Ladies and gentlemen, good day, welcome to the TCNS Clothing Co. Limited, Q4 FY 2023 earnings conference call. A disclaimer: 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, 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 a touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Anand Daga, Managing Director at TCNS Clothing Co. Limited. Thank you, over to you, sir. Thank you. Good evening, everyone, welcome to the Q4 and FY 2023 full year earnings conference call. I'm joined by Amit, our CFO, and SGA, our investor relations advisors. While Amit can share detailed financials, let me talk about the highlights of Q4, our perspective on the emerging market situation and approach for FY 2024. Starting with company performance, we achieved net revenues of INR 269 crores in Q4. This represents a growth of 15% year-on-year over Q4 FY 2022. On a full year basis, we achieved INR 1,202 crores of net revenues, growing by 34% over FY 2022. This quarter, offline channels registered a like-to-like sales of 110% over Q4 FY 2022, which was an impacted quarter due to Omicron. In this quarter, we opened net of 11 stores to reach a total count of 675 stores as on year-end. We have upgraded another 2 stores under Project RISE initiative, taking the tally to 31 stores. Coming to online channel, the business has grown by 22% year-on-year in Q4, in line with the stated focus on building D2C models with brand websites and marketplaces. The revenue share is weighed majority in favor of D2C model, which grew faster and is now contributing to more than 75% of the total online sales. Additionally, our online B2B business is also seeing a pickup over the last couple of months. On omni fulfillment, subsequent to stabilizing the stack for marketplace channels, we have upgraded the technology backend for brand websites as well. This should help us strengthen our brand website business. Coming to the current business environment, the broader market demand has been muted since Diwali, and we continue to see this trend panning out in spring summer 2023 as well. The demand is more resilient in Tier 1 cities, and the concern is more pronounced in lower tiers and smaller cities. From a regional trend perspective, while North and East have improved compared to last year, these regions still lag behind South and West compared to pre-COVID recoveries. Talking about the women's ethnic wear category, the category started to regain growth since last festive, which it continues to hold on. However, overall, women's wear segment is still trailing men's wear in recovery and has some catching up to do, which should happen in due course of time. With more women now getting back to work and more occasions opening up, the use cases should drive higher consumption in overall women's wear and more specifically, ethnic wear categories. Coming specifically to our performance, some of the challenges we faced in Q3 with respect to our product ranges continued to have a bearing in Q4 as well. Bulk of the quarter saw predominantly monsoon festive range on the floor, with fresh season starting to hit the stores only by segment. Even as the season start, as mentioned last time, we had to carry forward some of the festive inventory, which formed a meaningful part of the stock this season. This had larger than anticipated impact on our sell-throughs, which was magnified by the muted demand environment. While this continues to impact our sales, however, as we move deeper into the season, the fresh inventories mix changing favorably, we are seeing our relative performance getting stronger. Now discussing FY 2024 approach, the year will be about focusing on existing building blocks already put in place over the last couple of years and driving efficient growth. We will focus on four key agendas next year. First, is getting back to the winning range, architecture and merchandise mix. Second, is driving the same-store sales recovery while taking a more calibrated approach towards business development and expansion. Third, is building on the online growth journey with the stabilized base now in place. Fourth, is optimizing working capital. Let me start with first agenda of creating winning range, architecture and merchandise mix. We have already spoken about the range learnings in the last monsoon festive season, which has led us to focus disproportionately on understanding the product performance and learnings thereof. Our focus now is on premiumizing the occasion wear capsules, at the same time, casualizing the day wear ranges. Our new launches, which have incorporated some of these learnings, have hit the market over spring, summer 23 season and are seeing solid consumer traction. We continue to build on these successes. Their sales should be reflected fully in our upcoming ranges. Coming to the second agenda, last couple of years, there was tremendous focus on expanding and building a wider and deeper retail presence. This year, we will still take a calibrated approach to store expansion. Focus will be on driving store level throughput and efficiency more than ever. We will undertake a comprehensive approach, including optimization of store inventories, driving footfalls, adding the right merchandise mix. Given the higher operating leverage of our business, the singular focus on sales recovery can lead to significant impact on our financial metrics. On the online front, the focus over the last couple of years has been building our capabilities to transition the business mix from a B2B model to a D2C. As we are now stabilizing this journey, our focus shifts back to growing this business across models. Going forward, the approach will be to increasingly focus on the IT and convenience-seeking customers in addition to price-seeking consumers. With deep omni integration across websites and marketplace channels, we will be able to offer a comprehensive product range and drive better efficiencies through flexibility of our inventories across channels. As an organization, we have always had a sharp focus on working capital and cash flows, and even during the worst of COVID periods, we have been able to manage cash flows and working capital very, very tightly. Last season, we had planned for an aggressive scale-up, which didn't materialize as per our expectations. Our actual sales were meaningfully lower than anticipated, leading to increased levels of working capital, especially in mid. We are taking necessary steps to optimize the same, and while this will take a couple of seasons to fully resolve, we are hopeful of seeing a gradual progress on this front. As we carry on with the business agenda, we are pleased to inform about our proposed merger. Our board has approved a composite scheme by which our company is proposed to be eventually merged into Aditya Birla Fashion and Retail Limited, ABFRL, and become part of Aditya Birla Group, one of India's most respected conglomerates. The transaction will be subject to regulatory and shareholder approval and other conditions. While Amit can share more details regarding the transaction structure and terms, let me talk about the rationale and the strategic fit. The post-Covid retail landscape has been evolving rapidly, and as board and management team, we wanted to explore the best long-term growth path and value creation opportunity for the company and its stakeholders. As we explored possibilities, we realized strategic alliance with a larger platform being the best way forward. Association with a strong anchor such as ABFRL, can accelerate our journey and help us realize full potential in an expedited manner. The partnership with ABFRL gets us a brand playbook and portfolio complementation, synergies in terms of leveraging front-end, back-end ecosystems and leveraging trade partnerships, and a culture that matches our ethos of empowered and professional decision making. We believe this is yet another new beginning in our journey, we are looking forward with great excitement towards the possibilities ahead. Now, I would request Amit to share key financial highlights. Thank you, Anand. Good evening, everyone. Let me share the update on our financial performance for Q4 of FY 2023 and full year FY 2023. The company delivered revenues of INR 269 crores in Q4, which is a growth of 15% over FY 2022 Q4 revenues. The slowdown in the witnessed after the rally continued in Q4 and impacted our revenues for the quarter. Our gross margin for the quarter was 62%, versus 69% in Q4 of FY 2022, and 68% in Q3 of FY 2023. As we have mentioned earlier in our communications, we should see gross margins in conjunction with selling and distribution expenses and other overheads, as every channel that we operate in has its own nuance in terms of revenue recognition, gross margin, and costs reflecting in selling and distribution expenses or other overheads. Based on the channel mix, these metrics could vary in a range from quarter to quarter. In Q4, the gross margins and selling and distribution expenses were impacted due to lower sales and higher than normal discounting in the end of season sale of March and quarter 22. EBITDA for the quarter was INR 12.2 crores. Again, the EBITDA was impacted due to lower sales, higher discounting and increased investment in marketing. In Q4, we incurred a PBT loss of INR 44.5 crores, versus a PBT of INR 0.7 crores in Q3 of FY 2023, and a loss of INR 7.6 crores in Q4 of FY 2022. Please note that in Q4 of FY 2022, we had a rental concession of INR 10 crores, while there is no rental concession in Q4 of FY 2023. In Q4 of FY 2023, we have taken provisions for a specific partner which has gone under insolvency proceedings. We ended the year with 675 stores, adding 11 stores in Q4 on a net basis. In LFS channel, we have closed down certain stores which had low sales and low profitability for us, reducing our total LFS count from 2,500 odd point of sale at end of Q3 to 2,295 point of sale at end of Q4. Let me take you through the full year performance for FY 2023. The company delivered revenues of INR 1,202 crores in FY 2023. It's our highest ever, and a growth of 34% over our FY 2022 revenues of INR 806 crores. Delivered an EBITDA of INR 142 crores compared to INR 124 crores in FY 2022. PBT for FY 2023 was a loss of INR 31 crores versus a loss of INR 7 crores last year. Please note that last year we had a total rental concession in the full year, amounting to INR 38 crores, while there were no rental concessions this year. As of 31st March 2023, we had a working capital of INR 492 crores. We saw less than anticipated sales in the second half of the year, which has led to additional build-up of working capital. We are undertaking the requisite steps to address the same, and while this may take a couple of seasons to fully resolve, one should see a gradual progress on this front. Let me also give you a quick brief on the proposed transaction with ABFRL. The transaction essentially has 2 parts. The first part is the acquisition of 51% of the expanded share capital of the company by ABFRL, through a combination of share purchase agreement between the promoters of the company and ABFRL, and a conditional public open offer. The open offer is for acquisition of 29% of the capital of the company, conditional upon a minimum acceptance of 20.19%. Acquisition from the promoters would range from 22%-30.81%, depending on the public open offer. The second part is the amalgamation of the company with ABFRL, post receipt of necessary approvals. Under this scheme, 11 fully paid equity shares of INR 10 each of ABFRL will be issued for every 6 fully paid equity shares of INR 2 of the company. As Anand already mentioned, these are subject to regulatory and approvals and other conditions. We are making the requisite progress on the proposed transaction. We are excited with the possibilities this transaction can open for us. With this, 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 touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use answers while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Ladies and gentlemen, you may press star and one to ask a question. A reminder to all participants in the conference, you may press star and one to ask a question. Our first question is from the line of Devanshu Bansal from Emkay Global. Please go ahead. Hi, Anand. First question, I guess, you indicated that recovery is dependent on more women sort of getting back to work. I just wanted to sort of get your thoughts on what are the key data points that suggest and make you confident that more women will actually sort of come back to work. Secondly, it's a, it's a temporary thing and not a permanent thing that work from home sort of gains a larger proportion of overall working hours. Hi, Devanshu. A couple of things. See, more than what hard data points exist in the market, as we have seen over the last few months and few quarters, there's a growing number of offices which are now working, at least couple of days, 3 days from office. As we move on, there are lot and lot more organizations which are opening up offices even more full-time. More than, you know, getting the hard data from the other side, I think what I guess we have seen in our businesses is, if you look at the ethnic wear journey post-COVID, obviously, first few months were very, very difficult. Over the last, 2 to 3 quarters, we have seen consistently ethnic wear gaining some share against western wear. One of the key attributes is obviously, you know, people coming back to work, which is one of the key occasion usages for ethnic and associate occasions opening up. I think that is where it is. Frankly, we believe that this is a trend that we are seeing, and a lot of more companies are making changes in their policies, getting more people to work, and hopefully it should gradually build up. Sure, Anand. You mentioned this recouping of market share, or maybe you mentioned that ethnic is gaining share. Is it recouping of lost market share, or is it a correct understanding? Yeah. Devanshu, two things. One, women's wear itself, in terms of overall share, is right now trailing men's wear, and ethnic obviously has not come back to pre-COVID level. you know, over the last few months, we have seen it gaining some of the lost ground. Got it. Anand, second question, is on the potential sort of merger with ABFRL. If you could sort of highlight to us what are the potential synergies that you see on the top line, bottom line, as well as working capital front, it would be really, really helpful. Devanshu, without getting into too much granular stuff, because, see, a lot of these things will need deeper deliberations and, as we move along towards the transaction, we'll have to build a long-term vision and roadmap together. Some of the key synergies that we see upfront happening is, you know, first of all, we'll get a very strong anchor for the long-term growth of the company. We'll get access to the brand playbook. See, ABFRL, as an organization, has a history of incubating and scaling up brands to a large scale, and that is something that we are sure will benefit a lot. Whether it is incubating, scaling up strong brands, making them even stronger, that's one area. I think there's a lot of synergies in leveraging both front-end and back-end relationships. We share a widely common ecosystem, and a lot of these places will be able to together strengthen our relationships and gain from each other. Third big area of synergy that we see is obviously getting the benefits of the infrastructure systems, best practices, a lot of these services can actually make the business inherently stronger. We believe these are some of the great synergies that we see, which can be built very strongly over a long period of time. Got it. Anand, for your sort of outlook for FY 2024 in terms of key areas where you will be focusing upon, I just wanted to understand two things. Sorry, I could not sort of understand when you sort of highlighted on women range architecture, as well as the online growth journey that will be there for FY 2024. One thing you mentioned that there'll be some feminization in the women range architecture, and then the second part, I could not understand. What exactly you said? Sure. See, one of the key straight learnings from last season was, you know, in festive, you need to have more premium ranges, and unfortunately, last season we prioritized pricing over the same. That's one clear learning, that, you know, people are willing to pay the price for heavy occasion wear, and that is something, the silo that we are building. On the other side, what we are seeing is, you know, there are a lot of newer silhouettes, a lot of things like tops, tunics, there are a lot of fabric bases. This is all making everyday wear much more easier, and all that falls within ethnic. Those are the silos we always had, but now we are trying to even build them stronger. Whether it is fabric, whether it is some casual sets, whether it is tunic tops, these kind of stuff. That's what I meant by casualization of the day wear. This will be at a relatively entry-level, I would say, pricing, right? No, no, it's across. See, obviously, there would be some which would be entry price point, but it will be also higher price point. See, these have now become requirements for some easy wear, but, it could also be premium. That's not a problem. Okay. For online, did I understand this correctly, that you mentioned that till now the focus was on D2C, and now, you'll be, sort of focusing on all the channels, whether it be B2B or D2C. Is this the right understanding for online, outlook? Devanshu, we have been on this journey for now last, at least 18 months, if not more, wherein as the B2B as our partners started moving away from the B2B model, we had to build a D2C model from scratch. Right. That part is more or less stabilized. What I meant to say was, obviously, now we can focus on growing on a stabilized base. If you remember, last three, four, five quarters, we have continuously had disruption in the model. What happened was, while the B2B business was getting reduced, not all partners were ready with a D2C model to work with us. That is something now we have created the base more or less, and hopefully, without any disruption, now we should see a significant growth. The target of about 20%-25% sort of a growth should now be possible, in the USA, is it? I guess that's the intent. Yes, yes. Okay. Thank you, Anand. I'll get back in the queue. Yeah. Thanks a lot for answering. Thank you. A reminder to all participants, you may press star and one to ask a question. Our next question is from the line of Yash Bhandari from Neo Markets. Please go ahead. The line for Mr. Bhandari has dropped. May I request the management, we move to the next question. Our next question is from the line of Riya Verma from NR Securities. Please go ahead. Hi, sir. Thank you for the opportunity. I have two questions. Firstly, what is the store opening plans for FY 2024? How many net doors will the company open? See, right now, I would not like to give any particular guidance, but typically in the first half, we would go slightly slow and in a more calibrated manner, and probably up the thing in the, in the second half of the year. Maybe, you know, the very, very broad numbers could be anywhere, say about 40 odd stores, in that kind of range, 30 to 40 odd stores kind of range. Depending upon the response and depending upon the overall market pickup, obviously we can up the store. Right. How is Q4 performing, and how is the new collection doing? Is it gaining traction, as we had some fabric issues with it earlier? I believe you are talking about Q1, right? Yeah, yeah, Q1. For anywhere the number. The newer silos are doing well. Whatever experimentations we have done, most of them seem to be working. While we could, you know, we had to carry forward some of the old inventories, hopefully the next season that we are going to launch will be 100% fresh, and we'll incorporate all these. Okay, thank you. That was helpful. Thank you, and all the best. Ladies and gentlemen, a reminder to all participants in the conference, you may press star and one to ask a question. I repeat, you may press star and one to ask a question. Our next question is from the line of Jatin Sangwan from Burman Capital. Please go ahead. Sir, thanks for taking my question. I have a question regarding the unfair treatment of minority shareholders. If we look at the deal, we get to see the promoter would take an exit at around INR 470 per, 3 per share, while the minority shareholders, rather than the promoters, would take an exit at INR 437 per share. How could the board approve this deal if it is not in the favor of minority shareholders? Yeah, hi, this is Amit. Let me take this question. you know, we will have to look into the entire construct of this proposal. you know, the deal or the construct that we have already disclosed in the market offers full clarity and choices for all kinds of stakeholders to make an informed decision. When we were thinking about the construct, obviously there is a requirement by the acquirer that the current promoters of the company be declassified as the promoters after the transaction. The first part of the transaction is where ABFRL will acquire 51%. that is the reason why the open offer quantum is 29% and not 26%, which was the minimum requirement. Obviously, this construct means that the promoters will be able to sell a larger percentage of their shareholding in the transaction, which is the HPA Plus the open offer, as compared to the other shareholders, but that was the minimum requirement. Every other shareholder of the company can participate in the open offer to the extent of 29% for the remaining shareholders, and the balance shareholding will then get swapped into, you know, the shares of ABFRL, as we have already mentioned. My question is regarding the price, because the promoter is getting cash for 22% of the shares out of 30% he holds, while the minority shareholders would get share swaps for the 41% of the shares, and they hold, like, 70%. Just to add to what Amit has said, see, there was a deal construct wherein, in fact, we have not even used the full open offer exit for promoters. We tried to keep it minimum, giving all the other shareholders also a chance to get a fair share of open offer construct. Coming to the swap ratio, see, it's been arrived by translating various methods, and it has been done by the valuers, the merchant bankers, where the fairness opinion, it takes into value the long-term intrinsic value of both businesses. This is. See, we felt that, you know, this was a great deal at this point in time for the company and the stakeholders, and it gives a fair and balanced opportunity for various stakeholders to exercise their options. Okay, I still don't get the sense why we have chosen to proceed with the deal, but in the interest of time, I will move to the second question. We have decided to issue, in the board meeting, it has been decided to issue 14.3 lakh equity shares to the management. On what basis it has been decided? If I remember the agreement, I mean, if I remember the ESOP 2014 to 2017 scheme, it has to be on the exit formula by the promoter at the price of, I think, INR 950 or above. The deal is getting at around INR 450 or INR 460, so why the 14.3 lakh equity shares have been issued to the management? I think, sir, if you go through our, all our ESOP schemes, you are right, there was a part which was linked to performance of share price and all. That is not getting granted to any management or that's not getting vested at all. It is just some older scheme shares which the employees were granted, and it was vested long time back. They are just getting exercised. You are absolutely correct. There is no vesting of any share which were linked to prices and all. These are from earlier schemes. What I would request you is, sir, please go through the annual report. It has all the details. Even after that, if you have some questions, please do reach out to us. We'll be happy to answer. Thank you. Thank you. Before we take the next question, a reminder to all participants that you may press star and one to ask a question. Our next question is from the line of Yash Bhandari from Neo Markets. Please go ahead. Hey, all. Congratulations on your good results. My question is regarding the open offer, and what are the regulatory approvals required for the open offer, and what are the timeline you are expecting so that the all the open, all the approvals will be received? Hi, this is Amit. I will take this question. Primarily, there are two approvals which are needed for this open offer. One is the approval from the stock exchange. Yeah. Second is the approval from the CCI, which is the Competition, like, Commission of India. Okay. These are the two approvals. In the DLOF, draft letter of, offer and the DCA, which is the timeline, effectively, we believe that this should get consummated towards the later part of August or early September. Okay, thank you. Thank you. Ladies and gentlemen, you may press star and one to ask a question. A reminder to all participants, you may press star and one to ask a question. Our next question is from the line of Vikas from Equirus. Please go ahead. Yes, sir. Thank you so much for the opportunity. Sir, can you quantify what was the one-off write-off that you have taken with respect to the receivables for the quarter as well as for the full year? Yeah. without, you know, quoting a specific number, this was in high single digits. That is the quantum of write-off that we had to take for that one large LFS partner. You're talking high single digits as a% of sales? No, no, I'm talking about in actual quantum. Okay. Okay, and for the full year? We have been taking hits every quarter. From a full year perspective, the quantum is just about a low single digits, low double digits. About 10 odd crores is the hit that we'd have taken in the current, in the complete year. A larger part of the hit is what we have taken. We have taken hits across all quarters, but now since the partner has gone under the insolvency proceeding, the balance of the hit we have taken in Q4. Understood. Understood. Okay, sir. Thank you so much. Thank you. If you wish to ask a question, you may press star and one on a touch tone telephone. A reminder to all participants that you may press star and one to ask a question. Our next question is from the line of Shitij Sharma, who is an individual investor. Please go ahead. Hi, good evening. Yeah, good evening. Hello? Yes, sir. Go ahead with your question, sir. Yeah. my question is that last year, last couple of years, Sir, your voice is very faint. Can't hear. Sorry, your audio is not clear. May we request you to use your handset, please? Am I audible now? Yes, sir. Please go ahead. Hi. Last couple of years, organization has taken multiple initiatives. Can we know what are the updates on that, and what are the plans for taking any further new initiatives? Okay, as we have mentioned in the earlier calls also, some of the initiatives like new category introduction, we are trying to build that on in our own stores. As mentioned last time, they are contributing to double-digit% of sales and building up well across the stores they are present. One of the key initiatives was 11, which is now showing a lot of progress in SIS, and we are also in many stores seeing positive contribution coming out of it. As we go forward, we'll be focusing on these initiatives. As of now, we believe we have some of the things which are working well, and we are seeing a lot of green shoots. We'll focus on them. Thank you. Thank you. That was the last question of our question and answer session. I would now like to hand the conference over to Mr. Anand Daga 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 your queries. For any further information, please do get in touch with us or SGA, our investor relations advisor. Have a nice evening. 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.