Aditya Birla Fashion and Retail Ltd

NSE:ABFRL

Earnings Call Analysis

Aditya Birla Fashion reports steady growth amid strategic expansions and seasonal optimism.

In Q2 FY '25, Aditya Birla Fashion achieved consolidated revenue of INR 3,644 crores, marking a 13% YoY increase, with EBITDA growing 11% to INR 410 crores and a margin of 11.2%. Strong performances were noted in segments like Ethnic and TMRW, with the former tripling growth compared to last year. Challenges remain as the company recorded a consolidated PAT of negative INR 215 crores due to higher costs. Looking ahead, they expect positive trends in H2 driven by festive spending, targeting a double-digit CAGR for the Lifestyle brand while reducing net debt by INR 400-500 crores.

A Resilient Performance Amidst Challenges

In the second quarter of FY ’25, Aditya Birla Fashion and Retail Limited (ABFRL) reported consolidated revenue of INR 3,644 crores, reflecting a 13% year-over-year growth. This demonstrates the company's ability to navigate a challenging demand environment, primarily driven by festive spending and an uptick in wedding-related shopping. Despite a generally subdued market, the management anticipates improved conditions in the second half of the financial year, aligning with expected festive season dynamics.

Growth Across Business Segments

The earnings call highlighted growth across various segments. The ABFRL Lifestyle brand achieved revenue of INR 1,975 crores in Q2 FY ’25, with an EBITDA margin of 15.3%. In contrast, the Pantaloons division generated INR 1,082 crores, growing 3% year-over-year, and showcased an impressive EBITDA margin increase of 560 basis points to 15%. Notably, the Ethnic business demonstrated more than 3x growth to reach INR 454 crores, largely due to the inclusion of TCNS and Tarun Tahiliani Couture businesses.

Improvements in Margins and Profitability

ABFRL's consolidated EBITDA for the quarter stood at INR 410 crores, an 11% year-over-year increase, reflecting an overall margin of 11.2%. The increasing focus on operational efficiency, product innovation, and enhancing consumer experiences has supported these profitability improvements across established and emerging businesses. The management expressed optimism regarding the Ethnic segment's trajectory, projecting a turnaround towards breakeven in Q3 for TCNS due to significant product enhancements.

Strategic Moves and Future Outlook

Notably, ABFRL intends to complete its demerger before the end of FY ‘24, enhancing operational focus and strategic agility. The management confirmed an ongoing investment in high-growth segments, ensuring that the foundation remains strong for future revenue streams. With the wedding season approaching, a double-digit CAGR growth is targeted for brands under the Lifestyle banner, leveraging synergies from recent acquisitions.

Challenges and Opportunities Ahead

Although the company reported a consolidated net loss of INR 215 crores, primarily impacted by extraordinary costs relating to the Forever 21 restructuring and elevated interest expenses, the management remains optimistic. They expect net debt to decrease by approximately INR 400-500 crores by the end of FY '25. Key areas of focus include improving working capital efficiency and continuing to adapt to market demands, especially in smaller town expansions where recovery is anticipated to take longer.

Conclusion

ABFRL's strategic initiatives, focused on growth and efficiency, position it well for the remainder of FY '25. The company's ability to adapt to market challenges, drive profitability improvements, and leverage festive season opportunities provide a strong basis for future growth. With a well-defined strategy and promising expansion plans, ABFRL is a compelling prospect for investors looking for growth in the retail sector.

Earnings Call Transcript 2025-Q2

[Operator]

Ladies and gentlemen, good day, and welcome to the Second Quarter Earnings Conference Call of Aditya Birla Fashion and Retail Limited. The call will begin with a brief discussion by the company's management on the Q2 FY '25 performance, followed by question-and-answer session. We have with us today, Mr. Ashish Dikshit, Managing Director; Mr. Jagdish Bajaj, CFO. Mr. Vishak Kumar, Director and CEO, Lifestyle Business; and Ms. Sangeeta Tanwani, Director and CEO, Pantaloons.

I want to thank the management team on behalf of all the participants for valuable -- for taking valuable time to be with us. I must remind you that today's discussion may include certain forward-looking statements and must be viewed, therefore, in conjunction with the risk and the company faces. [Operator Instructions]

With this, I hand the conference over to Mr. Jagdish Bajaj. Thank you, and over to you, sir.

[Jagadish Bajaj, executive]

Thank you. Good afternoon, and welcome to the Q2 FY '25 earnings call of our company. At the onset, let me wish you a very happy festive season and a prosperous year ahead. I will first take the opportunity to set the context in view of the operating environment during the quarter. This quarter, the overall demand environment continued to remain subdued, consistent with trends observed in previous quarters. However, there were some positive indicators, primarily driven by festive spending and an increase in wedding-related shopping activity as we approach the wedding season for this year.

These positive upticks are in line with the trends we have been seeing over the past many quarters, where Designer Led shopping drive sales favorably impacting sales for certain categories. We expect improved conditions in the second half of the year. Amidst this, we maintained our focus on executing the plan we had set out for this year, where we drove good quality sales, rationalize less productive channels and markets and consistently drove margin improvement.

As you would have seen, the business has consistently improved the margin profile year-on-year for last 3 quarters. While the larger business reported an improvement in profitability, the smaller and rapidly growing businesses such as Ethnic and TMRW, maintain a range bound losses, though improving on margins on a Y-o-Y basis on a much higher scale. The profitability improvement was mainly driven through better planning, product enhancements, stringent markdown management and deprioritizing poor quality channels.

Each of our brands reported a positive like-to-like growth this quarter. Also noteworthy to mention that our sustained efforts toward improving our planning and merchandising process and our tight inventory control led to a marked improvement in our working capital profile, leading to better capital efficiency.

Let me also give an update on the corporate accounts. The last step in the acquisition of TCNS has been successfully completed and TCNS has been fully amalgamated with ABFRL from 1st September 2024. Hence, the results are consolidated considering TCNS as division. On the parallel demerger process, the company has completed the first step when it received NOC of the demerger proposal from stock exchanges.

The application has been filed with National Company Law Tribunal as the second step and we'll now go through the process as described by the Honorable tribunal. We expect to complete the demerger process before the end of this financial year.

Coming to the financial performance of our company for quarter Q2 FY '25. Our company delivered consolidated revenue of INR 3,644 crores in this quarter, growing 13% over Q2 FY '24. Consolidated EBITDA stood at INR 410 crores, growing 11% Y-o-Y in absolute terms with 11.2% margin. This includes the TCNS business this quarter, which was not there in the base last year.

Our established businesses continue to drive delivery of robust margins, while high-growth segments like Ethnic and TMRW achieved substantial revenue increases with marked improvement in margins.

Let me explain to you the exceptional items appearing in these quarterly results. First, company has decided to restructure the operations of Forever 21, taking a onetime hit of INR 98 crores towards impairment. The same has been reported as exceptional item. Secondly, the company increased its stake in Tarun Tahiliani couture business from 33.5% to 51%, resulting into onetime upward revision of its holding value on account of mark-to-market revaluation of historical stake to the tune of INR 121 crores.

Adjusted for these two items, the net gain in exceptional items in the P&L is INR 23 crores. Company's consolidated PAT was negative INR 215 crores, impacted on account of higher depreciation, amortization of brand and retail assets due to inclusion of TCNS this quarter along with elevated interest cost on higher borrowings. In H1, our company recorded consolidated revenue of INR 7,072 crores, growing 10% for H1 FY '24.

Consolidated EBITDA was INR 816 crores, growing 13% Y-o-Y in absolute term with 11.5% margin. The net debt as on 30th September stood at INR 3,759 crores. As on 30th September 24, our store network stand at 4,538 stores, spanning across a total retail area of 12 million square feet. I will now to take you through the performance of individual businesses.

Starting with proposed ABLBL segment. The segment in Q2 FY '25 posted revenue of INR 1,975 crores with EBITDA of INR 302 crores. The EBITDA margin stood at 15.3% for the segment. First, Lifestyle brand grew 3% Y-o-Y to a revenue of INR 1,636 crores in Q2 FY '25, with an EBITDA margin of 18.4%. Retail like-to-like growth for the brand stood at 3.4%, primarily impacted by lower demand in smaller markets. Continued focus on product innovation, casualization and markdown management, combined with elevated retail experience and consumer insights has supported profitable growth.

Emerging growth businesses, which include youth Western wear, inner wear and athleisure and sports wear segment posted 7% growth at an overall level with the segment posting another quarter of positive EBITDA.

Now let us discuss the demerge ABFRL segment. This segment has grown by 31% to INR 1,838 crores in Q2 FY '25, validating our portfolio expansion strategy to build meaningful size businesses in large consumer spaces of the future. EBITDA for the segment grew by 66%, with margin expanding by 170 basis points to reach 8.1% this quarter. All businesses within this segment grew well with profitability improvement across each of them.

Let me start with Pantaloons. Pantaloons delivered yet another quarter of significantly improved profitability. The business model improvement initiatives, which have been mainly around focus on key markets, improved product propositions and retail experience and better planning and merchandising are reflected in improved financials. It recorded revenue of INR 1,082 crores, growing 3% Y-o-Y with a like-to-like growth of 1.3%.

EBITDA margin expanded by notable 560 basis points to reach 15%. In absolute terms, we delivered EBITDA of INR 162 crores, a 65% increase Y-o-Y. Enhanced operational efficiency, coupled with trend-driven offerings and refined aesthetics has enabled us to achieve high sell-through rates, which has driven growth and profitability.

Our Style Up retail format has now scaled to 35 stores and is receiving strong consumer attraction. The business has already started to deliver store level profitability across the current network. Based on this success, we plan to accelerate store openings in the coming years.

Then the Ethnic business. Overall portfolio grew more than 3x versus last year to reach INR 454 crores, primarily led by including of TCNS and Tarun Tahiliani Couture business. Organic growth of existing businesses stood at healthy 10% with EBITDA margin improving significantly. The Designer led brands portfolio, which includes Sabyasachi, Shantanu and Nikhil, House of Masaba, and Tarun Tahiliani grew by 32% on Y-o-Y basis.

House of Masaba more than doubled its revenue, within which a beauty brand Lovechild grew to 10x of last year. With Tarun Tahiliani Couture, our already comprehensive Ethnic portfolio is further still on at another marquee luxury ethnic brand gets added to our portfolio.

Premium Ethnic wear brands, including Tasva, Jaypore and the TCNS portfolio delivered robust overall like-to-like growth rates. The TCNS brands recorded a solid 13% growth with a 3% like-for-like increase, marking the third consecutive quarter of positive L2L group. This has been achieved with significant product upgrade harnessing synergy benefits with larger ABFRL and focusing on retail productivity.

As far as the wedding related consumption is concerned, the first half of this year has been fairly muted. With the onset of festive and advanced purchase of wedding-related category, the end of the quarter saw encouraging demand for Tasva, which achieved remarkable year-on-year growth of 79%, we expect this momentum to continue as the rest of the wedding season plays out during H2 of this fiscal.

Luxury retail comprising the multi-brand format, the collective and other mono-brands maintain profitable growth. With a Y-o-Y revenue increase of 9%, the total network now encompasses 40 stores.

Coming to our digital brand portfolio of TMRW. TMRW portfolio more than doubled compared to last year with the inclusion of TIGC. Aside inorganic growth, the portfolio organically also grew by 30% plus. With a portfolio of brands targeted at the Gen Z and Millennial, TMRW adds freshness to the ABFRL portfolio and gives you scale to its relevance for the Gen Z and Millennial customer base, which will be one of the most important consumption segment in this country.

To conclude, despite a challenging demand environment, our company has demonstrated resilience and strategic agility achieving notable growth across various segments. The successful integration of TCNS and the expansion of our new businesses have announced our brand portfolio. Our focus on operational efficiency product innovation and customer experience has yielded positive results as evidenced by the robust performance in both established and emerging businesses.

As we look ahead, we are encouraged by the response during this festive and are very optimistic for the upcoming wedding season, which for a premium brand portfolio like ours would be significant. We plan to sustain the impetus on each of the initiatives we have been running to drive operational efficiencies to consistently improve the business outcomes.

As the second half of the fiscal unfold itself, with most of our stabilized actions already executed well, we will be very favorably placed to reinvigorate our growth channels to pick up the momentum with tailwinds from broader market improvement during the rest of the year, we wish to accelerate the pace of execution of our long-term strategy of building a leadership play in most of the large discretional consumption segment in Indian industry.

We are open to questions now. Thank you.

[Operator]

[Operator Instructions]. The first question is from the line of Gaurav Jogani from JM Financials.

[Gaurav Jogani, analyst]

Sir, my first question is with regards to the demand conditions, how have they been running into this first month of October in the festive season for both the brands, that is Pantaloons as well as the Lifestyle brands. So that is the first question.

And sir, the second question also is with regards to post the demerger between that ABLBL and ABFRL, how do you plan to scale up things in the ABFRL piece of business? given that, that business will have a certain amount of debt. So how the growth will be planned in that piece of the business? If you can answer that, that will be helpful.

[Ashish Dikshit, executive]

I'll get Vishak and Sangeeta to respond to the overall market conditions. Vishak, can you comment?

[Vishak Kumar, executive]

Yes. So far, we've had a decent start. I wouldn't say -- I don't want to jinx it, but a decent start to Diwali. It's been -- and what is important is the combination of wedding shopping as well as Diwali shopping that we've got. So we still have to watch out how it stands out during November, December. And the good news is there are a lot of wedding days through this period. So I do believe that -- it should be a decent quarter in that sense, at least for our brands.

[Ashish Dikshit, executive]

Is there anything different to answer?

[Sangeeta Pendurkar, executive]

So very, very similar products, Gaurav. I think festive. We had a good start just about closing. And I think it's like a mid-single-digit performance in terms of growth. Of course, the market conditions overall have been tough, but we've had an encouraging festive.

[Gaurav Jogani, analyst]

Just one thing. We have been hearing from some Eastern-based players that while the Pujo has been good, but the Pujo hasn't been that great as per the expectations, at least for them. So is it similar for you too?

[Sangeeta Pendurkar, executive]

Yes. So I'll come in again. So Pujo, as you know, is a very important period, especially for Pantaloons because East is a very important market for us. And we've had a low single-digit Pujo. I think largely, there were two or three external factors which disrupted the demand, the local protests that continued through Pujo, the fact that certain markets saw unprecedented rain.

The disruptions in Bangladesh, there is a lot of purchase from customers who come in from Bangladesh during Pujo period.

All of these factors actually impacted demand. But through that period, we saw some disruption in Kolkata, but very encouraging to see that those markets, which behaved in a near normal fashion in terms of more disruptions. We, in fact, saw a very good high single-digit growth in those markets. So rest of West Bengal, for example, did extremely well. The other markets in East did very well for us. So I think it's a combination of disruptions that we saw in Calcutta, but very good performance in the rest of the market.

[Ashish Dikshit, executive]

Gaurav, to your other question regarding how we fund the growth of the demerger ABFRL, which is -- which will have a fair share of debt post separation. As you know, at the time of demerger and announcement, the Board had also approved the fundraise exercise. And as we go forward at appropriate time, we would look to raise capital, which we had announced even at the time of demerger itself.

We wanted to look at how the merger process is going and then time the fundraise. So we will do that, and we'll fund it adequately to sort of drive the growth of the high-growth segments that exist in the demerger ABFRL.

[Gaurav Jogani, analyst]

Sorry, I'll just repeat my question. I mean, we are aware of the fundraise plan that you have, does that -- will that in any way impact your growth plans, what you have right now versus what you would have post this fund raise? I mean, would there be in a more curtailed and more, I would say, more profitable focused manner as it is right now? Or we would continue to be aggressive in terms of growth there?

[Ashish Dikshit, executive]

I think there is some inherent dilemma in your mind about growth and profitability choices that we are making. We are quite clear that over the last 4 or 5 years, we have expanded our portfolio very strategically with long-term consumption segments, which are meaningful for our business. And that's the portfolio expansion exercise.

As far as profitability is concerned, it will remain a very large focus for us in many parts of the business. We recognize that we have some way to go and our major businesses, it's already in a good place.

In line with our long-term strategy, I think a lot of growth businesses and very high-growth businesses would need capital. There is also a debt sitting on it. And therefore, that's the reason for the fundraise. In short term or longer term, I don't think our strategy is changing. The only part we have said is our strategic acquisition piece is now over, that phase which we went through between 2020 to 2024, where we entered many new emerging segments.

The entire digital portfolio got created of TMRW. We acquired rights of Reebok, built the entire portfolio of Ethnic wear business in a short period of time to become the largest ethnic wear company in the country with very, very iconic brands in the portfolio. So that is a phase of our portfolio expansion with a very long-term strategic outlook on where the consumers of tomorrow will be. I think once we have completed that exercise, the next phase of capital is growing these businesses.

[Operator]

The next question is from the line of Nihal from Ambit Capital.

[Nihal Jham, analyst]

I had two questions. One was in Pantaloons, obviously, we've highlighted that lower markdown led to an improvement in the margin profile. Just in case of Lifestyle brands, despite the positive LTL, was it a step up in marketing spend or maybe a channel shift, which is led to say margins being flat or slightly lower?

[Ashish Dikshit, executive]

Two, three factors Nihal. First is we kept discounts very, very tight.

[Nihal Jham, analyst]

Okay.

[Ashish Dikshit, executive]

And we were able to squeeze out significant amounts on discounts. We were able to create superior product cost engineering solutions as well, which gave us gains. There was an overall cost improvement drive across the system, which gave us a benefit. And of course, some amount of network rationalization also we did, which also further improve the overall profitability situation. So these were the key pieces, Nihal.

[Nihal Jham, analyst]

Absolutely. [ Ashish ], but the thing is that maybe on a Y-o-Y basis, the margins have been flat to slightly lower for the Lifestyle brand. So that is where I was just coming from that why was that the case?

[Vishak Kumar, executive]

Specifically, last year, same quarter, we had a one-off gain. So that had an impact, JV can probably quantify that -- but we had a one-off gain in last year, which we didn't have this year, which would have impacted margins.

Second is we are going through a situation with Centro where they are scaling down their business. So we had almost 0 business with Centro last quarter, which again took away -- they've been a very large trading partner for us in the past. So that also impacted our overall business in Q2.

[Nihal Jham, analyst]

And that explains the wholesale contracting?

[Vishak Kumar, executive]

That's right. That's right. A significant part of our -- it's been a big four partner for us in that sense. So it made a big impact.

[Nihal Jham, analyst]

Then maybe later if you would clarify on that one-off or I'll take it separately.

The second question was on the debt part. Currently, we are at INR 3,800 crores. I'm guessing this is a buildup which is effective. Just to understand, say, by the time we reach Q4, we'll have the planned INR 2,500 crores QIP. We'll obviously have, I think, around INR 1,000 crores left for ABLBL.

So what is the planned debt with which, say, the new entity will start with after the QIP, if you could give a ballpark sense? And would the pile up expansion that you're targeting be significant in terms of a CapEx outflow or overall CapEx and working capital outlook?

[Ashish Dikshit, executive]

So Nihal, at this stage, unless the Board has formally approved a fundraise, I won't be able to comment on it, but I would, therefore, speak of the debt from operating performance point of view. As you know, second half of the year is where the retail sales picks up and much of our portfolio is also heavily skewed towards wedding and festival-related periods.

While all of the fashion industry like that, our portfolio is particularly more heavily skewed around that. So we expect the debt to come down by INR 400-odd crores, INR 400 crores to INR 500 crores in the second half of the year.

As we said, there is a part which is allocated from 1st April 2024 into the two entities. All I would say is we'll sufficiently fund the demerged ABFRL to drive aspirations of the growth opportunities that we have created with the portfolio. I'm not at the liberty today to talk about either the size or the timing of the fund raise, and we'll do that at an appropriate time.

[Operator]

[Operator Instructions]. The next question is from the line of Garima Mishra from Kotak Bank.

[Garima Mishra, analyst]

The first question is on Pantaloons. Now this is with reference to the EBITDA margin expansion for the business that you talked about in the opening remarks. Now I note that over the last few quarters, Pantaloons have posted a negative EBIT. How do you view this? And I'm asking this also in the context that EBITDA margin does not give us a complete picture given some rental costs sit below EBITDA.

[Ashish Dikshit, executive]

Garima, the first thing is that improved performance is with -- on a like-to-like basis with the same principles that we applied last year versus this year. So I hope you agree with that. This is indeed an improvement, therefore, over last year because this is the same comparison that we give.

Also, as per accounting standards, these are same standards that are applied by anybody in the industry. So it's very close to what everybody else reports.

On the question of Pantaloons segment, Pantaloons also has Style Up as a part of it, a small portion, very small contribution today is the size of Pantaloons on the revenue side, but obviously, a slightly larger contribution in pulling down Pantaloons segment profitability, which is what you're talking about.

[Garima Mishra, analyst]

Okay. Let me ask this another way. Did Pantaloons segment generates cash in H1 FY '25?

[Ashish Dikshit, executive]

Absolutely. And we've said that before, Pantaloons was a free cash flow operating business before we went into COVID, post COVID it took time to recover. We are back to the same situation.

[Garima Mishra, analyst]

Okay. Understood. Our next question, and this is again on Pantaloons. Now assuming demand environment remains sort of tepid, maybe not as tepid as it was in 1H, but maybe still remains a little lower than what we've seen in the past. What proactive steps can be taken to drive up the LTL?

[Ashish Dikshit, executive]

So I think, Garima, I'll get Sangeeta to come in, but honestly, the drivers of improved productivity for us remains same, good or bad market because we are not using discounting as a lever. And therefore, it comes down to -- apart from the external conditions about store improvement, merchandising improvement, superior consumer experience and which are more fundamental drivers and they're more sustainable over a period of time.

I don't think we will do things which will create a onetime improvement, and it's going to be more organic. And as you've noticed over the last couple of quarters, this organic sustainable improvements is what Pantaloons business is driving. And it's showing up in all places, the stores are looking better. The product aesthetics have improved, product quality has improved, gross margin has improved and overall effectiveness of the network.

Some of the pressure on the Pantaloons business, and that's true even for some part of Madura businesses, is the smaller markets underperforming. And Pantaloons is one of the most expanded retail format. And it is not just in top cities, it travels pretty deep. While we did some of the rationalization last year, the lower end of the markets, which are smaller markets continue to underperform, which is sort of putting pressure on that. But we'll have to deal with it as we keep going forward in a more sustainable manner.

[Garima Mishra, analyst]

Understood. Next, I have a question on the innerwear business. Now in the PPT, you have talked about exploring this as a multichannel channel strategy. So is there any thought of expanding operations of your innerwear business in the quick commerce channel as well?

[Ashish Dikshit, executive]

Yes. I think innerwear is probably in fashion, the first and the most amenable category to quick commerce. We have just started or just about to start right now with one of the players, and we hope to expand with other players in this quarter, which is quarter 3 of this year. We'll see how the performance is, but early signs from what we hear from channel partners are that it's a category which we've got a good pickup. And we'll see if it grows further from there.

[Garima Mishra, analyst]

Understood. And last question from me, if I may. Is there any suggest on getting an external investor on board for TMRW? And in case there's no external investor comes in, how much more capital will ABFRL need to invest in TMRW?

[Ashish Dikshit, executive]

So Garima, we had mentioned that as far as ABFRL is concerned, we had board approval of close to INR 750 crores, which is what we have invested. At this point of time, we don't plan to increase that not as the business, needed at this point of time with the capital that they have got. Our plan was always to get an external investor support of time.

However, we'll have to time it appropriately so that the business is sizable and attractive for an incoming investor itself.

As you can see from this quarter or from previous quarters, the business is scaling up very, very fast. We have now pretty attractive portfolio of brands. We are clocking close to INR 1,000 crores run rate as far as the revenues are concerned. We are still some distance away from portfolio level profitability, but -- many brands are profitable at brand level. So we think in the right period of time, we'll be able to get an investor to fund the next phase of growth. Until then, we don't plan to make any acquisitions.

[Operator]

The next question is from the line of Devanshu Bansal from Emkay Global Financial Services.

[Devanshu Bansal, analyst]

Sir, in continuation to Garima's question, I just wanted to understand this increase in net debt better. So in H1, the debt has increased by INR 800 crores to INR 900 crores. From the cash flow statement, we have invested about INR 500 crores, half of which has gone into CapEx and invest in subsidiaries, additional stakes, ICD.

Working capital is actually reduced by about INR 750-odd crores. So there is an OpEx funding of about INR 400-odd crores in H1. So I just want to check which are the business segments as of now where we have to support operationally the business for them.

[Ashish Dikshit, executive]

So I think as far as H1 is concerned, and you are probably commenting on H1. Pantaloons segment to further answer Garima's question and your part has been free cash flow generating. I'm keeping ABLBL-related businesses out because they have a historical track record of free cash flow generation. So that's out of it.

Although this half, there has been some consumption of cash in that part of the business. But Pantaloons being free cash flow generating. Most of our cash has gone into ethnic businesses, which is largely in the subsidiaries part. Then there is -- which included TCNS also. Then there was investments that we made in remaining acquisition of Tarun Tahiliani.

We also had partial commitment of equity, which is -- which was planned for tomorrow investment. So a part of investment went into that. Part of which was used by TMRW to make further investments, which is investment in wrong that we made. So it's a combination of investments that we have made and operating businesses, which is largely Ethnic, which has consumed cash.

[Devanshu Bansal, analyst]

Understood. And sir, specific to TCNS, I guess, it has seen healthy growth of about 13-odd percent, right, in Q2. I guess, Q3 is a seasonally heavy quarter for this particular segment. So any thoughts on initial traction for the festive season? And if you could just update on the margin profile of the business?

[Ashish Dikshit, executive]

So I think as we had said, TCNS business when we took over, that will take us a couple of quarters. First, to focus on fundamentals, which is product enhancements and shape of the business. I had also commented at the beginning of the year by Q3, we will breakeven, which is we are pretty much on track as far as that is concerned.

Business profitability has improved significantly from where it was. And as we had projected by Q3, it will become profitable.

In terms of growth, I don't want to comment on specific month or so. But as you have seen as the new products have started to come in, the business has started to improve in terms of revenues as well. not just absolute revenues, but even the quality of revenues have been improving, and we expect to slowly improve -- continue to improve on that trajectory.

[Devanshu Bansal, analyst]

Just a small follow on. So out of all these TCNS, we are expecting profitability to improve or breakeven, I guess Sabyasachi, Tarun Tahiliani, Jaypore, et cetera, are profitable businesses. So Tasva is the only part where it may be operationally making some losses for us. Is this the right understanding?

[Ashish Dikshit, executive]

So Tasva and Jaypore are today, Tasva being the largest one, followed by Jaypore. And to some extent, we are still making investments in some of the high-growth segments, particularly in House of Masaba, the Lovechild, which is the beauty business. So some of those -- that those are, I would say, smaller pieces, the biggest piece will be Tasva.

[Devanshu Bansal, analyst]

Okay. And this INR 38 crore loss that we have incurred in Q2, is this the peak as in which we can expect some normalization from these levels going ahead?

[Ashish Dikshit, executive]

Difficult to say so early, I won't give that sort of indication today. We'll wait for the full year and then have a sort of more balanced picture.

[Operator]

[Operator Instructions]. The next question is from the line of Aditya from CLSA.

[Aditya Soman, analyst]

So two questions from me. So firstly, on the Ethnic business, can you give us a sense of how much of the growth is organic? And the second question on the Lifestyle business. Any sort of indication of store additions over the next two quarters and then also for fiscal '26. And if you can break that pipeline.

[Ashish Dikshit, executive]

So just a quick comment on the Ethnic business growth. You wanted to know organic growth of the business, which is without the addition of TCNS and Couture business of Tarun Tahiliani, I think Jagdish said -- talked about 10% growth for the remaining business, which is on -- which is the organic part of the business. Sorry, what was the second question?

[Vishak Kumar, executive]

I'll take that Ashish, he wanted to know the expansion. Aditya, Vishak here. Expansion, I think first half, we have primarily focused on consolidating, especially to take over unviable stores, we've pretty much completed that exercise. And hence, as we go into Q3, Q4, all the expansion would result in a significant net positive to the network.

The only part where we'll still stay guided for maybe a couple of more quarters is small town expansion.

As you know, that kind of business recovery that we need in small town, I think it will take a little longer. So we have been very careful in expanding in small town. Urban and middle India expansion will continue significantly. So you will see that as the quarters unfold.

[Aditya Soman, analyst]

I understand. Sir, just to follow up actually on both. But firstly, on the expansion. So any sort of commentary in numbers, we should expect expansion in 2H? And within that, would the understanding then be right that maybe Van Heusen, Louis Philippe and Allen Solly will see more expansion than Peter England and Peter England RED?

[Ashish Dikshit, executive]

Peter England RED perhaps might be a little more slow, but all the other brands would grow stronger, including Reebok, which is also catching up on expansion because we started with a smaller network, and we have a lot of catching up to do a lot of locations where we don't have Reebok stores. So that expansion will also continue full [ ped ]. So I think you would see all of these brands in especially urban and Midtown India, growing the network in H2.

[Aditya Soman, analyst]

Understand. I'm sorry, just to be laborious, but any numbers to give on how much expansion we should expect or you don't want to?

[Vishak Kumar, executive]

In our business, sometimes a few months slipped in the way network comes, but my sense is about 100 stores is the kind of number that we should look at in H2.

[Operator]

The next question is from the line of Ashish from Citigroup.

[Ashish Kanodia, analyst]

So the first question is on the franchisee because we have seen -- it has almost been now more than 2 years since the demand has been kind of subdued, and we operate a lot of franchisee stores both in Lifestyle as well as in Pantaloons. So what you are seeing there? Are you seeing any kind of a stress with the franchisee partners? And especially in case of new stores, what is the kind of interest you are witnessing?

[Ashish Dikshit, executive]

Ashish, I'll take it, and Vishak, Sangeeta you have something more to add. So Ashish, we have -- our relationship with franchisees have been long term. We -- I have always believed that the capital is as important as ours, and therefore, we have been very balanced in the way we look at it.

In times of crisis, we see how we can support that last 1.5 years or so as we continue to be weak, and that's why some of our expansion. If you look at the previous question, the reason Vishak mentioned about slowdown in some of the small town expansions, primarily because we don't see, you don't grow to markets at times when franchisees don't see possibility.

Most of our expansion at least in Lifestyle brands is driven through franchisee business. And therefore, our slower expansion is reflective of the franchisee situation today. But it is normal and we've gone through these cycles multiple times over many years. So I don't think there is anything extraordinary to worry about that.

[Operator]

The next question is from the line of Tejash Shah from Avendus Park Institutional Equity.

[Tejash Shah, analyst]

First question is pertaining to Pantaloon. So the trend appearing to take a very cautious approach on Westside expansion, how should one assess the growth potential of Pantaloon? I'm assuming that both cater to the same audience. How are we approaching the growth and your expansion for this format?

[Sangeeta Pendurkar, executive]

This is Sangeeta. So Tejash, as Ashish and Jagdish alluded in his talk as well. I think one of the shifts that we made and we talked about it in the previous calls as well, is today, Pantaloons is a large format, which is distributed extensively across 200-odd towns that we are present in with our 400-plus stores.

As we have assessed our performance over the last few quarters, we have recognized the fact that, of course, our right to win and our performance has been better in the larger towns.

And therefore, as we had called out earlier, our focus in terms of expansion is more in terms of metros, mini metros and Class 1 towns. Also, I think where we have strengthened our guardrails is in terms of the quality of stores that we opened.

So we are opening bigger stores. better stores, better representation of the labels that we have. We still believe there is a huge opportunity for us to grow. But of course, in terms of the numbers, anywhere between 20, 25 stores is what we have called out, and we continue to stay with that plan of opening about close to 20 stores.

In terms of square footage, we are looking at bigger stores. So we may end up doing more than what we had planned for. But opening the right stores and then making them perfect from an operations and an execution standpoint is what we are focused on.

[Ashish Dikshit, executive]

I think, Tejash, to some extent, this reflects the shift in strategy, which we are alluding to. The earlier used to aspire to open 50 to 60 stores. There was a year in which you opened 70 stores. We are now looking at 20, 25 stores, more urban centric, better, more ready markets because the effect of productivity, et cetera, we found is much higher here.

And fortunately, with the very promising start to Style Up, we feel the entire value retail format will be better served through many of these markets being served by Style Up as we go forward.

[Tejash Shah, analyst]

Very clear. Second question is on innerwear, on athleisure. So after many quarters, the leader actually gave a very positive commentary on the segment recently. So are we seeing any similar trend ships in our segment?

[Ashish Dikshit, executive]

Yes, Tejash, to some extent, I think the first signs of athleisure continuous decline has stopped. This is the first quarter or maybe I don't have -- maybe first or second quarter where athleisure has started to at least come back to a base level. And once that happens, because innerwear had come back a couple of quarters back, athleisure, which is pulling down the growth -- and so from here onwards, I think you will see stronger growth in the innerwear segment.

[Tejash Shah, analyst]

Perfect. And the last question is for Vishak. Vishak, personally, as the consumer Reebok seems to be one of the most under index brand in our Lifestyle portfolio. So could you share some medium-term attributes? You spoke about that there's a huge room and you are looking for locations.

But -- can you throw some more light on how do you see this brand in medium term? And what are your aspirations of goal here?

[Vishak Kumar, executive]

Thank you for that, Tejash. Yes, we just had a review in the first half on Reebok and we're looking at how we can accelerate expansion. We still want to be very sure on locations as we do that. But I do think that our footprint has to go through a significant enhancement over the next few years. We have a lot of catching up to do. What we're also making sure is that it is backed by a whole lot of solid products, solid both in footwear and in apparel that we're doing some really good stuff to make sure that these stores are viable from day 1. Also working a lot on multiple brand-building initiatives to strengthen the brand.

I do think that the next few years are going to be very significantly strong growth years for Reebok, just by footprint expansion and also back to throughput improvements across the board on the brand.

[Ashish Dikshit, executive]

I would add to that the whole BIS implementation meant that we had to strengthen our capability in terms of local sourcing and product development. which Reebok team has done a wonderful job. We had to make sure that we have intensive capability and deep knowledge of the category, which we have done very well.

So Tejash, it's just a matter of time if BI has not happen, perhaps you would have accelerated even faster. But now we have to make sure that we have enough sort of back-end capability to drive the growth. and you will see a shift in momentum on that.

[Tejash Shah, analyst]

Sure. And just one follow-up there. The route to market will be COCO, FOFO or mixed?

[Ashish Dikshit, executive]

We've always had a combination of these. There is a lot of very strong franchise partners that we have on Reebok who are keen to scale up. There are, of course, specific locations, some mall locations, et cetera, where we do COCO stores if required. So it will be a combination.

We are largely franchise driven, but we do a combination of -- so that the momentum on expansion continues strongly.

[Tejash Shah, analyst]

Sure. And the last one, if I may. So this -- October has been one of the warmest October in recent times. And the non-South India portfolio is usually known in fashion for being winter oriented. So how are you seeing and how much of our portfolio is exposed to that risk?

[Vishak Kumar, executive]

Ashish?

[Ashish Dikshit, executive]

Okay. Vishak, you can talk about.

[Vishak Kumar, executive]

Okay. see, we are very well prepared for winter. We do believe that there will be a strong winter. There are a lot of signs of that. If you read up on Weather commentary, there is a lot of signs of a strong winter. So we do believe in that. I think I said that it is -- it's an important part of our assortment in North India, Eastern parts of India, some parts of Central India, et cetera.

And we figure ways to manage for the ups and downs of -- usually, if not strong versus weak winter. It's when it gets timed early winter versus late winter, et cetera. So it's fairly prepared for that? And my sense is that it should be a decent winter.

[Ashish Dikshit, executive]

Quickly from portfolio in the view. I think Tejash other than lifestyle brands and particularly, I would say, one or two brands, which have higher exposure. Rest of our portfolio in the second half is actually not that exposed to winter wear per se. Of course, the wedding relevance and reliance is much higher.

[Operator]

The next question is from the line of Raj Kumar from [ Navotia ] Enterprise.

[Unknown Analyst]

This quarter on consolidated basis, Mudra Lifestyle brand sale is INR 1,975 crores with INR 33 crore PBIT. And the Pantaloon brand sale is INR 1,082 crores with minus INR 42 crores of PBIT. In your Mudra Lifestyle brand, the sale as well as the PBIT is decreasing and the Pantaloon brand, your PBIT has been negative for the last couple of quarters.

My question is what is the reason behind this? I mean in both the segments, they are very old and repetitive segment. So we expect 10% to 15% sales growth from both the segments. But why they are not giving that kind of sale as well as PBIT just want to know. And the second part is when the Pantaloon PBIT comes into profit.

[Ashish Dikshit, executive]

So I think in Pantaloon segment, there is impact of, of course, Style up business, which is in the incubation phase at this point of time. Pantaloons on its own, in response to earlier question, has delivered positively, but the combined operation, therefore, is negative.

[Unknown Analyst]

Sir, my second question is regarding employee expense and other expenses. Both the expenses are increasing rapidly on a quarter-on-quarter basis. I mean both the expenses are increased by 20% stand-alone basis quarter-on-quarter and 10% in consolidated basis. Is there any specific reason behind it and give some light on it?

[Ashish Dikshit, executive]

So I think there is -- there have been a lot of additions, which are inorganic in nature. We keep looking at our overall manpower expenses at the overall level, adjusted for acquired business, which is removing the cost that comes through acquired businesses. The overall growth in that account is about 6% to 7%.

[Operator]

The next question is from the line of Natik from MV Alpha.

[Unknown Analyst]

I just needed a clarification in terms of when you see your margins in Lifestyle brands, they seem to have come down. So can you please explain why they have come down?

[Ashish Dikshit, executive]

I think Vishak can explain the response to earlier question. To some extent, it was impacted by absence of one large important customers, and that's reflected in both lower sales and some loss of profit on account of that.

The second reason was a one-off last year same quarter, which was primarily due to reversal in minimum wages in Karnataka where most of our factory operations are, which gave us a onetime gain last year, which obviously was one-off. Net of the one-off events, margins are pretty steady and improving.

[Operator]

The next question is from the line of Vaishnavi from Anand Rathi Institutional Equity.

[Vaishnavi Mandhaniya, analyst]

I had a couple of questions here, Vishak, on Madura's growth because if I look at the H1 numbers, the numbers are flat, and I understand that the demand environment was subdued. But how should we look at the growth going forward? And what would be the drivers for growth in the same?

[Vishak Kumar, executive]

Yes, it's been a tough H1. By having said that, we've used this as an opportunity to become stronger in the way our portfolio is organized, et cetera, consolidating our network to drive retail profitability building further on product innovation, driving further on premiumization, casualization, a whole lot of things that have been built for voicing ourselves better for growth.

I think in any case, as we get into wedding season now, et cetera, we should see the calendar effect being positive to us.

So going forward also, visionary, multiple we've been a double-digit CAGR business for 2 decades. And that's the kind of trajectory that we should keep growing at and there are enough levers for growth in every brand and every part of our business. So I would say that, yes, we should keep that growth engine going at.

[Vaishnavi Mandhaniya, analyst]

Okay. So in the longer term, can we build like a 10% to 12% sort of a revenue CAGR for theLifestyle brand?

[Vishak Kumar, executive]

Absolutely. I think we should -- definitely a double-digit growth CAGR is something which we should drive these gains for absolutely.

[Vaishnavi Mandhaniya, analyst]

Okay. Understood. And in terms of premiumization, right? Since you said that has been a focus of what we've been working on, premiumization and casualization. Can you provide some insight in terms of what was the percentage, let's say, a couple of years ago like pre-COVID, and what it is now in terms of contribution?

[Vishak Kumar, executive]

Maybe, Vaishnavi we can send that separately to you. But I would say that significant shift on -- and it's just that I'll have to do this brand by brand for you. Different brands have different portfolios. For instance, Allen Solly is largely anchored around casualization. There -- it's not such a relevant thing in other brands, it's more so -- there are brands which needed significant premiumization.

There are parts of it which are already high there. I think it will need -- for me to give you a second level, double-click on this to give you a better answer.

But a ballpark level, here's where I can say to you. There are, let's say, in brands like Louis Philippe, there are opportunities which are emerging at price points of INR 4,000, INR 5,000, et cetera, for a shirt, which we have significantly scaled up.

We have a line which is Luxure by Louis Philippe, which is also scaled up, which is INR 5,000 to INR 10,000 price points. So that significantly strengthened.

We're looking at retail formats where there is a larger on position of from premium products, very top-of-line product that we have. So it's very contextual to each brand. But yes, in some of these brands, it's been a strategy which has helped significantly.

[Operator]

The next question is from the line of Rajit Aggarwal from Atharva Investments Managers.

[Unknown Analyst]

My question is related to TCNS. And if you can maybe help me with a slightly long-term kind of view on this. First up, has that brand stabilized? And from now on, do you see the brand only clocking profitable growth.

And a related thing would be, are you further looking at any one-off costs on -- related to TCNS in the next couple of quarters, be related to rationalizing our stores -- or do you see some duplicity in sub-brands of TCNS? Any thoughts on the same, please?

[Ashish Dikshit, executive]

So thanks, Rajat. I think TCNS, as we have been communicating in our previous quarter, previous communication, we have worked on three dimensions. The first one was product improvement, and that the team has done very well. The new product is certainly performing at a level that we had expected.

Most of the old inventory, which led to the onetime write-offs that we had to take, we have already done. We don't expect any change in that. In fact, the TCNS team has delivered outstanding improvement in their inventory, both in quality and absolute numbers. And this is both including the new inventory as well as old inventory. Most of the old inventory is behind us. There's no further onetime costs coming there.

As far as store expansion is concerned, I think as we grow in the normal course of the business, there will be rationalization that happens in all businesses. No significant sort of different versus other brands as far as store expansion is concerned. We are working on elements of synergy between the two companies, the two parts of the businesses, and that's playing out well.

In terms of your question about longer-term trajectory, we had said this year, we will make sure that the business has got stabilized on all dimensions, all onetime cost structure change or obsolescence hits. Those have been taken -- the policies are fully aligned, and we would look to start to probably the first profitable quarter from this quarter. And next year onwards, we look to come close to profitability with the longer-term ambition of getting into mid-double-digit profitability EBITDA margins.

[Unknown Analyst]

Great. just a small follow-up. I mean, I did allude to certain sub brands of TCNS, for example, let's say, WS and Aurelia. I mean, I think they do -- and I'm just talking from perspective of a consumer, they do have a similar product range. And hence, the two may have very, very similar locations as well.

So do you think -- I mean, that's the correct picture of it? Do you see something more distinctive carved out between W and Aurelia. And do you see across the portfolio, do you see certain similarities between various brands, and there may still be some work to be done to make them more distant from a consumer point of view?

[Ashish Dikshit, executive]

Fair point. I think there is to our best judgment and cumulative experience of the TCNS management team, there is a distinction of W being both more aspirational as well as more fusion and therefore, more contemporary versus Aurelia, which is slightly sharper price, more traditional works for more conservative consumer in that sense. And therefore, there is an element of fashion difference and target customer is slightly different.

We'll continue to evolve the positioning to make sure that it is sharper and well seen by consumers, as you are alluding to. But that's a more ongoing exercise. I don't think at this point of time, there is any thought of having one versus other. We are very, very mindful that these 2, both together as well as individually are the largest -- among the largest brands in the ethnic wear industry. And that's the whole sort of purpose of acquisition. We'll sharpen the positioning as we go along.

[Operator]

The next question is from the line of Chintan Mehta from Function Family Office.

[Unknown Analyst]

What is the PBT margin we are looking in lifestyle businesses?

[Ashish Dikshit, executive]

So we don't give numbers at that level. So therefore, I don't think I want to disclose the numbers of that. But over a longer period of time, -- the portfolio of the ABLBL brand, we have talked about EBITDA margin gains north of 18%, which is really what we are targeting from that portfolio. And that's the number that we have for you.

[Operator]

Thank you very much. Ladies and gentlemen, on behalf of management, we thank all participants for joining us. In case of any further queries, you may please get in touch with Mr. Amit Trivedi. You may now disconnect your lines. Thank you.