Aditya Birla Fashion and Retail Ltd
NSE:ABFRL
US |
Johnson & Johnson
NYSE:JNJ
|
Pharmaceuticals
|
|
US |
Estee Lauder Companies Inc
NYSE:EL
|
Consumer products
|
|
US |
Exxon Mobil Corp
NYSE:XOM
|
Energy
|
|
US |
Church & Dwight Co Inc
NYSE:CHD
|
Consumer products
|
|
US |
Pfizer Inc
NYSE:PFE
|
Pharmaceuticals
|
|
US |
American Express Co
NYSE:AXP
|
Financial Services
|
|
US |
Nike Inc
NYSE:NKE
|
Textiles, Apparel & Luxury Goods
|
|
US |
Visa Inc
NYSE:V
|
Technology
|
|
CN |
Alibaba Group Holding Ltd
NYSE:BABA
|
Retail
|
|
US |
3M Co
NYSE:MMM
|
Industrial Conglomerates
|
|
US |
JPMorgan Chase & Co
NYSE:JPM
|
Banking
|
|
US |
Coca-Cola Co
NYSE:KO
|
Beverages
|
|
US |
Target Corp
NYSE:TGT
|
Retail
|
|
US |
Walt Disney Co
NYSE:DIS
|
Media
|
|
US |
Mueller Industries Inc
NYSE:MLI
|
Machinery
|
|
US |
PayPal Holdings Inc
NASDAQ:PYPL
|
Technology
|
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
52 Week Range |
200.35
352.35
|
Price Target |
|
We'll email you a reminder when the closing price reaches INR.
Choose the stock you wish to monitor with a price alert.
Johnson & Johnson
NYSE:JNJ
|
US | |
Estee Lauder Companies Inc
NYSE:EL
|
US | |
Exxon Mobil Corp
NYSE:XOM
|
US | |
Church & Dwight Co Inc
NYSE:CHD
|
US | |
Pfizer Inc
NYSE:PFE
|
US | |
American Express Co
NYSE:AXP
|
US | |
Nike Inc
NYSE:NKE
|
US | |
Visa Inc
NYSE:V
|
US | |
Alibaba Group Holding Ltd
NYSE:BABA
|
CN | |
3M Co
NYSE:MMM
|
US | |
JPMorgan Chase & Co
NYSE:JPM
|
US | |
Coca-Cola Co
NYSE:KO
|
US | |
Target Corp
NYSE:TGT
|
US | |
Walt Disney Co
NYSE:DIS
|
US | |
Mueller Industries Inc
NYSE:MLI
|
US | |
PayPal Holdings Inc
NASDAQ:PYPL
|
US |
This alert will be permanently deleted.
Ladies and gentlemen, good day and welcome to the Fourth Quarter and FY '22 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 Q4 FY '22 and full year FY '22 performance, followed by a 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; Ms. Sangeeta Pendurkar, Director and CEO Pantaloons.
I want to thank the management team on behalf of all the participants for taking valuable time to be with us. I must remind you that the discussion on today's earnings call may include certain forward-looking statements and must be viewed therefore in conjunction with the risks that company faces. Please restrict your questions to the quarter and yearly performance and to strategic questions only. Housekeeping questions can be dealt with separately with the IR team.
With this, I hand the conference over to Mr. Jagdish Bajaj. Thank you. And over to you, sir.
Thank you. Good evening and welcome to the earnings call for our company. The year gone by has been a roller coaster in terms of COVID waves and lockdowns. As you are aware, the first half and especially Q1 of FY '22 was severely impacted by the Delta wave. The second half witnessed unprecedented growth with offline stores open and had it not been for the Omicron wave in January and February, it would have been a record-breaking period.
Before I [ dealt ] on the result, let me tell you about the announcement which we have made today. We are very excited to inform you that the Board in its meeting held today has approved raising of INR 2,195 crores of primary capital through a combination of equity and warrants on a preferential basis to GIC Singapore, a leading global investment from. GIC will infuse INR 770 crores on closure of deal by H1 FY '23 once all approvals are in place towards INR 1.02 crore equity shares at INR 288.75 per share and 25% upfront payment for INR 6.58 crore warrants to be converted into equity share at INR 288.75 per share.
The balance capital of INR 1,425 crores will be infused in 1 or more tranches within 18 months upon exercise of warrants. Post the entire investment, GIC will launch 7.5% equity stake in our company. Aditya Birla Group will hold 51.9% stake in the company post the completion of this transaction. ABFRL plans to use this capital to accelerate its growth engine built around strength of its current businesses along with a rapidly evolving play in emerging high-growth business models and fortify its position as one of the leading player in the industry. The fund raise is a testimony to GIC's faith in the strength of ABFRL's branded portfolio, a strong business model and its future growth potential.
Now let me take you through the performance of Q4 and H2 of FY '22. Q4 has turned out a very good quarter for ABFRL, despite the shock of Omicron wave which disrupted business in January and February. Sales in Q4 is INR 2,283 crore, a growth of 25% over Q4 FY '21. EBITDA for the quarter is INR 401 crore, a growth of 58% over Q4 FY '21. The net profit after tax for Q4 is INR 32 crore compared to a loss of INR 196 crore last year. E-commerce during the quarter has grown by 18% from previous year -- from Q4 FY '21.
I will just like a minute to reiterate that ABFRL has had an excellent performance in Q4 on top of a very strong performance in Q3. And let me narrate H2 performance that this will help you in understanding our results in a better perspective of how they would have been in a normalized scenario. Sales in H2 FY '22 is INR 5,270 crores, a growth of 35% over H2 FY '21. EBITDA for H2 is INR 1,010 crore, a growth of 50% over H2 FY '21. The net profit after tax for H2 is INR 229 crore compared to a loss of INR 137 crore last year. E-commerce has also grown in H2 FY '22 by more than 21% over H2 FY '21.
Now let me take you through the full year performance. Sales for full year stood at INR 8,136 crore, an increase of 55% compared to FY '21. EBITDA for FY '22 has been INR 1,203 crore and has witnessed a growth of 91% compared to INR 628 crore in FY '21. Net loss for the company is INR 118 crore after taxes compared to loss of INR 730 crore last year. We have been able to maintain our net working capital at same level this year, despite 55% higher sales.
The net debt of the company stand at INR 504 crore, down by 5% from last year. We have significantly ramped up our digital capability and our e-commerce operations. The digital channel sales have grown by 52% over the past year. We also enable close to 50% stores with omnichannel functionality. The e-com revenue for the full year is INR 1,000 crore approximately. We also continued to grow our physical network with addition of 606 new stores. Along with that we also rationalized 10% of our network by cutting of unviable stores.
I will now take you through the performance of individual businesses. Starting with Lifestyle brand business. Lifestyle brands have turned out an exceptional performance in Q4 on the back of a strong growth in its retail and trade segment. Our brands have continued on its journey of significant market share expansion. Sales in Q4 is INR 1,342 crore, a growth of 34% over Q4 FY '21. EBITDA fourth quarter is INR 312 crore, a growth of 77% over Q4 FY '21. The Lifestyle brands reported a stellar growth of 25% on last year sales in its own retail channel highlighting growth in its market share. This stands testimony to the strength of our brand and their versatility to fulfill consumer requirement in all market conditions. Sales in the wholesale channel of MBO and departmental store side growth of 71% compared to Q4 FY '21 of last year.
Let me also highlight strong performance of Lifestyle brands in the second half of the year. Sales in H2 is INR 2,931 crore, a growth of 44% over H2 FY '21. EBITDA for the second half is INR 658 crore, a growth of over 79% of H2 FY '21. E-commerce has also grown in H2 by more than 21% over H2 FY '21. For the Lifestyle brand, the sales for full year now has been INR 4,522 crore, which is about 64% higher than last year's sales. The EBITDA for the full year is INR 788 crore with a margin of 17.4%, which is higher by 510 basis points for FY '21 margin.
E-commerce sales continue to rise significantly for the division, 61% growth over last year and our brands are available on all leading e-commerce platforms. Lifestyle brands have continued their expansion into both existing and newer Indian towns and cities, exiting FY '22 with 2,522 stores, which has given its unassailable lead overs its peers in this market and is contributing to its market share expansion. Business significantly improved its working capital management and achieved revenues of INR 4,522 crore with an operating capital of INR 370 crores, excluding goodwill and right-of-use assets. This reflects strong asset productivity and high return on capital for the business.
The Pantaloon business, despite a relatively higher impact of COVID 3 on its business owing to its higher share of business in malls. Pantaloon recorded revenue on Q4 of INR 675 crore, a growth of 13% over Q4 FY '21. EBITDA for Q4 FY '22 is INR 82 crore, a de-growth of 6% over Q4 FY '21. E-commerce in the quarter has grown by 81% over Q4 FY '21. Pantaloons second half results shows its potential performance in a normalized period. It has seen a growth in profitability, despite being more affected due to Omicron. Sales in H2 is INR 1,741 crore, a growth of 24% over H2 FY '21. EBITDA in H2 is INR 298 crore, a growth of 8% over H2 FY '21. E-commerce has also grown in H2 by more than 73% over H2 FY '21. This profitability was achieved on the back of excellent inventory management and lower discounting leading to higher gross margins along with company's focus to leverage its operating cost.
For the full-year, Pantaloon reported an annual revenue of INR 2,626 crores, a growth of 41% from last year, while the EBITDA stand at INR 368 crores witnessing a growth of 33% over FY '21. The business focused on working capital management and improved NWC by INR 45 crore. It achieves its revenue of INR 2,626 crores with operating capital employed of just INR 325 crore, excluding goodwill and right-of-use assets. Pantaloons also ramped up its store additions during the year with 49 new additions, 18 of which opened during the quarter. We plan to significantly accelerate retail expansion of Pantaloons network in the coming year.
And lastly, our other business segments, which include Active Athleisure Innerwear, Youth Western Fashion and Super Premium Brands. Revenue from other business segment stand at INR 217 crore, marginally higher from INR 214 crore achieved in Q4 FY '21. Active Athleisure wear, we expanded our distribution network and now selling across 27,000 MBO outlets among the path to build a strong retail network. Youth Fashion and Super Premium brands continue to work on profitably and bring in more freshness to their merchandise. American Eagle grew 45% over Q4 FY '21, and is gradually establishing itself as a premium denim wear brand for its consumers. Forever 21 gives 13% over FY '21. We are expected to continue to grow profitability in the coming years. The Super Premium brands business segment, which includes the collective and international brands continues to grow strongly and profitably.
Let me talk for ethnic business. ABFRL is now one of the strongest and most comprehensive portfolio brand across price points, consumer segments and occasions. ABFRL has made a constellation of partnership with leading designers Sabyasachi, Tarun Tahiliani, and Shantanu & Nikhil to add to its first investment in Jaypore. The revenues of the segment for Q4 is INR 101 crore and an EBITDA of INR 5 crore, a margin of 5%. This is a nascent business for us. And FY '23, we'll see ABFRL make investments to grow the business both offline and online. We expect this business to grow rapidly over the coming year in line with our aspiration. In FY '23, in all these brands put together we plan to add 70 stores, including a store in New York for Sabyasachi. These forays will propel ABFRL to be leading players in the large ethnic wear market.
Now let me brief you the progress on new partnership, House of Masaba. ABFRL has announced a partnership with House of Masaba, and is picking up 52.4% in the company. We signed a definitive agreement and plan to integrate into our fold shortly. Acquisition of Reebok, as informed, FY '23 we'll see the addition of the world renowned sportswear brand Reebok in our portfolio with effect from October 1, 2022. Way forward, building on the momentum at the end of FY '22, we as a management are optimistic about FY '23 and plan to focus on the following area.
Significant capital expenditure to fuel the growth across all the brands in the portfolio; significant increase in spend on marketing activities for increasing strength in each of our brand; #3, sharp focus and increased investment in areas such as IT and digital, strengthening our omnichannel and back-end infrastructure; and #4, increasing focus on overall digital play through recently announced D2C entity wherein we would invest in building a portfolio of digital-first brands through organic and inorganic route and accelerate on e-commerce play. ABFRL has emerged much stronger out of the pandemic and is now operating on a much stronger foothold at the back of robust balance sheet, comprehensive brand portfolio and industry-leading talent, which enables us to realize our long-term ambitions of playing a leadership position in the apparel sector in India.
Thank you. And we will now take your questions.
[Operator Instructions] First question is from the line of Tejash Shah from Spark Capital.
I have many questions. I'll just try to club couple of them for efficiency. Sir, first question is regarding the fund raise. So last March, when we made this presentation for our [ FY '26 ] vision, we had not -- we had impact certainly retail capital improvement plan also which was not around any raising further capital. And when I look back FY '22, it actually went very well for us in terms of recovery, in terms of numbers. So then what triggered this sudden such a big fund raise, that's first question.
So Tejash, if -- our long-term plan was made in January of last year and was presented to the investors around early March. What happened in April, May, June, all of you remember, on the 1st November is being one of the most devastating period for life in general, but I think consumer, retail, specifically fashion retail. And all of first half of the year was significantly different from what we had imagined. We had come out of the first wave in January, February, when this plan was made. And to that extent your contention that nothing has happened in FY '22 is actually very far from our own assumptions of how FY '23 will -- '22 will turn out versus how it did.
Over this period, we also realized that a long-term competitive position would require us to invest deeper because many of our growth initiatives, which we had started on, starting from Pantaloons where we had laid out a plan to expand 70, 80 stores a year, but ended up with close to 40, 45 stores; innerwear, where expansion was held back; ethnic wear, many of the business that we acquired were relatively under invested from expansion in growth point of view. So if I were to summarize this, 2 things happen. One is FY '22 unlike what you're seeing is dramatically different from what we had imagined FY '22. FY '22 in our plan at that point of time was better than H2 that we have delivered this year. We had a similar view of H1 last year. And therefore the full year would have been much, much better.
#2, because of what was happening around and the conditions or expansion plans were held back quite significantly. At the same time, we continue to believe both in the long-term growth potential of the market and intrinsic strength of our brands. And we feel now the time is to accelerate to catch up on what we have not done over last 12 to 18 months and I would go back almost still the beginning of the COVID from 18 to 24 months where some of our growth initiatives have held back. We have made investments in acquiring platform, but commensurate investments and actually scaling up those platforms have been better than what we would have ideally liked. And therefore there is an accelerated need to grow these platforms. These are very significant opportunities. Because just you've seen how Pantaloons business has turned around in the last 3, 4 years and its strong fundamental economic commodity.
Ethnic wear business that we've acquired now, there is no doubt that the strength of these brands will allow us to grow them much, much faster, 2, 2.5 years back, the business didn't exist. Now we are clocking the business in about INR 400 crores, INR 450 crores a year, and we'll try to extend. We had laid out a plan for INR 1,500 crores, INR 2,000 crores of that. To realize all that would require long-term capital and a balance sheet, which is strong and we don't have to keep looking back. It is the plan that we've been working on from the time the COVID Phase II happened. And how do we strengthen significantly that for next 2, 3 years, we don't have to take our organic growth expansion plan. And that's really how we see it.
Sir, second, so how should we think about our FY '26 vision? Does it mean that we'll participate in many more categories because capital is also now available? Or does it mean that we'll go more aggressive in the existing categories that we have identified already?
So answer to that is later -- latter what you said, which is we have, as I mentioned, very, very strong platform. Pantaloons story is still to play out fully. Innerwear is still long runway. Ethnic wear we've just acquired. Reebok is a large opportunity that we will play out over. So our existing strength of platforms, brands and portfolio has a very large capacity and capability to actually grow. And that's where most of our investments grow. I don't think Tejash you should look at this investment as a one-time infusion to solve current problem. This is more a long-term strengthening of balance sheet, which will allow us to fulfill exactly the strategy that we played out, that we had laid out earlier.
Sure. And sir, whom do we consider our competition now? Because since pandemic, we are seeing that conglomerate retailers are getting very aggressive across categories. And unfortunately, fortunately, most of those retailers are either part of the big house. So the dilution if at all happening is not visible, or they are unlisted in India, so we are not able to track that infusion that closely. So just wanted to understand, are we competing some of those big names? Or are we actually still playing or marking our competition as which was the case, let's say pre-pandemic?
So I think, Tejash, we have always stated and you saw that in our strategy that the opportunity is what excites us more than competition. It's a very large market depending on who you ask at $70 billion to $75 billion, how much of it could have recovered. But when it normalizes, it's Indian apparel market is perhaps one of the largest, if not the largest consumer space in this country. The extent of branded play is still limited, reflecting the fact that even a major player like us is less than $2 billion in revenue, $1.5 billion in revenue. So that tells you how large the fashion space is, and how little is the penetration right now, and what is the large runway available to us.
So more than looking at competition because each of our competitor or each of our segment that we are playing has a different set of competition. Our strategy need to be guided by opportunity, our own intrinsic strength, our capability to execute and vision that we have for the business. And not really looking at competitors and looking at what they're doing and who is the competitor. Each of them, we obviously will have got the competitors, both national and international, and we'll have to deal and compete with them.
And the last one sir, was Flipkart, our strategic investor already was considered [ or accruals ] focusing on the fund raise?
No. This fund raise was with -- our idea was to get a really long-term financial investors, but whose outlook is into future on -- and a partnership that we could build on over the next decade or so as the company grows and expand its presence in the fashion market. Therefore, the idea was to get somebody whose investment strategy, proven discipline, ability to have long-term partnership in India, proven over a long period of time and that's how GIC filled most of these criteria for us. And to that extent, this is really how this partnership is considered.
The next question is from the line of Aliasgar Shakir from Motilal Oswal.
I have a question first on your fund raise and your inner growth initiatives that you mentioned. So I'm coming from the point of view that we are a company which has an ability to generate probably more than INR 1,000 odd crores of operating cash flow. So I hear your comments that we want to accelerate our growth initiatives. But when I see Lifestyle, largely franchisee led growth, even Pantaloons, we are now increasingly moving to that goal. And in fact, the kind of free cash flow generation we have, I thought we have a sufficient capital to drive growth in our existing portfolio. Correct me if I'm wrong. So I just want to understand what are the broad areas of investment of this new capital? Would it be used for further inorganic growth opportunity that we see in any new areas? And a related question there is so what should be your guiding force in terms of your margin profitability metric that we should see during this phase of investment term?
So I think Ali, a fair point in terms of our -- some of our business is having strong cash flow generation capability. But as I was explaining earlier to Tejash question, I think the way we see our potential and what has happened in last 2, 2.5 years, many of our platforms hasn't really played out to the extent that we wanted to do and rightly so considering the situation that the industry was consumer work and the overall [ land work ]. So we believed coming to your question where would large part of these investment go? I would say the largest parts would go in similarly expanding Pantaloons franchise to get it to the potential that it has. Ethnic wear portfolio is also -- and contrary to what you are suggesting, we have always maintained that Pantaloons will probably stay at 20%, at best 25% is expansion to franchisees. So 75%, 80% of Pantaloons expansions would be on capital.
Our entire ethnic wear portfolio, we've acquired some of the most well-known and strong brands in the portfolio. We now need to do justice to them by expanding those. Reebok is a large opportunity. Our international brand business, whether it's American Eagle or international brands, they are going very, very profitably and have a very strong runway. Reebok is probably a very long-term, large opportunity that we're playing out, if you look at that market dynamics. So if you really look at what we have in our hands, other than Lifestyle brands, which obviously have consistently been cash flow generated and need very little capital to grow. Even there, we'll perhaps at some stage 18 to 24 months, we'll have to build up a little bit capacity on the manufacturing and supply chain side. Most of this would go to strengthen the accelerating growth trajectory that we have created for the portfolio that we have. And that's our primary goal.
Needless to say, a part of the capital will also have to grow as the consumers are predicting as digital is getting more important both in infrastructure ability, building [ home platform ] business, which is required to actually have captive platforms where consumer shops from you instead of -- today about 80% of our business comes through third-party platforms. That's the other thing that we need to invest in. All these are, I would say part of an organic plan and pretty much part of the plans that we had laid down. FY '22 dynamics have affected both our growth investments as well as capacity because it has significantly [ linked at the ] balance sheet versus what we had imagined.
This is very detailed and insightful. Just a quick follow-up here. So then we should be build more than INR 1,000 crore kind of CapEx in our existing organic business. And are you seeing that we don't have any inorganic possibilities in the near term?
As far as organic CapEx is concerned, I think INR 1,000 crore would be aspirational for us. We would love to spend. I don't think we have the capacity to spend that kind of capital. But the number would definitely be what we would like to do is something like INR 700-plus crores, which we would invest in this year as we go forward.
I would just ask you, Ashish, because we -- sorry to interrupt, but I was just asking this Ashish, because we've already have that kind of operating cash flow to fund our business. And therefore I thought that…
No, Ali. I think you are looking at this fund raise which is a long-term strengthening of balance sheet to take us through next 3 to 4 years of growth with the CapEx of 1 year. I don't think that's the right way to look at it. But you have suggested that our CapEx will be significantly higher this year and perhaps for next couple of years, is correct. And that number perhaps will be INR 700 crores to INR 800 crores at best if you wish and maybe on the lower side about INR 600 crores to INR 700 crores, will be a function of our execution and scale at which we can build this, but that's where it would be.
And on inorganic, any near-term possibilities?
So inorganic, I don't see an immediate thing. But as I have learned over a period of time in an industry like this where there are so many opportunities available, I think at any point to say there will be never-ending inorganic would not be a right thing. It will be incorrect for me to suggest that. As and when these opportunities come, we evaluate them both with strategic alignment with where we want to go as well as the right sort of value that it goes there. As of now that's not the purpose of this fund raise. This will build around a longer-term balance sheet strengthening, which currently requires most attention as far as our organic business [indiscernible].
Just last one question on balance sheet, if I can just ask, Jagdish sir to address. Inventory payables yet look higher than pre-COVID levels, even if I adjust for the new store additions. So is this due to the new ventures in ethnic wear or should this reverse?
Ali, primarily this is a function of building up the inventories in the Q4 for the next season. The payments will flow in FY '23. And another reason is the inventory build-up for the expansion plan in all our business segments including the ethnic business.
The next question is from the line of Gaurav Jogani from Axis Capital.
Sir, my first question is with regards to the sharp margin expansion that we have seen in the Madura brands. So just wanted to know how sustainable this is? And what has led to the sharp margin expansion during the quarter?
I'll let Vishak to comment on this question, but I would only suggest that please look at margins over at least 2 quarters and -- because there is some shift in sales quarter-to-quarter. But Vishak would be in best position to explain this to you.
Gaurav, first things first. Just like Ashish said, we've been on a very good momentum. And Q4 also, even in spite of a January, which was Omicron affected, we had a very good like-for-like sale. So that significantly helped. The costs are largely fixed and when that gets spread over a larger sale then it flows straight to EBITDA. Also I think because of a very strong wedding season, discounts were tighter and hence gross margins also expanded a little more. Some parts of it will not sustain. One is I think we will get to a much larger advertising spend as we look at the quarters ahead. So that won't come. And there was some part of it, which was still one-off gains of last year with the kind of cost reduction initiatives that we had. So that's broadly the maths of where we are. So the momentum is good. The EBITDA percentage looks good, but perhaps there are couple of things where we will invest more in the quarters ahead.
And one follow-up to this. I mean in terms of the store expansion plan. So if we see the earlier opened around 145-odd stores during the year, as we have been guiding to add around previously 400 stores for the year. So anything on that front?
So Gaurav, this year also we actually added about 400 stores, okay. But we closed roughly 250 stores, okay. Now closure also, some of it was real closure, some of it was also some term changes, customer code change, et cetera. So net-net, we did expand close to about 400 stores. Please remember this was also a period of COVID wave 2, et cetera, where some parts of retail network have to be rationalized where we were not able to get rent concessions from landlord partners, et cetera. So we had to do that also. What it has done is, not only has the expansion momentum continued, it has also created a more -- it has churned out a more robust retail network as well, in terms of sales per square foot of the network which we have now. That momentum of about 200 stores per year, I think we will be able to continue for few more years.
And sir, the next question is with regards to the Pantaloons business. I mean, I do want to stand that the Pantaloons business was impacted due to the COVID 3, or COVID, Omicron impact. But how do you see the overall performance as of it had -- we start launching this impact? What kind of a performance internally it's tracking about? And how is the Q1 looking? If you can help us with that as well.
Sangeeta, you will come in. Just give a context a little bit about the large format stores have been particularly most severely affected by COVID. You would have seen it right through, but go ahead.
So I think as Ashish mentioned, we've seen given the fact that our businesses are over-indexed to launch we've seen through the year. The fact that large format stores have had a deeper impact. And it's true for us. It's true for other players in the industry as well. And largely, we've had a start-stop with Omicron kind of coming in Wave 2, Wave 3, Omicron coming in. We've seen a start-stop in Jan, Feb, the business got impacted. However, I think we feel good about our overall performance given all the headwinds that we've had. You've seen the numbers that, Jagdish has talked about. We've ended the year with a 41% growth over last year. Had it not been for January and February, I think our performance would have been even better. And when we normalize for that, our numbers look, we've lost about ballpark about INR 160-odd crores, INR 150 crores, INR 160 cores just in quarter 4 on account of the shutdowns that we saw in January, February.
I think what's encouraging for us is that everything that we have shifted in terms of strategy over the last 3-odd years, we've seen impact of that. We've made a lot of changes in investment during the pandemic to make sure that we are a much stronger organization. We've had headwinds with the shutdowns, some headwinds with our supply chain issues, which have led to some supply chain issues. But overall, looking at our performance through the back end of Feb, March and April, gives us terrific confidence in terms of both our strategy and the return to momentum that we have seen. I think if it wasn't for the closures and the fact that we are over-indexed in terms of malls, our performance would have been even better.
And one follow-up to this, I mean just like as you know as Ashish has also mentioned that booking for a robust CapEx plan going ahead in these all the formats, [ including Pantaloons ]. So how should we consider the store opening momentum here? And what kind of a CapEx could we see for the Pantaloons field?
Right. So this year, again we've opened close to about 50-odd stores. And just as Vishak explained, we obviously had some challenges there. We would have opened more number of stores, if it wasn't for the closure of a few months in the year. We have stated this very clearly in terms of our intention to open stores, we see Pantaloons has the format that works across town classes. In the past, we have clearly said a number of 70, 75 stores per year, and that's the acceleration that we will see going from this year to next year. Even this year, we would have opened more, if it wasn't for the challenges that we faced. But in the coming year and the years to come, we would take that as the number anywhere between 65, 70, 75 stores is what we'd like to open. CapEx that we would need for that is what we will factored in, in our strategy.
And then just one last question from my end is with regards to the other businesses. So if you see during the quarter, the other businesses [ just grown ] marginally by 1% Y-o-Y, actually declined on a Q-o-Q basis. So if you can highlight how has been the performance particularly for the innerwear and athleisure business in Q4 specifically?
So innerwear business continues to grow rapidly. There are other parts of the business like Forever 21, which hasn't grown over last year, which formed the substantial part of our other business. Innerwear I think has grown at about high double-digit 15%, 16% for the quarter.
The next question is from the line of Nihal Jham from Edelweiss Capital.
Sir, couple of questions from my side. First on the quarter specifically for our Lifestyle brands. The SSG performance has been impressive and definitely industry-leading. And you have highlighted certain aspects, whether it is in terms of extension of various brands, which have, in a way, helped this. I just wanted a little more sense, Vishak, if you could bifurcate that, is it mainly the brand extensions, or what is be the improvement of the share in e-com, which can you bifurcate and give more clarity on this growth? Also there is talk of obviously a wardrobe refresh kind of a trend currently happening. So are you seeing that trend and that would also reflect in terms of your formal and casual share how that is played out? That will be the first question.
Yes. So Nihal, I think it's lot of questions. First things first, the momentum on growth was overall good in the market. I think we did a little more, but yes, there was a lot of wedding season and all of that, which we were able to capitalize quite well on. We have in fact built it very well. We had built a very strong wedding line, et cetera. As you know, during the periods of pandemic, we'd also built a very, very strong casual line and sports lines, et cetera. Now that also came very nicely into the party. And with the third impact, which is a back to work happening and a very strong come back of a lot of people when they're going back to offices, buying new clothes for that. All of this together I think we were able to capitalize on all 3 segments. So that is what created a good strong momentum.
I think we also were able to -- our many initiatives which we've been taking over a long period of time, including a 12-season model, which allows for greater flexibility and ability to put what is required in the market at that point of time. Some of those things also -- they are very hard to put as a silver bullet, but they contributed significantly. Many supply chain initiatives including a lot of technology in terms of retail assortments that also help. So it was many things, which went together anyhow to be able to deliver. And it's not just Q4. If you look at Q3 also that same trend continues. So it is in that sense an extension of many of those initiatives bearing fruit.
So could we point out any one of these aspects standing out or it's all are [ equal mix use ]?
If I were to say, I think 1 would be hard, but if I were to say the top 3, it's a very, very strong wedding assortment, a strong formal assortment, and a strong sportswear and casual assortment. All 3 together I think came very strongly, which were enabled by multiple things at the back-end to be able to create a force multiplier as well.
Second question. Ashish, was on the fund raise, just concerning the quantum in terms of how our CapEx has been in the past and also the average ticket size of our recent investment? Is there any chance possible to give a bifurcation? You mentioned Pantaloons will be the first in order of where this INR 2,000 crores could be incrementally invested in? And second related question to that is, does it change our targets that we've laid out for FY '26 considering the phase for Pantaloons and all the other brands accelerate versus the earlier [indiscernible]?
So Nihal, it's harder to give exact break up, but clearly this is meant to strengthen balance sheet to a point that next 3 to 5 years, our expansion is sort of well supported. A large part of our growth story is built around growth of formats that we had, the 2 very strong ones which are Lifestyle and Pantaloons are sort of well positioned, but they still have a very large runway. There are new ones like innerwear, which needs to double and triple over next couple of years. There is whole ethnic wear portfolio where we started from 0 and limited about INR 1,500 crores by FY '26.
In terms of where we stand in that journey, I think our current confidence is that we will do well above that numbers, and that's the strength of the platforms. Reebok has additionally got added. Some of the confidence around our ethnic wear also comes from the new launches like Tasva. Jaypore coming on its own. And therefore at this point of time, we feel that the projection that we had made for FY '26, 1.5 years back, despite the fact that we have lost almost 6 to 9 months. We feel even more stronger that we will not only achieve, but exceed those numbers. A large part of our capital will have to go into that, and into growing and therefore Pantaloons and ethnic and innerwear perhaps in that order would take largest amount of investment as far as capital is concerned.
The next question is from the line of Ankit Kedia from PhillipCapital.
Sir, first question is regarding the fund raise. Why did you select the warrant option and not direct equity?
Yes, Ankit, we were looking at longer term solution for our capital needs for 3 to 5 years, at least 5-year horizon. So we came up to a number. As you can make out from the previous questions, that it's not that we need all that capital today. We wanted to make sure that the balance sheet is strengthen over a period of time and capital infusion is more in line of what we think would be our requirement as we go forward. And that's really how we needed to stagger it, and warrants came up with the best solution to do that.
Sir, my second question is regarding the D2C strategy, which we laid out last quarter. Just wanted to know what will be the capital infusion because few of your press interviews last quarter suggested INR 250 crore to INR 300 crore investment. Does it change after the fund raise? Or that capital remains at the same level?
No, I think as far as D2C is concerned, let me first state very clearly that we have said after initial infusion of capital, we would look to raise capital externally in that entity directly. That plan doesn't change at all. This fund raise is not to fund D2C business directly from this side. We have a clear strategy in D2C, which we laid out. We will stay consistent with that. We had mentioned an amount at that point of time between INR 300 crores to INR 400 crores, but that might change a little bit because the idea is to get [ 10 ] investments made in this year and then go out and raise capital on that. So that's on a separate track. I think it will have its own investment profile and will also have its own funding profile. Our current investment or current fund raise is primarily targeted to accelerate the growth of businesses that we currently have and the ones that we have in the portfolio, either part of Pantaloons, ethnic wear or innerwear portfolio.
And sir, my last question is regarding your debt equity. You've always mentioned you're comfortable with 1 to 1.5x debt to equity. Is it safe to assume we will continue with that or we want to be debt free going forward?
I think as a prudence, long prudent, long-term guidance which we can consistently sort of go by, Jagdish has given that number in the long-term plan that we have and will stay with that. So there is no change in that. Of course, there will be periods when cash flows will be such that probably it may just exceed marginally or there be periods in which there will be debt free. Our business will go through those cycles, but we will stay within the boundaries that, Jagdish had laid out earlier in long-term.
The next question is from the line of Devanshu Bansal from Emkay Global.
Congratulations on the recent fund raise as well as strong margin performance during the quarter. Sir, Pantaloons, we were doing close to about INR 8,000 to INR 8,500 revenue per square feet pre-COVID. Can we get back to this fund raise in FY '23?
Sangeeta, do you want to comment here? Pantaloons productivity pre-COVID and projections for -- going forward.
Yes. So as I mentioned this in terms of our strategy, I think all the things that we have done to strengthen the proposition of Pantaloons. And if you have seen during the pre-pandemic, we were on a good trajectory to strengthen our productivity through the stores. What obviously we've seen over the last 2 years is a disruption on account of lower footfall than that story has been told by us and many of the other players in the industry.
In FY '23, our endeavor will be to absolutely improve the performance over this year. I think both with demand coming up and with supply chain issues being settled, we feel pretty confident. Plus in the interim, I think we've done a lot of things as I was alluding to before in terms of strengthening our proposition. If you look at it, lot of our large stores have been renovated. Our entire effort is to get to a much stronger customer experience both offline, online and omnichannel.
So our endeavor would be definitely to get as close as possible with a better product proposition with investments in marketing with expansion in distribution, which of course does not improve the same store productivity. But all in all, a better proposition for our customer and a better customer experience built on a stronger brand, a better product expertise and an improved in-store experience with the new retail identity and the investments in the brand, our endeavor would be to definitely get back to the pre-pandemic levels.
Secondly, for these 75, 80 store editions that you plan, what is the estimate CapEx that you expect to do in Pantaloons? This question is because I guess the store sizes that we have been opening are relatively low.
So these stores, again it is a function of the size of the stores. I think with the new [indiscernible] we built, our investments in CapEx per square foot have been higher, but ballpark the investments would be in excess of about INR 150 crores that we are looking to invest in Pantaloons purely from a store expansion standpoint and some renovations included.
So Ashish, just wanted to understand what is the rest INR 550 crore sort of CapEx that would go into other segments like innerwear and ethnic? Can you sort of break up or segregate the CapEx for each of the divisions?
I don't have the number right now. Maybe Jagdish can share with you in greater detail. But a lot of it would be Pantaloons renovation, which would be over and above the expansion plan that we talked about. There will be a lot of investments in digital and back-end, which is warehousing and supply chain. There'll be subsequently large investment that we have planned in our ethnic wear business, particularly Tasva, where we plan to launch 65 to 70 stores next year; Sabyasachi, where we're expanding globally; Jaypore, where we will be opening 15 to 20 stores this year on the base of 10, 15 stores.
Part of Lifestyle brands would see investment in manufacturing as we scale up. The back-end of that business is the front end that's scaling very, very aggressively. And as you might know, this is only business where we have a manufacturing largely to ensure that the premium quality is kept in-house. So it's a whole bunch of initiatives around both growth, refreshment like Sangeeta mentioned for Pantaloons for renovation, and for back-end which is both digital IT being one side and supply chain and manufacturing on the other side.
And lastly, we have delivered about 19% EBITDA margins in H2. So I request you do provide some color on margin trajectory going ahead, targeting the investments that we are going to make. Does this 19% sort of EBITDA margin can be sustained going into FY '23?
So I don't want to at this point of time give an indication on the margin. I think you've seen the trajectory over a period of time. FY '23, '22 second half was buoyed by 2 factors. One is significant cost depression that we had done through efforts right across the organization, store network, refresh, closing down lot of lower productivity stores, driving hard rental negotiation and other cost measures that we've taken. And to that extent the cost base itself has got slightly deflated for the deal. So some of it would come back.
Part of our advertising investments, as Jagdish had mentioned in the opening speech, will need to go significantly higher than where it had come down during FY '21, 22, where we had to take deep cuts on that. And that will come back to the level before the pandemic -- pre-pandemic levels. So these were 2 effects, which will probably moderate some of the good outcome, which is more buying market, relatively stronger position in the market compared to other brand, at least in the Lifestyle segments, the benefits of the refresh that we are doing in Pantaloons both on the product and experience, the store investments that they're doing.
So to that extent some of that will be offset by the costs coming back to the levels that they were pre-pandemic. And that would probably indicate a margin, which may be slightly lower than H2 that we're indicating this year.
The next question is from the line of Ankit Babel from Subhkam Ventures.
Sir, a couple of questions. Sir, first is in this D2C business, should we expect some cash burn in the initial years?
There might be. There would be because while what we would acquire would be largely profitable businesses though sub-scale, but to get them scale would require investments, which may have to go through a period of losses in that business that you will have to do to grow these D2C brands. Some of them would be seller brands, which are intrinsically profitable and hopefully will remain that way. Some of them are direct-to-consumer brands, which require deeper investment in early phase to acquire customers, create stickiness around that and they will go through a period of losses in that. So it is fair to expect some degree of losses in that business initially.
And sir, my second question is, you did mention that you people are now confident of exceeding your FY '26 guidance with so many new brands coming into and scaling of the CapEx also. So now I understand that from top line point of view, there is a visibility of exiting the guidance, but from bottom line perspective also you feel that you will exceed the guidance about [indiscernible]?
Very, very hard to say, but I would say we should at least stay where -- what we have indicated at that point of time. The sole investment into growth is meant to create a very profitable business. That's what drives our thinking on these. And therefore there is no reason at this point of time to change that.
The next question is from the line of [ Abhishree Bang ] from JHP Securities.
So my question is, it is mentioned in market update that inflationary pressure is offset by price increase. So how is the response that company goes for this pricing increment?
So many of these price increases have been more continuous in nature than a 1x. If you follow textile value chain, the raw material prices have been going up now for last 9 to 12 months. Of course, the intensity may have gone up off late, but that's been a continuous price inflation in raw material prices. And there's also been there for a consistent sort of matching of that at least from the second half of last year. Much of that will play out and will depend on how rest of the inflationary environment plays out in the country across other consumption baskets over next 6 to 12 months. We will have to keep a watch on it.
Too early to say that it could -- in past, there have been times when most of this price increase has been passed on and consumer has had very little volume impact. But I think this time will be guided by overall macro situation as far as inflation is concerned. And that may have some repercussion, but we will continue to keep an eye on it. At this point of time, we remain hopeful on the current trajectory that most of this price increase will be absorbed by the consumer.
Abhishree, do you have any further questions?
No, that's perfect.
The next question is from the line of [ Yash Khemka from Yashwi Securities ].
I just had a question that what will be your guidance across segments in terms of revenue for FY '23? Will you throw some light on that?
We don't give guidance of that nature. At this point of time, it's hard for us to put a number to it. We have an internal target that I don't think it will be fair right now to predict -- to give out our guidance on that.
The next question is from the line of Rajiv Bharati from DAM Capital.
Sir, on Pantaloons, you said that you had lost INR 150 crores in Q4. Can you provide what was the little lost sale in H2 just to get a trajectory?
I think the number would be probably similar or little bit more around that. So effectively we have lost closer to INR 300 crores in this period due to various impacts that happened. Starting from -- of course, the number is much higher as you can make out in H1, but overall number for H2 also will be an extent to INR 250 crores, INR 300 crores.
And on the innerwear side, if I got it right, you said we grew 15% Y-o-Y in Q4. Can we break this number for Q4 and 33% for the full year number in terms of volume as well? What is the volume growth?
I don't have that number right now. I think we can share with you separately.
And lastly on the sourcing side, on the innerwear particularly, did you see if any disruption due to the issue in Sri Lanka?
No, we don't -- we don't have much sourcing from there. So while initially it was an important part of our [ innerwears ] but over a period of time, we have been able to diversify into other countries. And to that extent, we've not got impacted or have a large business coming out of Sri Lanka. That hasn't affected us.
The next question is from the line of Vaibhav Agarwal from Basant Maheshwari Wealth.
Sir, my question is we are raising about INR 2,200 crores in capital and assuming that we deploy this capital over the next 3 years by FY '26. What is the kind of asset turnover ratio that we can expect from this?
See, we have -- Vaibhav, we had laid down a plan very clearly, which was given at the beginning of last year, where we have created both revenue profitability over our projections on that. That plan has got appended to certain extent because of losses that we have incurred in H1 particularly and to some extent part of H2 in FY '22. A part of the capital would strengthen the balance sheet which has got impacted by last year. The rest of it would be [ ploughed ] back to actually accelerate some of the plans, which have not got played out last year. Also as I indicated with the strength of platforms we have with the addition of Reebok now and some of the other ethnic wear opportunities that we played out, we are looking at exceeding those numbers. So projections will remain roughly in line of -- hopefully ahead of what we had predicted around FY '26 numbers. To some extent, this capital is making up for lack of acceleration that we've missed out in FY '22, and to cover up for losses that we had in the first half of H1.
So would it be right to assume that the kind of the momentum that we lost in FY '22, we would have to dilute our equity to the extent of 7%, 7.5% for that particular loss in momentum in FY '22, for the remaining --?
No, not at all. I think it would be totally incorrect to see it that way. Equity is built with a long-term point of view with 4, 5, 6 years growth trajectory, ambition and opportunity point of view. And therefore, it cannot be linked with 1 quarter, 1 half. All I was commenting on was our projections for next 4, 5 years. They have been pulled back in last 12 months and some of that needed to be re-accelerated. See equity is a long-term capital, and it needs to be seen with that light. What happens in 1 half or 1 quarter would obviously impact some of those, but that's not the most critical element when we think about long-term capital rates.
The next question is from the line of Ankit Kedia from PhillipCapital.
Sir, just on Reebok, the consolidation was supposed to happen from Q1. Is there been a delay given that globally the dealer actually completed? When can we see that happen in India?
You will start seeing it from quarter 1 of this year. The deal you're rightly saying has got completed. We will get the consolidated numbers from quarter 1 this year.
Thank you. Thank you very much, ladies and gentlemen. On behalf of the management, we thank all participants for joining us. In case of any further queries, you may please get in touch with Mr. Rahul Desai or Mr. Amit Dwivedi. You may now disconnect your lines. Thank you for your participation.