Ladies and gentlemen, good day and welcome to V2 Retail Limited Q2 and H1 FY 2022 earnings conference call. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Akash Agarwal. Thank you, and over to you, sir. Good afternoon, everyone. A very warm welcome to our quarter two earnings conference call. I hope you all are staying safe and healthy through this unusual and challenging time. Along with me, I have Mr. Manshu Tandon, our CEO, and our investor relations team. I hope everyone has had an opportunity to look at our results. The presentation and press releases have been uploaded on the stock exchange and our company's website. Let me start with the key updates. The company opened three new stores during the second quarter. The company has opened one new store during the third quarter, which is the ongoing quarter. As on September 30th 2021, the company operates 96 stores spread across 15 states, and 84 cities with a total area of 10.1 lakh sq ft. The same store sales growth for quarter two stood at 59%. We continue to remain focused and committed to the accelerated store expansion strategy despite delays in the first half of FY 2022 due to lockdown. We are looking to open another five to six stores till the end of this financial year. At V2, with our strong customer connect, we have witnessed strong rebound in the demand post relaxation of restrictions in quarter two. The recovery has been much sharper with the onset of festive season starting in quarter three. Now allow me to give you an overview of our operational performance during the quarter. First, I will talk about the consolidated performance for second quarter. The revenue from operations stood at INR 149.5 crores, registering a growth of 76% year-on-year basis. Gross margin stood at 34.3% compared to 32.6% last year. The stores were operational on an average for 86% days, compared to 45% days last year. Compared to 45% for quarter one FY 2022. EBITDA for the quarter stood at INR 19.5 crores as compared to INR 9.7 crores in quarter two last year. EBITDA margin stood at 13.4% compared to 11.4% last year. Now I will talk about the standalone performance for the second quarter FY 2022. Revenue from operations stood at INR 149.5 crores, registering a growth of 76% from last year. Gross margin stood at 30.8% compared to 31.8% last year. EBITDA for the quarter stood at INR 16.5 crores as compared to INR 9.5 crores in quarter two of FY 2021. EBITDA margin stood at 11.1% this year in quarter two as compared to 11.2% for the corresponding period last year. Now the consolidated performance highlight for the first half of the year. Revenue from operations for the first half of FY 2022 stood at INR 232 crores, registering a growth of 90% from the first half of FY 2021. Gross margin stood at 33.7% compared to 32% for the first half compared to last year. EBITDA for the first half stood at INR 29.5 crores compared to INR 17.1 crores in the first half last year, registering a growth of 73%. EBITDA margin stood at 12.7% for the first half of this year. The profit after tax loss for first half FY 2022 stood at INR 15.4 crores as compared to a loss of INR 16.2 crores in the first half FY 2021. Now the standalone performance for the first half of the year. Revenue from operations stood at INR 232 crores, registering a growth of 90% compared to last year. Gross margin stood at 31.1% for the first six months as compared to 31.1% for the corresponding period last year. EBITDA for the first half of the year stood at INR 27 crores compared to INR 17 crores, with registering a growth of 63%. EBITDA margin stood at 11.7% for the first six months of this year. The quarter began with gradual recovery from COVID-19 second wave, with relaxed mobility restrictions and aggressive vaccination drive across the nation, sharply changing the consumer sentiment. Retail channel operations saw rapid growth in demand as the national infection caseload came down. This led to a strong recovery in demand, with sales moving swiftly close to pre-pandemic levels in August and September. All the stores are now fully operational, with overall store operation days at 86% for the quarter. Our customers continue to increasingly leverage the convenience of our digital platform with the online channel. As we speak today, our festive sales have been extremely reassuring, and we are having a very positive outlook for our Q3 results onwards. Now, I'll leave the floor open for questions. Thank you very much, sir. Ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question may please press star then one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star then two. Participants are requested to use handsets while asking a question. Anyone who wishes to ask questions, please press star then one. The first question is from the line of Priyanka Trivedi from Antique Stock Broking. Please go ahead. Yeah. Thank you. My first question would be on what would be your CapEx guidance for the year? Ma'am, your voice is not audible. It's voice is cracking. Can you hear me now? Still not good. Can't understand you. Hello. Now can you hear me? Yeah, it's better. Yeah. What would be your CapEx guidance for the year? We are planning to open another five to six stores, so I think for that we need about INR 7 crore-INR 8 crore CapEx. Okay. My second question would be on your outlook on margins and future sales in terms of, you know, the GST. There's a proposed GST hike from 5% to 12% from January onwards. Additionally, there has been a hike in the raw material prices of cotton and yarn. How do you see the margins going ahead, and how much percent of our inventory would be in the sub-thousand range? Yeah. The rise in the cost price of the raw materials is across the industry, across all the players. I think, instead of absorbing it in our gross margin, what essentially will happen is that the price would go up. I think, for the end consumer, they have, they will have to end up paying, maybe, a marginally extra cost for the tax hike as well as the rise in cost of the raw material. Going forward, right now our manufacturing unit sales contributes about 20% of our business, and we are looking to increase it up to, you know, 50% for the next year. I think with that in mind, we are targeting a gross margin of around 34%-35% for FY 2023, even with the cost pressures. Okay. Got it. Okay. That's it from my side. If anything else, I'll come back and get to you. Thank you. Thanks. Thank you. Participants who would like to ask questions, please press star then one. Anyone who wishes to ask questions, please press star then one. The next question is from the line of Amit Porwal from Marathon Capital. Please go ahead. Hi, Akash. First of all congratulations on good set of numbers, being a decent recovery. My question is on the number of stores addition planned for 2023 and 2024. Do we still maintain the guidance of around 15%-20% increase every year? Yeah. For the next three years, what we are, you know, forecasting is about 25% sales growth every year. Out of that 25%, 20% will come from new store addition, and we're targeting a 5% same store sales growth. Going forward, we have about 10.2 lakhs sq ft operational right now. By the end of the year, it should be around 10.5 lakhs-10.6 lakhs sq ft. We will add another 20%, that'll be about 2 lakhs sq ft new. It should be around 15-20 stores. Okay. Thank you. Thanks. Thank you. Participants who would like to ask questions, please press star then one. The next question is from the line of Vinod Gandhi from Vinod Gandhi Investments. Please go ahead. Hello. Hi. What is the approximate sales target for quarter three in financial year 2022? I won't be able to comment on the sales figures that we expect, but it should be the second half of this year should be very similar to the second half of last year. Okay. In terms of this quarter, I would say, in terms of the weddings and everything, most of the country opening up, will it be a higher target than the previous year? Internal targets are definitely higher, and till now we are seeing a good demand, and we have a very positive outlook. Like, it's very hard to predict what happens going forward. All right. Thank you. Thanks. Thank you. To ask a question, please press star then one. The next question is on the line of Ankit Babel from Subhkam. Please go ahead. Yeah. Hi, Akash. Good afternoon. Hi. Akash, I have a few questions. First of all, can you throw some more light on your targeted gross margins of around 35% in FY 2023? I mean, what would lead to these margins and any risk to these margins in the coming year? Yeah. As I said, currently 20% of our sales is the contribution for our manufacturing unit sales is only 20%. Every month we are increasing the manufacturing capacity. Going forward, I think next year the manufacturing unit should contribute at least 40% to the total sales. In those goods, in those 40% we will have an extra margin of about 7%-8%. That contributes, you know, that will help us increase our gross margin from 31%-32% right now to 34%-35% next year. That will be the major contributor. You would like to retain those extra margins, or you would like to pass it on to the customer? We are getting a benefit, like if we compare the price of cost of manufacturing to the procurement cost that we get from vendors, the total benefit is about 15%, because that's the kind of margin that our vendors keep. Out of which we will pass on maybe 7% to the consumer and the rest 8% will be absorbed into our gross margin. My second question is, what kind of sales per square feet you are targeting in the coming two quarters and next year? What are your targets? For FY 2023, we are targeting a sales per square foot of INR 725 per sq ft per month. On average. Okay. Yes. Okay. Approximately cost per square foot would range to what levels? Cost per sq ft would range from INR 165-INR 170 per sq ft. Okay. My another question is that you have a debt of around INR 50 crore on the balance sheet. Usually, your balance sheets are debt-free historically. Can you just throw some light on where do you see your debt at the end of this year, next year, or whatever, you know, time period you are comfortable with? Yeah. We have a credit limit of about INR 50 crores. By the end of this year, I think we will be able to reduce the limit used by around INR 20 crores-INR 25 crores. By the end of next year, we will again be debt-free. Because we didn't want to delay the payments done to our vendors, we paid most of our vendors even during COVID time, so we had to use the credit limit. Okay. This INR 725 PSF what you are targeting, I mean, can you again throw some light on, do you see that, you know, the ongoing demand tailwinds to take this PSF to those levels or something internally also you people are doing to push it towards that level? Like I said, in the third quarter also, looking at October and the ongoing November, I think we are very close to pre-COVID levels, and going forward, we are expecting numbers to be better than pre-COVID. I think pre-COVID, the last financial year, our PSF for the open stores that we have right now was around 700. We are only taking, you know, 4% growth on that. We are expecting the new stores to at least have the same PSF as the company average. That is the idea, ideology behind predicting INR 725 per sq ft sales for next year. Talking about the steps that we are taking, like the biggest contribution, like I always said, was product. If we increase the product contribution that are designed in-house from 20 to 40, so I think that should be the biggest differentiator. Because in that the customer is getting a much superior product as well as at a better price than you know most of our competitors, because we are able to manufacture it ourselves and save on the cost. Okay. My last question is on the inventory days. Now I understand that FY 2022 we have a lockdown impact in the first quarter, and it won't be good to see the inventory number of days terms. What are your ultimate targets to bring the inventory days to, say, by in FY 2023? Yeah. Going forward, inventory days should hover between 90-100 days. It should be around INR 2,100-INR 2,200 per sq ft. If we have 10.1 lakh sq ft inventory, the inventory value should be around INR 225-INR 230 crore. Currently it is INR 300 crore. Yeah. We will be able to rationalize it in the next six months. Because what happened was, we had to carry inventory due to the second wave, and we had to stock for the festive and the winter season because we couldn't use that summer inventory for the festive season. Now going forward, like I think the next six months will be rationalized. Even in Q3 it'll be rationalized a lot, which you will see also in Q3. No, again, you have you know new stores opening plans, which would be there in, say, in the month of March or April. You know, when you say around INR 2,100, I understand it's difficult to take a call at, on a particular point of day, like 31st March. Basically, like if you end the year at around 10.6 lakh sq ft, ideally your inventory should be in the range of INR 220 crore-INR 230 crore. Is it the right number which we should look at in, say by the end of this year? I'm not talking about consolidated inventory. I'm talking about standalone. The V2 inventory will be added to this inventory. What would be that additional inventory, V2? That should be about INR 30 crore. Basically INR 250 crore is what you are targeting in the number. When you look at subsidiaries. Okay. A INR 50 crore reduction in inventory, plus whatever cash flows which would be there. Why you still feel that you won't be debt-free by the end of this year? Because we're planning to open 25 stores next year, and we want to open bulk of those stores in the month of March, April, May, so that we get most of the festive sales. Okay, that's it. I'll come back if I have more queries. Thanks. Participants who would like to ask questions, please press star then one. The next question is from the line of Anish Jobalia from Banyan Capital Advisors. Please go ahead. Yeah. Hi, Akash and the team. Congratulations on a good comeback quarter in the light of the recent impact of COVID. I have the following questions. One is, before the second wave happened, you were targeting close to INR 1,000 crore sales, and you know, 9%-10% pre-Ind AS EBITDA. But then, this target has got postponed. Now with our strategy of also further increasing the gross margins, can you share what kind of targets do you have for FY 2023? Can we do better than that, what we were earlier targeting? Yeah. You know, because of COVID, what has essentially happened is that the target has moved from FY 2022 to FY 2023. Right. Because in FY 2024 also we were expecting our manufacturing contribution to increase, but due to COVID we didn't accelerate that process. I think for FY 2023, our guidance is the same. We should do anywhere between INR 1,000 crore-INR 1,100 crore of turnover with an EBITDA pre-Ind AS EBITDA margin of 9%-10%. We are targeting INR 100 crore EBITDA for next year pre-Ind AS. Sir, you know, when we are speaking earlier, our gross margin targets used to be 31%-32%. But now we are speaking of 34%-35%. Wouldn't we be expecting higher margins or is there something that I'm missing? That's my follow-up question on this. This is the operator. Participants, the line for the management has dropped. We request you to please reconnect it by dialing star one on your telephone. Ladies and gentlemen, thank you for patiently waiting. The line is reconnected. Sir, you may go ahead. Thanks for the opportunity again. My question, Akash, is that, you know, when we are guiding for 9%-10% earlier, so that time our, I think, gross margin targets were close to 31%-32%. Now, with the increased target around gross margins, wouldn't we be able to do better margins, say, in the next year, or is there something that's not coming up? Yes, you're correct because our earlier guidance, the per square foot sales that we were forecasting was around INR 750-INR 775 per sq ft. Okay. We've got that guidance down to INR 725 to tell our investors, but our internal targets are higher than those. Your question is correct because earlier the gross margin projections were around 32%. Right. The sales per square feet projection was INR 750-INR 770 per sq ft. Now we made a sales per square feet target of INR 725 per sq ft. That gives us a sale of about INR 1,050 crores for next year. Okay. Second question is, in terms of, you know, getting our revenues from our own manufacturing subsidiary. This product would be kind of like a private label product, right? In terms of the acceptability by the customers, are there any challenges or can you speak a bit about, you know, the response that you have already seen, whether, you know, it's like kind of surprising on the positive side and that's why you are looking to increase the products from your own manufacturing subsidiary? Yeah. Looking at the data, what we have seen essentially is almost 75% of products that we are making has a better sell through than the products in the same range from our vendor. It has been a very positive, you know, result. That is why we're looking to increase the percentage of this because these all these products are exclusive from us. Because we also get private labels from our vendors, but those are not exclusive designs that are exclusive to our stores. Now what we are manufacturing ourselves are designs that are exclusive to our stores. I think that has really helped us in connecting more with our customers, and that is why we're looking to increase it even further gradually. Okay. That's fantastic. If I can just ask one more. In terms of our consumer sentiments, I believe like our stores are more, you know, around the Tier 3, Tier 4 towns. Where the impact of the COVID has been, I think, higher than the other Tier 1, Tier 2. How is this translating to our, you know, our business, let's say versus competition, which has got more number of stores in the, you know, the Tier 1 towns. In general, can you speak a bit about the recovery for us from the consumer sentiment perspective? Thank you. Yeah. I would disagree on one point there. I think that Tier 3, Tier 4 were the least affected. Okay. I think, you know, the main metropolitan cities were more affected. Like, if you go to a smaller town, I think it's been one year since people forgot about COVID in most of the, you know, cities that we operate in. I think the recovery for us will be much quicker than, you know, players prominently who have, stores in Tier 1, Tier 2. We've already seen that happening. Like, even in August, in July and August was almost 90% of, pre-COVID levels, and we have seen almost the pre-COVID levels for October and November. This is very promising, and I think people have started stepping out of their homes more. They've been tired of being at home for the last two years and having lockdown. That's the worldwide trend, and I think we have a very positive outlook because the number of weddings is also, I think, a record number of weddings in the next 30 days and going forward in the summer. I think this trend should continue and the sales will be better than pre-COVID levels. Okay, fantastic. I wish you all the very best for the subsequent quarters. Thank you. Thank you. Participants, to ask a question, please press star then one. The next question is from the line of Amit Porwal from Marathon Capital. Please go ahead. Hi, Akash. One question is on our stores are mostly located in North and East. Are we planning, like, one of our competitors have acquired certain stores in the South part of the country. Are we looking to, you know, broaden our stores in South and West? That is question one. Yeah. I think for the next three to four years that the number of stores, new stores that we're targeting, we can easily open them in the existing clusters that we operate in because we opened a few stores in the south and we realized that the assortment is very different there. We don't have that bandwidth in our sourcing team where we can source from three different regions because the whole assortment changes. I feel for the next three to four years, we wanna focus in the existing clusters that we're very strong in, which is Bihar, Orissa, Jharkhand, the Northeast. I think we have enough potential and enough districts that we haven't covered yet to actually you know, cover the number of stores target, new stores target for the next three to four years. After that, once we feel we have saturated the existing markets, then we'll look towards the south and the east, south and the west. Okay. Next question is on the warehouse capacity. How many stores can the current warehouse address? Yeah. We just moved into this new warehouse, I think, last year, and we have planned the capacity till FY 2024. It can easily service us till the turnover of, I think, INR 1,600 crore-INR 1,700 crore. Okay. Thank you. The next question was on the rent. Now with COVID stabilizing or, you know, it's a little behind us, and the real estate seeing a pop, do we see the rental for our new stores going up? I think it should stay at the similar level that we have right now, which is I think INR 44 per sq ft. I think it'll be, the average would be the same for new stores. Okay. The last question, what would be the CapEx for FY 2023, absolute number, assuming that we are opening around 20 stores? The number would be around INR 25 crores. Okay. Thank you. I'll join back with you if I have more questions. Thank you. Thank you. Participants, to ask a question please press star then one. The next question is from the line of Ankit Babel from Subhkam Ventures. Please go ahead. Akash, a couple of more questions. First is what was your e-commerce sales in Q2, and what are you expecting it to be in the full- year of FY 2022 and 2023? Yeah. For Q2, the e-commerce sales was INR 4 crore, around INR 4 crore. For the first half of the year, it was around INR 16 crore. We are looking to close the year with around, I think, INR 24 crore of e-commerce sales. Why is it declining sequentially? Because we are changing the technology partner. We are implementing omni-channel, so we are not doing delivery from stores as of now. We are doing that implementation. That is why we've reduced the ad spend. We want to first, you know, take that system live and then we will accelerate on this e-commerce sales again. How much time will it take? I think it should take another 45 days. Okay. By the end of this quarter you'll be up with a new technology partner. Yeah. Next year, what are your targets then in e-commerce? Next year our target is anywhere between 5%-10% of sales. It all depends on the traction. You can say it's INR 30 crores-100 crores of sales, but we don't wanna burn cash. It all depends what is the marketing ROAS and what is the kind of return and how our ads are doing and what is the organic traffic. It depends on the business performance. Yeah. Actually, my next question was that only, that if you achieve, say, INR 50 crore-INR 70 crore of sales, will you make money? Will you lose money? Cash, non-cash? How the profitability would be. I think we will say the EBITDA would be maybe minus 1%-2%. That's it. For the e-commerce business. Okay, this sales would be in addition to what you have guided of INR 1,050 crores offline sales? Yes. You also mentioned that for next three to four years, you'll focus on the existing clusters on the edges. You see a huge potential here. Can you throw some light on the store potential in the next three to four years in these clusters for V2? Like, you know, we have already identified about 90 locations that we are not present in the existing clusters and, you know, 90 different districts where we can open stores. There are some districts in those 90 where we can have three, four, five stores also. If you look at the next four years, we want to open, I think, around 120 stores and which can be easily covered by the already identified locations in these existing clusters. Okay. Okay. Yeah, that's it from this end. Thank you. Thank you. Thank you. Participants, to ask a question, please press star then one. The next question is from the line of Amit Porwal from Marathon Capital. Please go ahead. Mr. Porwal, please unmute the line from your side and proceed. Sorry. Akash, you are guiding for a substantial rise in revenue and as well as stores in coming years. My question is on the bandwidth. Are we looking at adding up in the team? What's the plan there? Yeah. You know, the management team and the core committee that we have in our company, their biggest priority right now is, you know, getting the right manpower. We just hired a new HR head, and we've already given the LOR to our new CFO. Our retail operations head has joined from Easy Day. Marketing head is also about to join in the next 15 days. I think a lot of focus is given on recruitment and getting the right people because ultimately they are the ones who will take the company to the next level. Like me included and the whole management team, we're focusing a lot on recruitment and getting the right management personnel. Experienced people. Yeah, all the best, and I wish we will be reaching those projected levels. Thank you. Yeah. Thanks. Thank you. Participants, to ask a question, please press star then one. Anyone who wishes to ask questions, please press star then one. As there are no further questions from the participants, I would now like to hand the conference over to Mr. Akash Agarwal for closing comments. Thank you everyone for joining the call. We hope we have been able to answer your queries. Stay safe. For any further information, we request you to get in touch with Marathon Capital, our investor relations advisor. Thank you and have a nice day. Thank you. Ladies and gentlemen, on behalf of V2 Retail Limited, that concludes this conference. We thank you all for joining us, and you may now disconnect your lines.