Ladies and gentlemen, good day and welcome to FSN E-Commerce Q3 FY 2023 Earnings Conference Call hosted by Nomura Securities. 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 start and zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Kapil Singh from Nomura. Thank you, and over to you. Hi. Good evening, everyone. On behalf of Nomura Securities India, I'd like to welcome you to this earnings call. On the call with me from FSN E-Commerce Ventures, we have Ms. Falguni Nayar, Executive Chairperson, MD and CEO, Mr. Anchit Nayar, Executive Director and CEO, Beauty E-Commerce, Ms. Adwaita Nayar, Executive Director, Co-founder, CEO, Fashion, Mr. P. Ganesh, CFO, Ms. Sunita Sachdev, VP, Investor Relations and Strategy. With that, I hand over the call to Ms. Falguni for opening remarks. Thank you, Kapil. Good evening, everyone, and thank you for joining us on the call today. It is always a pleasure to interact with all of you. Before I start the presentation, I would like to take the opportunity to introduce you to our new addition to Nykaa family. It gives us immense pleasure to introduce our new CFO, Mr. P. Ganesh. Ganesh comes with 27 years of diverse industry experience in domestic and international markets. He joined us from TAFE Group. Prior to working with TAFE Group, Ganesh has held leadership position and senior management roles in India and overseas, and has been associated with Godrej Group, Glenmark Pharmaceuticals as well as Pidilite. Thank you, Falguni, for the warm welcome, and good evening, everyone. Thank you, Ganesh. I will also begin with a short presentation and will be happy to take questions later. I wanted to share the results with you with an important backdrop. As retailers, we are very close to the consumption moment. To put things in context is the seasonality in festive season that has been called out by most retailers. This has impacted quarter three 2023 when you compare with quarter three of 2022, when the entire festive season falls in quarter three. What this means is that for this year we had only 34 days of sale in quarter three compared to previous year when it was 42 days. That was because Navratri is an important festival, was in the quarter two of this year compared to earlier years when it was in quarter three. This like for like comparison has impacted certain growth in sales that I wanted to bring it out right at the moment. As we move forward, I wanted to say that the GMV for the quarter has come out at INR 27.9 billion, which is a 37% year-on-year growth. Revenue has grown 33% and stands at INR 14.6 billion. Our gross profit at INR 6.4 billion for the quarter is about 25% year-on-year growth. Our EBITDA grew to INR 782 million, which is a 13% year-on-year increase. Profit before tax stands at INR 12.7 million, and profit after tax is at INR 85 million. We can get into the details of the gross margin as well as the composition of the EBITDA growth and PBT as we go through this presentation. I recommend that we move to slide six. I wanted to show the nine-month period where our GMV has seen a healthy growth of 42% year-on-year and stands at INR 72.9 billion, and the revenue's grown at 37% and is at INR 38.4 billion. The profit also grew at 40% year-on-year at INR 17 billion for nine months period, and EBITDA grew at 49% year-on-year with INR 1.8 billion. Profit after tax is at INR 29.8 million. Profit before tax is at INR 29.8 million, and profit after tax is at INR 187 million. Talking little bit about, you know, various businesses and composition of the GMV growth. The beauty GMV grew at 26% on a year-on-year basis, while the fashion GMV has grown at 50% on a year-on-year basis. Both the dot-com and the retail businesses saw good consumer demand. Some of the consumer rebalancing of demand has happened from online to offline, but that seems to have stabilized now. It was more pronounced in the last quarter, for which we are talking about the results, where customers were quite enthused about stepping out, and we saw a growth in all our businesses. Our new business delivered INR 1.7 billion in GMV contribution, growing at 254% year-on-year, which we believe is a strong growth. These are early-stage businesses, but we are already right-sizing the inputs to keep the goal of our profitable growth. Moving forward, on slide eight, what you can see is that at Nykaa we have created multiple engines of growth. Looking at the GMV contribution from three business verticals, you can clearly see that our desire to diversify and address larger TAM was the right thing to do. Fashion already contributes more than 1/4 of our consolidated GMV. For a business that's less than four years old, it is commendable. At the NSV level, fashion contributes 14.6% of quarter C NSV versus 14% a year ago. On the other segment, which include eB2B, Nykaa Man and international, we've also scaled up significantly, led by the Superstore, which is our eB2B business, and that now contributes 6% of GMV, which is more than double what it was last year. Our unique transacting customer, in the next slide, continue to grow, and for beauty, fashion and other verticals. For beauty, we are at about 9.6 million unique transacting customers on a trailing twelve-month basis. For fashion, the number is 2.4 million TTM customers. In case of other business, that number is 0.5 million, quite significant considering those are mainly the shopkeepers and other businesses that are our customers there. We already believe that we are transacting with one-tenth of the online shoppers in India at a very healthy AOV level, as well as at a very healthy growth consumption level, which we will continue to penetrate further. I also want to highlight that we have retail customers which were another additional 0.5 million, up from 0.3 million a year ago. With that, I would like to hand over to Anchit to walk us through the BPC performance for the quarter. Actually, I'll continue this. Why don't I continue for a bit till he can join in? I think he was in a meeting. Sorry about that. I had a hard time unmuting myself, but I'm now on the call. Thank you everybody for joining the call. I will pick up the slide deck from. Anchit, we can't hear you. No, Anchit. Yes, we're not able to hear him. Ma'am, maybe you can continue. Yeah. I'll start till he can join. All right. audible? Okay. Yes, yes. You can hear me now? Yes, we are able to hear you now. Okay. Let me first start with a little update on the BPC industry in terms of the market size and the growth that we project over the next five years. These numbers have been updated by us in partnership with Redseer. I'll kick it off on slide 11. According to Redseer estimates, the India BPC market was a $19 billion market in 2022, and it's expected to grow at a CAGR of 10% over the next five years to reach a market size of $51 billion by 2027. Within that, online BPC is expected to grow at a much faster rate with a CAGR of 29%, followed by organized retail, which is expected to grow at roughly 14%. The online BPC penetration stood at about 15% in 2022, making it a $3 billion market. It is expected to grow at 29% and account for a third of the overall BPC market by 2027, which will put it at roughly a $10 billion market by 2027. In the interest of time, I'll move forward to the next slide. There is some commentary on what the key growth drivers are of the BPC industry, which I will allow you to read on your own time. Coming to slide 12, commenting on our growth strategy. We are focused around five core value propositions. First and foremost is driving customer acquisition and retention. We are focused on acquiring and retaining customers in the evolving and rapidly growing BPC space. Over the years, Nykaa has strived to create a loyal repeat customer base. That is evident in the repeat versus new customer mix, revenue mix, which we show on a month-on-month basis. Second, we deeply value our relationships with our brand partners, both international and domestic. We have always prioritized and sought to maintain a very symbiotic relationship with them on an ongoing basis. Third is we continue to penetrate across the value chain and channels to further drive consumption and to truly grow the overall BPC market in the country. We have invested across the vertical to help serve our customers better. This reflects in the launch of our eB2B business as well as our expansion of our physical retail footprint. Fourth, our house of brands strategy continues to evolve. We understand the gaps that exist in the Indian BPC market, that has enabled us to develop our own house of brands across mass to premium segments, keeping in mind that the Indian requirement is diverse across price points and consumption behavior. Fifth is the consumer connect. We are a consumer-focused business, the consumer lies at the heart of every decision that we take. Nykaa has always tried to be at the forefront of consumer engagement, we have always focused on creating multiple content streams to help increase awareness among consumers, enabling them to make better purchase decisions. Moving on to the next slide 13. I wanna highlight certain key performance indicators that we track at the Nykaa level regularly. The first is our total visits were up 13% to 250 million for the quarter, while our monthly average unique visitors were up 22% year-on-year. This reflects a very strong cohort of customers that we are attracting. We delivered a very strong order to visit conversion of 3.8% in Q3 FY 2023 versus 3.4% in Q3 FY 2022, a 40 basis point improvement. Our AOV has continued to sustain at INR 1,958 in the quarter ending December 2022. Third, our GMV contribution from existing customers was 76% versus 74% last year, signifying better customer retention and loyalty, which helps drive the premiumization trend in the country. Our TTM customer base increased to 9.6 million in Q3, which was a 27% growth year-over-year. Coming to category growth, we are actively widening our offering which helps us drive penetration with a significant depth and width of category offering. If I look at our makeup category, that category has grown 12% year-over-year. Skincare category has grown 37% year-over-year, and haircare has grown at 39%. Our other categories which include bath and body, health and wellness, mom and baby, fragrances and appliances, have each grown at a healthy clip year-over-year. Coming to slide 15. We always maintain a deep and symbiotic relationship with our brand partners, and as of December 31st, we had over 3,000 brands retailing on the platform. Of the top 100 brands, we have a diversified offering across both FMCG brands, international brands, direct to consumer brands, and luxury brands. This is just indicative of the diversification that we have managed to achieve in our core MarCom business. As you are aware, we host our largest flagship sale event of the year in November, which is in Q3. That is called the Pink Friday Sale event, and that has continued to grow from strength to strength. This year, our Pink Friday Sale registered a 40% growth in like-for-like GMV with a 22% growth in underlying visits. We have seen strong performance across festive sales, and we achieved almost four million unique visitors every day during the Navratri and Diwali sales as well. Coming to slide 16. We remain committed to our pole position as the guardians and as the creators of the beauty ecosystem in the country, and we have facilitated this with marquee events this quarter, including the Nykaa Femina Beauty Awards. This is our flagship beauty awards event, which we host on an annual basis. It was not conducted the last two years because of COVID. This year, we hosted it once again with fantastic turnout with over 400 brand partners in attendance as well as multiple celebrities. In addition, this quarter we launched a partnership with the Estée Lauder Companies to launch a incubator program called BEAUTY&YOU, where we partner to identify and support the next generation of beauty entrepreneurs with a non-equity grant. Third, we were the partner of choice for Priyanka Chopra's much-awaited brand launch Anomaly in the country. This brand was launched exclusively on Nykaa, and it generated significant coverage given the celebrity status of Priyanka Chopra. Coming to slide 17. In order to help improve our customer experience, we have invested across physical stores, distribution channel, as well as fulfillment centers to help us be closer to the customer and to increase the customer delight. As of Q3 FY 2023, we had 135 beauty and personal care stores across 56 cities, which achieved a GMV of INR 165 crores for the quarter ending FY quarter ending December 2022. Our physical stores now contribute to 8.6% of our total BPC GMV versus 8.2% last year. We distribute our own beauty brands across almost 2,400+ General Trade stores and 150 Modern Trade stores. We've also increased our fulfillment capacity. At the end of the quarter, we have now 37 fulfillment centers which have a total capacity of 1.2 million sq ft set across 15 cities in the country. This regionalization strategy, when it comes to our fulfillment, has allowed us to improve the order fulfillment from within the state and as well as within the region. Very few orders are being shipped across state borders, and this has made it possible for us to bring down our fulfillment costs, which you will see in the P&L in later slides. Coming to slide 18. Talking a little bit about our house of brands. Our own brand achieved a total GMV of INR 224 crore, which now accounts for almost 11.8% of our total BPC GMV. Our own brand's GMV saw 29% growth year-over-year in Q3. Talking a little bit about the B2B business, we now serve almost 4,000 retailers plus through eB2B app Superstore, which is a new business in which we are investing heavily. The subsequent slides 19 and 20, are just some images of the key launches, or key product launches which we had across each of our own brands in Q3. Coming to slide 21. We actively engage with our customer on our platform, this quarter there have been some updates which we'd like to share with you. We revamped our loyalty program, which is now called Prive 2.0. It is a tiered loyalty program to be more in line with best practice globally. We are now streaming personalized content on the Nykaa Stream, which is our on-app video video feature. This has helped us to drive awareness for consumption of beauty as well as education. We also invested in creating an educative content series known as the Bridal Series for the wedding season, which has achieved a reach of almost 15 million. I want to thank everyone for for joining this call. I will now invite Adwaita Nayar to discuss the fashion business's performance for the quarter rundown. Thanks, Anchit. Hi, everyone. I look forward to discussing our fashion business for the quarter. To begin with, we remain extremely excited by the sheer size of the fashion market. The fashion industry is four times larger than the beauty industry, and according to Redseer, the fashion market was $77 billion in 2022, expected to grow at a CAGR of 14% to reach a market size of $147 billion by 2027. Of that, online fashion is expected to grow at a much faster rate than the other segments at a CAGR of 27%, and it will eventually be, by 2027, a $49 billion size. The online penetration for fashion has been at about 19% in 2022 and is expected to be 33% of the total fashion market by 2027. Next. This slide here shows our focus areas for the business, in the subsequent slides, I'll talk about each of these in depth. Touching upon these five here, the first is customer acquisition and retention, that is a key focus. We're working on this via a strongly differentiated value proposition and focused initiatives across marketing and product. Second, building engaging and deep relationships with domestic and international brands and curating a comprehensive product assortment. Our core focus is investing and scaling multiple operating models to make brands available to customers while driving down inventory risk. The fourth, continuing to build our own portfolio of owned brands, which are independent and consumer-first brands. Finally, fifth, investing in innovative ways of connecting with our customers, led by experiential events and customer-facing technology. Moving on. Here we double-click into our key performance indicators. We can see that our total visits are up 19% to 137 million for the quarter, while our monthly average unique visitors are up 18% year-on-year to 19.4 million. Our AOV has held steady year-on-year, with quarter three AOV at MRP at INR 4,517, and its selling price, that is after discounts, at INR 2,526. We're quite happy with how our order-to-visit conversion of 1% has held up. This is up from 0.8% a year ago. A large part of this improvement is a result of both product assortment being better, but also in a large part due to attracting much better quality traffic through marketing, which has been a focus for the last nine months. Moving on. Our trailing twelve-month customer base has increased to 2.4 million for the quarter. That's a 50% growth year-on-year. Our GMV has grown at 50% year-on-year to INR 724 crores. Sequentially, this is a strong growth of 21% quarter-on-quarter. We're feeling good with the acceleration of the growth and do believe that our focused approach to building differentiation in our assortment is now working in our favor. Finally, the chart at the bottom left shows the mix across women, men, home and kids. Women take about 70% of the business. We do believe that the latter three, that is men, kids, home and others, will present opportunities that we can choose to double-click and accelerate at the appropriate time in the future. On the next slide, we're gonna talk about assortment. We now have 2,700 brands on our platform as of the end of December 2022. This is up from 1,540 brands a year ago. There has been significant onboarding in the last 12 months, allowing us to present far more choice to the consumer. The additions have come across categories and types of brands, both local and international. With even rapid onboarding, the focus for us as a team remains curation. We are convinced that being tightly curated in terms of trend and quality is the core of our differentiation and will ultimately be our right to win. We've taken advantage of past quarter festive season and have worked to strengthen our sari portfolio, adding brands like KALKI Fashion, KALKI Fashion and Unnati Silks. We do believe that saris are going to present a great growth engine for the months to come. In Q3, we have also doubled down on a property called Global Store, in which we're bringing the world's best fashion to India. It has now hit its stride. We offer over 600 brands. This particular property has contributed about 17% of the western wear GMV, and I think this is striking because a couple of months ago, this property simply didn't exist. Hidden Gems, another property which I've spoken about in the past as well, which includes emerging Indian designers and labels across the country, continuously sought out actively by the customers and now contributes 7% of our total GMV. Finally, New Season Collection, which is another element to being truly fashion-forward, has contributed about 17% of the GMV for the third quarter. Moving on. A highlight of this past quarter has been the partnership that we launched with REVOLVE. As many of you know, REVOLVE is the most trendy fashion platform in the U.S. With this partnership, we have launched REVOLVE on Nykaa Fashion. Through this, we're able to offer the customer more than 600 international brands. I believe that what makes this partnership unique is the unique B2B2C technology that we have developed. As per this integration, we now connect seamlessly with REVOLVE's architecture. We reflect their catalog availability and pricing on our site with minimal manual effort. We don't hold any inventory and rather push orders and do pickups on a daily basis. For the customer, it's a hassle-free experience. The flowchart here depicts the journey that we've built out. I do believe that the technology we built here can be useful in the future as well as we try partnerships with international companies. Next. A key focus for us over the last couple of years as we, as we've been building Nykaa Fashion has been to develop a strong and flexible backend. While the majority of our business is driven by marketplace, we built tech and operations capabilities in-house to also cater via inventory models and other hybrid models. On the marketplace side, that is the first component and the largest part of our business, we have built capabilities to pick up inventory from both multiple warehouses and multiple stores. And as we speak, we're in the process of building capabilities to integrate with franchise stores as well. All of this will give us a lot more availability when it comes to assortment without actually having to hold inventory risk. The second, the B2B2C technology, which I've already described on the pre-prior slide with regard to REVOLVE. As I mentioned, it can be replicated as we onboard more aggregators. Finally, the third, which is our inventory-based model. We do have the capabilities to run this as well. However, less than 20% of our business runs on that model, so we have ramped up our warehouses as well to support the growth of this business. Moving on. In quarter three, the own brand GMV stood at INR 90 crores, which was a 122% year-on-year growth. Our own brand GMV contributes 12.4% to the overall GMV of fashion, and an even higher percent if you were to look at it after discount. From the GMV of INR 90 crores, 50% of that is actually contributed by the sale of these brands on third-party platforms. In the past, I have mentioned that these brands do sell on third-party platforms, and that is all part of our vision to actually have standalone consumer-facing brands that are well-known and provided to the customer at multiple touchpoints. In the third quarter, there are two brands in particular that have hit significant size and scale. Up on the right, we mentioned Twenty Dresses, which has now hit INR 190 crore GMV annualized, and Nykd, which is at INR 180 crore GMV annualized. We've tried to also plug the underindex saree segment, and we have launched a brand called Nayee. We also focus on distribution when it comes to some of these brands. As you can see, we have added 14 MBOs for Twenty Dresses and RSVP, taking the total count of physical presence for these brands to 52. Nykd by Nykaa, our lingerie brand, which I have again spoken about in the past, is a brand that we remain extremely excited about. It is now present in 750 general trade outlets and has opened two MBOs with plans to add a couple more this quarter. Moving on. We'll just flip through these slides, but this will give you a sense of the type of brands and the type of products we're creating. We're actually generating a huge number of new products every, you know, every quarter, and we have built our capabilities in-house to support this level of growth. Moving on. Finally, we're going to talk about how we're trying to stay engaged with our customer. This quarter, we conducted physical events. We did do an event called the Global Style Fiesta, where we highlighted our global portfolio. We did a very large-scale event in Delhi called First in Fashion, where we enabled brands to show their new season merchandise. We do believe that fashion is the ultimate discovery problem statement. There's a long-tail nature of fashion that merits strong discovery features. How do you show the right product to the right person at the right time? We've made good progress in this regard. We've launched hyper-personalized widgets on the homepage. We continue to refine our recommendation engines and features at every leg of the app journey. It's all to drive product discovery in the life of our customer. With that, thanks to everyone. I'd like to request Falguni to take you through the B2B business. Starting with the B2B business. I just want to point out that we are very pleased to see. I mean, as you are all aware that with the B2B business, we wanted to enter the large part of unorganized market, which is currently being serviced by mom-and-pop distributors. I think there was a need for a specialist organized distributor like ourselves who would focus only on the beauty category. To our many of the beauty brands, we would offer now being able to sell their brands online, being able to sell them in our stores, and also sell it to retailers. From there, it would onward move on to the consumers. I think the business model was right as a disruption model where, you know, being focused on beauty category, we would do the right thing in terms of enabling retailers in specialists where beauty was a big sale, and enabling them with a number of, you know, all-in-one store, super service on delivery, lot of flexibility, ability to increase their earnings, and also, empower them with data and many more things that we can bring to a structured tech platform. With that, we introduce the Superstore business. Moving on. I just want to say that, from the business perspective, the transacting retailers has grown nicely to about 92,415 in this quarter, up from a very small number of 4,153 in a quarter a year ago. Almost 22x growth in transacting retailers, telling us that this is something which clearly there is a, you know, I mean, there is a place for this business. Also, the activation rate of registered retailers are as high as 59%. From the brand listed perspective, again, the number of brands on the platform has increased from 31 - 185. Large range of national brands are coming in, this is known by 6 times. Again, telling us that from both sides, from the consumer side, which in this case is retailer and also brand partners that we service, there's a clear need for this business. From the number of city perspective, we now service about 652 cities. Again, an 8x growth from 82 a year ago. The orders that the business saw was about 216,000 orders, which again was a 25x growth from a year ago quarter. Clearly the business has proven itself from size and scale, and later in our slides you'll see that we continue to build it in a manner which is, you know, right unit economics. Can we move to the next slide? Yeah, with that, I hand over on the financial performance to Ganesh. Thank you, Falguni. Good evening, everyone. I would like to take you through our Q3 FY 2023 financial updates. As you can see in slide number 39, our revenue grew by 33% YoY during the quarter. Our gross margin formed at 43.4% during the quarter. We achieved an EBITDA of 5.3%, benefiting from our operating cost leverage. Our PBT margin was 0.9% during the quarter. We had an incremental impact of INR 66 million due to the Ind AS lease cost accounting, about which we'll dwell in greater detail in subsequent slides. Moving on to the next slide. I'd like to bring your focus on this slide. As we can see, we improved our operating costs over the year. Operating expense as a percentage of revenue was 38% in Q3 FY 2023 versus 40% in the same quarter last year. Regionalization of our fulfillment centers has enabled lower ad rates. Similarly, rationalization of our marketing expenses has also helped us reduce costs. Fulfillment expense as a percentage of revenue was at 8.8% during the quarter versus 10.6% in Q3 FY 2022, which is an improvement of 137 basis points YoY. Marketing costs as a percentage of revenue was 11.2% during the quarter versus 13.7% in Q3 last year, which is an improvement of 241 basis points YoY. We saw a small increase in employee costs as we having hired up the curve to honor the growth of our new initiatives. Employee costs as a percentage of revenue was 8.7% during the quarter versus 8.5% in Q3 FY 2022, a growth of 23 basis points YoY. Moving on to the next slide. Here you see the waterfall which will give a better understanding of our EBITDA margin change YoY. Gross margin, as you can see, has declined by 293 basis points during the quarter, and this has been predominantly due to seasonality reasons. And as you will see subsequently, on a nine-month basis, gross margins are expanded 79 basis points. If you were to look at gross margins on a trailing 12-month basis, gross margins have expanded by 116 basis points. Coming back to quarter three, some of the other reasons which have resulted in lower margins during the quarter has also been the strong growth coming in from our PBT business, which comes with lower gross margins. The strategic mode that the business provides remains key to our commitment to the segment, while also providing an excellent India-wide distribution solution to our brand partners. Fulfillment cost improvement, you can see, has delivered 178 basis points through rationalized regionalization strategy. Marketing efficiency achieved through better order to visit conversion has delivered 162 basis points. Selling and distribution costs have increased due to offline distribution of our own brands. Employee costs have increased due to investments into new initiatives and investments also into the technology function. Other expense increase has been primarily due to investment in infrastructure. Moving on to the next slide. Here this waterfall explains the movement from EBITDA margin to PBT margin, which gives a lot more color on the investments that we have been making and its impact by way of depreciation lease accounting in the draft. As you can see, depreciation increased YoY on account of incremental CapEx in retail stores, warehouses, as well as office space. Lease cost increase has been due to addition of retail stores, warehouses, and offices as we ramp up infrastructure. Interest on borrowing during the quarter increased on account of incremental borrowing, which was made to fulfill working capital requirements, Q3 being a peak season. Lease costs as per Ind AS was higher versus cash lease costs. We saw an incremental impact of INR 66 million in Q3 FY 2023 due to the Ind AS 116 lease accounting impact versus INR 46 million in Q3 FY 2022. Moving to the next slide. Here you'll see our vertical performance, which gives a good insight into the economic background business. I want to bring your focus to the bottom part of the table where the cost items are calculated on NSV and the three business verticals are comparable at NSV on NSV basis. As you can see, gross margin for the BPC business was 45.4% during the quarter versus 47.5% in Q3 FY 2022. Similarly, for fashion business, gross margin was at 43.5% this quarter versus 48.4% in Q3 FY 2022. Others gross margin was at 25.5% this quarter versus 31.7% in Q3 FY 2022. We also saw improvement in our fulfillment expenses across businesses. For BPC it was at 8.6% versus 10.7% last year. For fashion it was at 10.3% this quarter versus 7.6% for the same quarter last year. For others it was at 9.9% versus 12.3% in the previous year. We have also improved our marketing expenses. As you can see, for BPC it was at 7.9% versus 9.7% in quarter three FY 2022, and for fashion it was at 25.6% this quarter versus 30.9% in FY 2022. We have been investing behind selling and distribution expenses, for BPC it was at 3% during the quarter versus 3.2% in quarter three FY 2022. For fashion it has been at 6.7% during the quarter versus 3.3% in the corresponding quarter last year. For others it has been at 16.4% versus 5.8% in the corresponding quarter last year. Contribution margins have been maintained at 20.2% during the quarter, with BPC accounting for 25.9% during the quarter. For fashion it, the margin coming in at 0.9% and others coming in at -5.6%. Moving on. Here you see the vertical performance for our businesses for the nine months ended December 2022, where we have demonstrated improved contributions after investing in customer acquisition and incubation of new businesses that are delivering outcomes. Gross margin for nine months has improved at 45.1% during the quarter versus 44.4% in quarter three FY 2022, with BPC gross margin standing at 46.3%, fashion gross margin at 44.5% and other contributing 25.6%. Contribution margin has improved to 20.3% in quarter three FY 2022 versus 17.9% in quarter three FY 2022, with BPC for nine-month period standing at 25.9%. For fashion it was 2% during the nine-month period. For others it was at -22.1% during the nine-month period. Moving to the next slide. Here we have our income statement as at the E-Commerce Ventures at a company level. You can see that our revenue grew at 33% year-over-year to reach INR 14.28 million during the quarter. Our EBITDA margin was at 5.3% during the quarter versus 6.3% during the same quarter last year. Our PBT margin came in at 0.9% and PAT margin was at 0.6% during the quarter. All in all, I believe that we have continued to improve our scale efficiency in a challenging macro environment. Thank you everyone for joining on this call. I would now like to request Prajeet to kindly initiate the Q&A session. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch-tone 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. First question is from the line of Sachin Salgaonkar from Bank of America. Please go ahead. Hi, thank you for the opportunity. I have three questions. First question, Falguni, I wanted to understand, any particular reason for, you know, the slowdown in growth apart from the seasonality, what you guys indicated. You know, we are hearing about consumer slowdown across the board, so just also wanted to understand your thoughts on the impact of that on cosmetics and fashion. I think, clearly seasonality, I mean, sorry, the fact that, about, eight days of sale was less and festive sales, and it was in the second quarter compared to third quarter for the previous year. That would take away at least 3% or so as, in terms of the growth. That clearly was one differentiator. I think in addition to that, we do believe that, in terms of, you know, in terms of the third quarter of this financial year, it was quite strong, but at the margin may be slightly impacted in terms of consumption, because of, you know, what's going on in terms of discretionary spend. Like you can see that we've grown nicely and we've acquired customers nicely. I wouldn't call it that it was a difficult quarter at all. In such difficult environment, I think it does shave away a little bit from the top in terms of consumption. I think there could be slight downturn or trading from certain types of brand to slightly cheaper brands, but nothing in a very meaningful way that would be of concern. It does feel that at some level, some amount of growth was shaved off the top. Got it. Thank you. Second question is on the gross margins. Again, they were down both in- Sorry, more for the festive Diwali rather than our team call it. Thanks, Falguni. You're very welcome. Second question on gross margins. It was clearly down both on cosmetics and fashion. I do see some comments saying that, you know, there were higher brand discounts as well as consumer downgrades. Again, you know, I mean, both for revenue as well as gross margins, do we see this, you know, likely to continue with an impact and see further pressure on margins going ahead? Not really. We do feel that the previous quarter our margins were at a very, very healthy previous comparable quarter. A year ago, the margins, the gross margins were at a very, very healthy rate, and hence we are guiding everyone to look at it on a nine-month basis. You can see that on nine-month basis there is no erosion of gross margin, and in fact there is only improvement in beauty and slag in fashion. Even on the B2B business clearly, you know, the other business includes both the Superstore business where we've been guiding that the gross profit margin is at around 15% compared to this overall mix, which has certain other new businesses like Dot & Key and Nykaa Man. It's very difficult to judge from this. I would say a lot of it is a mix issue and more of a category mix issue also in some ways and some ways not really. I keep saying that, you know, we don't have one cement plant where the raw material is going in and final good price is determining the margin. We are working with 2,000 brands in both beauty and in fashion, where, you know, the mix of the brands, the margins, the advertising income and many other things can vary. Sometimes, you know, there could be a certain differences from quarter to quarter. I think Nykaa also needs to learn in phases. I'd like to just add over here that if you were to look at, first month on a trailing twelve-month basis, you can see an improvement of 115 basis points. That also gives a reflection that over a period of time margins are moving. Got it. Thank you. My last question is, you know, any broad sense you could give us in terms of the mix of GMV between, let's say, online, offline, eB2B right now? You know, where we could see that mix, let's say, in the medium term? Yeah. Online, offline, we've been giving the numbers. I think online, in spite of growing our stores quite aggressively to now, you know, very large number, our offline sales in beauty still account for less than 10% of our total sales, which is about 8.6% for this quarter and 8.1% on a nine-month basis. We will continue to roll out more stores, and we could be expect another 50 more stores for the next year. I think e-commerce will also continue to grow. That's on the physical store picture. As far as B2B is concerned, I think, like you saw, I think. The way we treat that business is that we do feel, and you tell me whether this is wrong, but we do feel that B2B business in beauty is very strategic and it give us a huge advantage in the long run to be involved from entire, you know, when a brand, international brand comes into India, we are their distributors, not just for... We do their e-com sales, we do their physical sales. Even if they go to other modern trade channels, we handle that, and we also handle general trades. Besides makeup, which sometimes can manage a narrow distribution, most of the skincare and haircare do need wide distribution. I think this, you know, GT/MT distribution, which has been a key to success of FMCG companies, we've never offered it to third party. What we are trying to do here is build a third-party GT/MT distribution platform that will serve all our brands, our private label brands, it'll serve our import brands, and it'll also be available to third-party brands to benefit from. We think this is a disruptive business. It can grow very fast in terms of, you know, revenues that we can, you know, we can service. Orders and revenues will grow very fast. However, the inherent structure of this business will be about, say, 15% gross margin to start with in the long run in 2020-2025 if we add other value like technology and data. In the short term, it'll start at about 15%, and we have to manage the fulfillment costs below that. Right now we are managing the. We are trying to work on unit economics that will allow us to manage fulfillment costs in a healthy territory. Selling and distribution expenses is, which is seat-on-street expenses to build a retailer engagement is what replaces the marketing cost. I think we can at some point do a more detailed presentation on unit economics. Maybe we have planned for it at the end of the financial year after the March results. The plan is to have a really clear unit economics that will give confidence to everybody that we are on the right track to build the right business for the long term. In other value so one that grows in EU. Others are very small. Not very small, but small, relatively. Thanks, Falguni. Thank you. The next question is from the line of Vijit Jain from Citigroup. Please go ahead. Yeah, thank you for the opportunity. My question is, within BPC business, you know, Anchit called out makeup grew 12% YoY. Is that also seasonally driven? Because this is usually a seasonally strong quarter for makeup in general, right? That's my first question. Hello? Yeah. Look, I think, I think two things to keep in mind. One is that, if you remember last Q3, it was the really a standout quarter for makeup in the sense that makeup buying had been subdued due to the pandemic for two quarters before that. We saw finally in Q3 last year a return to social events, weddings, and generally people getting back to the office. I think makeup is coming off of a slightly high base, and that's why you see, you know, this 12%-13% growth versus the overall growth of 26%-27%. Like I said, other categories are growing a lot faster. I think that's the main reason. I think the second thing is there is a big focus from us to expand the customers', the width of the assortment that the customer is buying on our platform, and makeup and skincare are the two dominant categories that we're really investing behind growing haircare, fragrance, appliances and others, which we think long term will increase the basket size and therefore the average order value to the customers as well. Got it. Thanks, Anchit. One just quick thing I'd like to point out is that, a lot of, you know, the data that we're giving on growth is online, and there is a fair amount of uptick in offline sales growth. I think online sales growth throughout this year has been very robust, and offline a lot of makeup and high-end skincare is sold in our offline stores. Got it. Thanks, Falguni. My next question is. Yeah, go ahead. Okay. My next question is, you know, for own brands, you know, I noticed, you mentioned the revenue run rate for a couple of brands on both BPC and fashion. My question is there a threshold revenue run rate at which you think they'll start generating positive cash flows or hit target ROC for you? I would imagine given your own distribution platform it would be lower than for other D2C companies, but is there a threshold for that? Yeah. Our beauty brands are all profitable. They are profitable and they contribute to positive EBITDA after giving all the retailer margins on a arm's length basis. We do believe that beauty has always been very profitable for us. The right annual GMV run rate at which the brand becomes significant is about like INR 100 crore revenue run rate when the brand can start affording, like you can afford investing in the brand from marketing perspective. You know, it becomes an interesting point, and that's why we started reporting the brands which are above INR 100 crore revenue run rate. That's Nykaa Cosmetics, Kay Beauty, Dot & Key, that is 51% owned by us. And couple of our other brands are also very close to INR 100 crore, you know, in the beauty category. Under fashion also, while all of the fashion brands together, most of the old fashion brands together are close to breakeven levels. I think two of them are now trending towards the 100 crore revenue run rate. Kay Beauty, which is something we acquired a couple of years ago, four, five years ago, and we really built it out to now almost a 190 crore revenue run rate. Nykd is also now trending close to 100 crore. For both these now we have strategies for doing NBOs, we are selling Nykd through general trades. All that means that now we are handling it like beyond the D2C brand and investing in the future. Thanks, Falguni. I'll jump back. We are very excited about Yeah. Sure. Thanks. Thank you. The next question is from the line of Manoj Menon from ICICI Securities. Please go ahead. Hi, team. Just a couple of add-on questions. One, you know, when I look at your tier beauty Sorry to interrupt you. Manoj, your voice is breaking up in between. Are you on handset mode? I'm actually. I'll just speak as close to the mic as possible. Is it better? Yes, please go ahead. Okay. No, I just think if I take a step back, three, five years back, you know, when there was abundant capital availability, a lot of B2C brands, you know, coming to the market, et cetera, versus, you know, that's what, you know, the last few years versus, let's say, the recent winter we are going through currently. Two questions now. If you could break up the beauty growth in terms of, let's say, the same store growth concept in online versus, let's say, the new brands coming in. You know, some color on that and how does that, let's say, translate that into revenue. For example, I would assume that, you would charge a listing fee or let's say, you know, a new brand coming to you know, probably having knocked at your door for a long period of time, quantitatively and qualitatively. Just some color. What I'm trying to understand is your growth, can potentially could have been far better had there been a tailwind. So what's the growth sort of with the tailwind, without the tailwind is the question. I think, what you're trying to assess is an extremely complex information for a large platform with 2,500 brands, where top 20 brands or top 50 brands can change very rapidly over a three-month scenario, but definitely over a one-year scenario. We are a very dynamic, you know, really platform that is really doing very, very well. If I were to tell you our top 100 brands, 22 of those are international brands, 17 are FMCG brands, 32 are direct-to-consumer brands, which is clearly a very recent phenomenon over last two, three years. You see so many D2C brands stack up in the top 100 brands. We must remember that they are backed by a lot of investment in marketing, and they are all operating at negative profits or negative EBITDA, whereas the traditional international brands and FMCG brands are not doing that. They are investing within their internal profitability, if I may say so. Then there are the 10 Lux brands in our top 100 brands and seven global brands. It's a very dynamic platform with lots happening. What you have to remember is that we get a one billion-plus visits on our platform from 25 million unique visitors every month. Like, when we did Pink Friday Sale, on one day alone, there were more than 10 million visits. We are a must-have platform for any brand that wants to launch and build their brand in the country because of the cohort, customer cohort that we already have and how dynamic we are in terms of, being able to, you know, activate those customers towards all of our brands. Understood. Understood. Each of our brands, even the most largest brands, like, say, some of the largest brands, mass brands like Lakmé and Maybelline, they also get more than 50, 60%+ new customers to us every year. It's a very, very dynamic platform that keeps adding customers to every brand. Understood. Finally, thanks for the, you know, clarifications or some comments about eB2B little earlier. It was very helpful. One follow-up on the eB2B, is essentially that, in general, there is an investor perception that, given the MRP regime, which is very unique to India, there is only so much, let's say, distribution margins, which is very finite, which is available for any player, however differentiated the offering may be. Is it fair to assume that eB2B for you know, from a profitability point of view at scale, is a reasonably long gestation? The other point is that, you know, because you are one of the unique players who have got the end-to-end capability, it will also mean that, you know, it is a very high entry barrier business. How do we look at this, you know, let's say from a three, five-year, you know, sustainable, meaningful profitability metrics point of view? To be honest, like, all of the distributors for big companies, like, Hindustan Unilever or P&G or all of them, they all have, you know, thousands of distributors throughout the country, all of them are from small mom-and-pop shops who are not gonna lose money on behalf of the company itself. In my opinion, if the B2B business is done right, especially in our industry, where the, you know, distributor cum retailer margins are not small, I do feel that you can really add value, and especially to that you add data in terms of what the retailer should stock, the flexibility to allow them to buy a mix more frequently rather than buy the minimum sizes that others may ask. There's a lot of advantages shopkeeper has by dealing with people like us, ourselves. I don't think... The main thing is the business is to remember that it's a B2B business and not a B2C business. In the long run, fulfillment costs and marketing costs need to reflect that, and the overhead structure needs to reflect that. If one doesn't do that, it can be quite a dragging phenomenon. Where we are is that we have set up almost 11-15 warehouses which take us closer to the customer. We are gonna do a business where we will stay within 200-300 km radius of our fulfillment center. We will not jump in anywhere and everywhere. It's a business that we are doing very smartly, where we will service shopkeepers in a certain, you know. There will be a fulfillment center, and within a certain square kilometer radius of that we will focus our selling. I think if you do it right with the right unit economics, I think it can work. The power it gives and barriers it creates for entry for future and power it gives to build brands in India is gonna be very valuable in the long run. Understood. If I may just quickly, please allow me to relay an important conversation point with investors over the last few months, at least. You know, just some quick comments about how do you think about capital allocation in general? You know, now this question has essentially had come up in the last, let's say, six months, post your GCC foray, et cetera. While I completely understand the disclosures you have done about the market opportunity there, you know, there is just sort of a hanging question about incremental capital allocation. You know, how do you see that over the next three years? First of all, for us, the beauty, online, offline, consolidated beauty business is very important. In our opinion, we should never underinvest in that, and we will continue to acquire customers for the beauty business, both online and offline. Also we would like to build profitable brands in beauty and become, say, a consumer company like Estée Lauder or L'Oréal, coming out of India. That is a number one priority towards investment, and I don't think we would deprive this business of any amount of investment. Investment in inventory and warehouses and stores will be needed to continue to support it. At any point you can pull back on those investments and continue to grow online. Customer acquisition is another big investment we make. I think this business has seen huge amount of investment in customer acquisition, investment in fulfillment center, investment in stores, and investment that we've done in terms of, you know, building tech capabilities towards this business. I think there's a fair amount of investment going in there, and this business is not deprived of that. Yes, the profitability of this business is being used to build new businesses, including fashion. You can see that the profitability, like if you see at the EBITDA level, the EBITDA gross profit of BPC would have been INR 523 crores. That, some of that, has funded or say contribution profit is INR 298 crores, and some of that has funded investment in fashion and B2B. Yes, we are taking the profitability of this business to expand our TAM and invest in fashion. In fashion, we are very clear that as the equation between new and returning customer builds up, you know, and it keeps improving with every passing year. Fashion is just the fourth year of the business, but as this equation improves, we are confident that we should be able to bring down the marketing costs from current levels to just about 15 or, you know, mid-teens to late teens, and that itself will be very profitable. On the B2B business, it's literally fourth year. We are very happy with the scale and the retention and reactivation numbers. We do believe that it will need another year or two of investment before we can talk about being profitable. None of it will be massive losses. Like contribution margin, it would be only minus, you know, even this year it was only minus 12.6% negative, and next year it'll be lower. Like I said, path to profitability is clearly in our mind, and at the moment we are only investing in these three, four businesses. Beauty, like I already spelled out. Fashion, we are also building some private label brands, but investment is less than INR 4, 5 crores in those. Fashion platform itself, we've been investing, but it will turn profitable over time, and B2B business where we are investing will become profitable. I think GCC we see. I joke about it that in India we have customers, but we struggle with the wallet, and in GCC the customers have the wallet. I think it can potentially be a very profitable business. We will be very measured, and I think it's a market that will have a lot more dominance of physical retail compared to e-commerce. The mix will be in different, like mix will be 50-50. Also the fact that the physical retail in those markets can actually turn profitable very quickly compared to India. Fair enough. Thank you. Thank you so much. Appreciate it. Good luck. Thank you. The next question is from the line of Manish Adukia from Goldman Sachs. Please go ahead. Yes. Hi, good evening. Thank you so much for taking the question. My first question is on the fashion business. Falguni, on the first question you mentioned that some impact at the top of the pyramid with shave of growth, discretionary spend impact. On the fashion business, when you look at this quarter growth actually accelerated during the quarter. Can you actually talk about just the difference in dynamics between the fashion and the BPC growth during the quarter? A related question, when we look at one of the explanation on the slides around gross margin impact and where you mentioned consumer downgrades as one of the reasons. Just trying to understand what you mean by consumer downgrades, because AOV have moved up in the quarter, both quarter-on-quarter and YoY. If you can just explain what you mean by consumer downgrades here? Like I think consumers sometimes, you know. I mean, none of these are like module to remember is that it's 2,500 brands with lots of trends playing around, none of those are like a dominant long-term trend. We do expect that in general in the industry there is premiumization and customers are buying more premium products, they're buying more luxury products. If you look at it, at least, last one year, there has been some amount of popular, I mean, customers are downtrending at least, in certain categories from luxury brands to more, you know, premium and mass brands. There is some amount of that going on. I think it could be short-lived and it can change. Yes, there was some amount of, you know, inflationary pressure which is making customers pull back or choose the slightly lower category of each product. I think just coming in on the gross margin, you know, side of the question at least. I think we definitely want, you know, to draw the attention to slide 44 where we show the nine months, you know, sort of the nine-month numbers, because in that it's quite clear. We have to just define this call itself. From that it's quite clear that if you look at both the businesses, BPC and fashion, on a nine-month basis there's a improvement on both. Fashion has gone from 43.7% gross margin at NFC to 44.5%, and beauty went from 44.7% - 46.3%. We would encourage folks to look at the nine-month numbers, and there's no sort of plan to deteriorate margins at all. Yeah. Sure. my second Within fashion we have a lot of imported brands now. We are doing business in REVOLVE, we are doing business in a number of imported brands like Tiger and all of that you can see. There are a lot of mix changes that happen from quarter to quarter while we are trying to, you know, make sure that, you know, we try and manage all this in a more uniform manner. Please appreciate that the kind of mix changes that happen, new launches that happen and the impact it can have sometimes in the near term. Sure. Thank you so much. My second question again, just continuing on the fashion business. So clearly, I mean 50% YoY growth this quarter, AOV is still holding up quite well at around INR 4,000 odd. Just trying to understand, I mean, do you think this kind of a growth rate could sustain with the kind of AOVs that you have? Or do you think, you know, as to keep growth rate elevated, maybe you'd have to compromise a little bit on AOV? Adwaita, to your point earlier, I mean, you called out gross margins for the business. Clearly, across both BPC and fashion, gross margins are currently comparable, but there's obviously a fairly large differential between the contribution margin. As we think let's say three years out, do you think given contribution margin for these two businesses could be comparable? Yeah. In terms of growth, I think, you know, we're pleased with kind of the fashion growth that's come through this quarter. I do feel it's the work of, you know, many things coming to effect, whether it's the brand assortment, whether it's some of the fabulous international wins that have come through, whether it's just breakthroughs on the marketing side. You know, as I've always said in the past calls as well, for us it's never marketing at any cost. It's always, or sorry, never top line at any cost. It's always the right marketing. I think somewhere this quarter, you know, the ratios and sort of the mix that we wanted from a marketing cost perspective also lined up. There were at least two or three different things that propelled the business forward, everything from assortment, product features, to the right marketing later on. The quarter has held up. I would like to maintain, you know, a sustained sort of growth trajectory for the fashion business. Obviously with every passing quarter is on a higher base, so, you know, that is something to be kept in mind. This does feel like something we should be able to kind of hold on to. From an AOV perspective, we'd like to hold this AOV, and I definitely feel at least for another, you know, 12 months at least, there is no requirement to reduce this AOV to kind of grow in the way we want. For the near future, there is a focus on maintaining this AOV, and I do feel that this AOV is important because of the factor of having the right unit economics to make this business work. I think, Adwaita, we should say that the AOV is not something we insist. This is what we discovered that our customers are coming out at that, right? It is coming from a perspective that we are not flooding them with trying to give a lot of cheap products in terms of discovery or trying to give them a lot of discounts to convert and that's how the AOVs are holding up. We take pride in the fact that such a large% of our sales happens at full price, since a large% of our sales is happening off the new season, and that also has lesser discounts. I think it's all baked in many of those things rather than being rigid about holding the AOV. You know, I think, coming to our back-end question on, just where do we see the contribution margin ending up. Again, if we go to, you know, the slide 44 only, where you can see the nine-month numbers for the three verticals. Over time, our ambition is, you know, definitely gross margin can get to kind of Beauty levels. I think the major press in the next 12 months, obviously comes from the marketing and advertising line item, which is at 25.5% of NFV to date. I think there are, you know, big strides that we would like to make in this line item itself. I think over the long run, definitely getting to EBITDA breakeven is a key priority for Fashion. You know, that's the medium term, and I think in the longer run, getting to a similar cost structure of beauty does seem attainable and something we'll strive for. Can I just sort of come in and say one thing, which I believe in, that there's a lot of inefficient marketing in the, what you call performance marketing? One has to constantly optimize and reach a good, healthy balance between reaching the width of customers that you'd like to engage with and convert on your platform over time, and not doing wasteful expenditure that is just chasing the visits or just chasing sometimes the downloads which are never gonna convert in any healthy manner. Finally, what you want is the LTV of the customer or the right annual consumption value from that customer. Nykaa purely is optimizing all the campaigns from these parameters rather than chasing any numbers like any artificial visits or app downloads or a lot of traffic comes through wrong mediums that is, that they'll never convert in any meaningful way. Sometimes just certain incentives are given to convert for sake of converting. I think Nykaa stays away from most of this. Very helpful explanation. Thank you so much. Thank you. The next question is from the line of Kapil Singh from Nomura. Please go ahead. Hi, good evening. My question is a bit long-term. We have seen a projection of close to 30% growth of online business for both beauty and fashion. I just want to understand how do you envision Nykaa growth in comparison to that? Will it be similar? Will it be much higher? What do you envision? What are the top two to three main initiatives that you need to take to get there? Anchit, do you wanna take that? Adwaita or should I take it? Yeah. Go ahead. Go ahead. No. Yeah, go ahead, Anchit. I was just saying that for beauty, for BPC, we believe that the market, as I showed earlier in the slides, will grow at online BPC will grow at roughly 29%, and the overall BPC market will grow at 10% CAGR over the next five years. We feel confident that we'll continue to grow in line, if not slightly faster than the overall market, despite us already being one of the larger players on the online side. We continue to see a confident and healthy growth, and maybe possibly faster than market growth on the online side, due to multiple factors, including premiumization, including depth and width of assortment, as well as availability. Finally, increasing awareness that should drive increasing basket size of the customers. I think, on the fashion side, we see that the overall fashion industry is growing at 14%, and within that online is growing at 27%. Most definitely fashion will grow faster than the overall, you know, growth rates for the online segment, given that we're a newer entrant, given that we're at a lower base. That being said, you know, I think all of you know that we sort of play in a slightly more, you know, curated zone. I think it's not gonna be growth at any cost. It's gonna be, you know, kind of honing in on the positioning and the differentiation that we're going for, and within that world being a very, very, you know, sort of number one choice for the customer. Just to summarize, I think definitely growing faster than the 27% CAGR, but also keeping in mind that for now at least our focus on positioning differentiation holds. Can you also talk about any new initiatives that you need to take to get there? I think, you know, Yeah. Yeah. I mean, I think, you know, to answer kind of high level, I think it's the same playbook that we started with in terms of, like, trying to start with fantastic assortments. Just this year itself, I think, you know, you see that we managed 1,200 brands or so. I still feel there are a lot of strategic brands we still need to win, we still need to add. Assortment itself will trigger quite a bit of growth. That's like, you know, what people think of already in India. Of course we can go abroad as we've been doing. That I think again can be a big unlocker of growth. I think assortment remains one. I think the next remains, you know, the customer journey, the retention. I think holding the cohorts to make sure that the retention rates are exactly as aggressive as they can be is something that will drive significant growth. I think our new customer acquisition of course is a focus and making sure that every year there is significant decrease in new customer acquisition. Finally, the third bucket I would say is the, you know, app experience. A lot of focus on making sure that there are very few friction points for the customer, the conversion rate is improving, and importantly my favorite topic which is, you know, just discovery, that the customers really being able to discover what they want, which can be done through like fantastic personalization and product features. Assortments, retention of customers and new customer acquisition, and finally, you know, product features that can drive discovery and conversion rate. Okay. Thanks. Second question is on gross margins, particularly for B2C business. What I want to understand is when you look ahead over the next sort of five years, do you think we are closer to the right level or do you think, we have reasons to believe that even, the gross profit margins could, have good headroom to improve? If so, what are the reasons? I think the beauty gross profit margins are at a very healthy level. As you are aware, it includes the advertising income because, you know, we have so many eyeballs from really the relevant beauty customers, even though with very high conversion, beauty conversion. Still I think at 3.5% conversion, which means that any advertiser can get so many more relevant eyeballs to focus on their product. I think Nykaa's effort is to become bigger on the app platform side, and we have some investment being made to be a very significant player on that side where we work with our brands to add more value and give them more sophisticated ad experience on our site, and that can help us improve the gross profit margin a little bit. From product margin perspective, beauty is in a very good space already. Our private label share can also determine higher gross profit margin. Okay. Thank you. Thank you. The next question is from the line of Amit Sachdeva from HSBC Securities. Please go ahead. Hi. Good evening. Thank you for taking the question. My first question will be on, like, you know, like Falguni alluded to 3% impact on growth, purely on cyclicality because of the days were different. As you go in, just looking to whether January and February so far have you seen, has it shown some amount of more normalization even if, say, same growth rates, you know, sort of structurally trend, is Jan, Feb looking better than, like, last quarter or is it sort of? Could you give us some amount of thought on how the marginal growth is shaping up on demand side purely? I think October, November, December is the seasonally strongest quarter, and it's difficult to replicate that strength in a quarter. On a quarter-on-quarter basis, I don't think Jan, Feb, March can be massive growth over previous quarter. On a year-on-year comparison, the Jan, Feb, March is likely to be, is definitely likely to be decent because I think, it did start with that. I think, you know, it has all to do with how the wedding dates are in India and all that, and that made this quarter a little more interesting than it would have normally have been. Sure. Sure. That's very helpful. We also have one more sales, which is, you know, the Pink Love sales. Sure. Sure. That's helpful. My second question is actually on gross margin, and I'm trying to sort of understand the moving parts. Is it, you know, one is on B2C, where the margin impact on YoY is less, from fashion optically is higher if you take the gross margin purely on the revenue basis. Coming to beauty, is there some, you know, rather than downgrading or something else, is there a also, effect that's playing out where, you know, some brands are really iconic in their category and they tend to give lower margin, but they may advertise more on the platform, versus some new brands which are like, they don't have such massive advertising budget, but they can give higher margin for, you know, for being on the platform and maybe spend less on advertising. In some sense, is there like a mix shift happening where iconic brands are growing much more in a dominant way, but, you know, newer brands or D2C or something which have lesser presence, they are sort of, it's not falling by the wayside, but, maybe they are sort of flattening. Is that sort of trend that you're seeing, which is also in part reflecting in the margins? As you say that iconic brands will probably pay lesser margin, and that's what is slightly more structural than cyclical. I'll comment on the D2C side. I think short answer is no, I don't think there's any generalization we can make on, on that point. You know, it's really a mixed bag. As we said, out of the top 100 brands, almost 50 of them are direct to consumer brands, right? Who come up in a very short span of time. When I look at the margins, to your point, I wouldn't call them iconic. What I would say is FMCG, CPG brands, more established MNC companies, they may give slightly lower product margin, but they make up for it in advertising. Even equally so on the direct to consumer side, they give higher product margins, but they also are, you know, as we mentioned earlier, are well funded and are willing to spend heavily on advertising to acquire customers from probably the most relevant platform for customer acquisition that they have in the country today, which is Nykaa. I don't think it's really a, you know, this MNC or this FMCG versus D2C debate. You know, as we said, it's really hard to pinpoint because with 3,000+ brands, you know, and some being luxury, some being mass, some being hair, skin, makeup, multiple categories, multiple types of brand, you know, some brands might go aggressive in one quarter and slightly less aggressive in another, you know, depending on their own ability to pay and spend. You know, I don't think there's any generalization we can take out of this for coming quarters. Okay, understood. There is no real structural thing here. It is just what it is right now because of the you know, seasonal change in mix and things like that would just impact margin temporarily. Yeah. Also, I think, you know, we said 700 basis points of growth was preponed into Q2, which is worth noting. You know, there has been a slight return to travel. Travel retail was back in the quarter, as was typical retail. If we look on physical retail, we are becoming a very large player, and we are soon to become the largest on the beauty side. Still there are other players, and it's a very unorganized market offline. I think online to offline, inter-category shifts, some amount of, you know, a pull back from luxury just for the quarter. I think it's a really interplay of these couple of factors. Got it. Got it. That's very helpful, Anchit. You know, on a gross margin side, again, like if you look at the headline basis, the fashion was 81% and now 70 and a bit, so it's obviously could be optical. I just wanted to know whether it's also driven by like a mix changing. Because more you sell your own brands, optically it reduces gross margin because the market players would theoretically will be 100% gross margin category because it's net of all expenses and COGS, but your own brands come with certain COGS as well. Hence probably shift from 8.4 - 12.4 is perhaps optically gross margin reducing, but it might increase the value capture anyway. It is also playing out or is there any other factor which has also led to some drag on fashion side? For fashion, I think your understanding in terms of own brand or private labels is not correct. I think the, you know, the gross margin would increase from the private label. Actually, if you go to slide 44, you know, I think the metrics that I would draw your guidance's attention to is actually the last five rows on the bottom, which is on NNC. That, like, normalizes for any market-based inventory type of things. First and foremost, private label share and expansion of that should and will increase this percentage. Again, I think what we're trying to kind of say from a margin perspective is that we like to kind of focus on the nine-month trailing. I think there's a lot of, you know, seasonal understanding and changes that keep happening to the business, whether it's regarding income, whether it's regarding costs. I think we have some work to do with that regard as well. If you look at a nine-month basis, there is an improvement. Like I said before, on the fashion business, we actually don't see a decline in gross margin going forward. We would like to hold it or improve it, and we feel very confident in that. Okay, great. That's a lot. Thanks a lot, Anchit. In fashion a year ago. Yeah, in fashion a year ago, you know, IT was a small business, and, you know, in terms of discipline of booking, you know. What we are seeing is from quarter-to-quarter, there may not be a good discipline of booking things dry in the right quarter. By nine months takes away those differences. That's why we are highlighting. Got it. No, thank you so very much. That's very helpful. Thank you. The next question is from the line of Sheela Rathi from Morgan Stanley. Please go ahead. Hey, thank you for taking my questions, and good evening, everyone. My first question was because Falguni talked about some down-trading and some, you know, weakness in demand, even though the AOV has held up. Is that, is it correct to say that, you know, the number of products in the basket actually went up? Is that a fair assessment here? No, no. I think, you know, I think my comment on down-trading is being seen in a much bigger light than necessary. I just wanna say that honestly, in terms of down-trading, what I meant was that there is a lot of growth in, you know, certain price point brands which are growing very rapidly all across. For example, if you see many of those D2C brands, like, you know, whether Minimalist or Swiss Beauty or Many of those brands are growing quite nicely, and they all tend to be slightly lower price points than their luxe equivalent. If such large brand proliferation of B2C brands in India was not there would have been bigger growth of many of the luxury imported brands. That was the only limited point I was making. It's a very complicated point to make because again, if you look at FMCG, those who are always the very mass brands. I'm not talking about the mass brands at all. I'm talking about a little bit cheaper products that kind of imitate the international luxury brands, and sometimes Indian consumers are okay to consume those. That's the kind of down trading I was talking about. Understood. How would you look at the competitive intensity in this quarter, both from online players in beauty and, you know, fashion retailers on the offline side and for both the businesses. Has there been anything which is monitorable for you on the competitive intensity side? I think it's for beauty. Anchit can answer. Anchit, are you there? Yeah, I'm here. You know, I think there's been a lot of noise in the system around increasing competitive intensity, and this is something which has probably been discussed a lot since pretty much we went public as a company. I think, as I've always said, there is a on and off focus on this category from some of the horizontals, you know, from time to time. But, nothing that we feel is really going to impact the growth because we have to realize that the consumption in India is so low on a per capita basis, and there is massive room to grow. Nykaa is still seen as the destination of choice for beauty brands as well as for beauty consumers. I gave a couple of examples earlier when I spoke that, you know, when Priyanka Chopra launched her brand in India, she had the choice to really partner with anybody, but she chose to come exclusively with Nykaa. Same thing with The Ordinary, which is a brand owned by the Estée Lauder Companies, which is one of the best-selling brands globally for skincare. Chose to launch in India, they chose Nykaa as the exclusive partner. I think brands continue to choose us as the port of call for their entry into India. Customers see us continue to see us as the number one destination for the latest trends within beauty. I don't think that is changing. If there is an increase in competitive focus on this category, I don't think that's necessarily a bad thing. That will help increase the awareness as well as the availability of beauty in the country, which should only help accelerate the consumption on a per capita basis. To answer your question, nothing really meaningful to discuss this quarter, but obviously we monitor it very closely. We're happy to update you in subsequent quarters as well. Just a follow-up here, Anchit. Just, you know, Thanks for making the point on the launch of Ordinary and NIOD. You know, let's put it this way: Has it become less easier to get brands on an exclusive basis versus, say, two years ago? Because now even, you know, offline retailers are also, you know, focusing on expanding the beauty, their beauty businesses. That's where I'm coming from. Is it less easier than where we were, say, two years ago? You know, I think it depends. You know, there are premium luxury brands who are very conscious about having limited distribution, and for them, Nykaa remains the indisputably the choice, first choice. Now for more mass brands, you know, for them it makes sense to have wide distribution, so even they continue to partner with Nykaa first. Yes, then they do choose to distribute slightly more widely, because for them the whole game is about distribution. Versus a couple of years ago, yes, there are more options for brands, but we're still not seeing our... We're not losing brands, if I could say that, to competition. I mean, Nykaa is a default platform which any beauty brand who wants to retail in India has to list on. Whether they choose to list on other platforms as well, that is, I mean, that's something that depends brand to brand and could potentially be something which brands choose to do going forward. You know, we still account for a majority of their online sales. As Nykaa having both physical retail distribution as well as online, there is no other competition right now in India who's offering that very healthy mix of both, 150 stores on the retail side, plus, you know, 20-25 million unique visitors on a monthly basis online who are only looking for beauty. I think the It's quite a difficult proposition to replicate for a competitor. Yeah, we're not seeing it yet. You know, even if a brand choose to not remain exclusive with Nykaa, that's not the end of the world because, you know, by listing on other brands, the brands are able to build greater awareness and that snowballs into better momentum on sales, which then comes back to benefit us as well. It really depends on the brand strategy in the country. Thanks. On the fashion side, how has been the competitive intensity, especially from the offline players? I think, in fashion, you know, again, we were not the first mover, so there has been competition, and there have been players who've existed in this market. I think a couple of things. First and foremost, you know, again, we always keep orienting ourselves to the size of the market and the industry. If, $49 billion of sales is gonna happen online by 2027, there's a lot of space for definitely a couple of players. I think we're keen to be one of those, few players for sure. What we feel is obviously we're growing much faster than the online market, so we are taking share. Even anecdotally, when we talk to a lot of our brand partners, it's quite clear that for several brands now we are, clearly, you know, a very, very serious player for them in the market. What I would say is that it's been a period of us taking market share. You know, I think the market is large enough definitely for us to emerge as a very meaningful scale. Just one follow-up on fashion. What has been the retention rate which we have seen, say, in the last six months or nine months? You know, we do track that, but we're not kind of re-releasing that number, so we won't be able to share that on this call. I would say they're quite healthy and, you know, slightly behind our beauty retention, which is really, I would say, very at par. Thank you. One final- We probably Sure. Yeah, go ahead. Yeah. One final question. How has been the trend on the inventory days, for all the three businesses, say, over the last quarter? Has it moved up, the inventory days? Inventory days have come down. Inventory days have come down significantly in beauty. I think it pointed out that last quarter, September quarter, was just before the season, so we had also stocked up on inventory, especially international, imported brands and other inventory. I think that has really come down recently, and you find it in our results. I think as far as fashion is concerned, we are a market-based business with the exception of only our own private brand and one and some imported brands where we take inventory. That's a reasonably small percentage, but growing. Yeah, we do manage our inventory with a keen eye on number of days of inventory that we are taking. Understood. Thank you. Thank you so much. Thank you. Thank you. Abhi, is that all calls? Due to time constraint, that was the last question taken for today. I would now like to hand the conference over to management for closing comments. Yeah, just thank you very much everyone for being here. I think we find it extremely difficult to do this presentation without, you know, just on an audio call without the presentation right in front of you. Unfortunately that's what we have now. I hope you understood what we were trying to say. We are always. Download. Yeah, you can download the presentation from our site, investor presentation, we are always available for any clarification that you may need. We really appreciate all of you taking interest and talking to us today. The big theme is that, you know, we are definitely investing for the future, and I think I'm really glad that this was an audience that understood that below EBITDA line is all just investment for the future. I think just want to continue to say that we are investing for the future and remain very confident about building the right businesses that we set out. Each of our key businesses are really taking the right steps in terms of the path to profitability. That should also be clear from, you know, the financials that we released at this time. What we remain proud of is that it's been a period of large amount of investment in customer acquisition, fair amount of investment in stores, and warehouse rollout, and fair amount of investment in building offices and teams for future businesses. Even with that, I think we are really happy on where we stand in terms of our being able to maintain our contribution margin and being able to deliver profit to shareholders. Thank you very much. Thanks. Thank you everyone. On behalf of Nomura Securities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.