Ladies and gentlemen, good day and welcome to the TCNS Clothing Co. Limited Q4 FY 2022 conference call. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. 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. Anant Daga, Managing Director. Thank you and over to you, Mr. Anant Daga. Thank you. Good evening, and welcome to our Q4 and full year FY 2022 earnings conference call to discuss operational and financial performance for the quarter and the year. I am joined by Amit, our CFO, and SGA, our investor relations advisors. Let me start by sharing key highlights of Q4 and full year 2022, our perspective on the situation and our focus for FY 2023. Amit can then take you through key financial highlights. After two years and multiple waves of COVID causing significant business upheavals, hopefully we seem to be facing the pandemic settling into an endemic. Over the last few weeks, we are happy to see the ethnic sector experiencing a gradual return to normalcy, with many parts of our offline network now tracking ahead of pre-COVID numbers. This, in addition to the aggressive store expansion, robust traction in MBO and online channels, as well as response to our new forays, should set us well to ride the next growth wave. Overall, FY 2022, we saw sales growing by 41% over last year. We saw a steady recovery trajectory till December, which got briefly affected by the third wave in January and early February. In Q4, starting with offline, we added 31 MBOs, making it one new store every three days. As you would recall, we had taken aggressive calls towards closing stores during the COVID period, and with these new openings, we are now back to higher than pre-COVID store base for the first time in last two years. Q4 started with COVID wave three induced lockdowns and disruptions, especially in North and Delhi NCR region. January and parts of February were significantly impacted for us and a meaningful part of our business comes from these regions, which further aggravated the impact on our business. Since then, we have seen a fairly consistent recovery, with many geographies now tracking higher than pre-COVID levels. One big win for the quarter has been MBO business getting back on track. We have just concluded our monsoon festive trade show and have received a strong order book from the MBO channel. In Q4, MBO business has scaled up well, and we expect to build further on it. Coming to online, the secondary sales have grown well in the mid-teens% for the full year on an already large base. This is despite consumer purchase behavior readjusting back from online to offline over the last year. We have pushed ahead with our strategic thrust of tilting the online operating model towards D2C as preferred model of sales due to greater control and enhanced experience. In line with this objective, we have taken a significant realignment of inventory with third-party marketplaces impacting Q4 reported sales. D2C already contributes to majority of online sales now, and the aim is to take it higher in the future. Now, coming to the update against key focus areas for FY 2022, sharing few highlights for the year. The first area this year has been store footprint expansion. As shared earlier, we got on an accelerated store expansion plan starting Q3 and have added 24 stores in Q4 and 48 stores in full year FY 2022 on a net basis. We also now have 14 Project RISE stores, which are already tracking at 1.5x-2x sales from the same catchment areas. I'm excited to share that we have recently unveiled W's new avatar with a completely new retail identity, with opening of a 3,000 sq ft Project RISE store in Indira Nagar, Bengaluru. In addition to defining the new brand identity, this store truly encapsulates and fully showcases all the categories like apparel, footwear and accessories and complete brand assortment of Folksong and Wishful. I urge you to please visit the store and experience the journey we are on. We have opened other such stores in Camac Street, Calcutta and Ambience Mall, Gurgaon. The intent now is to roll out this concept across all key markets. Project Bharat also saw opening of 15 stores this year. Store expansion will continue to be a key focus area for us in FY 2023, and as communicated earlier, we are targeting to open over 100 stores for the first time ever in a 12-month period. The second focus area for us in FY 2022 had been growth of online business. As I mentioned, over the last year, with the gradual return to normalcy of offline business, we have seen a readjustment of consumer demand. Despite the shifting context, our online business has continued to expand across both own website and third-party marketplaces. Our brand websites have grown ahead of third-party channels and now contribute almost 1/5 of online sales. A key focus area has been building on D2C model, and its share has also more than doubled over last year, contributing more than 50% of online business. The omnichannel fulfillment continued to scale up strongly quarter-on-quarter, and is now contributing to about 20% of sales for select channels and hitting close to double-digit number for the entire online business. Third focus area has been cash conservation and cost control. Maintaining balance sheet strength was the primary objective we laid out at the beginning of the pandemic. This has been a key win for us, and we ended the year with more than INR 150 crores of cash. We have successfully navigated the pandemic without any external funding or weakening of our cash position. In the fourth area of speed to shelf, we are happy to share that all the building blocks are now in place and should aid next phase of growth for our organization. Now switching gears to next year, our focus for FY 2023 will be accelerated growth. The segment is picking up pace, with occasions making a comeback and offices reopening steadily. We are seeing a strong resurgence of consumers coming back to stores and engaging with fashion, as opposed to a need-based chore it had turned during the pandemic-induced fear and restrictions. We are also sensing aggressive roll out plans by our channel partners in both LFS and online space and seeing a strong revival in MBO. On our readiness, we are excited by the building blocks we have put in place across all key enablers to tap into this growth opportunity, including product, supply chain, and channel. Last two years have all been about protecting the balance sheet, strengthening capabilities, building infrastructure and processes. On the product side, this monsoon festive will be the first season after two years when we will have a comprehensive season appropriate range for the consumers without any overhang or carry forward from the earlier seasons. We just concluded our monsoon festive store tour and have got a huge thumbs up for the collection from all partners and channels. The supply chain with our investment over the last year in setting up an integrated warehouse as well as automated inventory planning capability, is now fully geared up to support fast scale up. We have also made significant progress in product creation process for our new forays. We believe the disciplined approach over last two years to manage cash will now empower us to invest in growth levers. Given the aggressive scale up aspirations in FY 2023, we are now deploying the cash to fuel growth with significant step up in investment in working capital and other CapEx. While there are multiple growth levers, let me share my thoughts on few key ones. One of the key agendas will be store expansion, both horizontal and vertical. We are targeting to open 100 new stores in the coming year. The store addition will come from both franchise-led Project Bharat model in tier 3+ markets, as well as normal expansion in existing markets. A key constraint that we face in the existing store size, which no longer suffices for the gamut of product offered by W. We are already experiencing a large sales spike in the existing Project Tribe stores, driven by both sales growth of existing categories, as well as a significant contribution of new collections and product categories, with their full representation now being possible. This further reinforces our belief that expanding a store size in existing catchment to offer a complete product portfolio is a very, very large opportunity for us, and therefore we are aiming to upgrade a lot more stores to Project Tribes over the next few quarters. This year, we'll be opening at least 25 Project Tribe stores across key markets, in addition to the ones we already have and regular upgradation across many more markets. With the reorientation of marketplace business towards D2C in place, we are firmly set to drive the online business growth across both third-party marketplaces and brand website. We have focused on establishing the single view of inventory and are live with all marketplaces across all appropriate partnership models. Going forward, we will continue to drive the growth of third-party marketplace channel through leveraging strategic marketing, scaling up to omnichannel fulfillment model, and launching online first products. With a focus on improving consumer experience, we expect share of omnichannel fulfillment to double this year. For the brand website, in addition to the growth enablers for marketplace, we will also go deeper into personalization and sharply relevant communication for each consumer. Coming to new forays, I'm happy to share that this was a quarter when the new categories and brands started achieving critical mass. We now have a clear consumer product fit in place. While there continues to be more learning each day on all sides, whether product, channel or supply chain, we feel more confident about each of these initiatives every single day. Overall, these forays put together, we are all set to hit an annual run rate of over INR 100 crores of consumer sales by the end of this year. Given the possibilities that lie ahead of us and the reserve put in last two years in creating a more robust platform, incubating new concepts and retaining financial and operational strength, we are all set to get back on building the next growth phase. I will now request Amit to take you through key financial highlights for Q4 and full year FY 2023. Thanks, Anant. Good evening, everyone. Let me share the update on our financial performance for FY 2022 Q4 and full year. Our Q4 revenue was INR 234 crores, which is a growth of 6% over our FY 2021 Q4 revenues. The quarter was severely impacted by the third wave of COVID, affecting large parts of January and February sales. We also had our inventory alignment in the online channels, in line with the objective of moving towards a higher share of D2C, which had a significant impact in our reported sales from this channel. Our gross margin for the quarter was 68.9% versus 57.5% in FY 2021 Q4, and 67.8% in FY 2022 Q3. Gross margins are now tracking at pre-COVID levels. However, we should see this metric in conjunction with selling and distribution expenses and other overheads. As we have mentioned earlier in our communications as well, every channel that we operate in has its own nuance in terms of revenue recognition, resulting into gross margin% changes and costs reflecting in selling and distribution expenses or other overheads. Accordingly, basis the channel mix, these metrics could vary in a range between different quarters. For Q4, the company generated a positive EBITDA of INR 32 crore versus last year's Q4 EBITDA of INR 41 crore. We incurred a PBT loss of INR 7.6 crore in the quarter versus a PBT of INR 4.7 crore last year Q4, and a PAT loss of INR 5.8 crore in Q4 versus a PAT of INR 3.9 crore last year Q4. The rental concession that we have booked in the quarter was INR 10 crores versus INR 17 crores that we recognized in Q4 of FY 2021. Please note that in the quarter, we have also taken a provision for receivables for a specific partner, which is reflecting in our other overheads. While the situation is evolving, we have been more conservative in taking this provision. During the quarter, the company delivered highest ever gross addition of stores. We opened 31 new stores and closed seven stores, taking our store count to 599 stores, highest ever. Now let me take you to the full year performance of FY 2022. Our FY 2022 revenue was INR 896 crores versus INR 635 crores last year, a growth of 41%. For the full year, we incurred a PBT loss of INR 7.2 crores versus a loss of INR 77 crores last year. At PAT level, we incurred a loss of INR 5.7 crores this year versus a loss of INR 56.4 crores last year. Our key focus in FY 2022 was to maintain our balance sheet strength. We have closed the financial year with cash reserves of INR 156 crores. As on thirty-first March 2022, we had a working capital of INR 363 crores, which is at similar levels as we had on thirty-first March 2021, but lower than what we used to have pre-COVID. With business now accelerating, you would see a buildup in our working capital in line with the business growth. Thank you. We are now open to questions. 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 touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Mr. Jignesh Kamani from GMO & Co. Please go ahead, sir. Hi. Thanks for the opportunity. Can you quantify the revenue loss because of the online realignment with all of the customers? Is it a permanent loss of revenue or revenue will differ from the fourth quarter to first quarter? Jignesh, see, the impact on the top line growth would be about 400-500 basis points. This is something like, you know, it's a readjustment of inventory, so this is not something that, you know, will be recouped in the future. This is when you shift the model from B2B to D2C, obviously the primary sales get reduced. That's the impact that you are seeing. Over a period of time it will adjust without impacting the consumer? Sorry, your voice is not very clear. Over a period of time it will adjust state, but there won't be any impact from the secondary sale, right? Only during this period. For a short period, there was some impact, but from a long-term perspective, no. Not impacted. Understood. Sorry, just to clarify this point further, while most of this has happened and, you know, gradually it's been happening, there would be some marginal sales which would be left, which would be done over next few quarters, but the impact would be very marginal. Understood. Second thing on the Elleven brand, now it's almost 2.5 years since we are operation. Definitely there was a COVID because of that. How is the current learning and has the model stabilized in terms of store size and revenue per square feet and other metrics, if you compare with the competitor or our internal benchmark, at what level we are? Sure. First of all, you know, you are right. We launched our first store just a month before COVID hit us, and frankly, for the next two seasons we did nothing on that. We had couple of stores operational, but frankly there was no focus on that. Elleven, we started focusing only since last season. As you would recall, we opened the first set of stores, which were about 10 odd stores, and this is the learning, we have just opened seven stores in this quarter. We are getting already far better traction from these stores, and we now have a healthy mix of stores which are doing as per our expectation. Even in other channels, I think, we have seen a month-on-month strong buildup on the brand and on the products. A lot of learnings in terms of consumer product, fitment and all is already in place. Obviously, you know, when we are saying that right now, we are seeing some traction, I am sure by end of this year, these numbers would be at least 2x, if not more. Product consumer part, I think we are well confident now. We have done most of the learnings. LFS part and SIS part, again, the learnings are very clear, and we are all set to increase the count. Having said that, of course, we are in talks with all the large format guys, and probably they would want to wait at least a season, full season before they decide on this. Coming to supply chain, there are two parts. One, of course, the products that we also do in our other brands, so there it's easier. The other part of the supply chain is, you know, we are also importing a lot of fabrics for this, and we are trying new kind of silhouettes. There we are still scaling up, which should take another couple of months. Overall, we are now very confident of what we want to run along with. Another couple of months for current set of EBOs to observe and then scale it up faster. Safe to assume after two or three quarters, probably we'll be ready to open 4-50 stores a year? I'm sorry. Again, your voice is not very clear. Yeah. Safe to assume after two or three quarters we'll be ready to open at least 50-60 stores a year after that? See, I think, from end of Q3 time, because we work in seasons, so by end of monsoon festive season, you'll start seeing the scale up. Yes, if the project goes well, then probably next year we'll be looking at that kind of numbers. Can your 100 stores include the 11 store addition also, or that is separate from that? No. Out there we have just taken about 10 odd stores. Anything above, over and above that would be. Again, just so that the point is clear, this 100 would be a net number. Obviously there will be some more upgradation, so the gross opening would be in excess of 125. 100. Thanks a lot. Yeah. Thank you. Next question is from the line of Varun Singh from IDBI Capital. Please go ahead, sir. Yeah. Thank you. Hello, Anant, sir. Just two questions. First, I was just looking at your numbers and just wanted to understand, sir, that in Wishful, recovery is low compared to business recovery in the W brand. I mean, when we look at absolute revenue and compare it pre-COVID, for example, Q3 FY 2020. In case of Wishful, our revenue is 53% of pre-COVID level, whereas in case of W, revenue is 73% of pre-COVID. Whereas, sir, I mean, I would have expected Wishful to do much better. I mean, the numbers are to be in quite an opposite direction. For example, 73% Wishful and 53% W. Can you please help us understand that why business recovery in Wishful is much lower compared to W? Varun, just to clarify, you're talking about Q4 numbers, right? Yes. Q4 Wishful recovery is actually not less. If you know, refer to the slides in terms of the brand share, you'll notice that Wishful is at a similar share percentage. Let me actually pull out the slide at my end too. Just give me a second. Vikas, maybe there's some difference in how we are seeing the numbers, but Wishful is only entering in line, so not material difference. In fact, you know, in the first couple of quarters, obviously, because we were not putting enough Wishful stocks in the store, there was a gap. Since festive, that has got covered. Okay. Wishful share for the quarter. Maybe we can discuss this again offline, but. Yes, yes. That's not the case anymore. Understood. When we saw the Wishful share coming down, obviously, you know, at that point in time, we took a conservative view of how consumers are coming and shopping. We actually tilted the balance towards more core and day wear, but now we are back. Okay. Okay. Yeah. Sure, sir. Understood. Amit, just this question on gross margin that we have our current gross margin is kind of highest ever, at 68.9%. What is the reason for this? I mean, highest ever margin given so much of inflation which is out there in the general economy. What's the reason for this? This and can we maintain this margin going forward for the FY 2023? Varun, let me give you a picture on the gross margin, and let's kind of segregate the understanding of gross margin into two parts. One is channel mix and second is the product piece, right? Where you spoke about the inflation. We have taken some price increases in the season to compensate for price increase on the raw material side. Also what we've done is that we have done various put in various efforts on the product creation itself to make sure that whatever price increases we are seeing in the fabric is mitigated to certain extent. As we have shared earlier, what we have done is that we have looked at the entire assortment that we have for all the brands that we have. We have, you know, either replaced fabric, we have kind of, you know, changed the mix between the uses of the fabric and the value addition. A lot of those kind of work has enabled us to mitigate the fabric price increase to a larger extent, and the balance has been compensated with the price increases that we have taken on our MRPs. The second piece, and that is where the trick is, because, you know, we work in different, you know, channels, and within the channels also there are nuances. Let's say, let me give you an example. Within online, we have a B2B business, we have our own website business, we have our B2C business. All these three business within the online itself has a different revenue recognition, and that affects how the gross margin gets recognized. It has a difference in terms of what cost sits in other overheads and what is the cost that sits in you know, marketing expenditures and other overheads. Similarly, between the different channels that we have, EBO or LFS, the revenue recognition differs. This in turn affects how the gross margin percentages eventually land up to. To answer your question in simple terms, 68% has to be seen in conjunction with our selling and distribution expenses, which is what I mentioned during my commentary, and it has to be seen in terms of how the overheads is reflecting. Now, going forward, what the channel mix eventually will land to in a particular quarter will impact whether we'll be able to maintain the 68% gross margin that we delivered in this quarter, or it'll be more like, anywhere between 64%-68%. Okay. Understood, Anant. Just one last question that will we be I mean, assuming that INR 1,150 crore is a base kind of revenue, I mean, FY 2019 and FY 2020, we kind of achieved this level of revenue. Assuming that now there would be no lockdown, et cetera, and given the aggressive store addition guidance that we aspire for, do you think 15%-20% kind of revenue growth over that number should be kind of an achievable range? Vikas, two things out there. First, we believe, you know, industry is getting back to normalcy faster. In a given year, any which way, I think, a mid-teens to high-teens% number should be deliverable. This year, there has been a gap of two years post-COVID growth, so our expectations will be higher. Understood, sir. Understood. Yeah, that's it from my side, sir. Thank you very much, and all the best. Thank you. Thank you. Before we take the next question, a reminder to all the participants that you may press star and one to ask a question. The next question is from the line of Devanshu Bansal from Emkay Global Financial Services. Please go ahead, sir. Yes. Hi. Thanks for the opportunity. Anant, you indicated that most of the online business is now D2C. Wanted to check, is revenue accounting for D2C similar to outright online sales, or is it similar to the large format sales channel that we have? Hi, Devanshu. In case of D2C business, the accounting is similar to what we do for LFS, which is where the revenue gets recognized at, you know, the consumer sales net of tax. It's very different from the outright business, because in case of outright business, the revenue is recognized net of, you know, margin, discounting, all of that. Sure. Got it, Anant. Is this omni capability that we have developed on our own website as well as third-party marketplaces really a differentiator that we have built in TCNS or all brands are offering this omni-channel capability across third-party marketplaces? Devanshu, while, you know, almost all the brands are on this journey, I would say that we are, we have been able to, you know, create a stronger base for ourselves compared to many other players. Having said that, this is a journey which, you know, anyone with a great online and a very vast offline distribution would aspire for, because frankly, this is going to be a very big differentiator. Now, for us, we have a very strong online presence as well as we have a huge offline network. Obviously it would be a source of competitive advantage compared to someone who has a more limited presence on either. One great benefit that we see out here, apart from, you know, a better customer experience and fungibility of inventory, it also gives us an opportunity to showcase entire gamut of product, irrespective of space in the store, irrespective of location. So I think that's a huge advantage. Having said that, you know, all the brands are trying to create this silo. I think given our current trajectory, we should be able to build it slightly good. That's helpful. Does that help in lower returns as well, as a cost of delivering? Yes, yes, because we have, what we have seen is, you know, any curtailing in time to delivery also helps that. Correct. It'll also help drive full price sale because all the inventory would be available. Both ways. Sure. Anant, from store level perspective, we have added new categories which are ramping up quite well. On the cost side, we have curtailed our unproductive network significantly over the last two years. How should we see the profitability of your network going ahead? I know, I understand that you have been investing in new areas as well, but overall, how should we see your profitability compared to pre-COVID levels? See, if you talk intra channel, obviously EBOs, once the sales recovery are complete, you know, one important thing would be the same stores also to recover to pre-COVID levels, where we are still not there completely, while couple of regions and many parts are ahead of pre-COVID, but I think we still need to do some catching up. Once that catching up happens and there's a commensurate growth, I think EBO channel per se would be more profitable than where we were. Because you're absolutely right, our new stores profitability are decent, and we have done away with most of our unproductive stores. There's only one impact that could come in on the share swap of MBO and online business, because MBO historically has been the most profitable business, and now it's at a certain level. While online probably is a lower profitability model than either EBO or MBO. There would be some trade-offs therein, but within channel, EBO surely will be more profitable. Sure. Lastly, Anant, I wanted to check, there have been categories like jewelry, celebration wear, even formal wear, where there has been a pent-up demand, which has sort of negated the impact of lost sales due to store closures during the pandemic. However, this has, as you said, that we are still not recovered in some of the regions, has not reflected in our ethnic category. What according to you are the reasons for this? Do you foresee some sort of a wardrobe refresh that should lead to stronger growth for us? See, as you have rightly pointed out, compared to many other categories, probably we have seen a lag in ethnic so far. Having said that, you know, if you look at last festive, and if you look at parts of April also, with some occasions happening, that gap has reduced significantly. Now, our understanding of the situation after talking to all our peers, our partners, because they all are in the same boat right now, is while occasion wear has made a strong comeback. I think the other key pillar of ethnic occasion usage is also work and related outings. That is still building up. I guess, once that is also back completely, then, probably you'll see much better trajectory in terms of overall sales. That's the understanding that we have right now. In terms of region, frankly, there's no particular reason why, you know, one or two geographies are struggling. It's difficult to pinpoint a single reason for that. Sure. Anant, do you see this recovery as some component of pent-up demand will also be there? Or do you expect a normal sort of recovery to return? No, I guess, you know, if you look at last festive also, it was not a complete unlock. Despite a complete unlock, the categories really saw a very decent spike in sales. I guess this festive we are looking at probably the strongest festive ever, not only for us, but for the entire ethnic industry. Last two years, you know, because of the lockdowns and all, consumers have not refreshed their wardrobes. Frankly, as brands also we have not come up with really new innovative ranges. Our focus this time is to get newer silhouettes, newer styling, lot of innovation. As you are rightly suggesting, I think consumers are going to set the refresh version button for their wardrobe. We think it should see the pent-up demand coming back that time. Sure. Very helpful, Anant. Thanks for taking my questions. Thank you. As a reminder to all participants that you may press star and one to ask a question. Next question is from the line of Vikas Jain from Equirus Securities. Please go ahead, sir. Thank you for the opportunity. My first question, of course our January was definitely disrupted because of the third wave. How do you see the SSSG of our mature store probably from the March and April perspective? Have they been tracking above the pre-COVID levels, or how are they? Just wanted a comment on that. See, without getting into too much specifics on monthly basis, as of now, most of our stores are tracking at about 90s kind of recovery number. April obviously was better because just now I explained that there were a couple of occasions, festives. But that's been the trend right now. Again, if you look at a regional level, South and West are already ahead of pre-COVID numbers. Most of the pockets there are ahead. I think it's North, which is lagging slightly, and East. Correct. Okay. Right. Sir, one more question. In your opening comments, you did mention that you target to open more of the larger size stores for FY 2023. Do you think we have attained or we have largely got our store economics correct when we open our larger size stores so as to like in totality they contribute to the overall margins and profitability? I mean, some comments on your thought process with respect to opening higher size stores and translation of same into the profitability. Vikas, three things. First, in terms of revenue, obviously they are tracking at a 1.5x- 2x kind of revenues. Rental increase for us so far in this cohort has been about 1.3x. Okay. The space increase has been about 2x. Now right now we are saying that, you know, there's still some recovery left, so I'm sure this will further build on. From that angle, in terms of profitability, I think we are bang on. Most of these 15 stores are profitable from month one, and as of now, we are sensing a payback period of anywhere between, you know, 12-18 months for most of these, including the security deposit, interiors and inventory. I think, it'll have a very positive impact both on our PNL and balance sheet and cash flows. Sure. Basis success of these, we are going even more aggressive on the same. Correct. Sir, one last question. Can you just quantify the realignment of the inventory that you did for the quarter? Some comments as to what is the freshness of the inventory level as we go ahead in the next financial year? First part, obviously, I just mentioned that, you know, this would have given us another 400-500 basis points of growth. That's the extent of realignment. Second question, I'm sorry, sir, I'm not very clear what you're asking about freshness. About the inventory freshness level, as we enter the new season, is it like? If you would recall, since our last three seasons, we have always been taking carrying forward inventory from one season to other because our whole focus was on working capital. As a result, you know, every season our first launch never saw a full-fledged season appropriate product range. Right now, as we move into monsoon festive across all our point of sale, you will not see more than 2% or 3% of carry forward. Everything would be fresh. If that was the question you were asking. Yes, sir. Exactly. Thank you so much. Thank you. Next question is from the line of [Arvind Gushta] from IME Capital. Please go ahead, sir. Hello. Am I audible? Yeah. Yeah. Hi. Hi. Thanks for the opportunity. I actually had a couple of bookkeeping questions. I just wanted to understand and kind of confirm my understanding on the LFS accounting, because the revenue recognized in the profit and loss statement is net revenue, right? Net of the channel margin that we give to our LFS partners, right? No, sorry. Correct that. LFS is a business which is on SOR model for us, sale or return model for us. There the revenue is recognized at the net consumer sales level, net of taxes, and the margin that we have to pay to any LFS partner gets recorded in sales and distribution expenses. Okay. Any margin, say, for any LFS partner, that margin gets recognized in one of the cost line item which is sales and distribution, right? That's it. Any discount schemes that we co-run with the LFS partner also goes into the same part. That is already netted when we report the net revenues. Discount to the consumer is already reduced when we do the revenue recognition. Taxes are already reduced, and margin- Okay. is an expense for us. Okay, great. Another question on one small, one particular line item. On selling and distribution line item, right? This is a fairly big line item as a percentage of revenue. Earlier, at the IPO time, you used to give us fabrication cost, and I understand this fabrication cost you have stopped it disclosing for competitive reasons. I believe you lumped this into selling and distribution costs. I just wanted to understand what are the components in selling and distribution line item right now, because it, technically, fabrication cost as a percentage of revenue should have gone down since we moved our operations out of NCR. We should have seen that benefit. This keeps fluctuating a fair bit. Can you kind of give me a picture on this? Yeah. Actually it's fairly simple. Any cost which goes into the production of the, Products is, you know, above the gross margin line, right? Any distribution cost. You know, to answer your question specifically, what goes into selling and distribution, primarily there are two costs today. One is the- Okay. As I mentioned, is the margin that we have to pay to large format stores that is sitting in selling and distribution. Second, with a higher share of D2C business, there are costs which pertain to that channel which sits in selling and distribution expenses. This is basically a fulfillment cost. Yeah, fulfillment cost, warehousing cost. Okay. Some bit of logistics cost, all that will sit in the selling and distribution expenses. There will be some cost which pertains to EBO channel or other online channel, but those are very, very small percentage of selling and distribution. This line item also includes the fabrication cost, right? No, no. Any cost that we pay to any fabricators for producing the garment. Okay. Is already netted off when we arrive at. These are all in. Yeah. It's in the product cost. Oh, okay. This is in the product cost. Just one second. Okay. Yeah. Okay, that makes sense. Sure. That's about it. I'm done with the questions. Thank you. Sure. Thank you. Next question is from the line of Jignesh Kamani from GMO & Co. Please go ahead, sir. Hello? Hello, am I audible? Yeah. Hello. You're audible now. We didn't get it earlier. Yeah. Since last 1.5 year, our focus was on the working capital and hence we cut down a lot on the inventory, which impacted our revenue for the third and fourth quarter to some extent as the recovery had been weaker. How is the current inventory position to gear up for the upcoming demand? Because if you think about inventories up by just 30%, if I take about 15% increase purely because of the higher pricing of the raw material. On volume purchase, we are just 13% increase in the inventory compared to last year. It's sufficient to take care of the future demand? you know, there are a couple of components to this. One, you would remember that we said we are now keeping OTB for within season repeats of best sellers, which was our quick replenishment model. that is now functioning very well. Okay. Obviously some OTBs that we have kept there. Second, you know, a lot of the new season arrivals, monsoon festive for us starts from July end. A lot of those arrivals would actually be happening in April, May, June. That is the time when you'll see further build up. This time a stock out situation will be very limited, right? If there is suddenly pent-up demand happen, we may not lose out on our market share compared to a competitor. No. So far in the last three, four season, obviously we have left some growth on the table because we wanted to manage the working capital. This time now with, you know, more or less COVID behind us, we are putting the best foot forward. Ideally there should not be such a situation. Understood. Second thing on the sourcing part. Now, how much of sourcing is coming from the known north region because we began to set up our sourcing center and manufacturing hub in the known Delhi NCR region also. already the north, non-NCR is now contributing about 25%+. This is coming from, you know, units in east, south and up north. Any meaningful benefit in terms of the raw material costing or the lead time improvements? If you look at it, raw material is still coming for the bigger mills. Obviously it's not the fabric base that is shifted. What we have shifted is our job work, which is conversion of fabric to garments. Obviously with the lower wages and lower overheads, those places are giving us material at a lower cost. That's also one of the key reasons why, you know, our price increases, typically we have been on the lower side. There are some benefits that is coming from that. Understood. Thanks, Anant. Thank you. The next question is from the line of Devanshu Bansal from Emkay Global Financial Services. Please go ahead. Yes, sir. Thanks for the follow-up opportunity. Amit, you indicated some receivable loss that has been booked in other expenses. Can you quantify the amount of the loss? Because other expenses have increased quite significantly this quarter. Sorry, Devanshu. We don't want to share that quantification. It's a conservative provision that we have taken for one of the partners. Let me state that, you know, the reason for the losses for the quarter is on account of that provision that we have made. Okay. Contribution of MBO channel has picked up strongly versus our year expectations of about 4%-5% contribution. How should we see this channel going ahead? My guess is, you know, we should see a number in a mid-single digit kind of thing, so it could be anywhere between, you know, 5%-8%. Having said that, please, I just want to reiterate, this is not a business which, you know, quarter-over-quarter number would make too much sense because it is a seasonal business and there are phases when the primary sales happens in this. Overall from a full year perspective, I think it should be a 5%-8% kind of number of overall sales. Sure, Anant. For online, Anant, you sort of indicated that with offline sort of gaining traction, this channel saw some impact in Q4. What are your growth expectations from this channel for FY 23 over FY 22? See, first to just make a small correction. I think what I meant by realignment of offline and online was, of course, the year before this was much badly impacted for offline. Obviously there was a surge, and this year with offline gradually reopening, some realignment has happened. That's what I was talking about. See, in terms of growth, I think online channel is. Well, and I'm talking about doing a good profitable business, and it's not like discounting to no end and getting growth. I think on a full year basis one should at least expect, you know, a 20%-25%+ kind of numbers. Sure. Last question from my end. You have talked about taking new forays to annual run rate of about INR 100+ crores by FY 2023 end. What are the current run rates for these new forays? All put together, we are right now tracking about INR 40-INR 50 odd crores on consumer sales basis. Okay. Most of it would be coming from footwear as of now? No. If I talk about current day situation, footwear, Elleven, both are contributing equally well. Okay. In terms of new forays, footwear, Elleven, and cosmetics, these would be the key segments. Cosmetics is just in the pilot phase, as we said. For our business, it's a season. Obviously that's just a pilot phase right now. Monsoon festive, we should see some build up, but I am mostly talking about Elleven and footwear, which are now completely tested. Sure. Makes sense, Anant. Yeah. Thank you. Next question is from the line of Varun Singh from IDBI Capital. Please go ahead. Yeah, thank you for the follow-up, sir. Sir, can you please elaborate more on Folksong? I mean, why did we launch this brand? Currently we are in 70-odd EBOs, and I mean, our footwear is around 200-odd EBOs. I mean, how are you thinking on the expansion or availability of this product in 100% of our EBOs? On Folksong, sir, if you can give more detail with regards to how you are thinking or what is the strategy behind launch of the brand? Sure, Varun. See, first of all, you know, we are trying it out as a collection in our select W stores. The idea behind this was, you know, there's a growing demand in consumers for a sustainable artisan, more Indian rooted products. We thought that, you know, our consumers would love to have a share of that from House of W. That's the reason why we started with this collection. The initial idea obviously was to just put it as a collection, but looking at the response, we are now expanding it. Why we have selected the 50 or 70 doors, 50 doors in the first season and then 70 now is because, you know, the supply chain for this is slightly more complex, and we need to have a full-fledged learning out there also. On the demand side, I think we have got some phenomenal response for this, but supply side has to catch up. As we move into future, you know, we'll see this thing getting replicated in many more stores. Having said that, right now we don't want to put just one bay or two bay of Folksong in smaller stores, so we'll stay away from that. As we open more Project Life stores, as we open more bigger sized stores in key markets, that's where we want to place it. Understood. I mean, is there any, for example, store size, benchmark that, you know, if the store size is more than this, then only we'll be kind of putting Folksong? Otherwise it will be cannibalizing, the sale, sales of my existing brand. Two things are out there. Wherever we have put Folksong, we are seeing an increase in average transaction size. Obviously, while the space is taken away, I think it still contributes positively. Second, it's not just about the size of the store. First is the clientele. Folksong so far we have just been selling on full price, and it's like a season agnostic premium product. All the key markets wherein, you know, we sell a lot of our premium stuff is where Folksong will go. Again, Folksong, to do justice to Folksong, we need at least, you know, 150 sq ft space. I guess any good store in such a market, which is 1,100-1,200 sq ft should take Folksong. even now, just to be very clear, I think we need to scale up the supply chain. On demand side, we have a very similar sourcing. Sir, I mean, we could have done similar stuff under the brand Wishful or, I mean, why Folksong as a separate brand? Varun, they are very, very different genres of product. Wishful is more Okay. Occidental. When you look at Folksong, the fabrics are more organic. It's all antique Indian art and craft. It's a very different. It's like a timeless classic versus Wishful, which is far more fashion oriented. Okay, understood. Sir, on footwear, I mean, currently 200 EBOs. Why only 200 EBOs? How are you thinking about expansion into existing EBOs along with the new EBO targets that we have? Varun, answer again here is very similar. You know, footwear needs big back rooms and there has to be enough space. While you know the footwear, wherever we have placed in the bigger stores, it's already contributing to a double digit number. There are a lot of stores which just can't take footwear because of the space crunch. As we open more and more bigger stores, footwear is getting placed in every single store. Understood. Okay. Sir, on incremental, for example, store addition guidance that we have. Can we expect that footwear will be there in almost most of the stores or not necessarily? Project Bharat stores, footwear might not be there because those would be typically smaller stores. Most of the expansion that is happening should carry footwear. Otherwise Even jewelry also, sir? Yeah. Footwear, jewelry, Folksong, all. Well, Folksong obviously will be limited to more premium market, but footwear, jewelry, cosmetics, all very good. Understood, sir. Thank you very much, sir. Yes. I just want to mention, you know, for everyone on the call, if someone, if any one of you are in Bangalore or, Calcutta or Delhi, please, try to visit these stores that we mentioned about and you'll get a much better sense than me talking on this call of how these things are coming to life. Right. Sir, just one last question, that Aurelia Girls, we made a mention about it, I think, couple of quarters back. Any commentary you wish to make on the kidswear category, which is relatively more fast growing? On kidswear, we mentioned, you know, this is the best season to do a full-fledged range is monsoon festive. This festive we are putting up a range which is probably a more comprehensive range of more than 80-odd styles. Apart from the top EBOs, we are also trying it out in select LFS. This season you'll see a full-fledged launch of Aurelia Girls also. Okay, sir, that's it from my side. Thank you very much. Thank you. Thank you. Due to time constraints, we are closing the question and answer session. I would now like to hand the conference over to Mr. Anant Daga for closing comments. Please go ahead, sir. Thank you everyone. Thanks for joining the call. We hope we have been able to address your queries. For any further information, please do get in touch with us or SGA, our investor relations advisors. Wish you all a very nice evening. Take care and stay safe. Thank you. On behalf of TCNS Clothing Co. Limited, that concludes this conference. Thank you for joining us and you may now disconnect your lines.