Ladies and gentlemen, good day and welcome to the TCNS Clothing Company Limited Q2 and H1 FY 2023 earnings conference call. This conference call may contain forward-looking statements about the company which are based on beliefs, opinions, and expectations of the company as of the date of this call. The statements are not guarantees of the future performance and involve risks and uncertainties that are difficult to predict. As a reminder, all participant lines will be in 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, sir. Thank you. Good evening, everyone, and welcome to our Q2 and H1 FY 2023 earnings conference call to discuss operational and financial performance for the quarter. I'm joined by Amit, our CFO, and SGA, our investor relations analyst. First of all, we wish you a very happy festive season. We hope you all had a joyful celebration with your family and friends, and claimed back a part of life which was being missed last couple of years. While Amit can share detailed financials, let me share key highlights of Q2 and H1 and our perspective on the emerging market situation. As we had laid out, our focus this year is on building growth momentum. I'm happy to share that in Q2 we have achieved our highest ever quarterly sales. Overall, the company revenue grew 46% year on year and 27% sequentially over Q1 FY 2023 to clock INR 351 crores for the quarter. A key milestone this quarter has been the number of EBOs launched. In line with our aggressive store expansion plan, we opened a gross of 41 stores in this quarter and 32 on net basis, which again has been the highest ever store opening in a quarter for us. This season also saw us investing in brand building after a hiatus of two years. Both W and Aurelia launched comprehensive 360-degree campaigns spanning digital, retail, influencers, and partnerships. We have significantly upped our marketing investment, which will reinforce our brand's market leadership position. Coming to the performance highlights of Q2 FY 2023, we are seeing resurgence in the overall women's ethnic wear market, both year-on-year and sequentially over last quarter. The women's ethnic wear category has seen strong recovery except North, where it still lags. Overall, for us, offline channel grew by 60% over last year. Aurelia led the growth, aided by a strong product range and comprehensive marketing campaigns. Talking about EBO channel expansion, in this quarter we opened 32 stores on a net basis to reach a total count of 648. In addition to these 32 stores, we have upgraded another 5 stores under Project Rise initiative, taking the tally of Project Rise stores to 25. As we shared earlier, given the rapid evolving experience expectations of Indian consumers, Project Rise initiative is helping us tap into existing demand in some of the most critical and important markets across the country. This quarter also saw opening of 11 EBO stores, taking the total count to 32. As shared earlier, we would be tracking the performance of these stores and accelerate 11 store expansion thereafter. Overall, all brands put together, we are well on our target to open 100+ stores on net basis this year. We have a strong pipeline of new stores, and going forward, all brands put together, each quarter should see 25 store-30 store additions on net basis. In LFS channels, we added 57 stores, taking the total count to about 2,479. Overall, LFS channels continue to be impacted since one of the largest partners is still not functional. Online channel continues to grow well and scaled up to 2.7x over Q2 last year. Overall, it has been heartening to see the offline channels bouncing back after a prolonged COVID impact, and we should see them build thereof. Coming to online channel, one of the key objectives has been to build a strong own website B2C business. We are happy to share that our own website has grown ahead of other channels and is now contributing to a quarter of total online sales. On marketplaces outright business front, our primary sales continue to lag behind the secondary, and hence the reported numbers are looking lower than actual consumer sales on secondary business. Of late, we are also seeing discounting and acquisition costs increasing across online channels. We are committed to building a profitable online business as well as balancing out growth opportunities and cost matrix in the near future. Talking about the new forays in the monsoon festive 2022 season, we have rolled out comprehensive product range for each of the forays. Given the healthy consumer acceptance, new forays are scaling up rapidly, and we are well on track to reach our stated target of INR 100 crore ARR and consumer sales by the end of the year. All in all, we continue to build on all the key initiatives and focus areas for the year. Now I would request Amit to share key financial highlights for the quarter. Thanks, Anant. Good evening, everyone. I'll be giving you an update on our financial performance in Q2 and H1 FY 2023. I'll start with the Q2 performance. Our Q2 revenue was INR 351 crore, which is a growth of 27% over Q1 FY 2023 revenues of INR 276 crore, and a growth of 46% over our Q2 FY 2022 revenues of INR 239 crore. Our gross margin for the quarter was 67.3% versus 62.7% in Q2 of FY 2022. As we had mentioned earlier, we should see this metric in connection with selling and distribution expenses and other overheads, as every channel has its own nuance in terms of revenue recognition, gross margin percentage, and costs reflecting in selling and distribution expenses or other overheads. Accordingly, based on the channel mix, these metrics could vary in a range from quarter to quarter. For Q2, the company generated a positive EBITDA of INR 47.9 crores versus INR 38 crores in Q1 FY 2026, and INR 45 crores in Q2 of FY 2022. EBIT for the quarter was INR 10.1 crores versus our PBT of INR 2.6 crores in Q1, and INR 14.1 crores in Q2 of last financial year. PAT for the quarter was INR 7.6 crores versus INR 2.4 crores in Q1, and INR 11.1 crores in Q2 of last financial year. We have INR 0 rental concessions in Q2 this year versus INR 17 crores of rental concessions that we recognized in Q2 of last financial year. During the quarter, the company added 32 exclusive brand stores, taking the store count to 648 stores. We have added 57 points of sale in LFS channel, taking the doors count to 2,479. Speaking of our performance in H1, the revenues were INR 627 crores versus INR 373 crores in H1 of last financial year. It's a growth of 88%. EBITDA in H1 this year was INR 85.8 crores versus INR 24.7 crores last year. PBT in H1 was INR 12.7 crore versus a loss of INR 35 crore last year. We are now open to questions. Thank you very much. We will now begin with the question and answer session. Anyone who wishes to ask a question may press star and one on the touchtone phone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handset while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Thank you. We take the first question from the line of Devanshu Bansal from Emkay Global. Please go ahead. Hi, sir. Thanks for the opportunity and congratulations on strong addition in the Aurelia network. We have sort of invested strongly in the inventory, and we have made some new launches under both W, Aurelia and Wishful. Just wanted to check if you could share some thoughts on the festive traction that has gone by during Diwali as well as Dussehra. Yeah. If you look at the festive traction, Aurelia has seen strong recovery. Barring North, it has been ahead of the pre-COVID numbers. North still is slightly behind, so that's where Aurelia is. Compared to Aurelia and W, we had some product challenges, and there were particular styles which we had optimized for maintaining the MRPs closer to pre-COVID, I mean, closer to earlier season levels. W has tracked slightly slower than Aurelia. This is between the two brands. In terms of Wishful, it is in line with earlier levels where it was. In terms of new product categories, elleven has shown great traction in LFS, so that we are gearing up. Footwear, jewelry, cosmetics continue to contribute strongly in the stores where they were launched, so that is also building out well. Got it. This Aurelia has been at pre-COVID levels, so this is on like-to-like basis or it is to the overall? My question is it on a larger store base that we have seen like-to-like performance or is it on a per store level that Aurelia has recovered to pre-COVID levels? Sure. Let me just explain it again. On a like-to-like basis, barring North, Aurelia has been ahead of pre-COVID numbers in all other regions, even on like-to-like basis. Okay. In North, recovery has been slightly lower, but if you take all regions put together, Aurelia has still been ahead. W, we had certain product issues because of which it has lagged the recovery. There were certain calls which we took because, you know, when we were getting the monsoon festive ready, the fabric prices were all-time high. In order to optimize, you know, the cost increases, we took some calls, which unfortunately didn't work as well. There's a lag there. Got it. We have seen a significant increase in the working capital. Do you expect it to normalize by the year-end? How is your expectation on that front? Yeah. If you remember last time, we were building up inventory for the festive season, and we have tried to be ahead of the curve because there were a lot of disruption in the supply chain overall in the industry. There's a lot of buildup that you see today. Inventory by year-end should look better. This is for the festive season. Got it. On elleven, sir, store additions have increased, and you have been mentioning that once we achieve a desired unit metric in this format, and we will sort of ramp up the store additions. Just wanted to take your thoughts on what extent have we been able to achieve the unit business we were looking for? See, if you remember last time also we mentioned that, you know, we opened about 20-odd stores, and then we took some learnings from there, about 17, 18 stores. Most of these stores, the new stores that we have added, has been added over last couple of months. I think we still need to see next 3, 4 months first time that these stores are doing better than the first store. Let one season play out there. In LFS and all, we have already seen a good traction and that we have seen. Got it. Thanks a lot for taking my questions. I'll get back in the queue for more questions. Sure. Thank you. Thank you. Participants, if you wish to ask a question, you may please press star then one on your touchtone phone. Sorry, your voice is not very clear. We take the next question from the line of Mr. Saurabh Patwa from Quest Investment Advisers. Please go ahead, sir. Good evening. Thanks for taking the question. Just one... What you mentioned of this response to the previous question, I- Sorry, Mr. Saurabh. Your line is not clear, sir. There's a lot of background noise on your line. One sec. Is it better now? Yes. Yeah. Just wanted to understand, when you say that W has some issues with respect to product optimization. Was it related to product design or was it related to the pricing of the product, because of which you couldn't optimize the product? No design concern. In fact, if you look at the space, some of the best-selling articles were our jumpsuits and kurtas and all that we have launched. Okay. Design was not an issue. What we did was, you know, we used some man-made fabrics, and we used some value addition techniques which were more optimized for costs. Okay. Finally, when the product came, I think the trials remained high, but somewhere the conversions dropped in these particular silos. It's not that the entire range had an issue. It was a part of the range. Clearly the issue was, the fabric value addition combination and not design per se. While this has happened, and it's impacted our numbers somewhat in this season, the good thing is we exactly know what the problem is and going forward it's getting solved for. Initially the impact would be more. Could we just look at the numbers when we see the margins could have been better had not been for these issues? Yes. If you look at brand level performance, if you even look at quarter one, W was leading the pack in terms of SSG recovery. This season. Right. There's a gap between Aurelia and W. If W would have recovered, not for these issues, obviously you would have seen a much better profitability and sales. Okay. Second, the second question would be that, see, we have a large number of EBOs also, and since Diwali season falls in Q3, so, hiccup in revenue would be more towards Q3 also. Is that fair? I'm trying to assume? You are comparing this with which season, sorry? Sorry? You are talking about year-on-year. Yes. Are you talking about previous quarter? Exactly. Year on year or even from Q2- Q3 wholesale revenue would have already come in Q2. The revenue on the EBO side, where you own your own store, where the stores are owned, that would come in Q3. Is it? That would be a fair understanding? Yeah. Secondary sales would be higher in Q3. Yeah. While the primary deliveries would be higher in Q4. Absolutely right. Okay, sir. Thanks a lot. Sure. All the best. Thank you. Thank you, sir. We take the next question from the line of Mr. Varun Singh from IDBI Capital. Please go ahead, sir. Yeah, thank you very much. Thanks for the opportunity. Sir, two questions. First, on the online business. You mentioned that 25% is the share that we expect from online business and 60% of the business is from B2C channel. I just wanted to understand, do you think that this increasing revenue contribution from online, because I think the percentage of revenue in our case is over indexed compared to other online apparel retail company that we could see in India and in the listed space that we look at. How do you kind of look at this number as more of an opportunity or more of a threat because there is so much of intense competition in the online space. No, Varun. First of all, the contribution from total online business is about 16%. It's not 25% of total business, it's 16%. 25% is our own brand websites. See, what is happening is over last couple of years, lot of marketplaces are also moving away from, you know, B2B model to B2C. There's been an alignment which we had done, you know, in the Q4 of last year. Since then, also couple of players have again become, you know, more B2C focused than what they were. This is that alignment with those guys wherein, you know, primary and secondary sales are like this. In terms of overall business, we are at 15%. I think, you know, what we have mentioned in the past also, growing this channel by 25% on secondary sales basis should be sustainable. There could be some quarters wherein, you know, you can see a lower growth and all depending upon what the earlier base was. That kind of growth should come. Overall, our percentages are about 16% and not 25%. I think there's quite a room for growth. Increase to 16% is overall contribution. I'm sorry, I did not understand that you previously mentioned that in FY 2023 share from online business is expected. What is this 25% number? Varun, you know, if you're listening to the presentation, we are talking about the share of brand website being 25% of the online sales. That's one part. Second, as Anant mentioned. Yes, yes. There is always a lack of primary, secondary, and we have mentioned, you know, secondary. I think this is a confusion. Varun, we understood. The confusion was it's not 25% of total business, it is 25% of online sales. Of the online business. 60% from B2C, how do we understand this number B2C, B2B of online? Again, if you look at it, about two years back, almost 100% of the business was B2B. It was business-to-business upgrade model. There has been a continuous shift. Last year, the B2C number in the total, which is, you know, sales from our own website or in marketplaces directly, where inventory is ours, we hold the inventory, that number has now come to 60%, over 60% of total business. That's the shift we were talking about. As we move forward, I think, there's a lot of inspiration from various quarters also to move more towards B2C model. Okay. Sure, sir. Then my second question is on our overall revenue recovery. Sir, do you think that we have taken more than expected time to reach pre-COVID levels of revenue? Why do we think that it is taking more time for us compared to like for competition or others there? No. Varun, if you look at our segment particularly, I think if you look at brand wise performance, Aurelia has improved well ahead in market. In fact, in a lot of partner channels, we would have also gained a lot of market share out there. W, because of an inherent problem, which was pertinent to a part of the collection, definitely has recovered slower than what the overall market is. That is where I think market is recovering well on ethnic wear front. Once we have this particular issue behind us, then W should come back strongly. Okay, in Q3, we should expect a much more strong performance from W. See, what happens, Varun, is unfortunately it's a seasonal business. For W, Q3 also would continue to be slightly impacted. This entire merchandise issue gets resolved with the new season launch, SS'23, which we have also, you know, done our trade show. We have got all the consumer feedback, customer, our channel partner feedback, which is very strong. W problem will persist till, you know, SS'23 gets launched. There could be another quarter wherein you see some lower recovery from W. Aurelia on the other hand has grown well and I think we should continue to see that trajectory there. Right. Maybe from Q4 onward, we should see strongly. Yes. February onwards with the new season launch. That is when, you know, this thing should get completely sorted. Right. Right. Anant sir, just one last question on Aurelia Kids. Any comment you wish to offer? Yeah. Aurelia Kids has shown very good traction. In fact, you know, the contribution also in the stores where we have put Aurelia Kids, it comes strong. That's a good silo, and we'll continue to build that. Okay. That's it from my side and thank you very much, sir. Wish you all the best. Thank you. Thank you. A reminder to all the participants, anyone who wishes to ask a question may press star and one on their touchtone phone. Participants, if you wish to ask a question, you may press star and one on your phone. We have the next question from the line of Mr. Jay Modi from EIML. Please go ahead, sir. Yeah. I just had one question. It was on the margins front. When we see at the revenue level, we've recovered to pre-COVID levels, yet somehow our margins continue to be much lower than what you've done in the years FY 2020 pre to FY 2020. Is this predominantly explained by the supply chain issue that you mentioned for W, or is there more to this that the core inflation is weighing down on our part? Hi, Jay Modi. This is Amit Chand. I think this calls for a question. You know, when we are looking at profitability, you know, and this is something that we have mentioned in our earlier calls as well, that the revenue at a store channel level have to recover to compensate for any cost increase that has happened at the channel level, right? Rentals may have gone up, utilities may have gone up. One level of sales increase has to happen at a channel level. Second, at a corporate level also, overall, you know, revenue has to increase to compensate for any cost increases at a corporate level. If you look into our, you know, rental cost, employee cost, overhead, they've also gone over the last year, right? Affecting post-COVID situation. To answer your question, why we have done better than pre-COVID in terms of total revenue, obviously there is one challenge, which Anant explained about, W lagging in terms of recovery. The cost increases are higher than the increase in revenue that is happening due to our pre-COVID numbers. Okay. That means recovery revenue for us to go back to the earlier, you know, profitability numbers. Right. Internally, do we expect FY 2024 to be the year wherein we can reach the pre-COVID EBITDA margin levels? Or it will take us some more time than what we find in 2020 might be delayed beyond 2022? We don't give guidance on specific numbers, but our historical and, you know, after, when there's some mistakes, PBT probably is a better number to anyway refer to. If, you know, whatever levels we have done this FY, you know, as I mentioned, we still need to go back to those levels with some, you know, upside coming in from store expansion and otherwise. Plus to go back to the profitability levels that you're talking about. I don't want to specifically quote whether those numbers will be achieved in FY 2024 or which quarter of FY 2024. Yes, once we reach sufficient revenue numbers, which again compensate for the cost increases that have happened, then profitability should follow. Okay, understood. Just one clarification. With respect to W, do you think the revenue is tracking lower or is it the profitability which is lower than what you used to do in the previous years? See, in terms of W, it's the same-store sales recovery which is lagging. Obviously, because lot of costs are fixed, it has an implication for the margins. Essentially at a product level, costs are not a challenge at all. It is more to do with revenue. Got it. That's helpful. Thank you. Thank you. We'll take the next question from the line of Mr. Rakesh Wadhwani from Monarch AIF. Please go ahead, sir. Hi. Hi, team. Thank you for the opportunity. Where do we classify the W brand? Is it into more of a festive or a regular women wear or office wear, you can say? Because, in case of Aurelia, that time the demand was lesser in Q2 because it's. That was a non-festive period. Q3 because festive. I don't know. I'm just trying to understand why W is lacking. Like, when we look at all the retailers in India, they have reported growth across all the segments, all the product categories. Why is this specific interest? I have a specific question with the W. Why is it- Sorry to interrupt. I'm sorry to interrupt, sir. The management line has got disconnected. Please go ahead, sir. Hi. Am I audible to you? Yeah. Yes. Hi. Repeating my question. Sir, I just wanted to understand your thought process. When we look at our two key brands, one is W, one is Aurelia. Aurelia we know it's a very festive-oriented or marriages, like people wear it during marriage and festive. The demand will be more during Q3 and Q4. I am still not able to understand why the demand for the W is lesser, like before COVID, because I think it's more of a regular female wear, office wear, you can say. Because if you look at all the retailers in India that has come up with the results, they have shown results growth with respect to all categories. Can you just throw some light on that? No, no, sir. First of all, even W is very, very relevant for festive. Both our brands, W and Aurelia, have a part range which is non-festive, non-occasion wear, and a part range which is occasion wear. Even in the past, W has performed equally well and better. That's not a question, key whether one is festive and one is non-festive. Wishful is one brand which is completely occasion wear. That is more dependent on occasions and non-occasion periods. Now, coming to W, as I was explaining, W's recovery has been in line till about Q1. Q2, when we launched the new range, there was a part of the range wherein probably it was an error of judgment, and in our pursuit to optimize costs, we probably launched some product which didn't resonate very well with the customers. That's one reason why, you know, W's recovery has lagged. Having said that, W continues to be the highest selling brand across all channel partners, but we have definitely lost a recovery opportunity which could have come. Now, as we move to spring/summer 2023, we have rectified most of those issues, and hopefully one should see W bouncing back strongly. Second, in a fashion business, again, it's not that, you know, this quarter will be a base for next quarter or next season. Consumers pick where they. It's not to say that consumers will pick only from, you know, the last phase. Obviously that W bounce back should happen very strongly once this issue is behind us. I hope that clarifies. Yes, that's very good. That's very well and detailed answer. Thank you. Sir, one more thing. Has the all the expenses have come back to normalcy, like advertising, rental, all the expenses, what we have seen in the quarter two, back to normalcy? Yeah. In fact, in areas like marketing, we have also over-invested because it is a long time that we are doing that. Obviously our ad spends are slightly higher. All the rent concessions, all the salary cuts, all those things have reversed. That's all normalized. Okay. There will be no sharp increase in the expenses in the coming quarters? Is my understanding correct, sir? No, I don't think there should be any sharper increase in any of the expenses, so it's more or less in line. Okay. Expenses that you are seeing in Q2 is a good reflection of what next quarters will be. Yes, that was my question. Thank you. Thank you very much, sir. All the best. Thank you. Thank you. We'll take the next question from the line of Mr. Nihal Jham from Nuvama. Please go ahead. Thank you so much. Yes, thank you. Good evening to the management. Sir, couple of questions from my side. First was on this issue that you highlighted for W. Is it a possibility that that could leave us with some stock and high liquidations in the Q4 quarter, given that, as you said, this, the monsoon season will continue and, you know, generally the Dussehra happens in that period. Based on initial trends, if you're not seeing a pickup, would that be, you know, one thing that could simply be a monster for you? You see, Nihal, we have to see how the season builds from here on. Luckily, you know, the winter set in and our winter range has nothing to do with shortcomings that we have seen in the festive range. Hopefully overall that part of the business should take off. Coming to the specific inventory silos, obviously there would be more left to hold because sell-through of those products has been lower. That will liquidate through online channel and other liquidation channels that we have. There could be some discounting impact, but you know, given the overall scheme of things, it should not be a very, very significant number. Understood. Thank you. Because it's one silo of W. Unfortunately, this is a silo which was present in the peak festive. Because this was more lower priced, most of the LFS and all also had a bigger share of that. I think it was also a lot to do with the timing issue of those particular silos. Overall should not be a very big risk, but yes, there could be some increase in discounting. All right, sir. The next question was, you know, on our channel-wise recovery. While our EBO channel has done pretty well and more or less, you know, come back to pre-COVID if I look at it on the first row, I noticed that for the LFS, the recovery is obviously still much lower versus the pre-COVID. Any specific points to highlight? I don't know how you have calculated that, Nihal, exactly, but there are a couple of things which I'll just spell out. One, you know, still one of the largest partner of ours is not operational, and those typically were higher throughput stores for us. Probably that is showing an impact on the LFS, which is exactly not a change to recovery, but it is because of part of network being dysfunctional. That's one. Second, you know, a lot of new stores are also not that high throughput stores, so those are typically lower sales per store kind of numbers. That is what you would have seen. At an overall SSG levels, we have seen W EBO doing better than LFS or W LFS. On a year side, LFS have done equally well, so there's not a material difference there. Anant, would it be possible then just to give a ballpark sense of the SSG for the LFS format? Because as you said, there's this issue with, I'm assuming, the Central, which is Mm-hmm. The fact that a lot of the LFS are coming up in Tier 2 and 3 cities, so the mix is not something that is fair comparison, you know, to look at it. Is it possible just to give a ballpark sense of the SSG versus pre-COVID for the existing LFS? Okay. More than increment in change. That was the kind of number which we saw in Q2. I'm so sorry, your line was not clear to me. My apologies. What was the number you said? I got that. Sure. Thanks. Thanks, Amit. Wish you all the best. Sure. Thanks, Anant. Thanks, Amit. I'll welcome Thank you. Thank you very much. We take the next question from the line of Mr. Vikas from QDS. Please go ahead, sir. Thank you, sir. Good evening, Anant. Good evening, sir. One more thing, one question from my side. Can you throw some color with respect to the new stores, the new Project Rise stores that you have added? How have these stores done in Q2 in the current quarter? Sorry, this is with respect to what stores? The new larger size stores that is under Project Rise. How have the performance of those stores happening in this quarter in Q2? Okay. Obviously, there was an overall issue with some parts of the W range, but these stores, wherever we opened, are on track about 1.5x-1.75x kind of numbers. That strategy is playing out really well. In those stores, the newer categories are also contributing to about 15-odd%. Those things are playing out well. In fact, we are being more aggressive on that front, and we are signing more stores out there. Sure. Sir, one observation from my side, I mean, when I compare our Q2 FY 2022 performance of our EBOs as a channel versus the Q2 of FY 2020, while the store network has grown substantially, almost an addition of around 80 stores, with better quality because we did do a lot of retaking into the stores where we shut down the stores during COVID times, and also we have opened up new larger format stores which are higher in terms of throughput. Despite that, our revenue per store trajectory is still either a few percentage points lagging than our pre-COVID levels. Is it just restricted to the issues that we face in W or there is something more to do towards that? No, no. See, there are two things. One is obviously what we have said, W. That is a bigger reason. Mm-hmm. Second is for some reason, North has not seen such a sharp recovery. You know, compared to many other brands and retailers, our North proportions are slightly higher, the business that comes from there. All W's big stores are in North, and North somehow I think across retailers and brands have been slower. That is it. Otherwise, there's no particular issue. If these issues were not there, you would have seen a different growth. Sure. Any reason you would like to highlight as to why what was the issue that we faced in the North side or probably is it an industry level? What was the issue that will happen? See, we have spoken with many brands, retailers and all our partners. I think no one has a clear understanding of why that has happened. It's always a very, very good consumption market. There could be some temporary blip. There could be lower NRI flows, the weather and there were a lot of disruptions with, you know, the rains and all in parts of UP, Haryana. There are multiple reasons, but, you know, difficult to pinpoint a particular. Sure. Understood. When you see the EBO like-to-like sales have not grown to a level, you know, that in correlation with what our costs have grown. Probably in order to achieve the previous margins that we did pre-COVID, what sales level would you like to do at a category level to reach those kind of margins back? I think there's no straight answer to this. It's a combination of two things. One, obviously overall throughput increase, and second, the quality of those sales increase. You know, whether it comes from EBO channel, whether it comes from SSG or it comes from online channel, there are a lot of those contributions. Unfortunately, there's no very direct answer. If all combination, everything locks well, then about 23.5% growth number should get us back to that trajectory. Again, it's a mix of many, many things. Sure. Sir, one last request. Thanks, since we have now, though being smaller in size, we do not disclose the revenues from the elleven brand. I mean, would you like to quantify what was the revenue that you're doing currently? Right now it's a small business. As of now, we would be tracking about, say, INR 25 odd crores on consumer sales, annual run rate, which we think by year-end should at least be INR 45-50 crores on consumer sales. Okay. You mean to say secondary sales, right? Correct. That's right. Correct. Thank you so much, sir. Thank you. Thank you. A reminder to all the participants, anyone who wishes to ask a question, may press star and one on their touch-tone phone. The next question from the line of Sanketa, Individual Investor. Please go ahead. Hello? Hello? Hello? Sir, you're audible. Please go ahead with your question. Good evening, madam. Hello? Hello? Can you hear me? Hello? Sir, your line is on mute. Please go ahead with your question. Good evening, all. Sir, aapka revenue toh bahot zyada achcha bata rahe hai magar profit kyu itna kam ho gaya hai year on year? Sorry. I didn't understand your question correctly. Sir, aisa hai ki abhi jo aap revenue growth dekh rahe hai, woh teen saal main agar aap kharche dekhenge toh woh badh gaya. Agar aap pre-COVID se compare kar rahe ho toh revenue commensurate growth nahi ho paya. Agar aap last year se dekh rahe hai toh last year main rent concession the, salary cuts the aur marketing main investment kam tha. Woh sab karanon se aapko last year ke profit se is saal ka profit thoda sa kam dikh raha hai. Future mein profit Q3, Q4 kaisa aayega? Sir, future guidance nahi dete. Sorry for that. Lekin, agar sales growth 1% hi hai, business fundamentally gross margins and all are in place. Toh wapis rent aane ki. Sir, aisa nahi sir. Abhi utna revenue aane ke baad profit bahut kam aaya na. Last year revenue se 10, mere khayal se INR 100 crore revenue zyada aaya. Agar profit last year, 11 crore se INR 7.6 crore aa gaya. Nahin sir, bilkul aapki baat theek hai. Wahi main aapko samjha raha hoon. Last year agar aap dekhenge aur aapko detail mein alag se main bata sakte hain. Maybe iske baad aap detail mein ek baar aapko hum samjha denge. Agar aap dekhenge kharchon ke rent mein, toh last time rent ka INR 70 crore ka humara concession tha jo is saal nahi hai. Last time aur bhi bahut kharche the jo COVID time mein kate hue the, woh wapas aa gaye. Ek kaam kar sakte hain, aapko hum alag se aur samjha sakte hain wapas. I'm sorry to interrupt, sir. It looks like the line from Mr. Sanketa has been disconnected. We move on to the next question. Okay. We can connect to him later also. That's okay. Sure, sir. We move on to the next question from the line of Mr. Rajiv Ji, DAM Capital. Please go ahead, sir. Hello? Hello? Yes, sir. Sir, my question is on you mentioned initially that there will be increase in discounting, and this is not only for W, this is for the entire portfolio, is it? No. In fact, if you look at it, even in Q2 our sales, we have been able to manage our discounts well. I was just answering to a very particular point which Nihal asked about a particular part of the range. I don't think it was true for the entire range. Entire collection, entire range. I was actually referring to your opening remarks. You mentioned something on the discounting which I missed out. Are you seeing any such signs that the discounting portion may have to increase, possibly some slowdown in urban demand? Are you seeing some signs? Offline, in fact, we have not seen discounting go up, and that's a very pleasant news for the entire industry overall. Online, we have seen discounting going up. Online there's some pressure on discounting, which again was around festival time and all. Offline, frankly, I think industry has really been able to bring down the discount levels from historic highs. Sure. Sir, on your various brands, are there gross margin differential between the three so that it's incremental when, you know, the mix changes in favor of one or the other? There is a you know, the gross margin drop can be explained like that. Look, they all operate in a tight range. Obviously, there are some differences, but they all usually operate in a tight range. W will be the highest gross margin business for us out of the other brands. But if- Yes. Yeah, I can hear you. Yeah. That's what I was saying. Gross margins are in a tight range. Obviously, W has the highest gross margins, but others are also close. Sure. Sir, on the inventory side, how much is raw material out of the inventory which we have in the system right now? You see, we don't give exact numbers, but typically it's around 20-25. At 20% level should be the current situation. That is irrespective if it's a March ending or September ending or the raw material goes. It keeps changing. See, when you are looking at inventory, two things to understand, three, but we source all our raw material, most of it. It's RM, it's WIP, and it's FG. Okay. Depending upon, you know, which part of the season we are in, it keeps changing. Typically the range for fabric could be 20%-30% and the balance are FG. If you could specify what is the rent outflow for, let's say, Q2 and H1. Sorry, can you repeat that question, please? I mean, the rent, the cumulative rent. You have indicated the payable part of it in the P&L. What is the cumulative rent outflow for the quarter in process? Currently we are running a rent rate of about INR 140-odd crore annually. Okay. Yeah. Even Q2 mostly will be in that zone. Sure. Thanks a lot. Thank you. We take the next question from the line of Mr. Devanshu Bansal from Emkay Global. Please go ahead, sir. Yes, thanks for the follow-up opportunity. Sir, I have two questions. One is around W. So, over the past few years, we have made investments in the quick replenishment cycle. So just wanting to understand the reason why we could not follow this process in this style that didn't do well for us. Going ahead, what are the takeaways that we sort of take from this particular event? See, I think, let me just clarify that these are two different processes altogether. What we do is when we create a new range, we obviously do a trade show, we take all our partners' feedback, we take the multi-brand outlet, LFS. Even this time when we launched W, we did all this. Frankly speaking, we got a much stronger response for W than Aurelia. When it came to the market, again, I am reiterating it was not a design issue, it was more a final outcome of some man-made fabrics and some value additions which didn't do well, and it took even our partners by surprise. It's very rare that something like this happens, but it happened unfortunately for a part of the range. The other parts of the range which were more cottons, which are more rayon, they have done well, and there's a clear difference. Going forward, we'll be following this process. Again, we have corrected these issues of manmade fiber with, you know, certain particular value addition. Obviously, some part would still be there, but mostly we will get resolved. That is one part. Second, coming to express replenishment. See, express replenishment is about the styles which have done well and how quickly can we refill that channel of stores. While, you know, this can solve for higher sell-throughs for wholesaling products, but anyway, whatever limited bet we have taken upfront and the product didn't do well, you still have no recourse to that. Okay. This is the issue that we are struggling. Okay. Just to put it this way, if we wouldn't have this quick replenishment process set in, we would have faced higher losses than what we are seeing as of now. Yeah. If you would have bought even higher. Loss of sales will happen because also the timing issue, that these products are there in the peak festive. That is one. I think what it has saved us is if you would have bought it in even bigger quantities, then obviously the leftover stocks would have been even bigger. To that extent, it gets solved. Second, also, we have to understand one thing clearly that, you know, while express replenishment works very well across the year, in festive period, because the window is so small that, you know, we don't really overplay this because in festive, whatever is selling in Pujo, you have to have it in stores in Diwali. Okay. Frankly, our cycles are about, you know, four weeks, 35 days kind of cycles. In festive there's a limited utility for that. Got it, Anant. Balance of the year you can work well with it. Anant, if you can, I'm just trying my luck. If you call out the quantum of inventory that's there for this particular style, then it would be helpful and sort of help us understand as in what actually will be the impact. No, see, it's not a particular style. It's some kind of product, and season is not over. Obviously, you know. Okay. We'll be selling it in another season sale also. There's the wedding season also. Okay. We'll take a better view once, you know, the season gets over. I'm just talking about a relative recovery in W. Okay. It's not like, you know, something has completely bombed or this. Okay. Yeah. Last question from my end. From online perspective, we have moved to this B2C class model, where we are taking the inventory and initial understanding was that, since we are sort of handling all the things, we would have better sort of control on discounting that's available on marketplaces. But as you indicated that, for online particularly, the discounts have sort of increased. That I understand that is not completely in your hands. But what exactly are you sort of seeing in terms of trends and going ahead in future, for online sort of sales? Devanshu, again, what I was saying was more from a market perspective that we are seeing discounting going up. Obviously, this part of the discount is in our hand, and that's what I mentioned in my opening comment. You know, we'll be balancing it out. It's not that, you know, discounting is going to shoot out of the roof. I just thought we should let you all know that probably there will be some trade-off between growth and between managing profitability. We would definitely control discount and see how it plays out. Got it. Thanks a lot for answering the question. Yeah. Thank you very much. We take the next question from the line of Mr. Saurabh Patwa, Quest Investment Advisers. Please go ahead, sir. Sir, my question has been answered. Hello? Yes, sir. Thank you. Yes. My question has been answered. Thanks a lot. Thank you. We take the next question from the line of Mr. Rakesh Wadhwani, Monarch Ltd. Please go ahead, sir. My question's answered. Sorry, I can't follow. Hi. Hi. I said, my question is answered. Thank you so much. Oh, okay. Thank you. Thank you very much, sir. We take the next question from the line of Mr. Shreyans Jain from JK Investments. Please go ahead, sir. Hello. Thank you for the opportunity, sir. Can you hear me? Yes. Just wanted to understand, I'm very new to your company. When you talk about the various channels, EBO, MBO and LFS, how does the inventory model work? Once we sell, do we take it back like SOR basis or it's once sold is, doesn't return to us? Hi, this is Amit. Let me answer this question. We'll have to see this at a channel level. Let me, you know, explain it to you. When we talk about EBO, you know, again, our EBO channel has multiple parts to it. A larger part of EBO channel is where the stores are operated directly by the company. We call it CoCo stores. Obviously in these cases, when I supply the inventory to these stores and eventually we recognize the revenue when the end sale happens to the end consumer, we have to take the stock back and we keep doing it within the season, but finally the stock return typically happens after a particular season is over. That is what happens in case of owned stores. The another part of EBO channel is our franchising network. Again, we have multiple different types of understanding. Given that we don't want any of these stores to be choked with any inventory which may not get sold. A larger part of the inventory which is not sold at the end of the season is obviously taken back. If I move to the second channel, which is LFS, second largest channel for us is LFS, large format stores, where we classify all the, you know, national chains, whether it is Lifestyle, Shoppers Stop, Pantaloons, otherwise. There the arrangement is sale or return. We keep stocking them during the season, and any product which is unsold at the end of the season is returned back. That's the whole understanding of sale or return model. The third offline channel that we have is MBO, where we work through distributors and eventually supply merchandise to mom-and-pop retailers. Yes, we do take returns, and we at a quarter level, we would keep taking returns from each network. Here we provide a limited return opportunity. Again, the intent is to not let any channel choked because of leftover inventory. Obviously returns that we take is limited to a certain percentage that we agree with the distributor whenever we enter into a commercial arrangement with them. The fourth channel is online. Again, there are two parts to online. One is the direct to consumer, where we do the billing directly to the consumer. In that case, whatever returns happens. In case of the second part of online, which is what we call B2B, where we supply the inventory to each partner that we have, there again, it works on a model where we allow a certain percentage of our initial billing to be returned. I hope that answers your question. Yeah, that helps. Secondly, sir, when we are talking about expansion, so our major focus area is EBO expansion. Am I right? Yes, our expansion is primarily focused on EBO. Would that be CoCo or FrCoCo? We want to maintain the mix. As on date about 65%-70% of our EBO network is CoCo, which is managed directly by us. The balance is franchisee. We find it a healthy mix and going forward when we look at expansion, we want to maintain the same ratio. We're not talking about specifically one quarter or two because it will depend on which stores we are opening when. From a long-term perspective, the current ratio of 65%-70% being CoCo, the balance being franchisee operated is what we intend to continue. When we do CoCo EBO expansion, sir, it entails a lot of CapEx, right? I think we've mentioned this somewhere in our presentation that we are focusing on an asset-light business model. In fact, it's when you go for an EBO CoCo, you incur equally significant CapEx in terms of store, inventory or manpower. Doesn't that actually make your balance sheet a little bloatier than you would want? Yeah, see, if you look into the overall business, you know, we are a brand business. So the CoCo stores that we are talking about or the expansion that's happening through CoCo is a small part of the overall business. You know, if you compare it with the retailer, if I can make that example, where most of the investment is done by the retailer itself. In our case, when we look at INR 100 of revenue, EBO is only about 30%, and again, CoCo is two-thirds of that. So from an overall business perspective, 86% of our business is where we make investment in the stores. The balance is where we operate from partners. Yeah. So that's one point. Second, in our business, we are builder, our payback period is relatively less. Typically, when we open a store, the CapEx investment that we do, we are able to recover it within a period of around 15 months. That makes sense for us. We can invest our own CapEx. What would a normal in a CoCo CapEx be for one store? Typically, if you look into our W store, it will be around, let's say, 1,000 or 1,100 sq ft and takes an investment of about INR 30-odd lakh. INR 30-odd lakh. Okay. Just in terms of the three brands, or maybe if I include even elleven, just wanted to understand what is the capital employed in each of them? If you could just give us a fair idea where is most of your working capital and how maybe capital employed blocks in terms of the brands, if I would to understand that. I think, we have never shared any such breakdown with this in the past. For almost all the businesses, the bulk of the investment goes into working capital. Sir, I think you mentioned somewhere on the call that W is the highest gross margin. If I'm not wrong, a few years back, I think I was under the understanding that Wishful was the largest ASP in terms of the brand. Am I getting something wrong here? Because from what I understood, Wishful was the highest in terms of ASP, and then you had Aurelia, and then you had W, which was a mass brand that you were trying to create. sir, actually, Wishful is highest ASP, followed by W, followed by Aurelia. This is how the pecking order is. The margins that we make on W is higher than others. Oh, is this because of the volumes, is it? No, no. Yeah, volume, distribution networks, yeah, all those things are there. But, cost is also lower in W compared to Wishful. Okay. All right. That helps, sir. Thank you so much. Thank you. Thank you. As there are no further questions, I would now like to hand the conference over to Mr. Anant Daga, Managing Director, for closing comments. Thank you everyone. We take this opportunity to thank you for joining the call. We hope we have been able to address all your queries. For any further information, please be well in touch with us or SGA, our investor relations advisors. Wish you all a very happy, successful day. Thank you. 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.