Ladies and gentlemen, good day, and welcome to the TCNS Clothing Co. Limited Q3 FY23 Earnings 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 and 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 of TCNS Clothing Co. Limited. Thank you, and over to you, sir. Thank you. Good evening, everyone, and welcome to the Q3 earnings conference call. Hope you all had a great start to the new year. I'm joined by Amit, our CFO, and SGA, our investor relations advisors. While Amit can share detailed financials, let me share some key highlights of Q3. Q3 overall saw a challenging demand environment. We saw a meaningful decline in consumer traction, especially post-Diwali, owing to a weak wedding season and delayed onset of winters. The market recovery varied between regions and tiers of towns. South, as a region, continues to be ahead of pre-COVID numbers, followed by West, while North and East still lags behind. Not surprising, given a weak winter season. We saw a much stronger recovery in Tier 1 markets compared to Tier 2 and Tier 3 across markets, across regions. Coming to company performance, we achieved net revenue of INR 306 crore in Q3 and INR 933 crore year to date, FY 2023. As we have discussed in the past, too, there has been a continuous shift in online business model from B2B to D2C, which had a pronounced impact this quarter. While the secondary sales have been higher, the reported sales have been impacted due to negligible primary billing to online B2B customers. While this will entail short-term pain, however, it also creates benefits for the business in the long term, as D2C model offers higher control and inventory efficiencies. Overall, our offline recovery was similar to last year levels. While South and West were closing on pre-COVID sales, North and East dragged numbers down. AJIO channels overall grew by 15% over last year on back of strong expansion. In this quarter, we have opened 16-odd stores on a net basis to reach a total of 664 stores. In addition to these 16 stores, we have upgraded another four stores under Project Rise Initiative, taking the tally of Project Rise stores to 29. Overall, all brands put together, we are well on track to add 90-100 net stores this year. SS channel was flat compared to last year, except for the impact of disruption on account of one of the large partners. We added around 33 doors, taking the total count to over 3,500. Coming to online channel, the focus has been to build D2C business at our brand websites and building capabilities for marketplace models. We are doubling down on our brand website, which continued to grow at 30% plus levels year-over-year and is contributing to a quarter of total online sales. We have launched our W brand.com in key international markets as well. On marketplaces front, we are seeing omni-channel stabilizing across additional partners, and this should further enhance inventory fungibility and consumer experience. Talking about new formats, Elleven continues to expand its footprint. Overall, we have 34 stores and over 200 SIS as on date. While the AJIO format continues to evolve, we are seeing strong traction in SIS model and continue to get additional accounts and doors. Other categories continue to contribute double-digit to store sales where they are present. We are expanding presence of these categories in line with our ongoing expansion of bigger stores. I would also like to mention about the launch of SS23 range. As mentioned in our Q2 call as well, we had a first range failure in W in the last decade. This was the outcome of us prioritizing and optimizing product pricing rather than product features and attributes, which in hindsight, was a wrong business call, and this has taken a toll on brand's performance this season. Taking full cognizance of the consumer and market feedback, we have incorporated the deep insights into creating a more comprehensive SS23 range, which is now getting launched in the market. We should be fully on with our new season merchandise by end of February, and this should set pace for a strong season ahead. Now, I would request Amit to share key financial highlights for the quarter. Thank you, Anant. Good evening, everyone. I'll be giving an update on our financial performance in the third quarter and year to date in FY 2023. I'll start with the quarterly performance. Our Q3 revenue was INR 306 crores, compared to INR 329 crores, same period last year. Our gross margin for the quarter was 8.3%, which is an improvement over 67.8% in Q3 of FY 2022. As we have mentioned earlier, we should see this metric in conjunction with selling and distribution expenses and other overhead, as every channel has its nuance in terms of revenue recognition, gross margin percentage, and costs reflecting in selling and distribution expenses or marketing or other overheads. Accordingly, based on the channel mix, these metrics could vary in a range from quarter to quarter. In Q3, the company has generated a positive EBITDA of INR 43.5 crore, versus INR 67.7 crore last year. PBT for the quarter was INR 0.7 crore, versus a PBT of INR 35 crore last year, and PAT for the quarter was INR 0.5 crore, versus INR 25 crore last year. We have not received any rental concession in Q3 this year, while we had recognized a rental concession of INR 7.7 crore in Q3 of last year. During the quarter, the company added 16 exclusive brand stores, taking the stores onto 664, and we have added 23 points of sale in the LFS channel, taking the count in this channel to 2,500+. Speaking of our performance on YTD basis, the revenues were INR 933 crores, versus INR 662 crores last year, a growth of 41%. EBITDA was INR 129 crores versus INR 92 crores last year. PBT was INR 13.4 crores versus INR 0.4 crores last year. We are now over 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. Participants, you may enter star and one to ask a question. The first question is from the line of Devanshu Bansal from Emkay Global Financial Services. Please go ahead. Hi, Anant. Thanks for the opportunity. I have a few questions. Firstly, I wanted to check if you could share some light on the current trends for Q4, since you mentioned that there were delayed winters. So are we seeing some tailwinds that should help us a strong growth in Q4? Also there was Omicron last year. So do these... Are these going to be tailwinds for Q4? Hi, Devanshu. See, first of all, our season starts in July, August, and goes till mid-February. So, a lot of the seasonal range issues that we had unfortunately continues till mid-Feb. But now, as we are connecting new drops, we are seeing good traction. So hopefully, you know, in the coming weeks, one should see a significant pick up in sales. Second, as far as winter is concerned, you are right. The delayed winter would have helped sales somewhat in January, but unfortunately, all this has come at a higher discounting. So while the volumes have moved, obviously next year's impact might not be as high. Okay. And also wanted to check, since this fabric issue has been there, so are we done with that particular inventory, or we'll be carrying it to next season in for Q3 next year, Q3 FY 2024? Yeah. There is a small portion of that which gets carried forward also. But that would be, you know, maximum at a 10%-15% kind of range. Balance everything would be fresh. So over 80%-85% of the stocks is all new season, where all the issues have been resolved completely, fully. We shouldn't be... I don't think we should see a big impact of this. Okay. The carry forward inventories. It's just a small proportion now. Overall inventory is also at acceptable levels, so there is not much increase because of lower sales, et cetera. No, Devanshu, since Q3 sales were impacted, obviously there are some built up in inventory. But, we have also, you know, adjusted some of the buys accordingly for this season. So by, you know, by end of this season, we should be at a more, you know, in the regular zone of inventories. Okay. And, Anant, so FY 2023 has been a weak year for us due to some specific issues pertaining to TCNS and overall slowdown in demand as well. So any outlook that you would like to sort of give us for FY 2024? So, Devanshu, I think there's the best way to look at is to break this probably in three parts. One, obviously, a lot of this performance has been because of our own internal range issues, which to my mind, we have corrected. We have shown to all channel partners, they all feel that, you know, these ranges are far stronger. And as it's getting launched, we are also getting good response from these trends. So that internal issue stands solved, which itself should give us, meaningful, growth. That's number one. Number 2, coming to ethnic wear segment as a whole, which was struggling till about, you know, last year, spring, summer, post- Diwali, post- Pujo, what we have seen is there is a consistency in demand there. And we have seen quite a few players also clocking, ahead of pre-COVID numbers. That's a very, very encouraging news. And if this trend continues, then obviously all ethnic wear players will gain out of it. Third, about the more macro market thing, I think, see, it's similar for everyone, so we'll have to see how that plays. But on the last two count itself, I believe next year should fundamentally be far stronger. Okay. And, what is the cash level as of now? Obviously, if you could share, since you expect some of the inventories to get liquidated by the season end. So if you could, indicate as in what are your expectations on cash exited FY 2023, and, whether, since we have, sort of, delivered low margin, so does that in any, any way impact our store additions for next year? So there are two questions out here. First of all, December end, we were positive of about 30-35 crore net cash. Second, coming to margin and store expansion, see, basically, most of the stores that we have opened, they are profitable. So when our SSGs or recovery is still not par, most of the stores are profitable. It's just that they are making lower profits. So with all these range issues, and if the sales come back, even these would be highly profitable. So all the expansion and all, right now, also what we are doing, we are taking cognizance of this and being very, very sure of profitability. We are going slow in a couple of areas, geographies, where, you know, sales have not picked up, and we don't have a visibility in near future. So these are very, very, you know, specific markets, couple of markets. So there we are going slow, otherwise, most of the expansion is profitable, and we are going on with, with that. Okay. And just a follow up on this. So even if macros don't improve, then that sort of 1,800 store addition annually that should continue for next year as well? Yeah, yeah. So that has taken into account. So obviously, if macros don't improve, that number of 90-100 could be 70-80 or something like that, but it's very specific market is. Okay. Okay, and then last question from my end is on this bottom wear category. So what is the sort of strategy that we are adopting for Elleven? Are we more into core or fashion segment or, or, also, if you could elaborate on which categories specifically are we catering to in terms of like churidar, palazzo, pillows, et cetera? So actually, maybe, separately, we can, you know, share more details also, much more granular detail. But on this call right now, the range we have created is it's elevated core. Core and elevated core. So for example, it's not hardcore fashion, but the core basic products are also elevated with features. So that's how the range of Elleven is. In addition to the normal categories which are core, like, you know, churidar, styles and basics, basic stuff. Yeah. In terms of category, see, this is something that cuts across western, ethnic, leisure, everything. So we have three or four different silos. So we have, on one hand, we have tights and churidars and palazzos and culotte. On the other hand, we also have yoga pants, we have travel pants, then we also have some denims and formal trousers. So it's a range which is a complete bottom wear solution. Some of these silos we are building up as we go, and some of these silos are more stabilized. Got it, Anant. Thanks. Thanks. Thanks. That's it from my end. Thank you so much. Thank you. Ladies and gentlemen, to ask a question, you may enter star and one. The next question is from the line of Nihal Mahesh Jham from Nuvama. Please go ahead. Yes, sir. Good evening. Am I audible? Yeah, I hear. You're audible. Hi, Anant. Couple of questions. On W, you highlighted the range issue that was visible. If you look at Aurelia, that is a brand that still seen a de-growth, while you're highlighting the issue of the macro concern, is that we've seen a reasonable amount of store additions. And generally, looking at performance with some of the other players also, it seems that at least on an absolute level, a lot of them have managed to report a growth. So if you could just highlight, you know, specifically anything about that. So Nihal, Aurelia, wherever it was present in the various barring one case, I think Aurelia did better than the chain average. Unfortunately, for Aurelia, a lot of these are frankly more, value and economy segment retailers who themselves have not recorded meaningful growth out there. And second, it's also an impact of a lot of Tier 2, Tier 3 recoveries being lower. But frankly, in terms of relative basis, if you take the season, I think Aurelia performed at par with most of the other, other peers in respective channels. So- Obviously, the impact of B2B is there. So B2B billing is something which had a toll. So B2B billing was 95% lower than you know what it was last year. So that has taken a toll on Aurelia as well. Of late, Aurelia is well. Got that. And, is it possible to get a sense that as you're highlighting this range issue, that ideally, what is the kind of sale loss you've seen because of, say, having the collection in W, which was not as per the standards you would have wanted or the customer expected? So Nihal, we can throw up a number, but it's more academic. So I would say, like, you know, till about Q1, Q2, W's recovery was ahead of Aurelia. In Q3... Sorry, Q1, and Q2, post festive, that there's a delta difference between W and Aurelia. Again, in these accounts, there are few players with stronger ranges have done better. So, you know, there's a difference, but really more of an academic answer, honestly. It's very difficult to assess in a number. Got that. Just last question, and again, this was an observation in the earlier quarter on the LFS channel, where the, the weakness seems to be more than any of the others. And earlier, we've highlighted the mix aspect also, that maybe incrementally we are adding large format stores in, non-metro or lower tier cities. But, in this quarter, it seems that, that as a channel has seen, a significant impact. I'll leave online apart, you've highlighted that. So anything separate to that or, if you could just highlight on that part? So, you're aware, you know, one large format account—they are continuing to have issue where the stores are shut and there was a big disruption, and that was a big account for us in LFS. So I think that has really taken a toll on the LFS numbers per se. If you know, if you just make that exception, it was LFS was also hit up last year. But that LSS was within issues in the base quarter of last year, right? So that won't be the reason for the YOY contraction there, right? No, no, it was not. Okay, I'll take this offline with you. Sure. We can discuss it later. Yeah. Thank you. Ladies and gentlemen, if you wish to ask any questions, please enter star and one. The next question is from the line of Varun Singh from ICICI Securities. Please go ahead. Yeah, thank you. Am I audible? Yeah, I'm here. Yeah. Okay, okay. Thanks, Anant sir, for the opportunity. My question is on the W range failure. As you rightly mean, or as you mentioned in your remarks, that this is a first kind of failure in a decade. Just wanted to understand, given that the revenue growth of our company, when we look at all of the competition or other set of listed companies in retail sector, so ours stands at kind of a lowest, or in the bottom of bottom quartile. We have been observing this since past several quarters. Earlier, we understand that, I mean, there was some channel-related stuff, mix changing. This quarter, we understand it is the range failure for W. So, sir, how... If you could throw some light regarding what has led to this kind of catastrophic problem, and why we failed to predict it? And the reason that I'm asking is, what kind of business risk is this event and the likelihood of it in future? So if you can throw some light regarding how has this happened, why is this this happened, and how should we look at this issue from future point of view as well? So Varun, I think there are a few parts in your question. So let me try to answer each one of them, and in case if I miss something, please do come to me. So first of all, when you say, you know, we have been in the bottom quartile this season, I completely agree with you. And this is a reason because of, you know, an execution gap in terms of range. I'll come to that in a minute, why that has happened, what we are doing to correct it, right? But that's a issue which is more internal, so market, ethnic wear has done okay, better than before, but we have not done well. So that point is 100% accurate. Now, coming to, you know, last few quarters, I don't know which company you are comparing us to, because in ethnic, frankly, women's ethnic, there are not too many listed entities. That's number 1. Number 2, what I would also request you to see is, you know, within these listed entities also, how has ethnic performed compared to some other categories? So after COVID, after probably one and a half, two years, this is the first season when ethnic wear has been able to show growth for a lot of the large format partners, also for industry as a whole. So I don't think before that, it's exactly apple- to- apple comparison. Not taking away that we could have executed better, we could have done better, but I don't think that's a very fair comparison. And frankly, till about, you know, apart from the period when we were very open and we came to the market, and we said that we want to prioritize cash, and that is what we are doing, and we want to manage cash. I think other periods, apart from that, frankly, our relative performance was also was not bad. We were in the medium band. We were not on the top of the game, but definitely we were not in the lower quartiles or even below, you know, half of that. So that I think maybe, you know, we can have a longer discussion on. This season, obviously, there has been a challenge. Now, there are two challenges. One is this model disruption, which is B2B to D2C, and second is the range, range issue. So B2B to D2C is something which started last year. We already had a very, very big base online compared to many, many other players. And for us, our B2B business was a significant part of total revenues. Now, when that thing is changing, there is an impact which is there in this quarter, which might be there for a couple of more quarters. Obviously, it won't be as pronounced, but this quarter it was more pronounced. So that's one part. Second, again, this is something which probably is not true for many, many listed players, especially, you know, the chain stores and all. So I think we need to just look at it in that light. Third, coming to W range issue, this is an issue which, you know, it happened because when we were designing this range, the fabric prices were all-time high. We were sitting in January, February of last year, where it was COVID impacted. So what we thought was, consumers might be looking at a slightly lower price option, and they might be okay with, you know, fabrics like polyester and ornamentation like glitter prints and all. Therein, we made a wrong assessment. So when consumers came back, premium segment, unlike value, moved much faster. They were demanding better products, and that's where, you know, caught lacking. Now, we have taken cognizance of this. If you go and see our new collection by end of February in the stores, you'll see that, you know, you have much more cotton, natural fabric. It's a different range altogether. So that is how we have corrected it. There's still 10%-15% of that carry forward, which will linger on, but I think that's a small part... This is, you know, how at least we see what has happened in our business, and that's our assessment of, you know, how these all the business has been impacted in the last quarter also. Right. So, what, how are we ensuring that this kind of event does not repeat in future? So if you can tell us. Varun, Varun, two things. One, see, in a fashion business, one-off cases can happen. And, see, the fact that in the last 8-10 years, this is the first time something like this happened talks about the robustness of the process. This time also, we went through the process. Unfortunately, we priced a wrong attribute. So when we are correcting SS23, and when we are looking at further ranges, we are doing the usual step. We are doing in-depth market studies, we are creating a range, we are calling all our partners to see the range, give the feedback, give their thumbs up, let us know where we can improve. So this is something that we have followed for spring summer completely. That's, you know, that's the best way when all our channel partners, when our customers, they are there, they are also seeing the range and, you know, giving an affirmative rating on the range. I think that's, that's the process we follow, and that's what we have done now, and that gives us confidence. Understood. And, so when you say the online, B2B, the business wherein primary billing was impacted because of the switch that we are making to D2C, because of the better business economics. So what is the, I mean, if you could, if you could give some objective number with regards to how much, how significant was this? So, online base was higher, I understand. But, what is the total contribution of this B2B billing to our revenue, sir? So if you look at this turnover, we lost almost 7%-8% growth only because of this one item. So the impact in this quarter itself of B2B billing, lower B2B billing, is somewhere in the INR 20-25 crore range. Okay. So, sir, I'm sorry, I did not understand this part. When you say that we are moving from B2B to D2C, so, what exactly we mean by this? So we want to sell directly to customer through our own website? Correct. So what happened was, you know, earlier the model, say about two years back, was completely wherein we used to do the buy and sell model with the platforms, wherein they would buy all the inventory and sell. So we didn't have a D2C channel at all. But now, gradually, lot of business is moving to direct channels, wherein we hold the inventory, and we are only using their platforms to service our consumers. So if you look at it from almost a zero level or less than 5% level D2C, this quarter, the D2C level is almost two-thirds of the total business. And when we are recording these secondary sales, the primary stock that our partner sites are holding, they are also making secondary sales on that without buying primary inventory from us. So whatever is in their store, they are also selling, and hence, secondary sales are higher. And till the time this transition happens, obviously stock is getting sold from two, but only one part, which is D2C, is getting booked in our recorded in our books. So this is the gap that I was talking about. Also, in this process of shift, obviously, there have been some disruptions wherein entire D2C inventory is also not being exposed to consumers, which anyway is getting rectified at a very good speed. So that should be online. But this is basically what is happening in the online channel. In this method of selling, wherein we are carrying the inventory risk, how much is the better margin improvement, and how do you quantify inventory risk as well compared to the B2B model? Also, see, inventory risk is these are all season inventories, and when we have an Omni-channel presence, obviously these are fungible inventories, so I won't say there is an additional challenge out there in terms of inventory risk. Right now, the D2C model, right now, the margins are slightly lower than the B2B channel because this is a new channel, and out here we have to now build our own website, build our own capability. So right now, the margins are slightly lower, which should catch up eventually. No, no, sir, sorry, but you said that to the existing partners who were buying from us and then selling it on their platform, instead of doing in this way, now we are selling it directly on their platform. So this is what I understood of D2C. Sorry, my bad. There are two parts to D2C. One is our own website, which is growing at a very healthy rate, wherein obviously, you know, we have to build the entire marketing base, consumer pull to our website. And second, when we are selling, when we are selling on their website. So these are the two, two different parts of D2C, and I was talking about overall margins. Understood. So, sir, I am asking about the third-party channel wherein we are selling, and we moved from B2B to D2C. So on our website, sir, I understand, but for these channel partners, how much is the margin improvement, et cetera? No. So, Varun, frankly, there is no margin improvement right now. It's comparable, but it is, there is no significant margin improvement, because earlier there were a lot of discounting and all, which they were bearing over and above whatever their margins were. So obviously there's not a gain right now. Okay. Okay, understood. Okay, that's it from my side. Sir, thank you very much, and all the best. Thank you. Thank you. The next question is from the line of Harshil Shethia, Shethia from AUM Fund Advisors. Please go ahead. Hi, sir. Firstly, my question was: How much of our contribution comes from the LFS channel? You mean to say sales contribution? Yeah. So typically it is about 37%-40% range. Okay. How much would be the large account that you said, which is in trouble? See, that was overall, it was about 3%-4% of overall business. Okay. Overall business, so obviously about 10% of the LFS business. Yeah. I'm giving you broad, broad numbers. Yeah. No problem. So my second question was, going now that we've corrected the whole designing end with our SS 23 launch and everything, what kind of EBITDA margins on a long-term basis, you know, would be sustainable for us? Yeah, this is Amit. I'll take that call. See, we have started referring to PBT post Ind AS 116 accounting. So if you look into our historical profitability, it used to be in the 14% range. We believe that with, you know, sales recovery at the stores coming back whenever we achieve the recovery at a pre-COVID level, and some growth at a corporate level, we should be able to go back to those levels of profitability. There will be one change, however, since the market, the channel competition has changed, and we believe that online will be a larger share of our pie compared to what it was pre-COVID. That data, and within online, you know, B2B shifting to D2C, competition of all of these may create a, you know, a certain dent on our profitability as a metric. But if you look into the profitability at a channel level, I think we can go back to those levels once we achieve 100% pre-COVID recovery, with some growth on top of that. Okay. So can you say something like, you know, assuming all these delays and everything now behind us, you know, we'll be able to do around 10%-11% on PBT level on a long-term basis? Exactly, those levels are sustainable. Obviously, we feel, we have to touch pre-COVID and beyond, and those levels that you mentioned are possible. Okay. So, going ahead, what would be our target in terms of growth for our EBO channel, in terms of number of store openings and, you know, an SSSG target that we would love to maintain for our mature stores also? See, I think if you look at next 3 to 5 years perspective, a single digit, mid to high single digit SSSG and opening about 80- 100 stores is something that we'll aspire for, at least. Okay. Sir, are we also planning to, you know, enter into the men's segment going ahead, or we would stick to the women's segment only, or maybe expand our horizon from ethnic or Indo-western kind of dresses or garments? No, so definitely there's no plans of getting into men's wear. Okay. So we are a platform for women's apparel, and obviously, even in our existing ranges, we have capsules which are very Indo-western. So all those things, apparel, accessory, category, these are something that, in the long term, we'll keep adding to our platform, but no plans of getting into men's. Okay, then also in the long term, you do aspire to go into the western segment, you know, completely western, like, say, jeans or some kind of T-shirts or something like that, or, you know, we stick to the Indo-Western only? See, the way we defined our company's objective, obviously, all those things are under that umbrella, but we'll keep prioritizing different initiatives at different point in time. But that, that's definitely a possibility. Okay. And that would be so, under the same brand name or a different brand would be launched for the same? No, no. See, right now I'm just saying it's a possibility, and, you know, we have not worked out any details whatsoever around that. We'll take a call at a more opportune time. Okay. No problem. So that's it from us. Thank you. Thank you. The next question is from the line of Rajiv Bharti from DAM Capital. Please go ahead. Yeah, good evening, sir. Thanks for the opportunity. Sir, on your B2B issue, did you try, let's say, tapping into the MBO market little more aggressively? Because, let's say, online guys and the LFS guys were not exactly picking up inventory during Q3. And how has historically been, for example, the behavior in terms of returns and possibly on the receivable metric also? No, so, again, as far as LFS and online goes, frankly, we have not got any challenge on, either, receivables or, inventory returns. Obviously, at times, you know, there could be some credit extension on those, but managed up. In terms of MBO, in fact, you know, looking at the market situation and the credit scenario, we have actually pulled back from a lot of outlets, and, we have curtailed that business slightly more. So we are present in MBO business, MBO, MBO channel as well, but doing in a more curtailed, controlled, manner right now. No, so, the return part and the receivable, I was actually asking from the context of MBO. So because the other two channels are a little slow, so possibly tap into MBO for the time being, is what I was referring to. No, no. See, MBO is a very, very small channel for us. So frankly, you know, and again, out there, a couple of years back, we took a more conscious call of, you know, putting our stuff only in MBO, which can do justice to our brand and which are, which have 100% creditworthiness. So in that aspect, we have actually curtailed, and I think, see, it will not meaningfully move the needle, honestly. So I think, that's why we are taking a more conservative call in that channel. Sure. And in some conversation, we have heard that, you know, Myntra has, you know, put out a GMV target 50% higher than for the next fiscal because the current fiscal as compared to the last fiscal. So, it looks like they will pick up inventory, what they have not picked up in last quarter. So, this B2B to D2C, is it required? Or, you know, because once things come back, the B2B itself will fire. No. So see, there are two things. One is obviously nothing has become zero. It is just, you know, from quarter to quarter, it becomes more difficult to explain to you. I really don't know what can happen in Q4 and again in Q1. But from a long-term directional point of view, I think business is continuously going to move towards D2C, and that's what I was alluding to in one of the previous questions. Sure. And if you can talk about your you know when did your end of season start and you know then and as compared to the last time and when did it get over? So this time, end of season sale started towards second week of December, and it just ended. So it was about two months. I think it was about a week, 10 days extra over, you know, what pre-COVID typically would be. I think slightly delayed onset of winter actually also made it so people advance it. Okay. And in terms of the range failure or the where you basically optimize cost, what part of this inventory is still left in the system? You mentioned something like 10%-15%. Is it possible to specify the content? So see, I, I don't want to give a number right now, but you know, about 10%-15% of the inventory is what we'll have to resolve for in the next 6-7 months in terms of liquidation channel, and that's, that's the content only. Okay. 10%-15% of the entire inventory is basically this. And this was largely festive inventory, right? Yeah, yeah. Yeah, Yeah, yeah. This was more festive inventory. You You are right. Sure. Yeah, that's all from my side. Thank you. Thank you. The next question is from the line of Vikas Jain from Equirus Securities. Please go ahead. Thank you so much for the opportunity. So my first question is with respect to our, again, starting with this B2B case points. Sir, was there any conscious call that you took with respect to lowering our sales with the B2B client and then boosting our, the D2C sales? Or it was like a naturally it came up from the partner website that, they, they reduced their, orders or pickups from us. No. So see, we have continuously been working with our partners to have a more uniform discounting, better brand representation. So all those have been going on in the background. But frankly, B2B business also was very good for us, so it's more from the partners' end, that their model is undergoing a change rather than us really pushing for it. Correct. So, in fact, what I was pointing to was, it's not anything which is related to specifically to our weakness. It is like all players will be facing the same, right? So, no. So there are two things out there. One is, historically, not everyone had a B2B model. So there were a few partners who had B2B models with these people, and this is basically, you know, before COVID hit, it was obviously used to be highly B2B. And now that shift has happened of late. For us, we have been primarily building our website business, which was a focus area, but on the third-party marketplace model, obviously that accelerated pushes from their end. Mm, sure. Okay. So one more thing, when you did say that, of course, the margin profile in our D2C business is currently quite lower, and would increase only upon scale up. So what is the margin profile that you're targeting to on our D2C segments that would like eventually shape up our company level margins going ahead? No, see, so out there, frankly, we don't like to share very granular details on this, but as we have mentioned earlier also, that typically for us, online has been a reasonably profitable channel. Obviously, it's much lower than EBO and MBO business. So we would like to get back to those levels, which could be lower than these, but definitely a double-digit profitability contribution. Right. But at achieving a certain scale, it would definitely be much more profitable than the current third-party online marketplaces that are there. Yeah, yeah, yeah. So, so just to give you an idea, every full price merchandise that I sell on my website is the highest margin sale across business. So as we build our own website stronger and stronger, as we do more full price and lower discounting products, that margin profile will keep improving. But again, it's certainly. Sure. So, one data point here, what would be our share of own websites in total online sales that we do? This quarter, it's about... This year so far, it's about 25%. Correct. And, that's exactly that you were talking about, where we have, we achieved the highest ever sales, and we sell at an MR, a full price MRP, right? That 25%. No, no, no. Sorry. Our website sales as part of total online sales is 25%. Yes. There is a low double-digit number, which is full price. There it is. Okay. Yes, I get it. Yes, yes. So, one additional question with respect to the range that you were talking about that didn't work well. Of course, as you mentioned, it would form around 10%-15% of our current inventory. But then, is the thought process that that would be like a liquidation with the higher EOSS that happened that just concluded, or it will be like... What would be the means of disposal of these inventory that you are planning? So typically, see, these get liquidated through all liquidation channels, and it happens over, you know, a couple of seasons. So that's what, see, every year we have inventories which are left over, and these are the liquidation channels that we use. So in this process, obviously, this time that quantum is slightly higher, might take, you know, a quarter or, you know, 3, 4, 5 months extra, but that's about it. So regular liquidation channel, we'll be able to liquidate that. Sure. And lastly, what was in this quarter any inventory losses that you booked, and was it above the normal level? Yeah, so this is Amit, I'll take the question. So we have a dormancy policy, which is anyway very aggressive in nature. We start taking a dormancy hit on our costs, you know, once the product reaches season minus three, and we keep on taking sequentially higher hits as the product, you know, moves on to older seasons. The reason why we have this kind of policy is that, you know, being a high gross margin business, in more often than not cases, we don't need to provide for any dormancy in even in season minus three. And the reason is that even when we liquidate it, either at a store level or online or any of the liquidation channels, the realization is higher than the cost. So yes, we did take a dormancy hit in Q3, which is as per our regular policy, which is anyway aggressive in nature. In any case, it was not normal then... It was not abnormal than a normal inventory write-off that we take. Right? No, it was not. Okay, thank you so much. Thank you. The next question is from the line of Shivaji Mehta, individual investor. Please go ahead. Hi, thank you for the opportunity. So I had a question on the markets of Bihar and U.P. You know, if you can give some color as to how they're performing, given that they had suffered from a poor rainfall in the current season, but with the rabi crop expected to be good, you know, are we seeing some traction here? See, overall, you know, in one of the earlier question, I just mentioned that U.P has been one of the most affected impacted markets for us, I think for the industry overall. So there have been multiple reasons for that. So as of now, frankly, we have not seen any uptake. We'll have to see how things, you know, move in coming months. But U.P as a market is really slower. Right. So my next question is on the cotton prices. You know, they've corrected a lot from the peak of about INR 100,000 per candy. Are we passing this on to the consumers in terms of lower pricing? Or are we kind of retaining some bit of this? No, no, no. So we already work at very healthy gross margins. So most of these benefits will be going back to the consumer, and it will reflect on the price value. Right. So my last question is on the new forays of footwear, et cetera, that, you know, we had gotten into. So if you could just give us some color on how these are performing? So see, first, let me just tell you, like when we talk about footwear and spectacles and jewelry and all, these are essentially extensions of brand W, and the idea was to create a full lifestyle brand out of W and have mega stores on the same. So with that perspective, we started these categories. So today, if you look at, the bigger stores, where all these categories are present without, you know, cannibalizing space for W apparel, which are bigger stores, they are already contributing to mid-teen kind of% numbers for these period price stores. So that is where we are building. As we open more bigger stores, I think these will continue to build. Idea is to have at least 25% contribution from non-apparel in next 2-3 years' time, and that's the journey we are on. Right. Thank you so much, sir, and wishing you all the best. Thank you. Thank you. The next question is from the line of Sanketa Gandaretti, individual investor. Please go ahead. Good evening, sir. Thank you for the opportunity. [Foreign Language] Sir, actually. [Foreign Language] Sir. [Foreign Language] [Foreign Language] [Foreign Language] [Foreign Language] Thank you. The next question is from the line of Vishwajeet Bhandigare from Alpha Valley Advisors. Please go ahead. Yes, thank you for taking my question. My question was on the balance sheet front. I can see at the end of the quarter of 2022, in the footnotes, you have mentioned, like, the assets have been pledged against the borrowings. I just wanted to ask if there are no borrowings, and why the assets are being pledged? Yeah, hi, this is Amit. I'll take the question. So, you know, we have these limits that we had even before the pre-COVID before the COVID period. And during COVID, we were unsure of how the you know, the impact of COVID will last and what will be the impact on the financials. So we want to retain these these limits with us. And as we were coming out of the COVID, I think the strategy for us, even for the current year, was to push on to growth initiatives. So to answer the question simply, why we have not been dipping into debt so far, it's always good to have a cushion with us in terms of limits. And these assets are kind of against those limits. It's not a significant limit that we today have, so about INR 50-60 crore. You know, Anant mentioned in one of the questions earlier, that as of December end, we were having cash over INR 35 crore. You know, the recovery starts happening, and we want to invest into opening up 80 stores on a per year basis. So it is only prudent management that we continue with those limits and hence the allocation. All right. The second question was on the front of ESOP schemes. First question is, like, why do you have so many complex ESOP schemes? And, the second one being, like, the total outstanding options is, like, 11.5% of total outstanding shares. So could you please, give your thoughts on that? Yeah. So if I understood your question, it was more about the complexity of the schemes. You know, these different ESOP schemes were introduced at different points of time as the organization became more mature and we wanted to incentivize different level of people. So before we went for the IPO, we consolidated different schemes that were existing at that point of time into one scheme, which was 2014 to 2017 scheme. Post which we introduced just one scheme, which is what we call 2018 to 2023 scheme. And within that scheme, you know, there are five, there are three different components. One of which is linked to, you know, longevity of the people staying with the company, in certain cases, performance specific to a vertical. There are other two parts, which is more to do with the sizing of the company. So if you look into just the current scheme, which is 2018 to 2023, it is relatively simple. There is one part which is to do with the longevity, and there are two parts which is to do with the valuation, in terms of how the share price moves. All right. All right. Thank you. Thank you so much. Thank you. The next question is from the line of Devanshu Bansal from Emkay Global Financial Services. Please go ahead. Thanks for the follow-up opportunity. Anant, I have two strategic questions. So basically, ethnic category has been seeing slower recovery versus other categories. So I just want to take your thoughts as in what gives you confidence that growth in ethnic will continue when Western is also picking up. Since you know the business in and out, if you could just help us understand as in what are the key drivers that should help us ethnic to sort of continue growing over the medium term? No, so, actually, in fact, you know, this is what we are seeing right now in market. So post, Puja, the demand for ethnic has gone up, and it has come at par with many, many other categories. So it is not like a hope. It is something that we are seeing in the market right now. So if you look at two categories, which were, men's formal and ethnic, they were slightly slower, but both of them are bouncing back. So, you know, as people have started going back to office, more and more physical, these things are physically things are opening up. I think this was bound to happen, and this is what we are seeing right now. At least as of now, for last four, five months, this has been a consistent trend. Got it. And the second question was on this discounting at online marketplaces. So, your products are available at even more than 50% discount. And even you mentioned that at your own websites, full price mix is only 10%-12%. So as a consumer, I think that this is really confusing as in for consumers to sort of decide where to buy from. Because as a consumer, I don't know whether online is getting old articles and at the store, it's the fresh one, which I'm going to get. So in your view, do you feel that this in some sense sort of impacts our brand image? And what are you sort of doing as in taking steps to sort of keep a uniform pricing across platforms? No, so Devanshu, there are two parts to this. One, first of all, you know, they are very different consumer cohorts. So there is a price seeker, value seeker, and there is a variety seeker. So a full price consumer is a variety seeker who wants something latest, and it's out of convenience and choice that she's coming and buying full price online. Wherein, if you look at a 50%, 60% discount customer, they're value seeker. So when they go on a site, the first filter they use is up to 50%... Sorry, over 50% discount. So these are two different customers, and they co-exist. So I don't, I don't think there are any challenge that way, number 1.... Number 2, coming to price parity, see a very, very at broad level for the fresh season, there's 100% price parity. Hello? Hello, yes. Yes, sir, we hear you. You won't see a price parity issue where with your online space for the fresh season. Hello? Yes, sir. So there is a beep sound coming from your connection. Participants, please hold while we reconnect the management line. Ladies and gentlemen, we have the management reconnected. Please go ahead. Yeah, sorry. So I was answering this question. I don't know where I left, but just to reiterate, on the fresh merchandise, there's absolute price parity, so it's not that, you know, something is very discounted somewhere and being sold on full price. As far as discounted merchandise, it's a very tight range. And, you know, inventories which are common is often at the same discounting across sites. The only minor difference would be in the B2B bulk inventory site, wherein there could be some minor differences, but on an overall basis, it's maintained very well. Devanshu, do you have any further questions? Hello? Hello. Yes. Yeah. Are you able to hear me? Yes. Yeah. Yeah. So, Anant, my concern was, if we want to address both the consumers, why address it by giving a discount? Why not price the articles at a lower price only? So why are we sort of giving them a discount, so? No, no, Devanshu, this difference in like, well, this is something which happens in offline also. So these are not online specific merchandise. That. So there are two kind of brands, one who obviously, you know, first inflate the price and then offer discount, so that's not what we are doing at all. So all our products, these are full price season sales, which after, you know, two quarter to one season, two season, three season, goes on discount. Offline also behaves same way, online also behaves same way. All the brands do this, so I don't think that. So it's not about inflated pricing at all. It is regular merchandise, all season at discount. Yeah, so I was coming from that point only, Anant. So, I think this is because of excess inventory that gets, that doesn't get sold at full price and that goes on sale. So what are we doing to sort of reduce that inventory so that we don't have to offer that kind of discount? No, so, so Devanshu, this is a different question altogether. First of all, in fashion business, there always will be leftover inventories, and there always will be, this is something which will be sold on discount, and this happens across brands. Now, the quantum of obviously, your sales discounting and greater sales is inversely proportional to how strong your season goes. So obviously, when in season where you have a challenge, this is something that propped up. The idea going forward is to increase full price sale, for which we have taken a lot of initiatives, which we can discuss, you know, at length sometime. So idea, we are, directionally, I'm completely with you. We should reduce discounting, we should do more full price sale. The rules could be very, very different, but, directionally, this is what, you know, even our, our, our attempt is. Got it, Anant. Last, bookkeeping question. This quarter, we have seen some players where margins were impacted due to realization of high-cost inventory, high-cost raw materials, sorry, raw material inventory. Do we also have that kind of raw material inventory where we have sourced it at higher prices or our prices are more related to the current prices that are there in the market? I'm sorry, I'm not been able to understand your question. Yeah, Anant, my question is on raw material inventory, which is about 25% of our overall inventory. So this quarter, there are certain players which realized margin decline due to realization of high-cost inventory that they purchased, say, last year. So I'm checking, as in, do we also have some inventory which is high price and, or our raw material inventory is more or less aligned with the current rates? No, no, majority of that is aligned. Obviously, there would be some, grade and all which we keep, but more or less it is aligned. Okay, got it. To the current market prices. So we are not carrying any high inventory, high-cost raw material. Got it, Anant. Thanks. Thank you. Ladies and gentlemen, due to the time constraints, that was last question for today. I would now like to hand the conference over to the management 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 SGA, our investor relations advisors. Have a nice evening. Take care. Thank you. Thank you very much. On behalf of TCNS Clothing Co. Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.