, which you wear at home, or you want to go to a local bazaar to do some shopping, you need some apparel or footwear, you come to DMart. If you want to go to a 5-star hotel or you want to go to, you know, expensive party, DMart is not the destination to buy apparel. We're very, very clear about that. I think somewhere there, we have to be more precise, and we have to fine-tune our assortment more effectively from that standpoint. I think with that, we should be fine. Yeah. I think, also our conversation should not be binary, that is general merchandise and apparel. I mean, apparel should not be the issue. I mean, I think the ecosystem around non-FMCG and what are the other saliences that we can have by adding more and more horizontally into the format is something we should think about. That's the longer term opportunity. That's why, if you remember, if I've been saying that the opportunity of having larger stores allows you to experiment. Yeah? It's not just about apparel not doing well. In the longer term, quite likely, apparel will continue to have a lesser contribution to business, and that's okay. Yeah. Okay. I hope I've been able to answer the question. If I just, you know, as a simple follow-up, just, you know, in terms of the general and merchandise apparel total sales, would it be fair to say apparel is a relatively small component of it, from your, you know, equal component? Maybe I'm not. Just to kind of understand the extent of how much distract can be, at least from a near-term perspective. I hear you, that, you know, there is a portfolio work that you are actually doing to better, you know, address it appropriately. If you could give us some understanding of the extent of this sales. Thank you. I cannot comment on that, Avi. All I can say is that between the two, apparel is a lesser of a contribution, that much I can tell you. Okay, perfect. That's all. The second bit, if I may, on the, you know, you had highlighted last week that quick commerce is not a concern for us from a brick-and-mortar. A, if that thought continues, and B, are you thinking of, you know, extending that space to DMart Ready, you know, because there is a clear consumer need? I remember your, you know, your comments that you said, "We will go where the consumer is." just wanted to understand this better. I think we're in a very sweet spot, Avi, from an e-commerce perspective. The way we are doing a brick-and-mortar business is also what we are looking at in terms of ensuring that the customers buy more and more. Our focus is on increased basket values, and our focus on customers continuing. Every time she goes on to, he or she buys on Ready, her basket value has to be large enough. I think, when we are focusing so much on that, going the quick commerce way. Let's put it this way, if instead of ordering twice a month, if you start buying six times a month or seven times a month, the basket values are sizable, happy to serve you, sir. If you call that quick commerce, fine, let's call that quick commerce. We all know what real quick commerce is, right? It's a lot of impulse, it's a lot of low ticket value. It's all about, you know, delivering the next 30 minutes. I don't think we are focusing on that space. We are focusing on bulk, but we see an opportunity in delivering earlier. Yeah. Earlier we used to deliver on average, maybe 50% of the orders in 24 hours. Now we are saying 100% should be in 24 hours. Within that, we are saying, "Okay, how much of this can be delivered in 12 hours?" Delivering in 12 hours is a good vision to have, considering the size of the order we have and considering the assortment of the order. See, the customer on DMart daily shopping, she's not expecting the order in 30 minutes. She's not expecting 60 minutes, right? The heavy stuff, buying a lot of groceries, it's like her monthly shopping. She gets great value, she also uses other apps to get her, you know, stuff quickly, right? We focus on the bulk as of now, Ari. Okay. Okay. Sir, if you may allow just the last bit. Any change in discounting from peers, anything that we should, you know, if you're seeing reckless discounting kind of emerge or, from the other offline or online peers from my side? Thank you. If that continues, our margin is a reflection of what is the benchmarking that is operating in the market. I think nothing much has changed Like- for-L ike from last year to this year. So I think it remains the same. Okay, sir. Thanks a lot for answering these. Thank you very much, sir. Thanks, Avi. Thank you. The next question is from the line of Garima from Kotak. Please go ahead. Hi. Thank you so much for the opportunity. Neville first question again on general merchandise. At some level, do you think it is unfair for us to assume that the contribution of general merchandise to your overall revenue mix can actually go back to pre-COVID levels, or should this just find a new intermediate normal? It's a good question, Garima. When I look at, our very, very old stores, across the country, when they started. I'm responding to this question even in earlier analyst meet, but I will say this again. Whenever these businesses start, whenever these locations start, the non-core, the non-FMCG contribution, that is general apparel contribution, are higher. As they mature, the contributions, of general merchandise apparel reduce. Okay? It has been a circular trend for the last 20 years. Why does that happen? That happens because when you open a store, in an area which is fresh, new, first-time DMart, you tend to get a lot of people from a larger radius, okay? Then they happen to be there, they buy groceries, they also buy a lot of general merchandise and apparel. Over a period of time, what happens, people who are more and more closer to the store, their shopping becomes more intense, they come, their frequency is more intense. The more frequency and more the shopping intensity, automatically, they're not going to buy the same% or the same contribution of general merchandise apparel. They tend to buy more and more of groceries. As my revenue keeps growing at a healthy stagger every year, there is a higher revenue share of FMCG than of non-FMCG. Yeah. Yeah, so from that perspective, yes. If you ask me today, as of this year, from a general merchandise apparel, should I take that view and say: "Oh, nothing, there is no issue?" Not really. We do have an issue in apparel, specifically. Yeah, I also commented in my Q1, comments that general merchandise was more of a COVID and a lot of other things, and we've got it back, more or less. Yeah, I mean, it is coming back. Apparel is an issue for the question, for the comments I made just recently, and we have to work on it. Yeah. Understood. Second question: Can you talk a little bit about the cohort of new large-size stores, particularly stores that have opened in relatively new areas, such as parts of NCR, Punjab, et cetera? Are these stores from a throughput and store economics perspective, behaving generally similar to your older stores in geographies that, you know, you've understood very, very well? Both Punjab and NCR are quite delighted. Store economics are trending similar to how we used to trend in other regions when we started around the same, you know, tenure. We are, we aren't having any issues there. We are quite happy with the outcomes. No issues in NCR or Punjab. Understood. The third question, quickly on e-commerce. Could you highlight the performance of this business in Mumbai? Because this is your sort of longest performing geography. How much of your revenue is being contributed by Mumbai? In terms of profitability targets, do you expect this business to break even in Mumbai anytime soon? That depends on how you define break even. Different people have different views on break even. For us, break even is at the PAT level, considering head office cost, everything, everything, right? From that standpoint, I can only comment one thing, Garima, that MMR region is better than the overall company. Overall company meaning Avenue e-commerce? Avenue e-commerce. I think Avenue e-commerce is a loss of negative 1% of revenue, right? Right. 8 point something. 8.7. 8.7, yeah. 8.79, yeah. Mumbai obviously is better than this. That is all that I can comment. The majority of the revenues would still be Mumbai. Is that fair to assume, although you have added a large number of cities in, say, the last 12 to 15 months? Yes, yes. Majority of revenue is from Mumbai, but the operating losses is, in the newer regions are significantly higher, right? when you start up, yeah. Okay. Understood. Thanks. Thanks so much, Neville. Thank you. The next question is from the line of Arnab Mitra from Goldman Sachs. Please go ahead. Hi, thanks for the opportunity. My first question was on the relatively lower sales in DM and apparel. Neville, my question was, does this in any way affect your ability to offer lower prices in grocery while maintaining your gross margins? Are there other offsets, like potentially higher sales, giving you better margins from your suppliers, which will allow you to maintain your gap with competition on pricing, despite having lesser sales of the high-margin categories? The answer is, it has no bearing on our ability to compete. Yeah. That is why the gross margins have come down, right? There have been no attempts internally, "Oh, contributions are lower here, so I'm making lesser margin, so I will raise prices or, you know, I'll hold prices. I will not compete." Absolutely not. That's why our gross margins has come down. Deep business, I mean, you see the numbers, right? With the PAT we have, you know, there's no worry. I mean, from a competing standpoint, there is nothing to bother about. It's just that PATs will go down. PAT as a% to revenue will go down. So what? We'll compete. Got it. Got it. Got it. Understood. Neville, second question was, if I look at your overall bills cut, this is one number which, you know, before COVID used to grow at 20%-25% every year. That seems to have, on a 3-year CAGR basis, grown at more like 8%-9% in the last 3 years, pre-post COVID. Anything that you read into this, are there less customers, because your store space addition has been similar? Is the pace of new customer acquisition, even in grocery, reduced, or how would you read this data point? The only broad point we look at, Arnab, is that over the last two to three years, we've opened a lot of stores in smaller towns. Okay? Like I've always mentioned, smaller the town, lesser the cost of real estate. Overall investment lesser, but revenue become high. Even the revenue is low, so number of bills are lower, margins are lower. It is a mix. It is a mix that of new store additions that is making you know, look at the numbers that way. I mean, which is a fact, but it's primarily because, let me put it this way: I think, 5 lakhs and above towns, we used to have 68% of stores three years back. It's come down to around 60% now. 40% of our stores, you know, are below. Broadly, we have opened more stores in smaller towns. That's why the numbers look like that. Understood. My last question, Neville, was on store opening. As you mentioned, you probably want to maintain the run rate of 40 stores a year. Given the opportunity size, I think you last time mentioned more than 1,000 stores potential that you see. Is there any internal way you could accelerate this addition? Because your base of stores is higher, so as a percentage of base, the addition is actually slowing down if you do not increase the number of stores. Yeah. The one single point mandate is store addition. I think from a model business, everything is fine, with just store addition. That's a single point agenda. my question was, 40 per store a year is not a constraint in terms of your internal, like, bandwidth of adding stores? Not really. We work harder, is all I can say. But yes, it's a huge opportunity and we have to accelerate our ability to acquire more stores. It is a huge effort. I mean, 40 stores every year, the amount of work that goes by, but we have to do it. We have to— I mean, very simple. That's a single point agenda now for us. All other levers are ready to fire. Our ability to run the stores, our internal processes, systems, tech, everything is ready. It's all primed. We just need to open more stores. Okay. Okay, thanks so much, thanks for your time. Sure. Bye. We have the next question from the line of Sheela Rathi from Morgan Stanley. Please go ahead. Good morning, everyone, and thanks for taking my question. Just extending to the previous participant's question is with respect to stores. Neville, the first question is: Is availability of good land parcels a bigger concern or availability of, you know, employees, a bigger challenge for us? Obviously, land is a bigger issue. Land is a bigger issue, then you have to have a solid team to get those properties. When land itself becomes an issue, then it has an exponential effect. You have everybody's chasing the same resource, right, who has great expertise on this. Hence, having a large number of people who have that expertise and to convert those deals is a challenge. Okay? Hence, we're working on it. Yeah, land is an issue. Not easy. And— There are very few retailers do this, right, in India. Sorry, could you repeat that? I said that is why very few retailers do this, right? Acquiring land or, you know, building stores. I mean, generally, the reason why a lot of retailers go to the lease model is because this is a difficult area to handle. From a near-term perspective, are we seeing challenges with respect to getting more people in our workforce? You know, we have always maintained a 20%-80% ratio with respect to contractual versus permanent employees. Are we looking to change that? Not, the structure of the model remains the same in all elements of the business. It is. Understood. My second question again is on the GMA bit. You said that, you know, the growth recourse. Do you believe that the focus on GMA could be modified and, you know, could be in terms of cost? Are we willing to say that, you know, the gross margin profile from business could be different and could be instead of 16%, could be, you know, 13%-14%? Is there something which worries us or whether we are thinking about that in some way? I can't comment on that. All I'm saying is whether it is 16% or whether it is 12% or 13%, the business is resilient, the business is adaptable, agile, and the key point is being relevant to the customer with the positioning of value, right. We shouldn't disturb that. I mean, how a consumer or a shopper thinks about DMart, that shouldn't get disturbed at any cost. For us, our view is we think from that standpoint, and within that, then whatever the outcome is the outcome. Yeah. Our direction to the team is this, at the operating side and the merchandising side, this should never be disturbed. The operating side operates the business efficiently, the merchandising team then figures out what should be sold and at what cost and at what margin. Yeah, I mean, what price and what margin. Understood. My final question was with respect to DMart Ready. I think, Neville, you sounded much more positive with respect to the e-commerce business this time versus, you know, the past. What has changed? I am one of the consumers who gets the 12-hour delivery. I'm very happy about that. Is scaling helping us to be more confident that we can be profitable at some point in time, or is there some strategic change which we have done that is helping us to feel more confident? I was just joking with my team today morning that for all the tech that we talk about in the e-commerce business, at least for grocery, actually it is more manual labor involved than a brick-and-mortar business. The effort involved in picking the material and delivering it to the home, actually, that cost element and that people management is a significantly larger effort, actually, okay, compared to the brick-and-mortar business. Secondly, I think even from a SOP and a process orientation, people think that brick-and-mortar business has more. In fact, that's completely wrong. The e-commerce business, especially on the brick-and-mortar, on the grocery side, the level of precision that you need from a standard operating procedure is at a different level. Because somebody has ordered something 12 hours or 24 hours back in a particular time slot, and they want it, I mean, the lag between ordering and actual delivery is, like, 12 hours or 14 hours. It's not immediate. When you shop in a store, you're picking the stuff you're getting, you're getting billed, right? You're billed exactly for what you picked, which is quite. I mean, if you make a small mistake, there will be 1 item short or 2 items short in virtually every single order, right? I think from a sheer operating principle standpoint, the e-commerce business is actually significantly more complicated on the operating side and the people side than the brick-and-mortar business. Obviously, I mean, that's, that was also one of the thoughts we had, that if this has to be done really well, then we should be able to do it, because we are supposed to be good in process optimization, efficiency, all of that. I think from that standpoint, why we are more confident today that we can run this business, okay, we're using the same principles as which we started or we run the brick-and-mortar business. Yeah? Secondly, is the tech side of the business. We have a marvelous team, fantastic. Doing a brilliant job. They are also, I mean, they complement, and they are the forefront of this business. How they imagine and how they think about running it is very different from what how we think. Hence, keeping this business separate has helped us a lot. Yeah. It's a complement, it's a win-win on both sides. That's why we're more confident. From a financial standpoint, we're more confident that we won't lose too much money. That's why the confidence. Thank you. Thank you very much, Neville. Thank you. The next question is from the line of Latika Chopra from J.P. Morgan. Please go ahead. Yeah, hi. Thanks for the opportunity. Let me basically continue with a bit on the e-commerce part. You know, I just wanted to understand, you know, you are currently in about 22 cities, you know, and would you look to expand to more cities or you want to, you know, scale up operations in more cities? As far as the revenue share is concerned, you know, on a consolidated basis, those double-digit share, as for Mumbai, is e-commerce or DMart Ready now and has a double-digit revenue share, and does it in any way starting to influence your physical store expansion plans? Okay, if I got all your questions right, choice between having more stores in the same city versus. Will the e-commerce continue to expand more or will you consolidate first? Yeah. Latika, that's right? You want to understand if we were going to expand. Yes, in more cities or you will, you are looking to first scale up in existing cities, you know. I think we would now focus, take a pause and focus on new cities and try to scale up within the existing cities rather than move into other cities on the e-commerce side. As far as cities like Mumbai is concerned, that's a very interesting point, and I think that's also something very fascinating. In spite of a decent contribution coming in from e-commerce in Mumbai, our Mumbai stores are also doing well—t hey haven't declined. We haven't got in revenue incremental on e-commerce at the cost of the big converted business. This is also telling us that, you know, these are probably two very, there will be a little bit of an overlap, but we have two different need customers that exist. There is a huge cohort of customers who like DMart, but probably are not shopping in DMart, and they are now all going to DMart Ready. Yeah. Okay. And how are you know, getting the mix now in terms of home delivery versus pick up? Is it possible for you to share the count of DMart Ready stores pick up points? Pick up points have been mentioned. We don't split the revenue between the two. We don't split. See, our view is both will coexist. Both are equally important for us, and we are focusing on both right now. There could be an opportunity to calibrate our pickup points a little bit more so that the operating leverage that we desire from pickup should kick in. See, as a service, it's great, so that from financial modeling standpoint, it should work. If it doesn't work, we will scale it down. Yeah. To that extent, we are celebrating it, but we'll focus on both channels. Then, any updated thoughts on private labels and on, you know, customer data, leveraging, you know, now that you're, you know, collating a lot of this data through DMart Ready? No, our position remains the same. Still, the private label comments remain the same. It's a long, I mean, it's a long game. We're doing fine. It's good, but we can do, we have to take a 10-year horizon probably in terms of how we want to build it. The team focuses primarily on building great quality at great value. Wouldn't the share increasing, given, you know, the focus on smaller towns, I would assume, because, you know, the customers might be a little more price-conscious there, you know, private labels could be doing better on an aggregate because it's share rising for you, even if gradually. Marginally, but not really. Nothing for us to have a different strategy for small town. Not really. I think this model is great if you have just one approach across all stores. It's more efficient, especially for a private label strategy. Okay, nothing incremental on customer data, leveraging, you know? No. Okay. Not yet. The last one is the mini max format. Any feedback, experience, you know, expansion plans here? Again, it's a test. I think, we imagine this format to play a more deeper omni-channel role in high-cost real estate, places like Mumbai, or Pune. We're just testing it. You buy from store, you pick up from store, you know, both these options are made available. We're testing it from that standpoint. Okay. All right. Thank you. Yeah. Thank you. you. The next question is from the line of Vivek Maheshwari from Jefferies. Please go ahead. Hi, good morning, Neville and team. A few questions. First, Neville, going back to the same, you know, store additions. If you are talking about, let's say, 40 store addition, that will, you know, that implies, let's say, about, 11, 12% on your, on your, base of stores right now. Where do you think, you know, if you look at the 3, 5-year view, where do you think you will be happy? You know, shouldn't this probably be more closer to 15% or even higher in the context of opportunity? In that context, is there? You know, you have, I think, spoken about it in the last analysis meet also, how about, let's say, long leases, you know, if you can get those, are you still averse to, you know, making that a reason of your total additions? I've commented, last year also. It's not really about lease versus buy. The challenge is getting a 30,000, 40,000 store is the issue, especially in the structure and form that we want. We don't go to malls. We'd love to go to malls, but we don't go to malls because of the ridiculously high rental costs. We were just discussing this over the last few months. If you see now, in fact, the funny part is, in a lot of cities, especially in the large metros, you're seeing, I think the malls have become more and more premium in look and feel, okay, compared to earlier. It's exactly opposite to what we want. These, I think some, someday the cookie has to crumble, and we have to be invited or we should be able to operate in a mall, is my belief, but at an appropriate price. Currently the rates are ridiculous. I mean, it's extremely high. The rental values are too much. Going to the point, then what are we left with? We're left with standalones. We are—o kay, let me put it this way also, that the real estate challenge is primarily in large towns. Yeah, from the land rent, everything. That's why you've seen that a lot of our stores have opened in small towns. It's easier to get property there. The point is, the business is also in large towns. If I want a INR 100 crore plus revenue, or a INR 150 crore revenue store, or even a INR 200 crore revenue store, they're all available in large towns. I get my revenues very quickly there. That is where the effort is needed. Yeah. Like I said, we are ready. I mean, we are, we are working hard towards it, but yes, it's quite tough. Does that mean there is a period of, let's say, in the, in the medium term, there's a possibility that, you know, the growth rate really comes up quite a bit? If I just do a, you know, a quick and dumb math of, let's say, 10%-11% store addition and, let's say, 6%-7% SSS, that means that, you know, you will be 15%-17% kind of growth company. Is that good enough for you, Neville? I would love to do it better, definitely better. It's not good enough for us, but obviously, if we get more stores, obviously, we are ready to open more stores. Not good enough, obviously. Like I said earlier, also, single point agenda is adding more stores. Let's say three years out, so you know, forget about FY 2024, 2025, but whatever you can see three years out, can you add, let's say, a 60, 70 store sitting today? Is that what you can do, or you still will stick with 40 number? It's not so with my ability. When we say our abilities, I will say 80% is our operating ability. We are ready to open 60 stores for now. We have that ability. From a market standpoint, opportunity of real estate, okay, that pulls us back. Our ability, once we've acquired property, to build it, get all the permissions and open it, and then run it, 60 stores, very easily doable. We can do it. Okay? Will you be able to get 60 at run rate level every year from the market in the next 2 years? I really don't know. Next year for sure. I'll also categorically mention that. We will not open 60 stores for this year. Sorry, one more follow-up on the same question, because this is important from a modeling standpoint. With all the excitement that I hear in my morning meeting around real estate and the property cycle, et cetera, et cetera, there is a chance that, you know, the property prices may stay high and whether commercial, residential, I'm just, you know, equating everything, you know, together. Does that mean that hampers your—a ssuming that, you know, real estate cycle stays as strong as it is, in the next three, five years, does that mean that, you know, store additions at DMart could be lower than what, let's say, the general expectations that investors have, is there a risk on that front? Real estate prices going up? I'm saying real estate, let's say the markets remain as point as those are right now, yeah, the prices remain as firm as those are right now. Yeah, see, while real estate prices may go up, even our revenues have gone up. If you look, take a seven, eight-year period of real estate prices vis-a-vis our revenues, I think, if I look at it at a net level in large terms, I think our position is actually a little bit better than six, seven years back from an ROI standpoint, Vivek. Yeah? Sure. It is just a question of getting those properties. Yeah? It's also a sense of because of the typical nature of our buildings, it gets a little bit difficult. Let me give you an example of Mumbai. In Mumbai now, because FSIs have gone up so much. We can make locations workable which were not workable in the past, because the builder has got that much more to extract. Earlier, the FSI used to be 2.5. Now, FSIs have gone further up, right? We can carve out a small space of 20, 30, 40 thousand sq ft, at the cost currently prevailing in certain parts of Mumbai, we can make a DMart workable. The sizing of our stores are very different. I think that alignment with the developer ecosystem is a bit of a challenge. From a modeling standpoint or a availability or the current market price of real estate to our ability to buy at that price, I think we are slightly better than what we were seven, eight years back. Okay. You know, the thing is, you know, even with the deflation that we are seeing, let's say, FMCG companies taking down prices, that's an important piece for you. Some of this may spread to us prices. I know those are still volatile, but if those go down, you know, does that also, you know, concern you from a, from a, let's say, gross profit per square feet or per store basis, those matrices may not look very good. How do you think about that? Deflation impacting us negatively? That's right. See, when you look at deflation as well as inflation, on both sides, we are pretty well-poised if it is not excessively high across all categories. For example, let's look at edible oil today. There's been a decent amount of deflation that is happening. It has been good because there was excessive inflation last year. If you have excessive inflation or excessive deflation on very few categories, it's okay. I mean, we are just a pass-through, right? As a. Exactly. Yes. It doesn't matter. When you have very large structural issues, then only it impacts us. Otherwise, either way, it doesn't impact us at all. Sorry, why? Because you are a pass-through, are you then suggesting in a deflation, let's say, theoretically, let's say, the overall deflation, and again, I'm taking a very large number, but let's say if it is -5%, are you suggesting that, you know, that will be offset by higher volumes and therefore this puts the—i n terms of gross profit per store, per sq ft, doesn't go down? See, we don't. See, See, every category or every item doesn't go through the same levels of inflation and deflation. That has been our, whenever we look at data. We have a percentage mark-up principle, right? If prices go very, very high, then we also recalibrate our margins, we, downwards. That's a continuous process. In the larger scheme of things, there is no impact, let's say, for us from a profitability standpoint. It does impact every single category. Okay. Blended average—m y point is, the blended average doesn't get distorted too much way, maybe a few basis points here and there. Got it. Got it. Two more, if I may. One is, you know, on slide 10, where you have revenue from sales, you know, per retail business area. If you look at FY19, INR 35,647 versus INR 31,096. Neville, if you just, you know, keep the stores constant as at 31st March 2019, and look at today's number from the same set of stores, is that number higher, reasonably higher than, you know, where it was in FY19? I don't know where the question is trending to. I've not done the math the way you are mentioning. I think the better way to look at it, Vivek, is look at SSSGs. Okay? We are quite. SSSG has softened, for sure, okay. Nothing is declining. Everything is healthy, growing. Like I keep saying, older stores are close to inflation or slightly lower than inflation. Wherever these stores are not doing too well, it's primarily because we have another store open close by. Yeah? Otherwise, our belief is that we've opened larger stores just to accommodate more traffic, number one, for the longer term. The second thing is also to experimentally try more and more categories, non-FMCGs. Okay. Last question, I don't know again, it's a fair question or not. Neville, with all the issues that we are seeing in, let's say, general merchandise and apparel, if I just, you know, and again, as I said, pardon me if the comparison is not correct, but when I look at Meesho, around the same time, let's say, Meesho has moved from 0, maybe half a billion dollar GMV to about four and a half billion dollar GMV. Is there a possibility that some of DMart customers may be shopping general merchandise online because there is value and there is convenience also? That is of, you know, a bit of a stretch in your view? I have never claimed that we have exclusive right on our shoppers, okay? There's no sense of exclusivity at all. I'm quite certain. In fact, in my own home, we try everything, right? I mean, that's the way it is. That's the power of a free market. I mean, what else do I comment? Yeah. My only point is, you know, general merchandise apparel, is it a macro issue or is there—y ou know, so you mentioned competition from an offline space, in the offline space. What about, let's say, someone like a Meesho, who has moved from half a billion dollar or thereabout, to four and a half billion in literally four years, and provides convenience and, and value-wise, I don't know the product quality, but at least pricing-wise, you know, is quite competitive. Does that worry you from a competition standpoint? The only thing that worries me is that why am I not adding more stores? My point is, I don't know about others, but the market is so large, it's available for everyone, it's available for me. Whoever does whatever, 5x, 6x of revenue or maybe 8x of revenue, great! Good stuff. Well done. Is it impacting me negatively? Not really. Is there a churn? Of course, yes. Some people are dropping off, some people are buying more and less now from DMart, I'm also getting new customers who are trying me and buying me. I'm getting a set of loyal customers. The point to make is that the market is extremely large. When should I be worried? I should be worried if my overall business at a store level is not doing too well. From that standpoint, like I've already commented, we are very confident on the general merchandise space. We've already more or less come back there. FMCG space is doing lovely, it's doing fine. Apparel, yes, we have work to do. Yeah, it is a macro issue, but it's also an internal issue. We are working on it, and that's life. I mean, some years you don't do well on certain things, you lose sight on certain areas. We're working on it. Yeah. Got it, Neville. Thank you very much for your responses. Wish you all the best. Thank you so much. Thank you. The next question is from the line of Amit Sachdeva from HSBC. Please go ahead. Hi, very good. Thank you so much for taking my question. And, Neville, thank you so much. Much of the questions have been answered, let me go back to general merchandise and delve a little bit deeper there. So if I look at, you know, somewhat may, you know, I think the DMart has a great team, there's a larger football, and whether you like it or not, fashion has become still larger part of the revenue, right? In fact, merchandise. And I would hazard a guess that you are still one of the largest fashion retailer in the country, which is organized, even though you are not intending to be one. You are a grocery retailer, and you want your choice to be very clear that you want to do those things that doesn't require high fashion content and offers best value, which I totally agree with. My question is that, you know, while the value retailing principles apply to grocery, wherein, you know, consumer instantly feel that he's getting consumer surplus or getting delighted with the pricing offered and good deal standard he can compare across. Fashion and merchandise is not so much so. I also observed that in this square, the cheap being has become a little inferior, because, you know, if the quality of goods was superior and the prices were low, there is a consumer delight happens. This has become a little challenging in probably merchandise. Do you need to rethink about those principles as well? Fashion has probably been not tended that well. Even general merchandise other than fashion, needs complete rethink about sourcing and also better marketing in the store. I know you're not a fashion retailer, but it requires slightly harder selling in some sense. Is there a lot of work to do here? You need to rebuild teams, there's rethinking. What is the steps involved in as you deal with that? Could you tell us a little bit how you plan to shape this piece? Amit, you answered the question yourself. It's how you run businesses, right? You have to look at people, competencies, market, customer, and one thing which we keep talking about internally is pre-COVID, post-COVID, you know. Pre-COVID to post-COVID, I think everything has doubled more or less. Revenues, number of stores, or at least 70% more, right? While we were in the best of action, because there was work from home, you have COVID disruption, all of that. Suddenly we all come back to work, and we have realized that companies changed a lot from what it was pre-COVID. Yeah. You actually. People sometimes don't get it that so much has changed. We've added so much more stores, so many more distribution centers, so many more people. Yes, it has created significantly larger challenges for us. I think when you have a challenge, you have to work towards getting it right. We. Generally, when you go through a rough patch, it's probably the areas that are not very strong that impacted the most, and that's where apparel has impacted us more. We'll work on it, I mean. General merchandise, I don't think, and that's our bread and butter. We understand that very, very well. Our view there is there's no quality or a customer standpoint challenge. Okay? It's more of a macro issue, which is getting corrected over a period of time, and we're very confident there. Apparel needs more work. Yes. Neville, the reason I asked this question is that just wanted to confirm how large is the problem according to you, and how much time will it take to sort of address it? Thirdly, whether the impact of that headwind, whatever that headwind is, macro or, you know, bit of a, you know, other structural piece, has it been bottomed out and you're seeing more flattening base there, or do you think still continued, store-level headwind coming from the apparel side? That is what I was looking for. Amit, you've seen the financials, right? Right. I hope I get more questions than just general merchandise apparel, because end of the day, this is going to impact your gross margin and creativity, you know, by a few percentage points. Yeah. I mean, you've seen the numbers, you've seen the trend lines. Sure. It is not an issue, but it's not so much an issue. Yeah, we're working on it. And, and— Like I've already mentioned, apparel is a smaller contributor compared to general merchandise. Understood. Understood. Second, if I may, you know, Neville, you made a comment that as a full network rollout is the last mile focus, where there's a vertical development, because that's where you see larger opportunity. Has that thinking shaping your network rollout as you go forward? If that is a construct, are you more keen to go in larger towns than with the smaller towns? If that's the case, you know, if you could just hazard a guess, how many years that you could double the retail area that you have, given the construct you are thinking about this? Not really asking for a store guidance, but broadly, as you double your business, in how many years you think the area will double, thinking about this construct? Amit, looking at the size and the ability of the balance sheet, we can go large towns whereas small town at the same time, especially in the states we already operated. There is While, like I mentioned, that from a financial standpoint, obviously, having more stores in large towns is better, but that doesn't mean that the small town opportunity will not be captured or will not be harnessed. We will be doing everything. Sure. The balance sheet allows us to do that. For the rest of your question, we always don't give our projections, all right? I keep saying this, judge us, this is a past performance, and that is what we stand for, stand by. Sure. Would you look at smaller stores if you were to go deeper into the, like a 10,000 sq ft store also is okay, rather than 10,000 or 20,000 or? Two years back, you asked me the same question. Yes, I'm just asking again, just to recall. 10,000 is fine, Amit. You give me, you give me 100 stores in Bombay of 10,000, I'll open all 100. Okay. Got it, right? Brilliant. Thank you so much, sir. All the best. Thank you. Thank you. Thank you. The next question is from the line of Richard Liu from JM Financial. Please go ahead. Hi, thank you for taking my questions. number one, Neville, if I use the bill counts data that you provided, and I divide that by the average number of stores, you know, that you have in various points in time, what it tells me is that your average footfall per store per day, and I'm using average because I don't have, you know, further data. This average foot per store per day is down from about 2,000 odd in fiscal 2019 to just about 2,300 odds. That's about a 70%-80% decline. You made up for this footfall, you know, shortfall, as your basket value is now much higher. Can you throw some perspective on this kind of behavior, please? you know, did less number of people visits, have any impact on general merchandise, et cetera, given that there is also, you know, an impulsive component to that? Do you expect this behavior of, lesser number of visits but higher basket size, to reverse anytime soon? Richard, I commented earlier, but I'll come with precise numbers. The number of stores contribution in financial year 2020 was 69%. Yeah. We had only 21% stores in, like, below towns. That has moved to 28%. Larger chunk of our new store additions have come in smaller towns. This number that you commented is simply because of that reason. Smaller towns, lesser footfall. That's why the blended average has come down. Obviously, notwithstanding that, post-COVID, the average basket values have gone up, so that also has an impact. That is why I come back to the same question, same point of view again, that we track our SSSGs across all stores, store by store, or even by vintage, yeah? From that standpoint, except for the apparel side or the general merchandise side area, the general footfall, the general revenue of all the other categories are growing robustly well. No worries there. Again, footfall to the store is not a challenge, but once she's in the store, our ability to convert them to general merchandise and apparel has weakened, and we are working on it to get better. The belief in the model is there, it's just that we need to get these areas sorted. These guys from the non-10 lakh plus towns, are also shopping, with a higher basket size as in the others? Sorry? you know, one reason you gave is that, you know, that the number of 10 lakh plus town stores, you know, are much lower in proportion. My question is that, you know, that between these 2 periods, obviously, the number of, you know, the size of the basket has gone up significantly. since there is a higher component of these, you know, smaller pop towns, are these guys also shopping, you know, with a much higher basket size? Basket sizes are relatively gone up across all category, all, Pop-strata towns, but the average basket value in a smaller town is significantly lower than the basket value of a larger town. Which basically means that if I take FY 2019 to be constant, you know, for those cohort of stores that were existing in FY 2019, would the basket size have been significantly higher today, than what they used to be, let's say, three, four years back? If, if I were to stretch my imagination a bit further, you know, the other question is that, are these guys who are buying more, and much more, per visit, a different set of people than the ones in 2019 and earlier? What I mean is, you know, does your customer cohort also now comprises many more shopkeepers buying a lot of stuff to stock in their stores versus, let's say, end consumers like you, me, and our neighbors? You're asking whether there's a B2B element in our business? No, not really, Richard. If that's, if that's what you're alluding to, no, because if that was the case, then our FMCG, the mix of margin would have come down. That's not the case. Our gross margin has come down because of lower contribution in the general merchandise and apparel business. Also to a certain extent, we have taken a certain deep cuts in certain categories within this subcategory within this GM and apparel business. That's why there's been deterioration in gross margin, but there has been no deterioration in gross margin in the FMCG side. Hence, no reason to interpret that high basket values is because of B2B. We also tightly control it. To try yourself, go to any store and try and buy one carton of Coca-Cola, 2 liters, or buy a carton of washing soap, and tell me what happens at the cash counter. Quite likely they'll stop you. Okay, got it. You know, just related to what you mentioned about gross margin level, you know, if I look at earlier times when you had 28% share of revenue from general merchandise, et cetera, versus now at 23, your gross margin, you know, is not very different, right? I'm talking about consolidated gross margin. It was 15% in FY19 and 15.1% for FY23. You know, how did this happen? Are you earning much higher margin on the more than 75% of revenue? I will not comment on consult. If you'd ask me on the standalone, maybe I'll be able to comment. That's 20 points difference. It's 14.7 earlier, now 14.5. you know, for a 5 percentage point change in general merchandise share. Go back to the question. Sorry, come again? What I mean is that your general merchandise and apparel share has reduced significantly from, you know, it used to be 28% earlier, and it's 23% now, right? I mean, that's a 5 percentage point reduction, which is pretty significant. If I look at your gross margin in the standalone business, at that time when the share of general merchandise was 28%, it was, I think, 14.7%, if I have my numbers correct. In FY 2023, with a much lower share of general merchandise, you're still earning 14.5%, gross margin, right? Yeah, excellent, yeah, brilliant observation. My sense for that is, Richard, I don't have a straight answer for it, because during this period, we've been transitioning from direct store delivery for a lot of vendors to DC deliveries, and there's been a lot of, what should I b lended average of gross margins that we earned have gradually changed across all categories over time. That's why you're seeing that. Hence, l et me put it simply: Suppose Hindustan Lever gives me 10% gross margin, but he's delivering at my door through a local distributor. Now, I go back to him and say: Look, I need my delivery at my DC, and I will do the deliveries myself. You get a better, significantly better margin from this company. It not only covers the cost of dispatch or managing all that, but you also make a couple of few percentage points more. This was over the last five years in the FMCG side, there has been this blended change. Okay? I hope you're getting what I'm saying. Yeah. Yeah. That's why it's not comparable. You have a brilliant observation, great point, but the response is this, because this is what has happened. That's why the loss of margin on non-FMCG has been compensated by this going direct on the FMCG side. Got it? Yeah. Do you have any such other tricks up your sleeves to gross margin other than through general merchandise and apparel? It's not a trick. I told you what really happened. Sorry. sorry, wrong use of word. I mean, any other such, you know, such leverage that you may have in the future, which can help you in gross margin? Not really. Now the only, the only choice is to get, general merchandise and apparel up? Yes. Okay. Okay. got it, Neville. Thank you very much. Wish you all the best. Thanks. Thank you. We have the next question from the line of Varun Singh from ICICI Securities. Please go ahead. Thanks for the opportunity. My question is on the apparel side of the business. I understand that you already highlighted about the problem which exists in the digital portfolio, delivery management that you need to solve. Still, I mean, if you could also, I mean, of course, I mean, the point that you mentioned about not selling lifestyle products or daily wear products, all that has taken into account. Still, as you said, that, as well as a category, it's still aspirational, no matter how much, you know, deep down the value we go. I mean, even if you take products like Innerwear, et cetera, and apparently all the categories are sitting at 45 points. Having said that, I mean, for example, if we look at the visual merchandising or the try-on rooms, I mean, it goes beyond just the product that we are selling or the employees who are engaged with the website. As the concern was the pointing out earlier regarding more hard selling, et cetera, just wanted to pick your thought or understanding on how we are solving all the problem in the apparel over and above just the product, getting the product and the price point, right? I mean, of course, as we said, everything different than selling value. Varun, right? Varun? Varun. Yes. Yes, yes. Varun, we are very clear about one thing, that we can't be everything to everybody. Yeah, we are distinctly stand for something, and we stick to that positioning. You can't create a very aspirational environment for apparel business when you're already buying groceries, and some rice is falling here or some ghee is falling there, you know, or. Things like that. We don't have very expensive lighting, and we don't have expensive crops. We can't do that. There's no point trying to say that, "Oh, we'll try to create, you know, a great shopping experience from that standpoint." Nonetheless, there were other opportunities to make the basic look and feel better. Obviously, we'll make it better. At the same time, like I said, see, look at it from a business modeling perspective. Even if a few percentage contributions go down on apparel, it's okay. I mean, there will be other opportunities in the overall scheme of, you know, the non-FMCG space that we've still not looked at. As the economy grows, if GDP grows at 7%, 8% or 6% per annum, the market will throw opportunities for us to sell a lot of stuff that we're not selling today. I think we have to use that lens and think about, okay, what else can we do there? You know, rather than just talking about how do I retain my apparel contribution to the overall business. We'll try as much as possible, but there are so many other levers to look at. That's the way we are thinking about the business. Absolutely, sir. Good point. I just wanted to kind of understand, I mean, in case you are thinking of scaling down the degree of the business, the category, I mean, of course, category, you all already talked about the retail area where, I mean, which we kind of care for this very category, even the pharmacies and new category that you already pictured. I mean, any comment on those lines with regards to the area that is engaging for this segment and going forward, I mean, the category that we are looking at and if also you can share comment on how pharmacy is tracking in the existing stores and the scale of, I think, consistent, how you are thinking about scaling up this category as well. Pharmacy, to comment is too early. Again, we have to open at least a sizable number of locations, and then we'll I mean, the financial itself will tell you how we are trending there. That's on pharmacy. We are pretty confident on pharmacy, because we used to run pharmacy, the pharmacy business earlier. I think at least 6 to 7 pharmacy stores is what we used to run at one point of time. We decided to shut it because we wanted to focus on the second model business. We are very confident that pharmacy, we'll do a decent job. On impact of retail area because of lower performance of certain categories, I've said that again earlier also, that the model is very agile, very flexible. It's like a Lego blocks. I mean, you, whatever you want to do, you can do. You want to reduce space, you can reduce space. You want to increase space, you can increase space. The incremental construction cost of the building doesn't impact the viability of the store. All those levers are available, and, depending on case-to-case basis, location, region, we will keep, you know, modulating the area, the space, or whatever that we want. On the higher side or the lower side. Yeah, in a lot of locations we build more, we, but we don't open that store. We wait for some time, we wait for the revenues to come up, and then we open those store, those additional spaces. All those options are available. Yeah. Understood. The last question on, like, the new cities, the geographies, that we are kind of venturing out to add stores, like, looking at, like, number of cities that we have ventured out in the current financial year. We have kind of narrowed down our focus more to the existing cities. I mean, is this because of, like, relatively lower performance, when we are venturing out into the new geography? I understand you mentioned about Bangalore, so economic tracking equivalent to, like, all just or, like, system level average. Still, like, I mean, also, for example, you had said that, you'll be more than happy to open 10,000 sq ft of stores, given an opportunity. Looking at these two contexts with regards to the store sizes, which, I mean, of course, we have also one more congregated, even in recent quarter, we had a 30,000-40,000 sq ft. Just if you mind with regards to item store size, that now we are looking at a 40,000 or 15,000 as we like the new cities, if we are looking to venture out while we are doing all these improvements to the business. If you are alluding to the last quarter, 3 stores that we opened at 30,000, there are just 3 stores. Yeah, we are still quite confident on opening larger stores. Yeah. So that, from that standpoint, there is no issue. Yeah? On geographical expansion? Yeah, geographical expansion. It's an operating leverage, now, Varun. That's why we say that we'll open more and more stores in the same city, because you get fantastic operating leverage, you know? That's why we like to do that. We also open now to spend a little more and open in cities which are a little bit away also, right? In new cities. We do that also. Got it. Got it, sir. Wonderful. Thank you very much, sir. That is it from my side. Thank you. We have the next question from the line of Ashish Kanodia from Citigroup. Please go ahead. Yeah. Hi, Neville. The first question is, you know, when I look at the revenue per sq ft, in FY19, it was around, you know, INR seven and a half thousand, and FY23 had around INR 51,000. I just, you know, look to your earlier comments in terms of, you know, going into smaller towns where, you know, the cost is also lower. You know, is it fair to say that, you know, this is the, you know, the store mix, area mix, which you had in FY19? That was the, you know, that was the revenue in FY 2019, and now in FY 2023, you know, revenue per square feet, fundamentally, it's surely a function of, you know, the store mix and nothing from a, you know, what we see fitting about competitive intensity and other stuff. Is it fair to say it's largely only a function of your, you know, store mix, area mix from a large, smaller to larger, towns and cities? Ashish, I've commented on this before, I'm saying this again, that see, for us it is ROI of the store. We invest in the stores and we look at the revenue, we look at the gross margin, we look at the cost of running the store, and we see that whether we make a profit. Now, for whatever reason in that store, for that city, the contributions of general material are different from others or gross margins are different from others. That's, that's part of that city or that market, right? Because what is important is the ROIC. Are we making money in that store or no? So from an individual, pop starter standpoint and a state standpoint, every state has a very typical behavior. Okay? The gross margins of certain regions are relatively different from other states, for whatever reason, right? It is, it is a fact. Maharashtra gives you a different behavior, South gives you a different behavior, Gujarat gives a different behavior, South of India gives a different behavior. The point to make is that in the overall scheme of things, are you making money? Yeah. Like it typically happens, certain states allow you to make more money, certain states do not allow you to make that much money, yeah, from a ROIC perspective. Does that mean that you say, "Oh, if one particular state is giving you a significantly higher ROIC, I should drive that into the other states?" Why not try to do it by nudging or doing something out of the natural behavior of the customer? We look at, okay, are there any white spaces? Are there any gaps? What is it that's working well in Maharashtra or what is, well, something that is doing well in Karnataka, where we're doing well, and can we do that there? Yeah, through a slight nudge. That is what we do. I mean, and like I said, we don't look at revenue per square feet, you know, as a metric. We don't do any evaluative people on that front. Sure. That's it. I mean, for us, fundamentally is, you know, gross margin, operating cost, net margin, ROIC. That's it. First of all. Sure, sure. Secondly, you know, that pharmacy, right? You have done it earlier, so you know the model works, right? From, you know, from a existing store point, you know, is it, you know, how difficult is it or easy to set up a little existing store? Because, you know, when I look at the one store that you have right in the mini-map, right, it's basically just a separate area based off our area. You write it up very small. Just trying to understand while, you know, you need to set up in a newer store from existing store, is it still the next model, you know, relatively easy to plug and play and scale up? For the pharmacy business, right? Yes. Absolutely, absolutely. It will be part of a store. Yeah. It shouldn't be a issue at all. Okay. Lastly, you know, I mean, just on the general merchandise and apparel, you know, from my understanding is, you know, when I look at Zara, H&M, predominantly or non-general merchandise and apparel business, right? When you look at the standalone business, almost 50 and a half% revenue comes from your, comes from sales to, you know, the e-commerce business. Is that also impacting your, you know, general merchandise and apparel mix? I mean, if I, you know, if the understanding is correct, that it's actually, you know, for the standalone, you are being related to, you have ready and that are purely your, food and non-food. There is impact from that as well. Is that understanding correct? Partly, that is inconsequential from the overall impact for gross margin, I mean, the general margin in the apparel contribution business. No. Your interpretation is not correct. Inconsequential. Okay. Okay. Just lastly, you know, you talked about, you know, operating levels, which you're also getting into, you know, into RRC phase. Now, in terms of, you know, just trying to understand this, right? Maybe in existing, is it relatively easy to get real estate and maybe, you know, if you go to a new state versus maybe trying to get a existing where you already have your store, right, 2 stores. If it is relatively easy to get, you know, real estate in some of the newer states, will you look into, you know, kind of expanding more, maybe at a cost of, operating leverage? I think, the lower the pop strata, easier to get the real estate. That's broadly what my sense is. Okay. Yeah. Thank you, sir. Thank you. The next question is from the line of Manish Poddar from Motilal Oswal AMC. Please go ahead. Hi, thank you very much for taking the questions. One is, let me say it's hard to open 40 stores in a particular year. Would you be able to help me understand how many stores need to be vetted and how big is the team which takes the final call? Manish, sorry, your line is slightly unclear. You said, what does it take for 40 stores? We couldn't follow you. Sir, Mr. Poddar, I will request you to kindly use your handset to ask the question, sir. Yeah. Sorry. Is this better? Yes, sir. Please continue. Yeah, sorry. I'm just trying to understand, let's say, if you open 40 stores in a particular year, how many stores need to be vetted, and how big is the team who takes the final call of, you know, taking the property? It's a multiplier. It's not like it's more of a multiplier. For example, if for every 100 properties, somebody shortlists, you know, 50 goes to the next level, then another 25 go to the next level, then eventually you may end up only, you know, the same deal may happen only for 10. Just like that. 10% is the conversion rate? Sorry? Conversion rate is roughly 10%. Is that how it is? No, I'm not telling you that. I've, I can't give you a clear number there. I'm saying the initial short list to final closure is a humongous effort. I mean, it goes to three, four stages, so it's a long effort. How big is the team who takes the final call? Because from my checks, it suggests it's very closely. Big enough, big enough to open 40 stores, at least. Okay. Just second one, in terms of private label, has there been any change in terms of let's say, you know, one is internal, in terms of number of SKUs across categories which you foray into, and second, in terms of consumers habits? Has there been any change? For now, you have more cleaner, you know, more advanced forward numbers. Has there been any change from our side in terms of SKUs available across categories and in terms of good consumer habits? Any change in that from a customer point of view? Thank you. Nothing much has changed. We are just focusing on private label from a standpoint of, two things: how easy is it for a consumer to accept a private label or an unknown brand to try it, and then, for regular use, huh, consistent usage. From a consumer standpoint, which is the easiest to cross that barrier? We look at that. Secondly, we look at what is our ability to ensure that we maintain the consistency and quality, and at a, at a price which is significantly discounted to the main brand. That's it. From that point, again, I keep saying that the progress will always be incremental and slow. I, we can't do a big bang here on the private label piece. Got it. it. Got it. Thank you so much. Thank you. The next question is from the line of Nihal Mahesh Ram from Nuvama. Please go ahead. Yes, thank you so much. Good afternoon, Neville and team. Neville, I'll be starting off with a question on GM&A. Just to understand, would you say that there has been a bit of a change in the customer profile that kind of shops at the DMart? We see the change in metrics, and rather than being an assortment issue, being the kind of customer who's walking in is different and potentially shopping for a lower share of GM&A. Is that something that maybe you picked up or anything related to that? Not really. In fact, no. I think the customer profile remains the same. Within that customer profile, I think there has been some tightening of the purse on the GM&A could be the reason, especially A. The inflation, we went through a huge surge of inflation. That kind of disrupted a lot of things. I think the segment of customers we address on the GM&A got hurt more acutely on inflation. That could be one of the reasons why the customer profile didn't change. I believe that makes sense, because, as we've discussed before, the metrics in a way of how ABV has moved, how all that, while you mentioned about cooking entire cities and also, you believe that the customer profile is more or less similar to the way it was before? Yeah. I'll tell you some insight on the apparel business. Very interesting insight. We have a huge chunk of basic products that we sell. During the high inflationary period, it was that segment that just got pushed, it just got pushed actually. However, the mid to expensive pricing was doing phenomenally well, but it was not compensating for the basic loss, basic product loss. What is happening because prices have corrected and all that, it's the reverse. Yeah, we are getting a lot of the basic segment as sales coming back with a roar. Yeah. This is all, you know, demand, supply, price elasticity that is in motion. The only thing is there are so many things working at the same time, you know, that in the blended thing, we have to give it more time, I think. Probably a few more quarters, and we'll have a more clearer view on what—y ou know, how apparel is trending. We are now seeing a lot of the sales coming back from all the entry price points. Got that. That's very helpful. Second and final question was on DMart Ready. We've obviously discussed how large maybe the contribution for Mumbai is. I think the focus to the other two cities, which is Pune and Hyderabad, where we have a large store presence and the fact that we've been present in these cities for a relatively longer period of time, and the brand DMart is also very much known and visible. Is the share of these cities also seeing a reasonable uptake? You know, that is where the dichotomy is coming, that while Mumbai has scaled up, but Pune and Hyderabad also are, in a way, are our bastion cities and have also seen a good traction over the last few years. Absolutely right. We're quite pleased with how they are trending. Like, Pune is like, I mean, Pune, again, it's our ability to quickly accelerate the fulfillment center closer to the markets. That will give us phenomenal sales. It's just our scale up. Bangalore, Hyderabad are also trending decently well. If I talk about Pune and Bangalore specifically, and in fact, from a time, period, time to performance period relationship, it is doing better than Mumbai. If I take what Mumbai was two years after launch versus Pune was two years after launch, or Bangalore was two years after launch, they're doing a better job in the newer cities compared to Mumbai. That's something, vertical, large towns, immense potential for our kind of e-commerce business. Just a related question. The share of Pune and Hyderabad, even Bangalore, as I included, has improved over the last three years as you said as that? Yes. Without any impact to the bigger motor business, and that's a huge positive. Thank you. Thanks, Neville. Best wishes ahead. Yeah. Thank you. Our next question is from the line of Percy Panthaki from IIFL Securities. Please go ahead. Hi, Neville. My first question is on inflation. Vivek touched upon it, but I just wanted to sort of ask once more. See, as you say, because we are a pass-through, if the inflation comes down, doesn't that sort of negatively affect your SSSG? Because let's say, hypothetically, last year, if there was a 15% YOY inflation in atta, person was buying the same 1 kilo, but 15% higher. This year, if the inflation comes down to 5%, then the growth in his spends is now only 5% for that category. As you say, it, which category, what is happening, but on an average, generally inflation is coming down. Don't you think that will affect your SSSG? if the gross margins are fixed for each category, then it will affect your profitability or rather, profits also. Yeah, it does, Percy, but it's all in basis points, because all these crazy increase, decrease in certain subsection categories is only for that. Like, for example, seed will go up by 50% in a year, yeah, or something else goes down by 20% in a year. Overall, at a blended level, okay, inflation, a high inflation is 8%, a benign inflation is 3% or 4%. We factor in that when we look at our SSSG. See, what was the inflation-driven SSSG and what was real volume? or walk-in or whatever. Let's say, supposing if inflation last year was, let's say, 6%, and this year it comes down to 3% or 4%, it's not a very big difference, but 200-300 basis points difference in SSSG, at least for the grocery part, which is 77% of your business. If, let's say, your SSSG normally is 8%-9%, it can come down to, like, 6%, 7%. Does that make sense or am I on the wrong track? Makes sense in what way, Percy? What I'm saying is, if inflation comes down by 200-300 basis points, is it fair to say that in the non-GMA portion, which is 77% of the sales, the SSSG for that portion also could come down by 2-3 percentage points versus what it would normally have been? Yes. See, the way we look at SSSG, we always factor in what the inflation has been for that year, and then we make a judgment on how we are performing. Yeah. We take inflation out of the picture when we evaluate how well a store is doing on an SSSG front. Understood. Understood. From a FY 2023 versus 2024, because FY 2023 was a high inflation year and SSSG was what it was after that high inflation, FY 2024, could see some moderation in SSSG versus what it was in FY 2023, especially for the 77% of your business, is what I'm talking about. That is this year, right? Yes. There could be. There could be, we're also seeing some of that. Yes. Okay, understood. That would also affect your profit, right? Because your gross margin would not change because of this. That I don't understand. You guys are better at all this. You figure it out. Okay, okay. Secondly, just wanted to ask, in your annual report, I see that you have opened a few of these Mini Max stores. If you can just give some idea, what is your sort of vision and strategy on that format? I responded to that in the earlier question. We believe that this format could have an opportunity from a pure play omnichannel perspective. It becomes a pickup point, and it also becomes a location to buy directly from the store. Our view is that from a ROI or operating metric, it could be a slightly more efficient model, especially in high real estate areas. It's just a trial, but—w e housed it in the e-commerce business because we believe that their ability to integrate online, offline, shop online, pick up from store, or, you know, maybe in the future, even pick up from store, the shop, from, shop online, and the delivery boy picks it up from store and delivers at home. All those possibilities can be activated, and that's why we are doing this as a trial. Let's see. As of now, you don't see it, like, becoming a important growth driver, like you can open 150, 200 stores of these kinds every year or something like that? DMart was never built with these grand visions. We played one day at a time. We do trials, tests. It's typical that, what do you call it? Crawl, walk, run, right? I think I learned all this from the IT guys, yeah, something like that. We'll do small trials, we'll see how it goes, and then we'll do a larger trial and then see. Yeah. Understood. Last question is on the CapEx. If I do some calculation based on your annual report, the CapEx per store is roughly 25%-30% higher than FY 2022 in FY 2023. Just wanted to understand what is the reason for this, especially because you are opening more stores in smaller towns now? See, I'll not give a% incremental because of the way you add CapEx in the balance sheet. Yes, in general, the trend line is cost per store is getting higher, compared to the past. This is pure real estate inflation or it's a function of the store size being larger? It's both. It is, it is cost of real estate, and it's also the size. Okay, okay. Thanks. Thanks, Neville. That's all from me. Thanks, and all the best. Thank you. The next question is from the line of Gaurav Jogani from Axis Capital. Please go ahead. Thank you for the opportunity. My first question is with regards to the DMart Ready site. You know, since your DMart Ready stores are largely into the major towns of Mumbai and Pune, et cetera. You know, most of the, their older stores are also in these regions. Is there a possibility wherein, you know, customers are now shifting more to the DMart Ready stuff, and then they have a limited basket size, you know, limited basket, or they run into government basically? This is in turn impacting the sales of general merchandise apparent, because they are buying these online and not visiting the stores. Could be, could be possible. See, yeah, more and more e-commerce, discovery on general merchandise becomes more and more, there could be a shift on that side of the business from our stores to these other avenues. Possibly. That's why we our belief is on the general merchandise apparel business, if you ensure the value is great, good quality products at great value, and I don't think e-commerce can deliver that. See, what does e-commerce do? It's just discovery is awesome. I mean, you're browsing through social media, you're browsing through some sites, apps, whatever, and constantly something or the other pops up, and then you like something, you click, right? That's the beauty about what happens on your mobile phone. What we are saying is that what we should focus on is that get the customer into the store. What is it that will bring her there? Once she enters the store, buys the groceries, and she then discovers or goes and sees general merchandise apparel products, when she sees the products and she figures out what she's paying for it, I mean, it should be of significantly higher wow. Significantly higher wow comes because the cost of delivering that product. I keep saying this: factory to store to consumer. Tell me a model which is better than that. If I have my assortment very sharp, try to be very wide horizontally in as many categories as possible, but few products, few choices, okay? Give great products at super efficient prices. E-commerce can't beat that. E-commerce is all about long tail. I mean, it's all about long tail, but very, very high margins, because the others can't deliver that product at homes at those prices, right? And those limited small volumes. That's why I keep saying that we have to be significantly divergent in the way the products are sold on e-commerce from a positioning standpoint, and then you'll get the customer, you'll get the stickiness. Sure. My question was actually, you know, that because we have now DMart Ready, and this DMart Ready is offering more convenience to the customers who are already shopping from DMart stores physically. Now these customers are not going to the stores, and because of which, you know, the sales of general merchandise is getting impacted in your stores. That is what was mainly driving, you know, competition from the other e-commerce players. No, I got that, but it doesn't make sense, no? The share of general merchandise and apparel is not going down because of that. The share is going down because people are going into the stores and not buying enough of the general merchandise and apparel as earlier. Okay. Sure. Sir, the next question, you know, is with regard to. There is an element of truth in what you're saying, purely from the standpoint of the number of footfalls that have come commensurate to the incremental basket values that have gone up. The chance of a customer getting exposed to general merchandise and apparel has reduced. Yeah. To that extent, maybe, yeah. Only but to that extent. Okay. Sure. The next question is with regards to the, if I look at, you know, the fixed cost per sq ft for you. In FY 2020, it was roughly around INR 2,300 per sq ft. Now if you see in FY 2023, it comes to roughly around INR 1,930 per sq ft. You know, this has come down considerably over these past years. Anything particular that you are doing, which is driving these operational efficiencies or anything that you could highlight on this front? No, not really. It's just a base effect, just because you open larger stores. Secondly, is like I mentioned earlier also, in last analyst meet, when you have lesser footfalls, all costs of the store come down, and one of the main causes are energy costs. So that, it is just a base effect thing. It's just because number of bills have been reduced and store sizes have become larger. It's just that. Nothing in particular that we have done or we have consciously done to reduce costs. Okay. Sir, my last question, you know, is in terms of the opportunity, in terms of the existing town radars, you know, so like a city like Mumbai, you would have a higher number of stores versus, you know, the newer geographies that you are entering into. How is the focus in terms of the percentage you're opening? Would those be in these newer towns or the cities that you've recently entered, or this will still continue to be more followed by the newer cities? Whatever comes first, I mean, teams are operating everywhere, but generally the trend has been that we open in cities that we're already there, bulk of our revenues and large towns. We're focusing on that. Obviously now the new focus area has been the north of India. We're focusing on UT, NCR, Punjab, so Rajasthan, a lot of stores coming there. We're focusing on that. Like I said, large towns, Bangalore, Hyderabad, these are stores which can take 100, probably 150 stores of DMart, each city can take that kind of number of stores. We're working on that, too. Sure, sir. Thank you. Thank you. The next question is from the line of Nikunj Gala from Sundaram AMC. Please go ahead. Hello, everyone. Just one first question on the ROI front. If tomorrow we want to look over to the new store only dedicated for the food FMCG and non-food FMCG, just want to understand how the ROI will be different from the two front, one is the CapEx, which is your capital return perspective and the, you know, operating margin perspective. This is very hypothetical. Nikunj, fixed asset ratio will be very high. Right. Store size will be very low. Right. Gross margin will be Low. significantly lower. Yeah. Operating cost will be also relatively lower, and net margin add will be relatively lower than what it is, if that's what you want to know. At a ROI level, will it be very different, from, you know, today's construct or, it would be similar in nature? I cannot comment on that. Okay. All I can say is that we'll make money even then. Sure, sure. Secondly, you know, when we mentioned there is a, you know, huge opportunity out there, if I just take two segment food FMCG and non-food FMCG, the non-food FMCG today, you know, the category in which we are working, it's say to, you know, market is 2 lakh crore, where our, you know, our revenue would be upwards of 5,700 crore from FMCG numbers. We have a 4.5% market share, and despite not being present in many parts of India. If I just consider where you are, then this market share will be, you know, very formidable. Do you see, you know, or from the market share perspective, what is the number you think that, you know, would be doable? My only view here is that these are not things to be worried about. You are saying 4.5, I don't know what the real number is, but when 95% of the market is available, I mean, it's a gold rush, right? You just go ahead and open wherever you can open. I don't have a modeling or I need to be this person of the market, and that person doesn't make any sense. I should be growing at the current rate. The top line should grow at a, at the current, at a particular rate that we should be satisfied with or happy with. A number of store additions should be at a rate that we are happy with. A new store addition should not in any way make a balance sheet weak, you know, things like that. Sure. Those are things we'll look at, you know. How do I sensibly grow? Market is not going anywhere. Okay. Just lastly on, if, you know, you enter any particular state, typically, what is the, you know, number of years you believe that, you know, to understand the consumer behavior in a particular state and, you know, to then, like you mentioned, crawl, walk, and run in the year, in which you believe that now you can expand, very significantly? I think 3-4 years. 3 years is a good number to look at for a brand new state. Sure. Okay, yeah. Thank you. Okay. Thank you. Thank you. The next question is from the line of Hiren Ved from Alchemy Capital. Please go ahead. Hey, hi, Neville and team. Thanks. Thanks for taking my question. Actually, most of my questions are answered. I just have one question, and I know this will be a little difficult because there was inflation and now inflation is coming down. If you look at a customer, let's say, in a larger town, do you see in the basket premiumization happening? Which means that let's say, if she was buying an X grade of tea, now she's moving up to a higher grade of tea. It may not happen in one year, but let's say over three, four, five years, do you see premiumization in certain categories happening? We, Hiren, we don't track, consumer data at a consumer level, so hence we cannot see that unless we see at an aggregate, number. In general, our view is that, modern trade as a format in large town tends to be, the mix tends to be more towards the premium sector than the general trade. I think over a longer period, the contributions, tend towards more premiumization in larger towns. It tend to be. These are very marginal movements. Because we don't have consumer data, we cannot answer your question very specifically. In general, in any category, you'll see the premium segment is the largest segment. So for example, in toilet soaps, when I look at all premium segments, their contribution is the highest in the category. When I look at tea, the premium segment contributes the highest contribution to the category. I look at detergent, you know, washing products, the liquids which are more premium, or the premium powders, are the largest contributor. By the nature of the format, the chance, the affinity of getting in these customers is higher. Can you hear me? Yeah, Hiren, we can hear you now. Okay. I mean, what I'm trying to get at is that if there is a general trend of premiumization, that should benefit you in terms of basket value, though it may be just a few basis points. Overall, over a slightly longer period of time, it should benefit you, right? If I'm buying a premium soap or a premium tea or a premium coffee, or a premium detergent. Hiren, can you repeat the question? Hello. Yeah. No, I'm saying that would it be fair to say that the general trend of premiumization in FMCG should also get reflected in your basket values over a period of time? Yes. Yes. It should. Are your gross margins in the same category better for a higher premium product versus a lower premium product? No, We don't look at it like that, Hiren. Okay. See, for us is, we have our own way, metric to look at how much we should earn on each category. There's no discrimination on that. We don't look at it like that at all. Our simple funda is, either price sensitivity, we should be more aggressive in operating. Understood. Understood. Fair enough. Thanks, and all the best. Thank you. Thank you. Thank you. Bye. Thank you. We'll take the next question from the line of Akhil Parekh from Centrum Broking. Please go ahead. Thanks for the opportunity. Neville, my first question is, we have highlighted that the external factors which have hurt our sluggish general merchandise and apparel. Globally, if you look at it, I think US value retailers, they have categorically said that discretionary category for them has also been impacted because of inflation. Do you see that the higher impact on GM&A is because of inflation and not because of competitive intensity going up? That's my first question. Yes, again, in the previous question I did mention that when somebody asked about did your customer profile change? I said, "No, customer profile has not changed. They remain the same." They come from a particular background wherein inflation has hurt them the most. That is why there has been a tightening of the wallet, and hence some impact on the adverse side for general merchandise and apparel. Yes, inflation has affected discretionary for our customers. Hopefully the inflation impact aside, we'll still see we inching back to the normal level. I'll not comment on whether we will go back to normal level, but we are seeing that trajectory, at least in general merchandise, at a significantly better level than apparel. That will probably be needed a couple of more quarters to have a very clear view. Sure. Got it. Second question I have, like, you briefly mentioned that there are certain white spaces in the general merchandise and apparel category. Any big white space which we are currently looking at and, you know, which we may add basically in some time? Yeah, there are numerous. I wouldn't, not the right forum. You visit our stores time to time, you will get a sense of what we are doing. I don't want to, you know, comment, because these are all so much of work in progress, and we have certain views now. We may try in a couple of stores, they don't work, so we withdraw, we stop. I really can't comment on which subcategory. The best way to make a judgment is keep visiting our stores once a quarter at least, and you'll get a sense of what's going on. In fact, that's something which we also keep saying. Like, at one end we keep saying, like, "Don't change anything, keep everything the same. Everything should be, you know, business as usual, assortment, and all of that." At the same time, there's another part of the side of thinking is, there has to be some novelty or some new opportunity should be created all the time to keep the format fresh. Just that the product should be blockbuster. They should be something that solves a particular purpose for the customer. You need to have this both left and right brain working at the same time, and that's why it's quite challenging at times to get that alignment. You know, you get leadership to understand the nuance of how to operate with keeping both the mindsets at the same time. Yeah. Sure. Lastly, now on the pharmacy part of the business. In the past, I remember, I think in FY 2019, You had answered this question on, you know, probably looking at eyewear as a category, because I think as organized retail is very small in eyewear, and then as a retailer has done very in eyewear category. Instead of that, we are looking for pharmacy, which is highly competitive in nature, both from brick-and-mortar as well as e-commerce part of the business. Any thoughts on that, why we went for pharmacy over, say, any other category, like, say, eyewear? Sure, it's a natural extension. It's a natural extension, and for no other reason, and it has a different size of opportunity. I don't know why you bring sunglasses, but I'll just quickly the thought comes to my mind is anything that is high margin and anything that needs expensive detailed servicing is something that is not our core competence. Okay. It's not that we never thought about the eyewear business, but it needs a different mindset to operate, which we believe we don't bring to the table. Pharmacy is very value driven. At certain homes, you need medication for a long period of time, a good value per month. You know, margins are there to discount, to update value. The similarities to the grocery business are there, and it doesn't need that quantum of, you know, personalization or service. I think that's where we believe there is an alignment. Sure. That's all from my side. Thank you so much. Thank you. The next question is from the line of Tanmay Gupta from Motilal Oswal. Please go ahead. Yeah. Am I audible? Yeah, Tanmay, sorry, you got dropped. Yeah. Yeah. Okay. Ajay, sir, the question is, since we have opened the larger size stores and, you know, 1,000 sq ft, in previously. Just wanted to understand that how much time does it take for the larger size store to reach at the, you know, normalized level within the, 1,000 sq ft, stores? Tanmay, different stores or different cohorts operate at different level. There is no normal or there is no midpoint average. Different stores operate at different levels of, you know. While the variability in gross margin may not be large, there will be a huge variability in operating cost and a huge variability in profit at the store level. Sir, I'm just asking on a revenue per square foot level, like, just to understand that, for example, if 50,000 sq ft stores got mature in three years, then after that we can see, you know, stable SSSG going forward. For a 45,000 sq ft store, I believe that the, you know, the years could be more, I think mature years could be like four, five years. Is that my sense, right, in this sense? Quite likely. All right. Larger the city, smaller the store size, significantly higher the revenue per square foot, and then in that order. Just put these three elements on a piece of paper, and then you toggle them up or down, and you'll have a differential, revenue per square foot, up or down. Correct. Correct. Also, second question following up on that. You know, since we have added most of the larger size store in the COVID period, like in three years, is it right to believe that most of the stores are in i t should now contribute, substantial growth? We all hope so. Yeah, because, you know, just calculating. You know, most of the things are seen now in the base. Just wanted to confirm in such sense. See, the point is, again, okay, let me answer this question a little differently. We look at cohorts at every gap of, say, 3 years, okay? We have older stores which are probably now 17 years older, 17 years and older, and 15 years and older, then 13 years and older, you know, things like that. Within that cohort, we look at, okay, how is the SSSG growing? Is it growing at a rate higher than inflation? If not, what are the things that we need to do? Okay. One of the criteria why these stores don't grow well is if the, if the stores are very small or the turnover square feet is very high. These stores should grow. If they're not growing, then we work on what we need to do to make them grow, right? That's it. It's a very micro, region-by-region kind of an approach, and try and understand, you know, what we need to do to make it better. Understood, sir. Thanks a lot. Yeah. Thank you. The next question is from the line of Swati from Hillfort Capital. Please go ahead. Hi, Neville. I have yet another question on apparel. It looks like some of these newer, larger stores seem to have more space allocated to apparel, at least, you know, from when we visit the stores. Just wanted to understand, you know, does that compound the problem, number one? I know someone asked this earlier, but maybe there is larger space being allocated to it, does it affect our ability to reinvest in the core FMCG business and keep it as attractive? That's the first question. Not really. I think, the way that the organization is structured, different teams run different, you know, categories. Because something is not happening right in apparel doesn't impact the FMCG side, number 1. Even from a financial allocation, investment allocation, no difference. That's not the case. We are very cognizant about the first part of your question, which is if most space, sales doesn't happen, how does it, you know, from an inventory term, especially perspective, are we getting impacted? We're very cognizant of that. In fact, you notice that inventories have actually fallen. That's the beauty about the format, right? The ability to quickly recalibrate all the elements of that line of business is fantastic, and that needs a lot of effort, mindset, technology. You know, everything has to be aligned, and that's there, I think. comes to the point of: Okay, if contributions are lower, can we reduce stores? We do that also. We used to do that even in the past. We reduce store sizes. We reduce trading areas. We do that, too. the point is, that's the beauty of the format. We have all these levers capable, available, people are empowered. in fact, I mean, and these calls also are taken significantly lower level from me. you know, for me, it's just an FYI. I'm doing this because there's a reason. I think that way the organization is pretty agile and empowered to make calls, to ensure the overall, you know, operating principle remains intact and the financial discipline is maintained. Yeah. Yeah. Thank you. The, the second part is, you did mention that, you know, there is a lot of work that needs to be done here. I think you mentioned some of the things that, you know, we will not do. Do you mind telling us some initiatives that we are taking here, related to supply chain pricing on the apparel side, I mean? I think the bigger aspect in apparel is people. I think, 70% of the issue is people. I mean, they drive it. I mean, it's Apparel is a very person-driven, competence-driven, business. You know, I think, that's the key part. All right. Just one, third question, last one from me. In fact, curious to understand if the segment in our e-commerce business is very similar to the brick-and-mortar business or not really? Everything on the FMCG side is the same. It's very little of the general merchandise, very little. Okay, got it. Thank you. Thank you. The next question is from the line of Deven Kulkarni from Marcellus. Please go ahead. Yeah. Hi, Neville, can you hear me? Yes, yes, Deven. Hi. Neville, my first question is on the apparel front. What sort of buying principles or buying practices were being followed? Also, we have seen a personnel change out there in the last year. What have been the incremental steps that have been taken or a new ways of working that have been introduced by the new personnel? I didn't get your question. Can you repeat the question? I wanted to understand what kind of buying practices were we following in apparel? Secondly, we have seen a person from Shoppers has come in to lead the apparel business in the last one year. What changes has he brought to the buying process for the apparel division? only to comment, Deven, since you are mentioning that, you're already observing that, you know, we are doing some stuff. That's it. That's what, it's all work in progress. We're working on it. What are the basic buying principles on which we work? The principles remain the same. The broad ethos of what we stand for remain the same. The quality of execution has to get better. Okay. We need apparel experts who understand the customer, and figure out, what is that white space that we need to be more sharp. How do we make that white space more sharper? Okay, so that we present the product in a manner that is very difficult for anybody in competition to replicate. It's simply what it is. Okay. Secondly, on the store opening front, right, you said that 80% internal- Excuse me, sir, your audio is not coming clear, so may we request you to use your handset, if possible? Sure. One second. Okay, sir. Is this better? Yes, sir, please continue. Yeah. On the store opening front, right, you said you are 80% internally prepared to do a 60 store expansion. 20%, there seems to be some internal capabilities tend to be built out. In the last 5 years, right, what internal capabilities have you invested in to be able to ramp up your store count? Secondly, what are the bottlenecks today internally in store count? External bottlenecks, you explained the market, real estate, all that. Internally, I'm trying to understand where all are the bottlenecks in expanding the capacity to store expansion. Right, it's primarily around talent. We need high-quality talent here. See, there are certain— I mean, we all know what's happening in the country, right? There are these certain sectors, like, let's look at IT. Within IT, it is IT security and IT security ops. I mean, acute demand-supply mismatch, right? People come with 3 offers, and these offers, it's like one offer is 100% higher than the existing salary, one is 150% higher, and, you know, it's crazy, some of these things, right? Right. it's not even about that. What we also see is that even after offering those kind of crazy hikes, again, after six months, somebody leaves. Okay. he's got a further hike from somewhere else. I mean, it's ridiculous. Some of these things are just. I mean, it's completely nuts, you know? Right. That's at the BD level team, right? At the top level, is there any operational bandwidth constraints between, let's say, you and Mr. Baheti in approving these properties? He's, yeah, right next to me. No, not really. In fact, we're pretty fast in that, very fast. It's just that—s ee, okay, let me put it this way also. There are certain— You know, what would help me if you could just take us through that finalization process and then you can explain why there is no bandwidth constraint. Come again? If you could just explain me the, how the finalization is done between you and Mr. Baheti, and then, we can weave in why, there is an operational bandwidth or not. It's exactly similar to how you must have bought a house, right? How do you negotiate with the developer? He will tell you 20,000, you will have in your mind 18,000, and then you come somewhere in between. That doesn't take more time. That's hardly 1% of the problem. The larger problem is scouting for land, bringing the developer to the or a landowner to a level that suits us. The title has to be clean and clear. There's a lot of. Handshake is the easiest part. Mr. Baheti and my job is the easiest part in the whole scheme of things. We just catch a flight, go and meet him, and finish the deal in 5 minutes. That's the easiest part. That's not the bottlenecks. These bottlenecks or these problems are with MNCs who come in other countries to do real estate deals. Okay? Corporates or promoters or owners who operate in the country where they belong to, finalization is the least of the problem. It is the due diligence and all the effort prior to that, which takes a lot of time. Understood. Let me give you another analogy. This is probably one of the reasons why, even if you look at the real estate developer landscape, right, you always have each developer having his core focus in his region. Any developer who's tried to do that across the country, we know what happens, right? This is very typical about this industry. Understood. Understood. That BD team is seeing a lot of high attrition, that's why it's having some internal challenges, right? Yeah. Also because this sector, this nature of role or this type of role spec is very new to this country, right? Right. If you go back, I mean, 20 years, there was nothing like this, right? At this scale that you would want to. The inherent development of talent in this sector is very minimal. Whatever talent that has developed in this sector is either leasing, which these IPCs do, yeah, or it is extremely large land deals, where the clients they service are large developers. Our need is very, very niche and very unique. That creates a limitation for us. Understood. Understood. Finally, on the succession planning front, right, what we've seen is, since listing, there have been a lot of, there have been a few, high-level exits that have happened. Some of these were replaced externally. Firstly, why are these exits happening despite being heavily rewarded so far? Secondly, why were the replacements sorted externally? What is the challenge in promoting internally? Thirdly, how are we maintaining the company's culture? How are we inducting the new external hires into the company culture? If you look at, I mean, I've done a little bit of research on this. When a company moves from an INR 100 crore revenue to an INR 50,000 crore revenue over 20 years, I mean, the ability to retain our talent to the extent we have done, I think we will be in the minority. We have retained significantly higher number of old talent than most other industries, whether or most other companies who've gone through this route, number one, yeah? I, and I'm happy to be corrected, but this is my point of view, number one. Number two, which I also mentioned in our GRSR, the challenge we also have is the nature of this industry. Why whenever we hire people from outside, why they don't last too long, is the nature of the job here is very, very different. It's very tactical, very operational. It has a huge amount of operational rigor, physical effort, traveling, meeting blue-collar workers, you know, all of that. Generally, top-level leadership wouldn't want to have a role like this, okay? That has been our interpretation. Prices are great, but that's again, a challenge because this industry is relatively new from that standpoint. Our need is also like that. We want people to be deeply connected to the ground. Yeah. That could also be another challenge. Third is about promoting people internally. Again, I'll bet on this. The quality and the effort that we put in terms of promoting people from within is phenomenal. I mean, we take great pride in doing that. Yeah. even there, I would love to do a ref check, or I would like you, I've mentioned this even in the previous analyst meet, I would like you to go and see our stores, okay? talk to our supervisors, talk to our managers, ask them how many. Yeah, no, I agree. Your internal promotion to the buyer level or to the general manager level is super. The layer where the AVP, VP layer is where we are seeing some attrition. That's where I want to say, like, are these GM level guys not capable enough to elevate to the VP? Or what's the gap out there? Again, it's not a binary. A lot of spaces may people internally have taken those top jobs, right? There is N minus one or N minus two. In fact, N minus one, N minus two, most of them are been with the firm for a very, very long time. Yeah. Yeah. At the same time, company is also growing, at this, even at this rate, at 18%, 20%. Two years back, it was growing at 30% or 25%, right? When you're adding INR 1 billion of revenue, you also need a lot of people from outside, right? You can't fulfill every position or everything internally, right? In a way, it is good. It's good to bring a small percentage of people from outside, because they bring that outside in, the outside perspective, right, about things. It helps the organization. Okay. So. Finally, how are we inculcating these internal hires into the DMart culture? What do you want me to say? No, like, Let's say, what is the induction process for these guys to get that DMart culture? Because it's useless if you bring in someone and then he just leaves after one year given, you know, he can't fit in. How are you making him fit into the DMart way of working or DMart mindset? It doesn't start after he joins. I personally do this, especially with senior leadership, at least N minus two, N minus three. I personally have a chat and explain. While everybody will sell their company, we actually warn them or alert them about what this job involves. Okay? That they know what they're getting into. That is, it starts before you hire somebody. You have to have this very candid conversation: "Look, this is the role, this is what is expected out of you," all of that. Okay? At the same time, whenever somebody joins, we are not very number-centric, even with top leadership. The first 1 year, there is no deliverables at all. It may sound crazy in today's world, but I'm personally ensured that it's not there. He should first understand, a deep-rooted, culture-oriented, value-retail kind of a format needs to understand the nuance of what this company is all about and how this business has to be run. All those typical trappings of any other firm where, "Oh, I have a KRA, oh, I have a target. I have to deliver a profit margin target, or I have to deliver a store addition target." We don't do that for the first one year. We first ensure that he kind of seeps in, soaks in to the culture, the way we operate and all of that, right? I think, when we say culture, it's not very complicated. We have a very, very simple, straightforward, matter-of-fact company. We, that's it. I mean, it's. Sometimes some people also get unnerved by that kind of a, an approach, right? We minimize meetings, we want action, we want things to get done, we don't want people to idea too much. We're a straightforward business. Even that kind of gets unsettling. Imagine somebody who's working in an MNC, FMCG company, ideation is the key factor of getting outcomes, right? Which we also see when they operate. We try to tone that down and focus more on getting things done, more execution, more action orientation, huge amount of people connect. Yeah. Understood. Understood. All right, fine. That's me. Yeah. The next question is from the line of Mandar Pawar f.om Kotak Mahindra AMC. Please go ahead. Yeah. Hi, good afternoon, Neville and team. Thank you for giving this opportunity. Wanted to understand, you know, when we are looking at the modern trade and the number of players based on and offline with commerce increasing and obtaining size, has it in any way input our distributor margins or sourcing margins under pressure? You're saying that, our margin is going down because of all of this? Yeah. Yeah. Just whether is there any case for that or, we have to hold our margins? No, there's no issue there. Okay. I'll give you one snippet on this. To see guys, some companies, I don't want to name them, but they haven't been coming for a very long time, and then when they come to us, we deliver, we become their largest customers. Okay. We also have situations like that. We are still a very important channel for a lot of brands. In fact, we say no to a lot of brands because we think the quality is not good enough, so we don't launch them. Wherever we find good quality at good price, we launch them, we actually become the largest supplier for them. Got it. Got it. Sure. Just, you know, going back to that topic of, you know, apparels as a category, now, if I look at the sales and the ratio that you're giving in the, you know, cost ratio for 15 that we allocate to general merchandise and apparels, it approx out like, you know, on the first percentages, we are still 20% lower as compared to the pre-COVID levels. Now, of course, there will be inflation in the raw materials also have, would have got passed also, because volume demand would be higher than 20% in terms of value. It is also a function of, you know, which is significantly lesser space been allocated, to, you know, GGMA as a consequence is. I Just tell me the last sentence, like, last point. I couldn't get it. Yeah. You know, if I assume that the, you know, ratio of space allocated to GMA is constant, then, you know, it is a decline in the revenue per sq ft. I just want to remind this wrong, where that ratio is constant, and, effectively, you have given lesser space allocated to, GMA category. Is that something, you know, because the traction in this category is weaker, you have decided to allocate less space to that and, you know, more towards the other categories? The space has not yet reduced, all of us. No. Space for GMA has not been reduced, if that's what you're asking. Yes. Okay. Okay, that is good. Next year, one-off call where it's really small and it's impacting the inventory terms, but otherwise, no. All right. Just one final question on, you know, when I look at the, you know, your cluster base approach and the way we have spread our, you know, presence across the states, two notable differences are the states of, you know, Goa and Kerala. Just wanted to understand, that there are any specific challenges that you face in those states or something that is in not, you know, fitting completely with the philosophy that we have in terms of, you know, our operating profitability metrics? Some states we haven't gone yet. Okay, generally, all the states you mentioned, there's a lot of land restriction, by the way, because they're ecologically sensitive regions, so very little land is available for commercial activity, and those prices are extremely high. Hopefully we'll have a store in one of these states soon. All right. great. Thanks for the opportunity. Thank you. Thank you. you. The next question is from the line of Tejas Shah from Spark Capital. Please go ahead. Yeah, good afternoon, Neville and team. A couple of questions from my side. In our observation, the limited success that we have seen in GMA retail space in the country, has come from very sharp focus on private labels. First question, do you agree to the observation? Second, if yes, then how do you see private label journey in GMA space? We have been very, very calibrated on private label, commitment on the grocery side. What is your understanding in GMA? Do you think we are private labels or you think we are not private labels? In grocery, you have been very, very clear that it is like you, it will be a trial and error. On this side, it is kind of when you scale up, because you mentioned last, on the last call, that there are multiple dimension to private label, that there's a higher commitment to inventory, and we should not look it from a lens of only margin. Just wanted to understand that when you scale up GMA and when we go on that journey, how do you, how do you see that private label commitment shaping up? GMA, as I've commented, so bolne ke liye hai that it's not private label, but in a way it is kind of a private label. They are manufacturer brands. They are not very popular per se by the name. Just that because it has a manufacturer of brand, he's significantly more invested than per se, an FMCG private label brand. Okay? From that standpoint, I don't know what you're asking, but whatever we are doing, we will do it exactly within the same parameter structure that we are currently operating. They are all manufacturer brands. The question was largely on Costco, Kirkland model also, the way they have popularized the GMA brand. Will we invest in the branding side as well or not, in terms of popularizing the brand also on brand investment? Okay. The, our view there is in the GMA is quite chaotic. In the price points that we operate, branding as such is not. I need to evolve over a period of time. Like, for example, we are doing, let's say, in apparel, we are doing branding now on the socks, handkerchief. Wherever there is very clear, sharp segmentation, branding adds value. Wherever there is chaos and, you know, it's, everything goes all across the place, having a brand may not be the best way to approach it. You have to get more time. Just one academic question. Like design e-commerce kind of business with a lot of data, with a lot of vanity metrics, also DAU, MAU, DMB, and we are usually known to keep things simple. I was just curious, what are the top three or top KPIs you monitor to kind of as the efficiency of that part of the business? Yeah, they're just standard, all commonsensical. We have one on time in full. On time means if customer has ordered at a particular time and date slot, you ensure what percentage of the orders reach at that time. Deliver in full, so what if we call it order? In full means you ordered 20 items, all 20 should go. Yeah. At line and at depth level, whatever, you know. Things like that. This is at the customer level, because that's the final proof of the pudding, right? To deliver that, what do you do at the back end? All orders for the next 2 or 3 days, we already know right now. You have to ensure that you are planning of manpower. There are metrics around that. You have metrics around pickers, you have metrics around vehicles. The usual stuff, I mean. One is the output metric, and then you look at the input metric that will drive that output metric to be delivered 100%. The beautiful thing about all of this is, everything is measurable, everything is digitized, everything can be tracked. There's no paper, and there is no reporting postmortem. It's all real time. If we know that suddenly it's rained, and today, right now, and everything is getting flooded, then we know that delivery will be affected for the future orders. We inform the customers in advance, and we recalibrate the date, the delivery schedule, stuff like that. Yeah, so that's how we operate the business. Even last year, store expansion— I just want to clarify simplicity. Simplicity doesn't mean that you ignore data, you don't have, you know, metrics to evaluate. We have a very sophisticated way of looking at data. Yeah. We ensure that we deliver, we don't get into unnecessary, you know, metrics. Yeah. You try to reduce noise on some of these parameters. Okay. Last thing, Neville, whenever we speak about store expansion, you actually speak in terms of absolute stores, usually. Do we internally think in terms of percentage, space addition, and then hence profitability building also should be seen as we go on a higher base, the capacity or both, can be seen from percentage terms? Internally, everything is percentage. We look at it in percentage. It's not percentage of square footage addition, that's a dangerous line of thinking to go into. If you go there, you're finished. Okay? Percentage is percentage number of stores. It's very clear. If I add 20% more stores CAGR every year, that's what I personally teach my team. If I have 500 stores, 20% of 500 is 100. We should be opening 100 stores every year. If I'm 1,000 stores, 20% of 1,000 stores is 200 stores every year. Very clear. Then the math beautifully works, that you'll get around 15% CAGR from new stores, and you'll get around 7%-8% or probably even a higher CAGR, because then you have consistently a young cohort of stores in your system all the time. That is the story of DMart, except for the last two years. Yeah. You need that for sure. Getting a number, so number is better because it's more precise, right. Just curious, Neville, can you elaborate on that point, projected in dangerous line of thinking, because most of the engagement with other retailers is largely on this point. Our entire model is based on profitability at store level, no? If, if profitability at store level is an objective, then if I need only 30,000 sq ft, I'll not have a 1 lakh sq ft store, no? Because of vanity. V ery clear. Very clear. Thanks a lot, and all. Yeah. Thanks. Thank you. Thank you, members of the management. Ladies and gentlemen, with that, we conclude today's conference call. On behalf of Avenue Supermarts Limited, we thank you for joining us, and you may now disconnect your lines. Thank you. Thank you, Michelle. Thank you, Michelle. Thank you, sir.