Electronics Mart India Ltd
NSE:EMIL
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Ladies and gentlemen, good day, and welcome to Electronics Mart India Q2 and H1 FY '25 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Karan Bajaj, CEO of Electronics Mart India Limited. Thank you, and over to you, sir.
Thank you. Good evening and a very warm welcome to everybody present on the call. Along with me, I have Mr. Premchand Devarakonda, our Chief Financial Officer. We have uploaded our results and investor presentations for the quarter and half yearly end FY '25 on the stock exchange and the company's website. I hope everyone had a chance to go through the team.
In H1 FY '25, our revenue stood at INR 3,361 crores, reflecting a growth of 13% year-on-year. Our EBITDA stood at INR 238 crores against INR 227 crores, also growing by 5% year-on-year with EBITDA margins at 7.1%. In Q2, heavy rains in South India have impacted demand. But we anticipated that the consumer spend will rebound as conditions normalize. Additionally, Q2 tends to be a softer period for electronic [indiscernible]. And this year, we paid additional challenges as well.
As mentioned, with [indiscernible] especially Hyderabad and [ Vijaywada ], our key markets experienced heavy rainfalls, causing reduced footfalls and beating demand. Air condition sales were impacted by the [indiscernible] monsoon. However, the category was to demonstrate [indiscernible] a consistent performer, maintaining steady sales for the first half of the year and showing a growth of 46% in Q2 FY '25, a growth of 24% Y-on-Y. Large appliances contributed to maintain this thought as the largest revenue contributor. For H1 FY '25, large appliances contributed 46% to the revenue. Mobile phones contributed 42% and small appliances, IT and other categories contributed 12% collectively. In the first half of FY '25, we continue to expand our store footprint. We have opened 18 new stores, our store count as of September 2024 stood at a total of 177 stores, out of which [ 160 ] stores are the multi-brand first, 13 are exclusive brand outlets.
We are present in 70 cities across 60 currently. In India region, we have reached up to 25 stores. We remain confident in our full year guidance of adding 25 to 30 new stores. Going forward, our strategy would be to further strengthen our presence in Delhi NCR cluster and the existing market at the same time. As we prepare for the upcoming season, we expect consumer behavior to revolve with an increased focus on premium anatomic.
Moving towards working capital, we typically see an increase in inventory during the September end in preparation for the festive period. As of September '24, our inventory days stood at 62%. Going forward, our strategy will be to focus on optimizing inventory levels to drive higher cash flow conversions, which will further strengthen our balance sheet. Same-store growth for H1 '25 -- for H1 of FY '25 came at 6%. And I'm also pleased to report that our [ not ] cluster has remained EBITDA positive for the 3 consecutive quarters and we expect this improving going ahead, our goal is to steadily improve margins is not cluster, aligning them with the performance of the South cluster.
As India continues to move up the ladder in terms of GDP per capita growth, the increased disposable income is fueling great demands for [indiscernible] consumer durables and electronics [indiscernible] and washing machines [indiscernible]. With increased purchasing power, more households can afford these products transition from aspirational purchase in the cities in many open and semi open areas. Additionally, a growing middle-class population, coupled with improved access to financing options and innovative product offering is expected to significantly grow sales in these 3 categories, driving further growth going forward. At [indiscernible], we're catering partner of the top brands that offer a wide range of products [indiscernible] to serve a broader base of customers. As India's GP per capita continues to rise, we have been witnessing increased demand for high-quality consumer durable with a noticeable shift towards with the top 5 brands and key segments.
Our comprehensive product collection enables us to meet this growth demand. While our focus on trusted brand drives customer satisfaction, this powerful combination of strong brand partnership and broad product offering position us for significant growth going forward.
With this, I request Mr. Premchand Devarakonda, our CFO, to update you on the financial performance. Thank you all.
Good evening, and warm welcome to all the [indiscernible]. Let me begin with the Q2 FY '25 financial overview. Our revenues for the quarter stood at INR 1,386 crores as against INR 1,303 crores in Q2 FY '24. with a growth of 6% year-on-year. EBITDA for Q2 FY '25 stood at INR 84 crores as against INR 97 crores, a degrowth of 13% year-on-year. EBITDA Margin Q2 FY '25 stood at 6.1% compared to 7.4% in Q2 FY '24. [ Pre-Ind ] EBITDA per Q2 stood at INR 54 crores with a margin of 3.9%. PAT for Q2 FY '25 to date [indiscernible] as against INR 37 crores, a degrowth of 34% year-on-year.
Now moving on to the H1 FY '25, our revenues for H1 FY '25 should take INR 3,361 crores as against INR 2,987 crores in H1 FY '24, a growth of 13% year-on-year. EBITDA for H1 FY '25 stood at INR 238 crores as against INR 227 crores, a growth of 5% year-on-year. EBITDA margin for H1 FY '25 stood at 7.1% as compared to 7.6% in H1 FY '24. [indiscernible] EBITDA for H1 FY '25 stood at INR 178 crores with a margin of 5.3%. Same-store sales growth for H1 FY '25 was 6%. At H1 FY '25 stood at INR 97 crores as against INR 98 crores, a decline of 1%, which is marginal. For H1 FY '25 is in [indiscernible] rate stood at [indiscernible] ROC and ROE on an annual [indiscernible] basis for H1 FY '25 could add [indiscernible] and 13.2%, respectively. The working capital days as on 30th September '24 stood at 66 days. The broad debt to net debt time to equity stood at [ 0.46% ] and our net debt-to-EBITDA stood at 1.09x. Pre India cash flow from operations stood at INR 260 crores. In this brief presentation, may I now open the floor for questions. Thank you.
[Operator Instructions] We have first question from the line of Devanshu Bansal from Emkay Global.
First question, current is there has been some growth moderation in Q2 after the very good Q1. You alluded to some sort of operating challenges to that. I just wanted to check, has there been some postponement of sales into the current festive? So if you could just help us understand how has been the trend so far in Q3?
So definitely, you see historically also Q2 is always a lower quarter compared to Q1 and Q3, Q3 becoming a basic period quarter with the value invested versus no big festival or big product launches during the Q2. So that definitely impacts and then no moderate rainfall versus a heavy rainfall, which we experienced the side lot of geographies that we are present in, definitely impacts a lot of footfall factors, not like the only reason, but one of the reasons for the lower growth, I would say. And definitely, what is happening is trends over the years, whereas the period become like a go-to market for consumers to come and buy because there will be discount, cash backs and offerings by all retailers and companies.
So definitely, as somebody buying a product during the last week of September usually would postpone it by a weak quarter because this year, if you see, we started flexible with the first number on the 3rd October. So that definitely that kind of postponed buying is always there. So Q3 has been good period was the most [indiscernible] the past period. But then how the Q3 pans out during November and December is major make it important because usually, we would see a little dip in sales post the active period once all the brands and cash back offers would get reduced starting this week. So then you would see that impact coming there as well.
But overall, no complaints. So this was -- we have always been a quarter where there is one of a quarter where the numbers go down a little bit because of a lot of external factors but as expected, Q1 did well as expected. Demand did well. So that is in line with the numbers that you would expect and then you have a lot of costs involved in doing operations, especially for new stores that get launched during that quarter on [indiscernible] that are getting ready. So a lot of CapEx involved a lot of handover already onboarded. So all of those will definitely bring down the margins a little bit. But all is under control and the alignment of what we had planned for the new store opening expansion season for the balance sheet that we had planned because we had to -- from an inventory perspective, also, we had to buy out a lot of stocks in the last week of September, and that was the time when iPhone 16 also got launched.
So there were a lot of reasons that we had to increase in [indiscernible] you would say [ 62 ] days of inventory on the books because first week of October itself, would be the beginning of the season starting from Narrabri. So we had to get all the stocks ready and in our warehouses. So you will see that cost also going up a little bit, yes.
Currently, just qualitatively, if you could indicate between [indiscernible] like-to-like this year versus last year, how have been the trends? Any qualitative or quantitative number that you can grow here?
So [indiscernible], obviously, we not be able to give you an exact number on that. But the flavor has been good all positive to the [indiscernible] so it has been in line with what we saw [indiscernible] time orders this year, what we saw during other big festival days. [ Navaratri ] and Diwali and [indiscernible] turned out to our expectation. So there is no complaints there. In fact, few regions that you saw being flat, like, for example, the Hyderabad cluster being flagged during Q2 has also performed really well during Diwali so definitely, it is not that high or growth for that region but the base has been very high. We still saw good growth coming in from that region as well.
Understood. Lastly, I wanted to say the company has done a good job with no major increase in working capital despite 18 new store additions in first half. Typically industry, we see peak inventory levels at year-end because of all the conditioners stocking that we have to do to sort of seasonal demand. So I just wanted to check, what is your expectation on debt level for the company at year-end. So we may have to sort of invest in the inventory. So any thoughts on that?
[indiscernible] little further. So more than year-end on 31st March, definitely, you will see higher -- not higher debt levels, but higher [indiscernible] standing out because of the cooler and the category being in demand during that particular season of summer but if I give a comparative to our Q3 numbers and would be -- you would see a much drastic difference in terms of the number of inventories are and debt levels, both panning out on 31st of December. So because it has already been -- so whatever inventory get planned out for demand already been sold. We're not carrying a lot of inventory currently because except few categories, which is part of the plan that we have, where we have additional offers, we usually would tend up buying a little more stocks over this quarter as well.
They will support us on the margins. So apart from that, everything is in line and the debt level also will be in line, if not we were historically what you would see right now competitively it will keep on going down, not [indiscernible] but a little bit going forward as well.
Okay. So even after these 12, 14 more additions in H2, you do not see any significant increase in that level side?
Yes.
We have a question from the line of [indiscernible] from Arjav Partners.
I just have one question. We have guided for a 20% kind of revenue growth for the year, and that is what the general guidance we have been giving. Do you think you'll be able to meet that kind of a guidance given the sales in the festive period?
Yes, we were looking at a 15% to 18% growth. That is what we've been commenting out in the market every time in some months. So 15% to 18% is what we comfortably achieve. That is not a problem.
So should be able to make up for the kind of a low growth in Q2 in the rest half of the year, right?
Yes. So if you look at the numbers there, what guidance we have given out on what numbers you would pan out, we are more or less at half 50% mark of it anyways. So we don't worried about how what has been behind us versus what is going to come in the future. So the value went when things are under control, so now the only delta that you would see in the higher number would be by the end of Q4 where summer [indiscernible] as early second or third week of March, and we'll have an additional [indiscernible] crores of sales happening during the last 10 to 3 days of summer. Apart from that, we will not see a major change. So there will be a delta of INR 150 crores or more than that.
And secondly, on the margin side, see, when we started rolling out in NCR region, we saw some kind of a margin because of expenses involved. But now it looks like we are in the -- so do you see some kind of operating reage paying out for us?
So just to answer your question, what will happen is, right now, we're at 25 stores. We are adding up 6 stores in the next 20, 40 rates. So what will happen is because of the denominator being lower, additional 7 stores together adding up in the next, say, next couple of months or a month or so, it will automatically been down the margin a little bit. But we are looking at that reason to stabilize. We have to give it a little more time, but we are looking at that in Q2, give us a similar kind of margin at least for the existing stores, the 78 stores that we opened 2 years back. So those kind of stores will start giving us a similar number in the next 12 months or so. So we're looking at that region growing in terms of giving us a leverage on our balance sheet in the next 12, 14 months, nothing before that.
So you start seeing some kind of interest [indiscernible] in terms of the operating profits?
Absolutely. So we're not looking at loss there right now. So that is what is more alarming if that would be the case. So right now, we're not looking at anything in the last 3 quarters going forward, demand this quarter did went. So looking at that number, we are quite confident that we don't need to worry about that region and get stabilize from here on.
We have a question from the line of [indiscernible] from Trade Brains Private Limited.
Sir, I have a couple of questions. From last 2 years and [indiscernible] that, from Q1 FY '23, net sales per store is reducing in June FY '23 net sales per store was INR 12 crores at present [indiscernible]. Is there any replication actions we are taking for this?
Yes. So actually, you pointed out the right question, where I think the right comparison would be that what are the additions of stores that we add on quite that we add up in that particular quarter or the year. So last [indiscernible] years, as you said correctly, we've been expanding drastically and we [indiscernible] newer clusters and we added new space at a much higher rate than what we've been doing in the previous years or quarters. So that is why you would see that the average ticket size or the revenue per square foot would be a little lower compared to our previous quarters but if you look at the actual number of the sales generated from the existing outlets that we are there or the mature stores or the stores getting matured between open in the last 12 to 14 months, those who have been doing really well. And then we see that other competitive number. But in the presentation and in the public market, you would actually have out a total store count versus the average per stage revenue on the revenue port store generated.
So that is why because of the numbers to account increases tactically, you would see a drop in the productivity ports store but we can give you a complete breakup of historical data as well, whereas you can compare it at a much detailed level, where we will understand that the cluster that we've opened stores which are mature or 12 months or 14 months older stores have also grown by [indiscernible]
Okay. Understood. Sir, as you mentioned, there are 177 stores end of Q2 FY '25. How many stores are in profitable as of [indiscernible]?
Sorry, how many [indiscernible] profit? [indiscernible] 7 stores opened last quarter. Out of this, you can say that these stores will take under also [indiscernible] operational profitable because they're existing [indiscernible] so these stores are all profitable. Only, I would say, one store that we estimated for it not to be profitable. It's one in Hyderabad [indiscernible] which we would expecting it to go into red in the next 12, 14 months. That is why we ended up that store. That is the only store that we shut this financial year, early date. And I would not say that any store in red operational breakeven [indiscernible], but the only thing that open store last month or the last 45 days, it takes up a little time for it to get mature, right?
Apart from that, no other score and any reason that we operate are in red. Only how it would -- how we would defer it is that or might make a blended EBITDA of the store-level EBITDA of 10%, some would be 11.5%, some would be at 6.5%. That is how the math would work out, but [indiscernible] on a whole see new origin where the EBITDA margin will be much lower compared to our [indiscernible].
We have a question from the line of [ Drashti ] from [indiscernible].
Sir, can you help us understand what is the unit economics of the older stores that we have? And how do we think about the profitability of those stores? What would be the growth of poster revisitation and OpEx growth in those stores? And of the 177 stores that we have, that proportion would be the older dose? And how are we thinking about the newer stores?
So as how it would work out is that we would look at acquired average of 10,000 square feet in the mature stores. So that is an average pace that you take at the benchmark and then -- so these stores were for the existing clusters because most of the mature stores would be Hyderabad, a few of them in the [indiscernible]. So these are older stores that opened, say, 5, 7 years back. So these kind of stores, which are in a cluster where you are already matured to say INR 50 crores, INR 70 crores to INR 100 crores, these kind of stores would grow at a much lower pace compared to the newer stores that we opened in the last 24 or 36 months.
So the newer stores that we would open recently would pan out to grow at, say, 18%, 20%, 30%, depending on the leasing of the store. But the mature stores, especially in the classes where we cannibalized by opening a store nearby, those who would look at a growth rate of [indiscernible] not more than that. I think unless there is a new technology change or new addition on the floor for new technology products. But these stores are all mature at INR 70 crores, INR 80 crores on an average. So that way, the EBITDA margin for these particular stores would look at, say, 9%, 10% kind of a number and properties that we own, where there is no cost of rental for the mature store, then you need to look at [indiscernible] higher than the rented out score.
That is how the depreciation would be. The new stores will start panning out in the Southern cluster we start handing out at 5%, 6% initially for the year 1 and then eventually stabilize at 6%, 7%, 8% going forward in terms of store-level EBITDA margins. And the growth rate year 1, year 2, year 3 would pan out to actually 50% depending on for the year 1, depending on what quarter or what [indiscernible] we open, you have to stabilize at say, 30%, 35% year 3 then would be at around 20%, 25%. And then from there on year 5 onwards, it would be a 7% to 10% kind of a number because the pockets are on [indiscernible] not see a big cluster of market and a big growth coming up there at the same time. So it all organic debt, whereas in terms of the mature stores are 177 stores, you could count around 18 stores being under 24 months and the rest of the stores, especially the NBO stores are all matured over 24 months.
Sir, is it [indiscernible] this typically 2 years for a total [indiscernible] after that, the growth expected in those stores would be 300%?
No, no, no. So it depends. So like, for example, if we cannibalize the store, for example, if I was told in Hyderabad, which is 10 years old, which does INR 100-odd crores and we cannibalize or because it can't take up more people than INR 100 crores in turnover for details later [indiscernible] issues or other things. So when we cannibalize or we feel that customers can't [indiscernible] kilometers or we need to open one more store in a similar [indiscernible] that will be cannibalized. Once we cannibalize that store, then the growth rate is single digit there. But in case there's a market where the growth is the stores be INR 70 crores, INR 80 crores and still growing at 10%, that is a different store.
So when we don't analyze it, they use a higher growth even for the mature store. But for the stores which are over INR 100 crores, and all we usually we've opened a few stores in the same because there is a lot of spillage or there is a lot of leakage during big days, we came somewhere Diwali. So that is how we would do. Those we look at a number of 1%, 2% kind of a thing, which are [indiscernible].
Understood. Sir, why I'm asking this is because what I'm seeing is in the value growth that in our stores has not been more than 2%, 3% because I'm trying to understand how the mature stores grow because volume growth I assume would be hardly anything in those [indiscernible]
if I give you an example for quarter 2, you've seen INR 100 crores growth on quarter versus quarter or that is quarter 2 last year versus quarter 2 this year, out of the INR 100 crores, the majority of the growth has come in see the mature stores, which are over 3 or 5 years have contributed to a flattish number, say, [indiscernible] 1% kind of a growth rate. But whereas the stores which we opened last 24 months, that contributed to almost 80% of that growth where is the 8 stores that we opened up in that quarter has contributed to a total value of almost INR 15 crores [indiscernible] of the INR 100 crore.
Understood, sir. So in these metro stores, wage inflation would be 7%, 8%. So is it fair to say that these are EBITDA margin declining stores perennially or how do you think about that?
Yes. So in fact, our industry now, if you look at a lot of the [indiscernible] I think that deal with the brand at deal with, we don't see a pricing. In fact, [indiscernible] conditions are down by 2% or 3%. [indiscernible] have gone down, [indiscernible] have gone down [indiscernible] watching which the average pricing has gone down by 7%, 8% actually, not increase the other way around. Only apart from 1 or 2 brands iPhone have also got launched at a lower price than last year. So if you actually see the pricing for iPhone 16 [indiscernible] which got launched in last week of September, the pricing for the high-end models are down by [indiscernible] compared to last year.
So if you see in inflation, there is a deflation of pricing, especially for high-end premium products. They're like a 75-inch or 85-inch is at [indiscernible] this year.
Sir, I was asking about the employee cost increase, the wage inflation?
Employee cost. Yes. So if you see -- that's what we see this quarter as well, that was a major hit that we had to take in our expense, the rental later expense on manpower, housekeeping and security all put together, we would see a higher cost involved there. So that is always -- so you would always look at a 5% or 4% kind of an increase in that cost every year. So can't avoid that.
Understood. And sir, in your opening remarks, you mentioned that you've seen a noticeable shift towards that 5 brands. So what would be the contribution currently? I think it was 65% summer last year. So what is the contribution of [indiscernible] first half?
Yes. So it would be around a similar range, but acceptance of these brands is going up day by day. So even if you are Tier 3, 4 towns, [indiscernible] an Apple device or a Samsung television, the customers even in entry level, say, a direct replicator or a semiautomatic washing machine to [indiscernible]. So now people are preferring for bigger brands and better brands across categories.
Despite so many newer brands coming in, people are referring to that [indiscernible]
Yes.
We have next question from the line of Viraj Shah from [ Shah Investors. ]
I just had one question. Sir, within this segment, we have seen outperformance in Q2, any uptake in [indiscernible] capability because of rainy season?
So usually, you would expect that the monsoon will bring us higher season drier than washing machine, but this year, it was more or less flattish or a little negative, I would say, down by 1% even [indiscernible] both categories were negative this quarter. So that was a surprise for us, but then a lot of reasons for that. The whole industry was actually down by a higher number in that category but then especially in Hyderabad, where our base was quite high for washing machine as a category, where we saw almost a 1% dip from the numbers last year.
Next question is from the line of [indiscernible] Investment Managers.
Sir, if you can give us some flavor of the growth is slow growth in the quarter and a slightly better growth post the quarter in Diwali within mobile large appliances for the small appliances, which one was a slowing area in slow growth area in Q2 and which is a kind of an area of category which has picked up post Q2 where this Diwali season is looking fine for us?
Not only Q2 but last 6 to 8 months, the major -- the usual the growth that we've seen in the last 5 years already has come in from a [indiscernible] category being the highest growth category in [indiscernible] as to down mobile, which is growing at 20%, 25% the last 5 years. Now we see a 10%, 12%, 14% kind of growth on that has reduced a little bit. But apart from that, larger appliances have been a little flat. Television has seen decent growth [indiscernible] seen a decent growth, which [indiscernible] a decent growth. Other categories that seem like audio, specialized audio, all of those in [indiscernible] have seen a decent growth.
But overall, the mobile phone will ask 5 years is to go area after the 4G rollout that growth we've not seen in the last 6 months. So that is a little slower compared to what our estimations on mobile as a category would be.
That has kind of picked up post Q2, your saying there's some signs of growth coming?
Yes. So nothing [indiscernible] a mix of all product categories, and it has the majority of the new launches during this period as well. So usually, mobiles are driven with a lot of factors, especially new launches, new technology changes or some new features in the phone like AI is the new thing that everybody is talking about now. In AI starting at INR 20,000, INR 40,000 in basic phone also has become a good feature for it to sell better. So the adaptation of AI in the coming time or some better features coming in, we definitely have that improvement in purchase of new devices.
So mobile phone is a category over 2 major conditions. One is either a really good feature or a new technology change or the rate cycle has to get better, whereas up cycles, they might be a little delayed and especially with the premium phones and the better quality of one, you see the rate cycle being a little slower compared to [indiscernible] period of 14 months, yes. It will increase by a little more higher period this time.
Sure, sir. And sir, the second question is about NCR in a [indiscernible]. I understand there were relatively in your stores. And you would expect to pick up -- any new discernible trend change in say similar 2- to 3-year-old store in [indiscernible] region or it is NCR as a region as profitable as South region for us?
So right now, firstly, the most important task here was to understand the market and deliver a similar store throughput. So we are quite confident that first, we achieved a benchmark of INR 25 crores, INR 30 crores in year 1. In the NCR region, that is what we're looking at right now. And the productivity for the first set of Q4 that we opened up in the last 24 months, or last 18 months, which are mature now. Those are in line with what we would see in the Southern cluster but any as a whole, as a brand being very new there for us. We wanted to give it a little more time for it to start delivering us the numbers. It will be too high of expectations from our group to understand within the span of, say, 3 years or so, we start a number that we do in sum, whereas the brand is quite new to the customer preferences are a little different there.
All those things we're learning coin the first 12 months. we try to fix them and try to grow from them. We see a positive growth coming in there. So we will look at a very small pay and now that's going to 40% to 50% is still a smaller number for us. We would like to create a bigger rate in the going time in that region as well and start dominating that market or at least with a bigger market share than what it is currently at.
We have a question from [ Rajiv Bharati ] from [indiscernible]
Regarding this North cluster, so for the quarter, we'll be having EBITDA [indiscernible] loss, right?
Sorry [indiscernible]?
For the quarter, for Q2, at pre level in the north cluster, there should be a loss?
[indiscernible] level exactly right project. So there would be a decline in it because when we calculate the EBITDA post NDS, the interest, the depreciation of the rental would get post EBITDA. So there, you would see a little decline there compared to the previous quarter but like looking at this quarter because the productivity also was a little lower compared to the previous quarter of Q1 or Q4. then automatically, you look at a lower number there. So that is what we said is true. But then panning out for quarter 3 to quarter 4, we are in line with our expectation of being positive in that region as well.
So when I compare this against, let's say, your south cluster where you mentioned that the SSG is -- I mean, low single digits. There, we have still seen a new kind of held ground on the cost of detailing [indiscernible] and the margins are [indiscernible] so this is you think purely the rental line item, which is getting that above that, everything else is...
So Rajiv, what happens is that like, for example, there are almost 7, 8 properties, which are not operational in the regions for which we've already capitalized a lot of expenses, their interest has been booked because we bought these properties out, and they're quite expensive property. Calculate core to the cost is higher than the actual operational cost that we'll without operation that we are bearing that cost on the balance sheet with the existing operational stores. So the non-office stores are also very high numbers versus the operational so like in [indiscernible] region, when you open 130, 140 stores, even if 3, 4 stores are getting made, the cost doesn't impact our margin graphically, whereas in the not trustbase still for operational stores is very low versus what is getting under construction today are almost 40% of the same base. So then the costs also get negated towards the operation stores.
Sure. And this because your north -- the Southwest is largely started, the 70 basis point drop in gross margin, it can be purely because of the mix of this lost or let's say, in South also?
We was not attributed to north south or a particular category mix. So if you see, it was a onetime quarter where you would see that kind of a dip in whereas the product mix more or less was in line what we expected the mobile phone usually in this quarter go up a little bit. The productivity from other categories were also same. So we do not see major only large appliances like respirators and washing machine little degrowth there. But apart from that, not major concern, where we would try to tweak something or be worried about something. I think it was just a one-off quarter with the margin got declined. Actually, if you see the whole half year also, it is down by 0.3%, 0.4%. So not much of a concern area as well here.
So the only bit is as and when North clusters proportion increases, the gross margin would not [indiscernible]
[indiscernible] contribution from North so INR 180 crores. So there are actually [indiscernible] contribution in a market.
We have next question from the line of [ Omkar Tipnis ] from Trade Brain Private Limited.
Previously not decided because of [indiscernible] my question was on [indiscernible] profitable now.
So mate, so I didn't know [indiscernible] that. So can if you look at how the only store that you opened in the last 6 months or so, only stores will be starting of doing operational breakeven, whereas your cost for rentals and all would get covered at 4%, 5% EBITDA margin kind of [indiscernible] but overall, if you see, there are no stores in it. Only one store that we expected it to get into rate in the next 12 months or so, which was in a mall because of the rental escalation going up drastically. We had [indiscernible], apart from that. No other store of ours is into red where we can get burning money to run that store. So we [indiscernible] in that manner. So all of us [indiscernible] much lower in terms of profitability today because a lot of other expenses are getting added to that cluster where the base it can be so low.
Apart from that, no other stores, no other cluster is in red, all I would say that no other cluster as many of our concern, we have to start shutting tower looking into the profitability of those stores. The margin would like to make sure to 8%, 9%, 10% kind of an EBITDA, for example. The newer stores will start giving you 2%, 3%, 4%. So a blended would be at 8.5%, 8.1%, 8.2%.
Okay. Okay. Sir, as [indiscernible] so are you planning for any [indiscernible] those stores?
Sorry, can you repeat your question?
As you've guided for 20 to 30 stores for FY '25 before going ahead. So are we planning for any IP for that?
No, no, no, no. Nothing that domain. So right now, with our internal cash flows and the lines of debt available with us, we're quite comfortable for the expansion. There is on the INR 20-odd crores less for our CapEx money also that we had rate during our IPO back in '22. So that was around INR 20 crores is less with us for a further expansion of CapEx. So money is there. So no variance on that.
Okay. My last question is on the Slide 6, I saw that there is 0 [indiscernible] online. For the past 2 years, we are not making sales on online. Our competitors are going on an aggressive that smaller market what is our plan for that, sir?
So mate, historically also we never were a direct seller for our consumers online as well. We never sell from our own portal. What you see online is on the marketplace of Amazon, Flipkart. So usually only when a brand that we sell like a Samsung or a Sony or Apple, whoever it is, only the authorized to sell something online, we sell online. So not that we sell online throughout the year or we sell lot of products. So there are hardly any listings of online category, and that is only after the approvals of the bigger brands. So we do intend to go online and sell online until they ask us to do that.
Okay. What is about [indiscernible]
Sorry, can you repeat your question?
How [indiscernible] be audience?
Yes. So we are to definitely or -- so I see our core is almost 50% are in Tier 2, 3 and 4 towns as well. [indiscernible] are growing right now, we would see good growth coming in from those clusters, but probably deposit a little more smaller store size a little more aggressive differential marketing there because on that print and radio would work in every cluster there as well. So all of those things are taken care of, and we see good demand coming in from those areas as well.
Okay. But as you mentioned in the case of exclusive brand [indiscernible], are you going for any ownership and operation model?
No, sir. So exclude brand office will be only for brands like Samsung and Apple. So only after they would suggest us to open in any of the regions, we would do that, but that is not a growth strategy for us going forward as well. Probably you might see 1 or 2 stores opening up under the EBO format. Apart from that, we don't intend to open for that at all.
As there are no further questions, I would like to hand the conference over to management for closing comments.
I would like to thank all of you joining the call. I hope that we were able to answer all your questions. And for any other queries, you may get in touch with us or Mr. [indiscernible]. We will be happy to address all your queries. Thank you once again.
On behalf of Electronics Mart India Limited, that concludes this conference call. Thank you for joining us. You may now disconnect your lines.