Ladies and gentlemen, good day, and welcome to the Kalyan Jewellers Q2 FY 2023 earnings conference call. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Rahul Agarwal. Thank you, and over to you, sir. Good evening, everyone, and thank you for joining us on the Kalyan Jewellers India Limited Q2 and H1 FY 2023 earnings conference call. We have with us Mr. Ramesh Kalyanaraman, Executive Director, Mr. Sanjay Raghuraman, who is the CEO, Mr. Swaminathan, CFO, Mr. Sanjay Mehrotra, Head of Strategy and Corporate Affairs, and Mr. Abraham George, Head of Investor Relations and Treasury. I hope everyone got an opportunity to go through our financial results and investor presentation uploaded on company's website and stock exchanges. We will begin the call with opening remarks from management, following which we'll have the forum open for Q&A session. Before we start, I would like to point out that some statements made in today's call may be forward-looking in nature and disclaimer to this effect has been included in the earnings presentation shared with you earlier. I would now like to invite Mr. Ramesh Kalyanaraman, Executive Director of Kalyan Jewellers India Limited, to give his opening remarks. Thank you, and over to you, sir. Thank you. Good evening, everyone. The recently concluded quarter has been very good. It was really exciting for Kalyan Jewellers. We achieved robust momentum in footfalls and revenues across all our markets, and we are continuing to see strong profitability trends and meaningful expansion of our return ratios post-COVID. We recorded consolidated revenue growth of more than 20% in Q2 as compared to the same period in the previous financial year. Moreover, our revenues as a company has meaningfully expanded through COVID, with Q2 consolidated revenue having grown at a CAGR of more than 18% over the last three years. If I now step back and look at our business over the last year and aggregate the last four quarters, Kalyan has achieved revenue in excess of INR 13,000 crore and PAT in excess of INR 420 crore. Now let me spend some time on the current quarter. We are extremely excited with the way the quarter has started despite a very high base last year. We tracked the festive season as Diwali day minus 30 days, and in this period, we have witnessed a revenue growth of approximately 25% versus the prior year. This has been driven by very strong customer walk-ins across all the markets. What has also been really encouraging was the share of new customers during the festive period. It is in excess of 35%. As indicated on the previous call, operating model at the existing 5 franchise showrooms have stabilized, and we are extremely satisfied with the business traction on the ground. We are aggressively pursuing the next phase of franchised showroom expansion. As of now, we are at various stages of discussions with 50-odd potential franchisee partners and have signed the next set of six LOIs in India and the first LOI for the Middle East market. While discussing on driving strong, day-to-day execution, we have developed a strategy and roadmap to further improve the profitability of the business and build a robust return on capital profile. First area of focus is to expand showroom network predominantly through the more capital efficient FOCO model, enabling us to utilize sizable part of the profits earned to pay down the Cash Credit facilities and to reward shareholders. The second area of focus is to convert some of the existing owned showrooms in South India to franchised showrooms and redeploy the capital to grow the higher margin non-south markets aggressively. Thirdly, we will reduce invested capital in the Middle East and improve its return profile by converting some of the existing owned showrooms to franchised ones and simultaneously expand the showroom network through the franchised model. Our international operations will be predominantly franchisee-driven in the next three years. Finally, divest non-core immovable assets which will be released due to the reduction in working capital cash credit, and also divesting certain non-core movable assets, thereby lightening the balance sheet. We will update you on the progress in these matters periodically. Now let me hand it over to Sanjay to take you through the financial highlights of the quarter. Thank you. Good evening, everybody, and thank you, Ramesh. I'm really happy to be talking to you all after a great quarterly performance. For this just concluded quarter, our company reported consolidated revenues of INR 3,473 crores, a 20% growth compared to the corresponding quarter of the previous year. Consolidated EBITDA came in at INR 266 crores, versus INR 228 crores in the corresponding quarter of the previous year, a 54% growth. I shall now give you the breakup of the Q2 performance, starting with the India numbers. Our India revenue came in at INR 2,841 crores for this quarter, versus INR 2,503 crores when compared to the corresponding quarter of the previous year. India Q2 EBITDA came in at INR 222 crores, versus INR 201 crores when compared with the corresponding quarter of the previous year. India PAT came in at INR 95 crores compared to INR 68 crores in the corresponding quarter of the previous year. Moving now to talk about our Middle East business. Revenue in the Middle East came in at INR 601 crores for the quarter, compared to INR 360 crores in the corresponding quarter of the previous year. EBITDA for the Middle East business came in at INR 47 crores versus INR 26 crores in the same period of the previous year. Lastly, Middle East profits came in at INR 14 crores in the quarter compared to INR 35 lakhs in the corresponding quarter of the previous year. Talking now about our e-commerce business. Candere posted revenues of INR 37 crores in the quarter versus INR 32 crores in the corresponding quarter of the previous year. The quarter recorded a loss of INR 3 crore versus a profit of INR 54 lakh in the corresponding quarter of the previous year. During the just concluded quarter, we had no bullion sale and gold coin sale to retail and corporate customers came in at about INR 13 crore, about 0.5% of total revenues. We opened five new outlets in the quarter, 4 in Kalyan Jewellers and the first offline outlet in Candere during this quarter, taking the total stores opened during the first half of the current financial year to nine. With this, I'm now done with the summary of the financials, and we can now open the floor for questions. Thank you. Thank you. Ladies and gentlemen, we will now begin with the question and answer session. Anyone wishing to ask a question, may please press star and one on your touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is on the line, Shirish Pardeshi from Centrum Broking. Please go ahead. Hi. Good evening, team. Good evening, Ramesh. Thanks for the opportunity and congratulations for a good set of numbers. I think I've got a couple of questions and need some clarification. We have opened five new franchise stores in India. Yeah. Right? Yeah. At various points of time it would have done its sales, but maybe if you can highlight what is the contribution in the current quarter we have got of these five franchises? Yeah. It is very minimal, so hard to share the number because it's a very competitive information. Okay, got it. Second, again, some data points. In that 20% growth what we have reported in the quarter, what is the absolute grammage growth we have experienced? The revenue growth will be higher than the volume growth because you know that the gold prices have moved by 5%-6%. Yeah. It should be in that level. If it is 20%, maybe 2/3 is volume? You should reduce the studded ratio where the volume has gone up, meaning the revenue has gone up. That will also have to- No, maybe if you have handy, what is the gold tonnage growth we have experienced in this quarter? It will be in the range of 5%-7%. 5%-7%. Yeah. Just, you touched upon the studded portion would have been close to about 28%-29% now? The ratio you mean? Yeah. Studded ratio for Q2 will be in the range of what? 26%. 26%. It's moved from 24% last quarter to 26%. Yeah. 25.6%, meaning, if you want to be accurate. 25 point? 25.6 is the studded ratio. Okay. That's really helpful. My larger question is that, in this quarter, I mean, the quarter three, we have seen a very strong wedding season, and there are various numbers which are floating out, but it comes to a hard number, which is 41 days, Muhurat, which is there for wedding. Yeah. How do you see this demand on ground? Per se, where I'm more interested is that, where do you see the interaction with the client? Maybe if you can offer what kind of footfall or advance interest which we are seeing in terms of the client interaction. Here, of course, yes, there is going to be a lot of weddings in November, December, but most or we would have absorbed a lot of wedding demand in October as well, which should be there. November, December, I think, the momentum is still there as we speak. As I have mentioned, we have actually a revenue growth of around 25% if you look at Diwali minus 30 days. That's how we look at it. That is partially because of this wedding demand. Okay. No, the reason why I'm asking because this Muhurat is still going to be till, say, around seventeenth, eighteenth of December. Yes. There is some demand which is coming. Just one observation, since we have been tracking the industry, all these big bang weddings which were supposed to happen in January, March, which got somewhat postponed in the month of April and May, but the larger portion is going to come now. Yeah. In terms of your consumer interaction, do you really see the high ticket wedding jewelry, whether it is studded or even in gold, which is getting picked up? If you look at the high ticket wedding, there is a natural growth for the high ticket products, majorly because the unorganized segment are not now focusing too much on the higher ticket products. Because, you know, during the COVID, they had liquidity issues, et cetera, where they had to reduce their inventory levels. They basically reduced inventory levels in the non-staple products like high ticket size. There is a demand or there is a higher growth in those kind of products in general. Yeah. That's what we found. I just wanted to recap on those. Yeah. You are correct. Yeah. Okay. Second, on the Gold Metal Loans, where do we stand now and what is the aspiration which we want to close it by March? Earlier we had actually guided towards 1,800 levels. We have achieved that. As of now, we have 1,819, as on 30th September, we have 1,819 crore of Gold Metal Loan. Probably at the current level of sanction limits, we should be settling at these levels, maybe another 50 kg higher. That's it. Okay. INR 50 crore higher. Sorry. My last question on the margin. I think, directionally, we have seen the market leader is also expanding its studded ratio. We are also getting a lot of traction and momentum in the non-South market. Of course, the franchise operation will tell us where we want to head. In the medium to long term, say, can we achieve, say March, or maybe next four quarters, should be in excess of 8.5%-9%? I mean, I'm not asking for the guidance, but directionally, do you think we should be achieving that target? Okay. First, if I tell about Q2, okay, the gross level. Actually, at the gross level, the margins have improved year-on-year, okay? Even with the high competitive intensity prevailing the market. The EBITDA margin there is a drop when compared to the last year, and it is majorly driven because of some lower ad spend in the base year, because we were just coming out of the COVID wave two. Okay. In this quarter, we also have a one-time promotion which has been done. If these two are negated, actually the margins would have been, the EBITDA margins would have been in the range of 8.1%-8.2%. I think you should look at it that way because very hard for me to give a guidance. I wanted to tell you that the EBITDA margins in this quarter or the quarter which just ended would have been in the range of 8.1%-8.2% if these two things were negated. That is the clarity which I want to give. No, you touched upon the same thing. In fact, if I've seen your number and the observation is that at the company level, our ad spends has gone up by 43%, while domestic ad spends has gone up by 46%. When I look at the sales promotion expenses, which has gone up by 13.8%, while in the domestic market, it is 7.7%. I just wanted to understand, is this ad spend because of the season and we are seeing the strong current, and of course that will help the franchise also to get the confidence. Was that the necessity or it will continue in the quarter three and quarter four also? Q2, the ad expenses were high because we launched the campaigns in India and Middle East a bit early, because Diwali was coming a bit early this time. September by around second week itself we started our campaigns. Is it going to be recurring? It should be in the range of what 1.8%-2% is what we generally look for in ad spend. Sure. Okay. All right. Thank you. Thank you. A reminder to the participants, anyone wishing to ask a question may please press star and one. The next question is on the line of Manoj Menon from ICICI Securities. Please go ahead. Sir, hi, team. A few questions from my side. Ramesh, the one thing about demand, you know, that is for the second half. Normally I don't get into too much of quarterly and short-term stuff, but it's a very peculiar situation. When I look at the gold prices, let's say exit September thirtieth, and I think about that, let's say it stays where it is for the next six months, you know, on a YoY basis, it looks like, you know, there is no gold inflation. Just wanted your top-down view on consumer behavior, you know, that let's say in a scenario of no gold inflation, just the volumes, you know, can you know make it make up, let's say, and get to your team's you know sort of a good sort of a double-digit growth. Yeah. If you look at our Diwali minus 30 days, no, Manoj, we have grown around- Yes. 25%, right? Majorly it is volume driven, right? Because the price has not been moving when compared to last Diwali. Okay. The footfalls are very high. Diwali was like mad, wherein, I would also tell you that, we should not expect that Q3 ends up in 25% because Diwali has been like a revenge shopping. The market has been very vibrant during Diwali time and, we are happy that we could actually grab the revenue. Okay. Even otherwise, we are very confident about Q3 and, like I always say, when prices actually are lesser, the volume increases and vice versa, because people come with a budget. Fair point. Stability driving volumes. Understood. Very heartening to hear. Now, second on the franchising bit. You know, so just one qualitative comment for the record would be helpful. You know, what's the sort of color of franchisees, you know, which you're having? What I mean by, what sort of background they come with, and what are the selection criteria you use? You know, are they existing jewelers? You know, are they auto dealers or do they come from, let's say, apparel retail? I don't know. I'm just trying to understand, what sort of, you know, let's say criteria you use when you select a franchisee. The current ones, what you have, or maybe you can talk qualitatively the pipeline which you have, you know, what sort of background they come from. Yeah. Sanjay, do you want to take it? As we've shared before, we've worked with one of the top four consultants to kind of set up a template to help us shortlist franchisees. Like you said, from our experience, we've found that the kind of people who are having like affiliations to do this are from the retail background, either from the auto business or from the two-wheeler business or from existing franchisees of textile brands, etc. It's an assortment of all of that. Fair point. Sanjay, do you already have, let's say, someone with jewelry background, etc., or no? One minute. Yeah. First of all, Manoj, Ramesh Kalyanaraman here. Let me highlight that existing jeweler franchise does not bring in any additional benefit as we are working on a FOCO model. You know that. Okay? Sure. I know, I know where you are coming from. If you are checking whether the same franchisee is working for KJ and its peer group, both of us are right in saying yes and no. Reason being, no partner will work with the same competition brand in the same entity, right? Yes, we are working with associates of franchisees of our peers. Loud and clear, sir. I will not push this envelope anymore. I understood that. Yeah. Ramesh Kalyanaraman, third, I'm sorry if I missed that. When I go back, you know, 30 days back, you know, on the quarterly announcement, you put it on exchanges in the first week of October. Yeah. There's one line which spoke about, you know, which specifically called out gross margin pressure during the September quarter. Yeah. Essentially to do with the customs duty, you know, pass-through, which you get the drift, right? Is there a quantification which you have? That's point number one. Let's say for example, you had to give X percentage or X quantum higher discounts because of this substantial gain which unhedged players would have got one-off. Point number two, you know, a general comment about competitive intensity otherwise. Yeah. First thing, Manoj, competitive intensity has increased. Okay? The gold rate, meaning the board rate, continued to remain under pressure throughout the quarter. The board rate is decided by the local associations everywhere across the country, and there has been pressure in the board rate itself. Okay? That is majorly because of the customs duty one-time advantage which the other organized one-store, two-store kind of jewelers would have got. They were completely passing it over to the customer, and we also had to do that. There is no one-time advantage because of that. The continued competitive intensity was there throughout the quarters. I'm sorry, sir. I actually understood. I got the answer for the second one. The first one, what I was asking was, you know, because of the customs duty increase, somebody who was, let's say, unhedged would have got a one-time inventory gain, which, you know, that particular competitor may have chosen to, you know, use it as a discounting tool. Yeah. Now, obviously, you being a hedged player, you know, didn't have that luxuries. It has to come from your P&L. You know, I was just trying to understand, is there some sort of a quantification you have that you had to give this extra discounts? Maybe that because that is a one time which happened only September quarter. Just trying to understand that so that I don't have to assume that, you know, this will recur in the next 12 months, 24 months. Yeah. Manoj, what is happening? How is an organized, meaning or unorganized or a regional player giving that one-timer to the customer. He is actually bringing down the gold rate, gold rate which he displays. Okay? Got it. That is done through associations. We also had to follow the same gold rate in the markets. In short, we also had to give away that as a discount. It will not come as a discount. Customer will not even know that he has been discounted, but it is actually given away to the customer. Is it not counterintuitive? Because if I am that XYZ player who's unhedged and I got the gain- Yeah. I would have loved to use, you know, tell the consumer that I'm giving you know, let's say lower making charges or something else so that it's also, you know, customer recruitment tool for me. Yes, you are right. What happens is that players, not all players do like what we are doing, wherein, they don't reduce the gold rate to the so-called plain rate, right? There are players who keep premium on gold rate. Of course, the premium has come down drastically, but there are players who keep a premium on that so-called gold rate, right? That is actually a competition win for them. When they compare to Kalyan Jewellers, it's not a win because we also sell at that, at the same gold rate of theirs. Understood. One last thing. I found in your investor presentation on the slide about strategy ROC, there is one comment, if I remember correctly, it's I think the last line which talks about. You also mentioned briefly in your opening remark about the divestment of some non-core assets, movable and, you know, immovable as well as movable. Could you elaborate a bit on it? Because there is also a comment about, which I saw in the presentation about aircraft, corporate aircraft divestment possibility. Yeah. We have signed a mandate to an agency to sell the aircraft. Our longer term plan is, as I mentioned in the presentation, our expansion will be majorly driven by franchisee. It is a FOCO model, very asset light, capital light. This will actually bring in lot of cash in the books, and that will be again used for reducing our Cash Credit, which will take out the assets which we have mortgaged, the collateral, and which can again be liquidated to further improve the return ratios. Moreover, you know that there are a lot of indirect benefits in you going and reducing your cash credit facilities. It is not that we claim to be a debt-free company. Okay. It is actually to bring in more negotiations on table in terms of cash credit facilities, better bank facilities. You can improve your gold loan facility. You can reduce your collateral which you are given. Your ratings are going to improve. There are a lot of indirect benefits as well. Of course your ROCEs will also get better, meaning your return on capital will also be better. We will also start rewarding the stakeholders. Understood, sir. As I recall, a few months back, you know, there was again an exchange release about, you know, likely refinancing options which you're considering. Could you just update on where are we at this point? The international bond you mean, right? Yes. Yeah. That is still on wherein we, the market now is, meaning we will not be able to do it right now, but it is still on, and it really now syncs to the long-term plan also, meaning the three-year plan which we have put in the presentation. Because anyway we are going to retire the debts and, if bond comes in, that retirement for the banking purpose will happen very, very swiftly, meaning immediately, so that the collateral all comes out and we can go in liquidating the assets, et cetera. The bond is still on, but we are waiting for the market to get settled. Okay. Fair point. Thank you. Good performance. Good luck, sir. Thank you. Thank you. Thank you. Thank you. The next question is on the line of Ratish Varier from Sundaram Mutual Fund. Please go ahead. Yeah. Thanks for the opportunity. Just one clarification, sir. Yeah. One of the participants asked you about margins, where you mentioned couple of one-offs for the quarter, and you mentioned if you exclude all that, we are looking at 8.8% margin. Just to understand them better, are we trying to say that as you get into the second half, because up-fronting has happened in terms of our spending, we will move towards 8.8% margins? Thanks. I don't want to give a forward-looking statement. Yes, without the adjustment relating to the advertisement and provision, the EBITDA margins would have been in the range of 8.1%-8.2% in the quarter which just ended. Are we trying to say that we have up-fronted these expenditures? No, only the ad- Because you also mentioned Diwali is ahead, so we would have done up-front spending. Some of the ad expenses, yes. Relating to provisions, no, because it's a one-time. Yeah. Ad expenses for the full year, we should consider between 1.8%-2%, as we have been mentioning earlier as well, right? Yes. That is the target for that. Just to add one more clarification. Sure. When earlier participant, Manoj, asked you about, you know, the gold price you mentioned, right? The unorganized or smaller players have reduced the gold price and they have sold. We also in parallel had to do that somewhere. Mm. We, you know, from a Kalyan brand per se, where the positioning comes in here when we also have to follow what our competitors do. We just wanted to understand where the branding comes into play then in that perspective. It is actually we charge a premium in terms of making charge, etc. Okay, that is all a very hidden kind of charges wherein customer really looks at the product design, the product portfolio which we offer, etc. Okay. When it comes to a gold rate itself, it is very hard for a consumer to say that, okay, the product is better and we pay a gold rate better than a competition because we are competing with regional players who have a good brand value in the specific markets. To some extent, actually we have negated the impact of the gold rate pressure because of the charge of premium in making charge which we had. Okay, thanks. Thank you. The next question is from the line of Nilay Shah from Moon Capital. Please go ahead. Thank you. Hello, Ramesh ji. The question that I had essentially is, first of all, you know, you spoke about, festive to festive 35-36 days growth being 25%. That is obviously much higher than what we have seen in the past and what you have kind of guided for or alluded to in the past also. This leads to operating leverage, obviously. You expect this stronger growth to drive margins much stronger over the next two quarters? Or will some of it be taken away by higher ad spends? First of all, it is just to correct, of course, it is Diwali minus 30 days. It is not 35, 36 days. Okay. That is the way we see the festive. Yes, the growth has been in the range of 25% and already starting from a higher base. Diwali, it was like a revenge shopping. The market was extremely vibrant and growth has been there for all, mostly all the large players in this festive season. Okay. We as a brand started our campaign well in advance. We managed to do a good job. Okay. This 25% is a very bullish number. We should not keep that as a Q3 or a Q4 target. Of course the quarter has begun very well and we should see a good, a strong double-digit growth is what we see. Regarding the operating leverage which will step in, yes, of course, when your revenue grows, operating leverage will step in. There has been pressure in the gross margin itself by way of gold rate. Competition has been intense and that also has to be considered. Okay, got it. You know that when the revenue comes in, our primary focus is to grab new customers. We cannot leave them. They are going to give us better quality revenue in the future. We have been seeing very high good contribution from new customer in the range of 35%+. Market share increase is what we will focus as a primary vision. Of course margins will be better because OpEx will be surely taking a role. Got it. The second question is, you spoke about your collateral being freed up by potential sale of non-core assets. I'm aware of a piece of land which you have, mortgaged to get some collateral for your gold metal loans. Is there anything else that you're alluding to, or that is the piece of land itself that you are speaking about? Okay. I will just give you a view. Apart from the aircraft. Yeah. Yeah, it's aircraft is separate. I told you it's a. Yeah. movable assets which we have already signed with an agency. Yeah. to liquidate it. Okay? Apart from that, all our credit sanction facilities, it comes with a 35% collateral, which we have given to the banks, be it via GML. Okay. be it via a usual working capital limit. Okay? When we retire the debts, 35% of it will come out. Got it. That gives you better bargaining power for future gold metal loans. Yeah. There are a lot of advantages. is what you are talking about. Yeah. There are a lot of advantages. Once you start retiring your debts, banks will surely come out with better interest rates, better deals. Okay? Your balance sheet becomes lighter. Mm. Again, your rating improves. Okay? Because strengthened balance sheet surely comes with better negotiations. All put together, it is not that we will be a debt-free company. Okay? That's not the target because that should not be the way where we do it. Of course, primarily we will focus to retire the debts, take out the collaterals, again liquidate it, put it back to the company in terms of improving our return ratios. If the future negotiations come with a lighter collateral engagement with a better interest rate, we might again go for an exposure, but not at this level, not with 35%. We'll optimize it. The line for the current participant has got disconnected. We'll move on to the next question. That is from the line of Gaurav Jogani from Axis Capital. Please go ahead. Thank you for the opportunity, sir. I'm sorry if my questions are repeated because my question is with regards to the performance in the Middle East. While the top-line performance there has been tracking well and largely, as you mentioned in the PPT also that is largely SSG driven, what is the outlook in terms of store opening there, one. And second, how should one look at the margins there? Because you know, margins there have been tracking a bit lower, but you know, equally good growth has been seen. How should we look at the EBITDA margin given that will be the operating leverage benefits also? Middle East, if you look at the revenue, there has been a substantial growth in revenue in Q2. That is not the way we should look at it, because Q2 actually, in the last year, the market was just starting to become vibrant. Okay? From Q3, Middle East was back in form in last year. As we speak, Diwali has been good in Middle East also. The revenue growth has been very similar to that of India, and even now the market is vibrant. Regarding expansion for Middle East, it will again be more of franchisee-based, which we will look for. We have signed the first LOI for our Middle East franchise business, which we will be launching this year. Sure. Sir, my next question is with regards to your experience with the set of franchisees that has been opened over, you know, the last couple of quarters. How has been the experience there, with both you and the partner? What have been the early learnings in this process? What confidence does it give you in opening future franchises going ahead? It has been extremely satisfying. The revenue is on target, the operating model is on target. The kind of momentum which we are getting from the franchisee, new franchisee partners whom we are trying to tie up is also very positive. As we speak, we are in talks with more than 50 franchisee partners and existing partners are again seeking more showrooms with us. It has been very positive as we speak. Sure, sir. Sir, my next question is with regards to, you know, as you had mentioned about the divestments of the non-core assets, and, you know, the land or couple land that you're speaking about. Is there a targeted, you know, debt number that we are looking to, maybe at the end of, say, not 2023 but 2024, when we are targeting? Because, you know, we also seen a good increase in the share of the Gold Metal Loans now, so how should one look at the overall interest costs going ahead in the next couple of years? Our target, actually, for the next three years will be to retire most of the Cash Credit facilities which we have in India. That is our primary target. Once we start retiring it, if we get bank facilities with better options like leaner security, leaner collateral, again, more of gold loan portions, et cetera, we might go for that. It is not a target of making your company debt-free. We will be heading to INR 1,200 crore Cash Credit which we have in India. We will be predominantly reducing it in the next three years. Sure. Okay, the last part I didn't get it. Right now you said that the cash credit facility is around INR 1,200 crores in India, right? Yeah. That you are looking to reduce too. Is there a number? That will be mostly reduced. Meaning, I'm not using the word zero, but that will be mostly, meaning that's the focus area. It will be mostly. Okay. -reduced. Got it. Got it, sir. Thank you, sir. That's all. Thank you. Thank you. The next question is on the line of Anurag Dayal from HSBC. Please go ahead. Yeah. Hi. Hi. Thank you, sir, for taking my question. Hi. My first question is I want to understand the throughput difference between South and a non-South stores. Because if you look at per store basis, the non-South revenue is lower and we don't have break up of sales per square feet. But assuming that the selling ratio and all is higher in non-South market, just want to understand, I mean, my reading is correct that non-South should be higher throughput or it's currently low for you and you expect it to improve in the coming quarters. Yeah. You are asking about, first of all, revenue growth in South and non-South, right? If I heard you right. Yeah. Not more so revenue growth, it's more about per square feet sales. Revenue per showroom will be surely higher in South than in non-South. that will continue to be what it will, I mean. Yeah. Revenue. The gap will narrow. Revenue per store in South India will be higher than in non-South. That is because first of all, in South India we are there. If the number of showrooms you see, we are there in almost all the Tier 1 and metros, okay, in South India. In non-South area, we are only starting to expand. If you look at the Tier 1 stores in the non-South, that is actually similar to the revenue per store in South India. Okay. That's a different way to look at it. Okay. Got it, sir. Because now if you see, one thing we need to actually keep in mind, okay, newer showrooms are smaller in size when compared to the existing ones, okay? The CapEx which we are investing in newer showrooms are also lesser when compared to the South showrooms, where the CapEx was higher. It all depends upon the stock turn, right? When you go with a leaner, investment per store, the stock will be lesser and the stock turn will be higher, but the revenue per store will be surely lesser than in South India. Got it, sir. Thank you so much. The second question is basically you are looking for a franchisee conversion of some stores in South into franchisee stores. But what I understand that the gross margin is quite low in South stores. Yeah. How the economics will work for the franchisee will come. Have they shown some interest or you have some other kind of like margin package you are offering to them which is different when the non-South stores? Yeah. We are working on a package which is different from the non-south. Okay? We will be because there are a lot of franchisee inquiries which is coming from the South India where they don't want to do franchisee outside South India. Right. They are okay to take the package which we are actually offering to them, which is a bit different than in the non-south markets, and that is why we are exploring that. Basically the ROEs for you will be similar, right, for you? Yeah. What I calculated basically for a franchisee store in Mumbai would be 50%-65% right for you because you hardly put any investment. It should be similar for South as well, or it could be slightly lower. It will be similar, if you look at approximately. Okay. Thank you so much, sir. Thank you. Thank you. A reminder to the participants, anyone wishing to ask a question, may please press star and one. The next question is from the line of Shirish Pardeshi from Centrum Broking. Please go ahead. Yeah. Hi. Thanks for the opportunity. Hi. I have a few questions. Some clarification if you can provide on the movable and immovable property. What is the quantum of that? You did mention that it will happen in two years. Is this has a further charge within the other group companies or it's purely on the balance sheet of Kalyan? We have only one company, no. Meaning, Kalyan Jewellers owns the land and the charge is only for Kalyan Jewellers. Okay, you mean to say that this INR 1,200-odd crore will get retired in next, say, 18-24 months? Three years. Three years? Yeah. Okay. My second question on the franchise. I did remember that there was a full page ad for a franchise inquiry, which was done in Business Today in Mumbai. Yeah. Basically, your pipelines look very strong. If my interaction goes back a quarter before, you did mention that we want to stabilize this first five-six franchise and get a good learning and then expand. Yeah. Do you have, in that journey, you have got enough understanding and now you are fast-forwarding, the appointment of, franchisee? And the related question on that, by March, what number you are having in mind? Okay. First of all, I told you we were going slow because we wanted to actually do the pilot phase properly. We have existing five franchisees. We are extremely happy it has been stabilized and that is why we have signed six more LOAs. Okay. Regarding the 50 prospective franchisee partners, we are engaging with them and we are already. We think that we have covered the learning curve, but we can do minor corrections even before signing those 50. Okay. Six LOAs we have signed now. Again, we have done minor corrections from the six which we have earlier done. Okay. The first six LOAs which we did and first five showrooms which we opened. That is about the learning curve and the experience which we have had with the five franchisees which we have opened. If you are asking for before March, how many more stores, we would say that as we speak, actually, we have opened seven own showrooms and five franchise showrooms in Kalyan Jewellers. One own showroom in the Middle East, one own showroom in Candere. Totally 14 showrooms we have opened as we speak. The plan till March is to open six more immediately because LOI has been signed, and again six more before March. That will be the plan for Kalyan Jewellers for this year. We will be opening two more Candere stores, and we will be opening one more showroom in the Middle East that will be a franchise. Total 24 Kalyan Jewellers, two in the Middle East, three Candere, 29 showrooms this year is our target. Okay. Just one clarification on that. Even Candere is also will have a mix of own and franchise, or Candere will have only franchise? This year we will limit it with our own stores because own store itself is a new experience for us in Candere. We opened only the first showroom last month. This year we will actually do only own store in Candere. We already have franchisees who are inquiring for Candere, and we are actually interacting with them, but we will wait for stabilization of the own store at Candere, and then we will be looking for franchise there. Okay. Just last question on the tax rate. Now these all things which are happening and given the benefit of franchise operation and versus our own store, what will be the tax rate one can assume for 2023? Tax rate is 25%. Yeah. Okay. All right. Thank you and all the best. Yeah. Thank you. A reminder to the participants, anyone wishing to ask a question, may please press star and one. The next question is on the line of Rajiv from DAM Capital. Please go ahead. Yeah. Thanks for the opportunity. On the balance sheet side, there is on the current liabilities, which is increase of INR 243 crores on the consolidated. Can you specify what exactly is that? You mean the creditors, right? Yeah. Yeah. That is supplier credit increase because it is what do you call preparing for the festive. The inventory would have increased and creditors would have gone up. Uh- The normal pre-festival build-up inventory. All right. On the Middle East gross margin, so we have seen close to 200 basis drop there, and which is slightly different from the Indian piece. What is the differential because of? From Middle East margins have been in the range of 15%. No, it's almost steady. It used to be 17.5. Yeah, yeah. It It used to be 16%-17%. Because now, you know, tourists are back, customer sentiments is very positive, lot of traffic. Now you know that the competition will also behave and people will demand for plain gold staple products again. Even Q1 was in a similar range, 15%. Middle East should be looked at this range because the momentum in revenue is very high. Right. Similarly on the Candere part. We have stepped up the investment there, right? What is, for example, the OpEx rate going forward there on the Candere portfolio? I know it's still early days. You are talking about the physical store? No, no. The loss in Candere is INR 3 crore, right? As compared to, Yeah. I just wondered what is the burn which we are shooting for on an annual, yeah. Sanjay, you want to take it? This year, we are making investments here. Coming back to investment mode in this business in the current year. Essentially we are undergoing a major upgradation in our tech platform and have made some investments in technology as well as people. Staff costs and technology costs have got front-ended. I expect that because we are in investment mode, we will have a marginal kind of loss this year in that business. Okay. Then you so you alluded to some provision in this quarter, right? Can you spell out what exactly is that? You said that adjusted for that we would have been 8.1% EBITDA margin. Provision is predominantly for the bond issue, which we were planning, and it pertains to that. In a conservative way we have put a provision for the bond expenses, not fully, but marginally. Sure. That's all. Thanks a lot. Thank you. Ladies and gentlemen, that is the last question. I now hand the conference over to the management for the closing comments. Thank you very much and looking forward for a good quarter and hope to see you again. Thank you. Thank you. Ladies and gentlemen, on behalf of Kalyan Jewellers India Limited, that concludes this conference call. We thank you for joining us and you may now disconnect your lines. Thank you.