Ladies and gentlemen, good day and welcome to Q3 FY2023 earnings Conference Call of Go Fashion (India) Limited. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions, and expectation of the company as on date of this call. These statements are not guarantees of future performance and involve risks and uncertainties that are difficult to predict. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. If you need assistance during the conference call, please signal an operator by pressing star and zero on your touch-tone phone. Please note that this conference is being recorded. I will now hand the conference over to Mr. Gautam Saraogi. Thank you, and over to you, sir. Thank you. Good evening, and a warm welcome to everyone present on the call. Along with me, I have R. Mohan, our Chief Financial Officer, and SGA, our Investor Relations Advisor. Hope you all have received our investor deck by now. For those who have not, you can view it on the stock exchange and the company website. The company has shown strong performance in Q3 FY2023. Our revenues grew by 24% to INR 179 crores. Highest ever quarterly revenues at Go Fashion. EBITDA and PAT grew by 14% and 3% respectively, from INR 59 crores to INR 22 crores respectively, which has been on the back of high volume growth and increased product mix for you. Our revenues compared to Q3 FY2020 pre-COVID levels has increased at 51% for Q3 FY2023. SSG for EBO stood at 18% Q3 FY2023 compared to pre-COVID level, which is Q3 FY2020. SSG for EBO is at 10% compared to last year Q3. For the quarter, our volume growth, our overall volume growth has grown by 17% compared to last year. Compared to pre-COVID levels, our overall volume has grown by 28%. Our product being core and essential to customers has enabled to operate us on a business model where we offer limited discounts, and the feel of our product, especially at full price, which is in our experience, results in greater flexibility. 96% of our sales in the nine months FY2023 are at full retail price. In addition, our EBO average selling price has increased continuously, primarily on account of value-added products that we've introduced as part of our product portfolio. Our ASP for the nine months stands at INR 724. As mentioned in our last earnings call, the company is investing in brand-building initiatives which will help us in gain visibility and help us focus and grow our online sales channels to benefit the evolving customer trends in the market. During the last quarter, the company has had a brand campaign, Good To Go, which activated 53 mega and macro influencers across eight cities, reached 56 lakh unique audience via influencer marketing. The approach was to reach out to audience which have affinity to the brand and put the audience who are currently in the consideration funnel of purchase. We reached 82 million audience and the recall lift at 23% after six weeks. During Q3 FY23, the company added 35 new EBO stores with a total of 101 stores in the nine months FY23. This takes the EBO store count to 604 as on 31st December 2022. As guided earlier, we will continue to add 120 to 130 stores in FY2023, which is in line with our growth expansion plans. We are looking at omni-channel engagement for a seamless customer experience, building on a technology-driven strategy to reach consumer across all cities. We are leveraging technology to bring cost efficiency and enhance customer experience. We intend to further improve our operating efficiency and ensure efficient supply chain management through global best practices. We will look to upgrade our warehouse to optimize our inventory and supply chain management. Coming to the working capital front, we have reduced our working capital days to about 51 days as on December 31, 2022, compared to 178 days as on December 31, 2021. We are further working to reduce it mainly on the inventory front. On the cash flow front, we have delivered a positive operating cash flow of INR 60 crores for the nine-month FY2023. We look forward to continuing our innovative and creative approach and launch more designs while providing more brand destinations for our consumers, which will help us grow and gain market share in the coming years. Our focus will be to target personal acquisitions to drive sales through our website and online marketplaces. In addition, we intend to invest in content generation to build engagement with the younger audience. With this, I would like to hand over the call to our CFO, Mr. R. Mohan, with the update on the Q3 and nine-month FY2023 financials. Thank you. Thank you, Gautam, and good evening, everyone. The company has posted strong performance for the quarter to nine months ended 31st December 2022, backed by the increased demand across product categories. Our revenue for the quarter stood at INR 177 crores as against INR 142 crores in Q3 FY2022, a growth of 34% YoY. Gross Profit stood at INR 104 crores, an increase of 31% YoY, with a GP margin of 59% as per now. Our EBITDA for the quarter stood at INR 52 crores as compared to INR 50 crores in Q3 FY2022, a growth of 15% YoY. Our EBITDA margin stood at 33.4%. Profit After Tax for the quarter stood at INR 24 crores, that's 8% Y -o- Y growth from Q3 FY2022. PAT margins stood at 13.8%. Coming to the nine-month F20Y22 performance, revenues stood at INR 508 crores as against INR 288 crores in nine-month FY2022, a growth of 70% Y -o-Y. Gross profit stood at INR 303 crores, a growth of 68% Y -o- Y with a GP margin of 69.some% for the nine months. Our EBITDA for the half year stood at INR 166 crores as compared to INR 81 crores in nine months, FY2022. A growth of 99% YoY, our EBITDA margins stood at 31.8%. Profit after tax for the nine months stood at INR 68 crores as compared to INR 23 crores in nine months FY2022. A growth of 192% YoY, profit margins stood at 8.2%. The ROCE and ROE on an annualized basis stand at 19.8% and 17.8% respectively. With this, we will now open the floor for the question and answer. Thank you very much. We will now begin with the question and answer session. Anyone who wishes to ask a question may press star then 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, we'll wait for a moment while the question queue recovers. The first question from the line of Ankit Kedia from Phillip Capital. Go ahead. I just wanted to understand your volume growth for the quarter. You know, given that you have posted 17% YoY growth, but you also had a 27% area or store addition. And SSG, you know, ASP growth is also around 10%, 11%. What is the volume growth in SSG, and how has been the new store impact on profitability and volumes? Yeah. Thanks, Ankit. From an SSG perspective, this quarter we've had a 10% value growth over last year Q3 FY2022. The value growth is at 10%. The volume we have seen a degrowth of -2%. Our business, like I'd also mentioned earlier, is becoming more of a cluster-based business. This quarter we have seen there are SSSG has stood at 10% and -2% on a volume level. Our SSSG, which is same cluster, same growth, has stood at 24% on a volume level and 11% of volume level. This is Y-o- Y? These are all Y -o- Y, Sampat. I'm telling you the comparison between Q3 FY 2023 versus Q3 FY 2022. Thank you. From, you know, from a cluster-based approach, how many clusters do you keep or how many stores do you add in that cluster? You know, how many kilometers is that cluster and how many stores out of 600 odd stores are, you know, in this cluster-based SSG? Yeah, I would say about 60%-70% of the stores. About 60% of the stores or little more than that are in clusters. How many stores we can have in a cluster is very subjective to that particular location. Every area, every locality is different. There are some localities where in the entire cluster one store is enough, and some localities where the area of the cluster is very small, but multiple stores is required. I'll give you an example now. We are saying Mumbai, right? Linking Road is one cluster. Linking Road, if you have one store for the entire road, it's enough. If I take the Bhuleshwar market, the other store in that small west, rather west area where the shopping is there we can have a potential of three to four stores. It really depends from market to market. Sure. Going forward, is it fair to assume a volume growth on SSG basis, would be low single digits at best, while on the cluster base it could be a higher growth? Though we are going to be a cluster-based model, but at an SSG level, we are going to continue aiming to have a volume growth of 4% to 5% on a SSG level. This quarter, the overall retail traffic was the overall traffic footfall was really slow. That is why we've seen a degrowth of -2%. On a generalized basis, we are aiming to maintain that volume growth of 4% to 5% on a SSG, on a Y -o- Y basis. Sure. My second question is regarding your working capital. On an overall basis, we are more of a cluster-based growth model than an SSG model. Understood. My second question is regarding your working capital. If you look at on a quarter-on-quarter basis, the cash on books are actually reduced. You know, while you are saying your operating cash flow is INR 60 crores, I believe that is still gross in that operating cash flow. If you can just help us, you know, with the absolute inventory number for the December ending number, that will help to understand the actual, you know, working capital. Yeah, yeah. Yeah, yeah. Let's see, Ankit. Our absolute inventory is around INR 223 crores-INR 225 crores in the, which is including finished goods and raw material. Now, very rightly, you pointed out this cash flow from operations which is here INR 60 crores, this is post-indebted basis. If I take pre-indebted basis, this INR 60 crores will actually be zero because we have a rent outflow of INR 60 crores-INR 61 crores. If we net off the rent from the INR 60 crores, the INR 60 crores becomes zero. From a, from a cash flow from operations perspective, it stands at nil on a pre-indebted basis. Understood. That helps me. What happens is the working capital also includes the inventory for the newer stores what we've opened. This zero cash flow from operations was here. It is both the inventory what we've added for the new stores. Sure. If you look at your, you know, September inventory was INR 262 crores. Approximately INR 8 to 9 crores inventory has been added. That inventory was also slightly on the higher side because, you know, as cotton prices are falling, you know, you would be using the high-cost inventory and securing low-cost inventory. Shouldn't the inventory absolute amount decline? See currently, Ankit, we are at four months of inventory and we are looking to optimize our inventory and we have been doing it over quarters. We are looking to bring it down to three months. This optimization to four months to three months will take a few quarters, but we are aiming to bring it down to three months. That is how we are going to be reducing our overall working capital. Understood. I'll come back to you on this. Thank you. Sure. Thank you, Ankit. Thank you. We'll take the next question from the line of Mr. Devanshu Bansal from Emkay Global Financial Services. Please go ahead, sir. Sure. Thanks for the opportunity. Sir, I wanted to understand the gross margin decline versus last year. While EBITDA impact has improved, but our gross margins have actually dipped by about 360 basis points. What explains that? See, this quarter, we had some marketing offers, debits from our platform at store partners. This is why because it's all in 1 quarter, that is, can be usually written off to create revenue because the window is one month, or something like that. Because of that, impact of those marketing debits, our revenue has fallen to that extent and this has led to the decline in turn. That's why decline and not a drop. Compare, comparable gross margins you're saying. next if you would like to call out the impact of this, thing. Usually, on a steady-state basis, we will maintain 60% to 65.5% or 60% to 60.5% gross margin approximately. Sure. Sure. No. And- ... this is the same channel mix. If the channel mix tomorrow as the EBO sales increases, the GM will increase. Yeah. Keeping the same channel mix, we will maintain 60% to 60.5% of gross margin. Got it. Sir, with cotton prices sort of being at reduced levels, sustaining at the current levels, how is the competition sort of taking it? Are they going for reduced prices or... What's your plan on those fronts? See, we don't have any plans to reduce prices. Even what we have studied from competition has also not reduced prices. Currently, these reduced prices, these reduced cotton prices, we have to see the sustainability for two, three quarters, and then we'll have to see because cotton prices in the last 18 months have fluctuated a lot. Mm-hmm. For us to make a judgment on whether these prices will continue to be low, we don't know. We'll have to study this for two, three quarters. Having said that, we have not reduced pricing and we have also not seen anyone else in the industry reducing their pricing. Got it. Sir, you indicated that this was a challenging quarter, and I should sort of give you good compliments on maintaining decent inventory levels. What sort of helped us in maintaining the inventory levels despite, you know, short falling sales this quarter? No, see, I think, look, our inventory planning is very accurate, Devanshu. Because all our inventory planning is through our ERP calculations and AI, what we have built internally. Everything is based on sales and sales prediction. We kind of very accurately planned our inventory in terms of how the quarter will go. We have done about INR 177 crores of revenue. Ideally, as management, we thought that we could have done about INR 184 to 185 crores of revenue. We have fallen short by INR 6 to 7 crores to what we thought would have been a good number to achieve. Got it. This INR 6 to 7 crore, so there is a general trend that January is being relatively weaker performance versus what historical January has been. Is that same trend visible in your, at your stores as well? I mean, this time January has been pretty decent. I mean, usually how January performs, we have seen similar trends in January. It's too early to comment because January has not concluded yet. Mm-hmm. From what I understand, I see in the industry, it has been pretty decent and it's been in similar to past trends. Got it. One last question from my side. Generally, on an annual basis, we have seen about 10 to 15 store closures, this year there has not been any store closure. Do you expect store closures to happen in future or not? Hard to say right now, but maybe one or two stores. Nothing material. Got it, sir. There are one or two airport stores which we are considering to shut. We have not finalized that yet, but maybe one or two stores in the last quarter. Nothing material. Got it, sir. Thanks a lot. Yeah. Thank you. Ladies and gentlemen, if you wish to ask a question, you may press star then one on your telephone. We'll take the next question from the line of Mr. Varun Pratap Singh from ICICI Securities. Please go ahead, sir. Sir, thank you. Sir, as you highlighted that depending on channel mix, the trajectory of gross margin would be changing shape. Just wanted to understand that in our current presentation, revenue contribution from online channels are close to 21%. If we look at your last quarter presentation, the revenue contribution is around 3%. From 3% to 20%, it is quite a big jump. No, no. No, no, Varun. There is a small correction there. I think you've read it wrong. The online is just less than 2.5%. The 21% what you're saying is telephones. Telephones. Okay. Okay, okay. I think there's some error in the presentation. Right. Understood. Okay. Maybe I'll have to check the presentation. Maybe the color coding was wrong. I'll have to check that. The online sales, which was earlier at thre, is currently at about two and a half, 3%. It's been maintaining a similar trend. Got it. Understood, sir. Okay. How do you look at the revenue contributions from this channel going forward, for example, next two, three years, especially from online channel? We are looking over the next two, three years we want to ideally scale the EBO business and online business together. Currently, we are at about 76% both EBO and online together. We would ideally want it to be around 80% over the next 3 years or little more than that. We are aiming to get to that 90%. In that 90%, online would be about 8%, 9%. Currently online is about 3%. We would like to take it to 8%, 9% over the overall sales. Right. Right. That should not be a gross margin dilutive. I mean No, in fact that will further improve the gross margin. Currently, based on the current channel mix, we have a steady state gross margin about 50% or 50.5%. As the EBO and online sales contribution increases because we have a direct to consumer, that will have a positive upside on our gross margin. I'm saying only for online channel. Gross margins should ideally be dilutive, given the commissions and the prices we have to pay compared to. No. What happens is What happens is online commission is booked below gross margin. The gross margin in online and EBO are similar. Understood. Okay. Second question is on marketing spend. Given the renewed thrust on improving visibility and brand perception, how should we look at the overall expense as a% of revenue? On a steady state basis, Varun, you can estimate it to be between 3% and 4%. Usually H1 will have higher spend than H2, which was even the case this year. See, because we usually plan our advertising spend prior to half year. This year we had about 4.5% in H1, which has now come down to 3.5% by for 9 months because our spend in Q3 was less. On an annualized basis, on a steady state basis, we will see about between 3% to 4% in GRX. Okay. Okay. Understood, sir. Yeah. Thank you very much. Understood. All right. Thank you, Varun. Thank you, sir. We take the next question from the line of Mr. Nihal Mahesh Jham from Nuvama. Please go ahead, sir. Yes. Thank you so much. Good evening to the management. Three questions. First, the clarification on the cluster approach that you mentioned. Just to understand that right, you were basically highlighting that opening stores in the same cluster ends up impacting the SSG value and volume growth in a way. Is that the right understanding because the stores opening next to each other? Correct. Sometimes it does. Yes. That's helpful. The second question was that if I look at your city expansion over the last 5 years, you've consistently opened around 20 cities every year, and I think for this year also it's at 30. Maybe I think by 2023 you will be reaching a similar number. Is there a thought of accelerating that or is it the pace you wanna follow in terms of the number of cities you keep expanding into? It's very difficult to estimate how many cities we are going to add every year because it's all based on availability of store roots. What I can tell you is that in whatever 120 to 130 stores we are adding, 50% would be from the top eight cities. Our percentage of top eight cities to our octobase model is about 50%, 60% to 57%. That ratio will maintain. How many new cities we'll add every year is very hard to estimate. Sometimes 20 cities, sometimes 25 cities, all based on availability. The mix of metros versus non-metros is currently at 53% by metros. Got that point. Just one last thing on the inventory side. Currently we are at around 120 days of inventory and that's a number that has stayed similar for the last couple of quarters. It has seen a viral fall, but I'm guessing that is because of what had happened due to COVID last year. What is the roadmap from the 120 to 90 that you've been highlighting? What are the parts of the value chain where you will reduce inventory and that will help you reach the 90 days? Nihal, let me clarify why 120 days and why we are at 120. Let's see, as our business, our store model is such where we buy fabric, we buy raw material, and then we convert it into a garment. There is an element of raw material inventory in our in our books. If I take the 120 days, my garment inventory days is around 90 days. It's because of my fabric, what I'm maintaining of 30 days, I'm having 120 days inventory. If I take in terms of real terms of finished goods inventory, we are still at three months of inventory. It's just that the fabric is making it look like four months. Now, of course, our sourcing model has been consistent right from the beginning. Pre-COVID, we had 90 days of inventory. This little bit fine-tuning what we end up doing it to bring it down to three months is we are going to be fine-tuning the inventory at the warehouse. At the store level, currently we are having about 35 to 40 days of inventory on the overall sales. This will remain the same. The warehouse inventory in finished goods we will fine-tune that a little, and we fine-tune the fabric inventory. Automatically, this 120 days will come down to 90 days. Including the fabric also. Yes, absolutely. It will take some time because the fine-tuning has to go over a period of time. Maybe it will take two, three quarters or a little more, but we will bring that down to 90 days, which was the number prior to COVID. That is helpful. Thank you so much. I wish you all the best. Yeah. Thank you Thank you, sir. We take the next question from the line of Mr. Manish Poddar from Motilal Oswal AMC. Please go ahead, sir. Hi,Gautam. One is, would it be right that this quarter had the entire raw material impact and let's say incrementally, you know, raw material, let's say Sorry, Manish. Can you repeat the question again? I lost you a bit. I'm just trying to understand, let's say, the gross margin which you see during this quarter, does it bake in the entire, you know, all this inflationary impact which was there, let's say, in the inventory this is took? Is this is took? Is that how one can read in the gross margin? Manish, the inventory, the cotton prices which has reduced has actually not given the upside yet in the gross margin because our inventory works on a weighted average methodology. Right now, the newer fabric what we are sourcing is on the lower cotton prices. That has really not adjusted. The reduced prices have actually not bought that positive upside on the gross margin yet. It will take some time for it to kick in. This should reflect by Q1. Is that how it is?[Speech Overlap] It's very hard to estimate. What I'm trying to understand is the exit prices which you gave in December, that would be at least 30% to 40% lower than what the current average will be. I see. That is still on the test. No. See, the price increase what we had taken in December 2022 is more or less comfortable RM prices, not the product price. I'm just talking about, let's say, the cotton raw material which you get, be it a dyed product or a top of progress. Has that started reflecting lower prices because of the price correction which is happening in the other commodities? I think that the price hike what had happened in December 22 at the RM front, that has already impacted the gross margin. Your question is right. That increase what had happened at that point of time has already started showing in the gross margin. It's not so much because we have taken a price hike also at the same time. This as from now we are putting out for this year. I believe at the beginning of the quarter one, I think July, August, you mentioned about 4% to 5%. Is there a change in, you know? No, no. I stand corrected that the 4% to 5% was more from a guidance of Q1 and Q2. For a year through, we are looking at 3% to 4%, not 4% to 5%. 4% to 5% is more from a Q1 perspective. Okay. Just 1 last 1. Let's say, this year your store guidance, you know, ballpark stays. Internally, are you planning to open a higher number of stores in the next five, four, and three? We are yet to fix the plan, Manish. Probably we'll have better clarity, maybe in the next couple of months. It will be in the line of, more or less it will be in the line of 120 to 150 stores.[inaudible] Okay, sir. Thanks. Thank you, Manish. Thank you, sir. We take the next question from the line of Mythili Balakrishnan from Alchemy Capital Management. Please go ahead. Hi. Just a couple of questions. One is on this, SSSG. Given that we have indicated that 96% of our sales were. Can you sort of just help us a little bit in terms of, you know, was the SSSG during the quarter? Is it currently on? What is the kind of response we are seeing? We have 2 SSSG periods basically. We have 1 we run it during quarter 1 and 1 we run it during Q4. Mm. Currently, we have an SSSG running on certain articles we are providing certain offers. The impact of such articles are very less because the total inventory which will come under those offers will be less than 15% or less than 20% of the total inventory. The 96% of full price sales still continues to be. Got it. Those offers are there at the store, but it is on very, very limited inventory. what- In our business, most colors and products continue to the next season without any discount continued. We don't have too much of such inventory where we want to discount it on discount. Got it. When did the SSSG start for us? We just started now in January end. It will go on till March end. Also just wanted to check on the ASP increase we have seen on a like-to-like basis. How much of it is mix and how much of it is price and increases versus? This, this ASP what we have seen increase from INR 709 to INR 724 are based on, based on new products. Because the last price hike what we had taken was in September of 2022. 21 would be- For 2022 we took, no? Twenty- 21. I confirm. December 2021, yeah. The last price hike we had taken was in December 2021. Mostly after that we have not taken a price hike. This slight increase in average selling price from 709 to 724 would be on the basis of new products, largely driven by new products. Correct. Just wanted to also get a sense from you on the outlook which you had spoken about that, you know, there was a certain part of the sales which, you know, you expected the sales to be higher with INR 67 crores versus INR 60, INR 20. Was it a consumer sentiment change or just, you know, could you sort of elaborate a little bit on what you were seeing at that time then and what are you seeing currently? Yeah, I think look, overall the sentiment has been pretty decent. I mean, look, I wouldn't call this a bad quarter. The sales were pretty good. Look, we had a management expectation of about INR 180 crores-INR 185 crores. We ended up with over INR 177. Consumer sentiment has been pretty okay. We thought it could have been a little better. Otherwise, September was quite a fall, like a sharp fall. October and November were pretty good. Got it. Also wanted to check with you on 2 other points. One, on your EBITDA margins, while you have indicated your gross margins. Hello? While you have indicated your gross margins would be like 60%-60.5% range, do you have a similar range which you are looking for the EBITDA margins? See, on a year-to basis, we are looking to maintain EBITDA margins of about 32%-33%. Post interest. Post interest. Got it. Yeah. On a On a year-to basis. On a full year basis. Basically some quarters will be higher, some quarters lower. Got it. Got it. Correct. In terms of the loyalty program, is there any further testing which happened along that side? We have already made the loyalty program. We are interesting the final rounds of testing. Hopefully we should be taking it live, starting first quarter. Okay. My last question is on the pledge. Just wanted to get a sense from you that you had mentioned earlier that it would take 6 months to sort of get it out. What's the plan in terms of... See, our original plan was to close it by December this year. It was and it continues to be short-term in nature, the pledge. As a family, as promoters, that is on our top of priority list and we're looking to close it soon, as soon as possible. There is no timeline that you are giving for it? As of now, as of now we're not giving a timeline. Yeah, we continue to retain, saying that it is very short-term in nature and, you know, it's on top of our priority list to close it. Got it. Hard to give timelines right now on that. Okay. I just wanted to get a sense from you of the rental to sales ratio that you are seeing currently, for the nine months ended here. See, at a company level, we've had about 14%-15% as rent to revenue ratio. On a other than overall sales basis. If I look at an EBO level, EBO channel, EBO level it will be about 17%-18%. 17%, 18%. At a company level because, at an overall company sales it will be about 14% to 15%. All right. Coming to this, you know, opening more stores, especially on a cluster basis, we are now seeing some amount of, you know, this cannibalization happening on the, on the volume side. Correct. You know that, which earlier was not the case and clearly the market is a little more saturated than you might have expected. Right. I just wanted to get your thoughts on this aspect given that you are indicating that you want to be at the 4% to 5% SSG level at a store. You know, how are you sort of thinking about it? Like on incremental stores, are there any metrics that you'll keep a close track on that, you know, if things don't work out appropriately then you might just rather close some of these stores? See for us, closure of stores don't happen a lot because, see, we are a foot of foot mover in any market before we open a store. We typically wait for the larger retailers to open first. We judge their performance, and then after that we decide to open a store. Closures in our case is very limited because we are the foot of foot mover in any market. Considering how we are growing in clusters, the right metrics to be used in our evaluating our sales is obviously SCSG, which is same-cluster-based growth. As management we continue to aim at an SSG level we will want to maintain about 4% to 5% volume growth. We would want to at least aim and try maintaining that. Got it. Our experience has been that within a cluster, though, in a cluster multiple stores sometimes cannibalizes the first or the second store for the same cluster, it does not really reflect in the decline in margins because the incremental increase in revenue and the incremental increase in the rent and other expenses is far greater in revenue than the expenses. The margins, what I have noticed at a cluster level is pretty much maintained, if not get better. Got it. You are closely tracking these margins at a cluster level too, right? We look at cluster as one location, right? We take out data, we take out gross margin at the cluster level and then see whether there has been a decline after adding more stores. That trend we have not seen any decline. Okay. Thanks a lot for calling me. Thank you. Thank you. We take the next question from the line of Mr. Vikas Jain from Equirus Capital. Yes, thank you so much for the opportunity. Just a couple of quick questions. Can you break this 10% increases you speak of into a pricing or a volume led breakup, can you please do that? Yeah. The 10% when it converted into volume, it is minus 2%. Volume is minus 2%. Correct. Yes. Sir, I missed the mark when you said that, you ascribed a reason for the decline in the gross margin from this particular quarter. Can you please repeat that? What was the reason? Yeah. You see, this quarter we've had some marketing and offers from some of the large format store partners and such debits are knocked off in the revenue. Because it is adjusted in the revenue line item, we have seen a slight decrease in the gross. Sure. Sure, sure. This is more to do with or just to understand the nature of this item, it just usually happens every third quarter or each... What is the time period? It differs. It It differs. It happens every alternate quarter. This time the amount was a little more than normal. See, what these offers are basically, during the large format sales, there are many schemes in their stores. Like, on a BigBasket they'll give a particular offer. They run some marketing campaigns in their stores. Such initiatives are basically borne by the brands, the family brands and also borne by their private labels. Proportionately we have borne our contribution. Correct. This is a normal business phenomenon that usually occurs every quarter, right? It is always in the normal course. There's no. It's not an outlier. Understood. Understood. Understood. Sir, with respect to the stores opening, you did reaffirm that around 10 usually in a particular year. I just want to confirm one more thing. This comes every quarter, but this time because of it being a little more than normal, we have seen a decline in the GM. Sure, sure. Understood. Understood. I got that. Yeah. Sir, last question. with respect to You did mention that whatever store openings we could have on an annual basis, either 120 or 150, around 57 or 58 still would continue to be opened in top eight cities. Is that understanding correct? Yeah. About 50-55%. See, in our existing cities also we are seeing a lot of store base. I think, 60% of our openings from our top 8 cities are top 10 cities only. Understood. Sir, in that case, can I ask a broad question? Like, we do mention in our presentation that our revenue from a particular matured store will be around INR 85 lakh INR 90 lakh, right? Out of this 600 odd stores that we have, around how much% of our stores would be clocking such revenue throughput? See the INR 85 lakh to INR 90 lakh is not for matured stores. It's a blended number. by blended We mean it is also including the stores which have opened in the current financial year. Last is a blended number, the INR 85 lakh to INR 90 lakh. It's not for the matured stores only. All right. a matured store would be even clocking higher than this? Ideally it should be clocking a little higher. I don't have that number handy, but it will be clocking higher. Sure. Sure, sure. How do we measure maturity? Any store which is greater than 18 months, we keep that as a matured store. We measure maturity by time and not by revenue. Understood. Understood. Understood. All right, sir. Thank you so much, sir. Thanks. All right. Thank you, sir. With the next question from the line of Mr. Akhil Parekh from Centrum Broking. Please go ahead, sir. Hi. Thanks for the opportunity. My first question is on the demand trend, right? You highlighted October and December were good. Would you be able to bifurcate how different or similar they are in, say, tier one city versus tier two, tier three, tier four? I think the real difference happens at a state level and not at a tier level. I'll give you an example. Delhi, for example, let us take the Delhi region, right? Suburbs of Delhi. October, November are usually good months. December starts to decline because of big shops. In South the trend is very different. October does very well because of Diwali, and then December around Christmas we have the sale again. The trend really differs between individual states and not at a tier level. Okay. No, I mean, yeah, I mean, you answered from a seasonality perspective, probably. I'm just saying in general, how the demand trend is there. In general, what happens is usually festivals fall in October, and even this year it was in October. October usually sales spike. November again, after festival the sales slightly takes a dip in November. Then in December because of New Year and Christmas and the holiday season, December again the sales spike. It usually November is slightly lower than October and, uh, December picks up better and becomes December usually becomes on par with October. This is the usual trend. It depends when the individual festivals fall. No, that's my question. Where I was coming from was, like, we are seeing, right, the impact of inflation, hurting the consumer segment more so, people who are in tier two, tier three towns, which is evident from the numbers reported by some of the FMCG companies. Are we seeing such kind of a discrepancy between, say, tier one versus tier two, tier three in terms of demand? See, in our case, we have not seen any such disparity of this as of now. Our Tier two is continuing to do as well as our Tier one. We have not really seen so much of disparity between Tier one and Tier two. Having said that, look, we are more currently looking at our network. If you think of us, we are in top eight cities. Currently we are more Tier one from a network perspective. Whatever we have in Tier two, Tier three, Tier four, we have not seen any such fall. I mean, no greater fall than what has happened in Tier one. Let me put it that way. Okay. As in the volume of minus would be broadly similar across the tiers, basically. Yeah. It would be similar. Okay. Okay. Second question is on the ASPs. You said, you know, that you've seen a kind of +10-11% ASP increase probably on a Y -o- Y basis. Are we, so are we seeing any trends where premium products are getting sold way more than what they used to be and probably mass products or entry-level products are getting sold less currently as compared to in last one to two years? We have not seen any dramatic shift on that front. I think it's been fairly similar and consistent to what it was before. We have not seen really any big change on the premiumization front. Look, the customer is upgrading, and that's why our ASP is increasing. There's no dramatic shift. Okay. Okay. Fair enough. Last question was. To your question, there is a shift. That's why you have seen our ASPs increase because of the new product portfolio. There is a shift, but it's a very slow and gradual shift. Okay. Cool. Fair enough. Lastly, on the ramping up of newer stores, right? I mean, I'm sure the newer stores would be clocking only 50% of sales as compared to the very mature store sales. How does the timeline look like? For example, if I open a new store today, how many months or years it takes for that store to reach to the sales level of our very mature stores? Like I was mentioning on the call, maturity for us we measure not by revenue, but we measure it by time. We have some older stores also which is well below the average of INR 85 lakhs, and we have some newer stores also which are well above the INR 85, 90 lakhs number. For us, for a store to be matured, it's by time and not by revenue. Usually between 18 to 24 months is when a store gets matured. Okay. Okay, cool. That's all from my side and best wishes for coming quarters. Thank you. Thank you. Thank you, sir. Ladies and gentlemen, in order to ensure that the management is able to address questions from all the participants in the conference, please limit your question to one per participant. Okay, the next question from the line of Mr. Himanshu Nayyar from. Please go Please go ahead, sir. Yeah. Hi, good evening, Gautam and Mr. Kumar. The first question, I mean, given that you said the demand rates are very similar for you in the both metros and the larger and the smaller markets. Just wanted to understand, is there any notable or significant difference in the store economics for the stores that you open in the top eight cities versus your other stores? I mean, given if you open a significant proportion in your non-metros, would that impact your overall store economics or not much? See, from a margins perspective, margins are very similar, between Tier 1 and Tier 3, and I'll tell you why. There will be a difference in revenue. The top 8 cities average store revenue versus a Tier 3 city revenue would be different. Tier 3 is a revenue level per store would be lower. In our case, it is not significantly lower, but it is lower. What happens is, even when these revenues are lower in Tier 3, our other costs like rentals, staff costs and other expenses also are that much lower. The kind of EBITDA what we generate at an average store level EBITDA of 31% to 32%, whether it is a Tier 3 or whether it is a Tier 1, we end up delivering the same 31% to 32% EBITDA. There's no change in the margin%. The revenues would be different for a Tier one versus a Tier three. Okay. return ratios in main stores, that would again broadly be similar as well? No, no. There'll be a change. The return ratios in a Tier three would be slightly longer because the investment for you to put up a store for a CapEx inventory, whether it is a Tier three or the Tier one, is the same. Your payback period is likely going to be longer in a Tier three versus a Tier one. Got it. Okay. Second bit was on omni-channel journey. Can you share some details as to where we are in that journey? I think we have already started it in a significant number of stores. Any initial data on how much is that adding to our store throughput or revenue per store, basically? We have started omni-channel in a small way, and we started seeing some success. It is still early days. We have started doing localized deliveries from certain stores, and it is scaling up. We're also now making an omni-channel program where any customer who walks into a Go Colors store and if she's not able to find the color and size, we convert that customer into an omni-channel customer. We are initiated it. Right now we have done it in a few stores, so it's very early on to say how the result is, but it has gone live in a significant number of stores. Any idea how much do you think that can, I mean, that can have a significant impact on our store throughput? Exactly. That was the idea. I mean, we are quite optimistic that it should improve the store economics and the store throughput. Since we have piloted in a few stores, even the staff are getting trained how to use that omni-channel concept, so it will take some time for us to really know how much is the output improvement. We have done a small pilot in four to five stores. Oh. It's like it's still a long time away that we actually start seeing a material- There are so many integrations we need to do at a software level. We have piloted in four to five stores to see how it goes. Got it. All right. That's all from me. Thanks. No problem. Thank you. Thank you, sir. The next question from the line of Saptarshee Chatterjee from Centrum PMS. Please go ahead, sir. Good evening, and thank you for the opportunity. My question is, sometimes we have talked about your repeat customers around close to 30%-35% of the total customers. If you can talk about how that has moved, and if your product per customer has also grown Q -o- Q or Y -o- Y? Our repeat purchase was about 40% to 45%. That has more or less maintained. The other point, data what we mentioned, whether the same customer is buying a lot more or not, that data we have still not tracked in this quarter. Probably when we have little more information on that, we will circulate it. Our repeat purchase at 40% to 45% has maintained. Understood. Yeah. Also, like, do you track whether a same customer with Vintage, someone who is buying two years, three years back with us is buying more? Is there any evidence or data for that? That's something we have not tracked that data in the last couple of quarters. What data we track, I'll tell you, which we have done very well in Q3. We track how many customers have lapsed. From data around the lapsed customer, we sent out SMS, and we have been able to recover many customers back to the store and converted those lapsed customers into active customers. We have done that as well. For the customers which are very old and not repeat purchase to the store. Understood, sir. Helpful. Secondly, we want to know what are the parameters you track for the brand recall as a, like, Go Colors on all omni-channels, and how do you track that? In, see, offline, there is no real one way to measure it. In social media and digital world, there are some third-party agencies who social media and digital, they're able to tell what is the recall value. There is some metrics and app they use, so there are some third-party agencies doing that. In the social media space, in digital space. In the offline space, there's not really any real way to measure the recall. Obviously, we conduct a customer survey. Okay. Can you quantify, like, what has been our brand recall as per the third-party agencies? Yeah. In fact, we had a recall. We did a recent brand campaign also. In the social media space and digital space, we had a brand recall post our campaign. We did a survey. It was about 23%. Versus, like, Y -o- Y or something, like, how to compare that? No, no. This campaign we have not done before. This was the first time we have done this. Understood. Understood. Last question from my side is that, like, you have talked about maybe around 120 kind of store additions every year, and we have a visibility of maybe another five or 10 years. In terms of, like, we are seeing some bit of volume cannibalization within the stores of same regions. How our number of locations are going to grow in the next three, four years? See, we are going to continue to grow in clusters. That's why, for us, chain cluster sales growth is a much better metric than chain store sales growth. We are going to be continuing to grow in clusters because ours is a cluster-based expansion model. Over the next two, three years, we will continue to add 120 to 130 stores, and it's very hard to say how many will be coming from the existing cluster. It's going to be that driven model only. Okay. Thanks for the information. All the best. Thank you. [In order to ensure that the management is able to address all the questions in the conference, please limit your question to one per participant. We'll take the next question from the line of Prerna Jhunjhunwala from Elara Capital. Please go ahead. Thank you, sir. One question from my end is, how much of your sales would be new product sales versus old product? This is to understand the impact of raw material movement as well, because you've not taken a price hike since December 2021. There's new material improvement, you know, increase in the cost of raw material as well. Just wanted to understand these two factors. For us, whether new product or old product, our gross margin structure and multiplier is the same. Even if the newer products are selling or older products continue to sell, our gross margin profile, which is we are having at an EBO level, we have about 68% to 69%. That maintains and that will translate to even 60%-65.5% at a company level. The margin profile is very similar in all our products. We don't have that differentiating between a new and an old product. No, it is, it is from the point of raw material actually, because if raw material prices have increased to 30%, 35%, 40% without price hike, beyond December 2021- I'll tell you. In fact, I have the stat. In In fact, the raw material price has increased twice, and around the same time we are also increasing the price of the product. I'll tell you, that increase what happened in April 21 or March 21, where there was a sharp increase in RM prices. We had also immediately simultaneously increased our product prices. The same trend happened in December 21, which I'd also mentioned earlier in the call. The RM prices went up in December 21, and we gave the product price hike also in December 21. When we're taking a hike with the increase of the RM hikes, it kind of counterbalances. Okay. It's very hard to say when is that impact coming because the newer inventory. Even though when we are changing our prices, the newer inventory coming in is going with the new selling price. The older inventory in the channel is still selling at the old price. Okay. Understood. Now. The increase in the RM and the increase in the selling price goes hand in hand, is what I'm trying to say. The last increase of RM and the last increase of selling price happened in December 2021. Okay. If cotton prices come down, then what do you do? What do your ASPs... Because, just trying to understand on the core product, do you reduce your ASP? No, no. That is not so. It is not possible for us to reduce the prices. Even if tomorrow the RM prices fall, I mean, it's already fallen, if it consistently maintains, even in a scenario, in that scenario we will not be reducing our prices. Your gross margin should increase then. I mean, if the cotton prices, if the reduced cotton prices continue, then our gross margin should increase. Okay. Understood. Could you share the numbers between the core and premium products revenue share? That will help. Currently it's the same ratio of 50/50. Okay. Historically? Maybe two years back. Three years, three to four years back it was more 60/40 than 50/50. Oh, thank you so much, sir. Thank you. Thank you, ma'am. I'll take the next question from the line of Mr. Aditya Sharma from Aditya Birla AMC. Please go ahead. Hi, sir. Thanks for the opportunity. Just wanted to understand this. We have completely outsourced in terms of manufacturing. Can't we use the procurement can be done by the outsourcing company to whom we are outsourced and actually save around 60 days in working capital? As you talked about 30 days are in terms of inventories occupied by the RM that you're procuring. That could actually in turn become paid and the company could actually have a much, much better cash flow from operations and much better working capital. Just wanted to understand, are we prioritizing cash margins over cash flows? Can we actually implement this model? See, I'll tell you. Look, because of this model, what we work on, margins definitely are better because we source our fabric directly. Having said that, see, the reason why we are sourcing our fabric directly and raw materials directly is because of the quality. See, we as a brand, the fabric quality, it plays a very, very important role in a garment. Okay. That is why our customers keep coming back to us. That quality, we want to have it in control. That is one of the reasons why we buy our fabric directly. Now coming to our subcontractors, you see, we work with very small subcontractors. We work with multiple subcontractors, but we work with very small subcontractors. Those subcontractors don't have that kind of financial strength to buy the fabric directly from them. Okay. Because we are working with such small sub-subcontractors, we are able to source a better rate on subcontracting charges. Whereas if you go to a larger export firm or a garment export, garment manufacturing firm, their cost of doing the conversion, efficiency versus the smaller subcontractor will be far higher. We work with the smaller subcontractors that give us a upside in our CM charges. Upside in the gross margin. Upside in our sourcing. Got it. I get- The primary reason of doing this model is because we want to control the quality. More than margin, it's more from the reason of controlling the quality of the product. we also can actually have, our, from where we are outsourcing, we can ask them to actually We can nominate. -uh- Nominate. Nominate the supplier. buy from our supplier list. Yeah, we are doing that. We are doing that, but We, there are many suppliers we don't even use. Now, if I take an entire outsourcing model, there are many places- Yeah. Yeah. What has changed in our inventory? We are having the same model, but before we had 90 days, now it's consistently around 120 odd days. While we were understanding that, the RM prices had shot up and there was uneven demand and probably that could actually result in some kind of high inventory risk. Just wanted to understand this inventory piece. Like what has resulted in this high inventory days from previous years? I think, look, during those periods of COVID, I think inventory planning, you know, became little difficult at that point of time. It was during the period of COVID that our inventory days went from 90 days where it had gone as high as 170, 180. We've been able to bring it to 120. I think COVID was that scenario and that situation. Now since we have somewhat got around to reasonable sort of 120 days, we further wanting to optimize it. It was the COVID, it was the COVID window when this happened. Can we achieve this in a couple of quarters or, what's the timeline for achieving this? See, we ideally are looking at two, three quarters, a little more to stabilize this at nine. Got it. Got it. Thank you so much. Thank you, sir. We'll take the next question from the line of Mr. Rajiv Bharati from DAM Capital. Please go ahead, sir. Sir. Can you follow the rent and the SCF number for this quarter? Just one second. I I don't have it handy. I'll get you. What is the figure, sir? The rent, I'll tell him. The rent is, we have paid INR 23.5 crores of rent, in quarter three FY 2022. This is entirely the fixed rent, is it? Sorry. No, this is. Yeah, this is the rent. Correct. Then, let's say, the ICF number or the SCF number for this quarter? The INR 60 crore is for nine months, right? Yeah. That's not the INR 60 crore is for nine months. For the nine months, the INR 60 crores is on the basis of Ind AS 116. If I look at pre-Ind AS operating cash flow, it is nil. Right. We've had INR 60 crores of rent and we've had INR 60 crores of cash. basically nil. Basically, it is nil. Got it. For the quarter, I just want to get a sense. We have paid the cash flow for nine months. Okay. one question on, let's say, on loyalty, which was asked before. Do you have a metric which you are, let's say, simulating right now in terms of, you know, the loyalty, the repeat purchase? The loyalty for us right now is not gone live yet. We are We are testing it. We are making the program. Hopefully, loyalty should go live from Q1. This is what we are planning. As far as repeat customer base is concerned, our repeat customer rate is at above 50% to 45%, which has been consistent over last one and a half years that we have seen. Right. That's all from my side. Thanks a lot and all the best. Thank you. Thank you, sir. We take the next question from the line of Mr. Gautam Rathi from CWC Advisors. Please go ahead, sir. Hi, Gautam. Thanks for taking my question. The first one actually wanted to understand, so you said you took a price hike in December 2021, right? Generally, when you see your history of last five, seven years, whenever you take a price hike, how much impact does it have on your volumes and how much time does it take for the volumes to come back to a normal level, right? Is there a correlation there? Usually we have not seen a volume impact because of price hike. When we do a price hike, very rightly you said we put it in December 2021. Whenever we have taken a price hike, we've taken it with the entire industry. It's usually the customer, the experience of price hike is across all GACs. We have not seen a volume impact because of price hike in our own experience. Because we increase our prices only if there are long-term fluctuations in raw material prices. Short term, if there are any fluctuations, we absorb it because we have the gross margins to absorb. Any long-term fluctuation, that is when we increase and when input fluctuates, the entire industry takes along with it. Gautam, Nishith here. Next quarter the price hike that you had taken in December 2021 will come into the base, right? The impact that you were getting because of higher prices will also be in the base. The question which you are trying to understand is, you know, your volume growth being where it is it possible that the growth will start to taper off a bit? No. You're saying, can you come again with the question? I didn't clearly understand. Basically, there are three elements which are there in your growth. One is the volume growth that you're getting. Especially in your SSG, right, you know, most of the SSG is coming from prices, right? You have around a 10% SSG wherein volume growth is -2%, right? If the volume growth has not been impacted by the prices that you've taken, the next quarter onwards the prices will be in the base of Q of the previous quarter last year. Right? In that sense, you know, the quarter will be. The growth will start to normalize, right? Unless you take another price hike now. you see No, no, I understand your question. No, no. I'll explain the question. I understood where you're coming from. We as a company, we don't want to increase our prices every year to drive growth. We will increase our prices only if there are changes in raw material pricing. As far as how are we going to be doing growth is going to be at an SSG level we want to grow at 4% to 5%. Having said that, our ASPs will keep increasing because of the new products coming in. We are looking at a value SSG of about 10%, in which 4% to 5% will be driven by volume and the balance 4% to 5% will be driven by ASP, which will be driven by new product portfolio and not change in pricing of the existing products. Fair. Your historical ASG SSG was much higher, which now you are saying your. You believe that the SSG should grow at 10%. The second thing is in this quarter you were at -2%. Will, you know, it will take some time. The question I am trying to understand is it will -2% to 4% to 5% will take some time, right? No, no. See, that's why I'm saying. The -2 happened because obviously about the mix up. In our business, the right way to look at it also is through the SCSG mechanism. In the SCSG data, we've had 11% volume growth in this quarter on a Y -o- Y. Which is fair. Which I understand, which is Okay, which is a fair, okay. That's perfect. The second thing which we wanted to just understand is the seasonality bit, right? I'm just talking from I think one of our previous conversations you had mentioned that, you know, the way you think about seasonality is broadly 45%, 55%, right? 45% in H1, 55% in H2. Does that remain or is this year an exception to that? These were the patterns prior to COVID. This is the first full year after COVID. This is the first year, we'll have to see. Looking at the current year trends, it is looking at the same trends of 45% and 55%. Okay. Even if 45%-55%, which will mean that Q4 could see further acceleration. That is the only limited point. No. Usually quarter four is the biggest quarter of the year. Exactly. Because if Q4. Yeah, usually 45 to 55 applies for us because we are adding new stores. Stores which have opened in the first six months of the year- Yeah. They normalize to a certain extent to give revenue in H2. That is why the 45, 55 rule applies to us. On a same-store basis, the quarter four is the weakest. Understood. Understood. Understood. Understood. Sorry, one last clarification. When you say, you usually consider 18 months for a store maturity, right? When you call out these SSG numbers, are these also for those 18 months base or is it a different time period? It's a blended number. It's a blended number right from our oldest store to our newest store. What qualifies under SSG? Any store. Let me clarify. We had 10% SSG, right? Q3 FY2023 versus Q3 FY2022. What are the stores going to be considered in SSG is all stores which have opened before October 1, 2021 are going to be coming under SSG evaluation. The store has to be live for a full quarter in comparison for it to be evaluated in the SSG. Right. October 2022, right? Before October 2022.