Electronics Mart India Ltd
NSE:EMIL
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Ladies and gentlemen, good day, and welcome to Electronics Mart India Limited Q4 and FY '24 Earnings Conference Call.
This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on date of this call. These statements are not a guarantee of future performance and involve risks and uncertainties that are difficult to predict. [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 presentation for the quarter and year-end FY '24 on the stock exchange and company's website. I hope everyone had a chance to go through the same.
In FY '24, the segment has observed the robust surge in consumer demand for premium appliances. This includes large key televisions, smart inverter ACs, spacious refrigerators and top-loading washing machines, among others. Concurrently, appliances presenting a compelling value proposition, combining connectivity, convenience, comfort and energy efficiency has sustained positive growth.
Anticipating the robust performance, the consumer durable and electronic industries [indiscernible] for a double-digit revenue surge in FY '25. This optimistic outlook pans across diverse markets, emphasizing the significance of premium, value-added and feature-rich products driving the industry's growth trajectory.
To share an update on the store openings front in Q4 FY '24, we opened 12 MBOs. Out of these 4 MBOs opened in Andhra Pradesh, 3 opened in Telangana and 5 in Delhi NCR region. In FY '24, we opened 33 new stores. Our store count at the end of March '24 stands at 160 stores, 147 of which are MBOs and 13 are EBOs. Out of 160 stores, 137 stores are leased, 11 are owned and 12 are partly owned and party leased premises. As on date, we are present in 62 cities across 4 states.
To give you a comparison, region-wide stores opening out of 32 new MBO stores opened in FY '24, 13 stores opened in Andhra Pradesh, Telangana, which also added 30 new stores, 6 stores opened in Delhi-NCR region and 1 new store of EBO opened in Delhi NCR region during FY '24. Given the healthy cash flows from operations in FY '24, we are optimistic on the future cash flows from operations being effective working capital management, and hence, almost all feature store additions will be well funded through internal accruals and remaining IPO proceeds.
Coming to Q4, we have delivered robust growth of 15% revenue year-on-year at INR 1,524 crores, and 15% year-on-year increase for FY '24 at INR 6,285 crores. Our EBITDA for Q4 '24 stood at INR 108 crores. And for FY '24, it stood at INR 449 crores. EBITDA margin stood at 7.1% for Q4 FY '24 and 7.2% for the whole financial year of FY '24.
Our [ ST ] for quarter stood at 7.3% for FY '24 and stood at 8.4% for the whole year. On account of investment made to open our new stores in geographies that is NCR, the company has increased investment in brand building, sales and marketing for which is expected that the EBITDA margin will improve as revenue throughput from the new geography stores will increase eventually. Also to highlight like-to-like sales growth in FY '24 region-wise, starting with Hyderabad City, which grew approximately at 9% for 68 stores. Telangana, excluding the Hyderabad stores, 17 stores stood at 11%. Andhra Pradesh grew by 22% for the 28 stores and Delhi grew by 95% for the stores.
Our store productivity per store on per square feet is visibly comparatively a little lower due to the 6 MBO new stores that we opened in the month of March in Q4, aggregating to an approximate of 38,000 square foot. So competitive numbers look flat or reducing. So practically, it is not the case.
Also to highlight on the operations of 2 stores in 24 the stores in Telangana and Delhi region were ready for operations, but due to some hindrance, we do not commence the stores during that period. We are concentrating on strengthening our position in the areas where we currently operate before exploring new markets. This strategy has allowed us to establish a brand in markets of Telangana and Andhra Pradesh. This not only helps customers in both regions connect with our brand but also familiarize them with our range of products. It enhances our understanding of the market and preferences of our customers. We are confident that this approach will contribute to achieving this significant market share and establish dominance in our current markets. Our future plans involve future expansion in our store network in Andhra Pradesh and Telangana. Additionally, we aim to gradually extend the presence to the NCR region and deepening our roots there. Following a focused expansion strategy based on defined clusters, our proficiency in local market dynamics, efficient supply chain management and strategy inventory control has contributed significantly to achieve high-end cost competitiveness and consistent profitability.
The customization of our product assortment and maintenance of a comprehensive portfolio play a pivotal role in securing an enhanced visibility, brand recognition, deeper market penetration and an expanding customer base. We provide a complete and unique shopping experience to our customers by showcasing a wide range of electronic product under 1 roof in our MBO model and providing a specialized brand experience with our EBO model. We work with limited brands, but in huge volume as compared to other players who have more brands on board. This gives EMI a competitive edge and better bargaining power with top brands versus the top tiers. With this, I request Mr. Premchand Devarakonda, our CFO, to update you on the financial performance. Thank you all.
Thank you, Karan sir. Good evening, and warm welcome to all the participants. Now I would like to present the financial overview of the company for the fourth quarter and the financial year 2024. Our revenue from operations for Q4 FY '24 stood at INR 1,524 crores as against INR 1,327 crores, a growth of 15% year-on-year. And for FY '24, our revenue stood at INR 6,285 crores as against INR 5,446 crores with a growth of 15% year-on-year. EBITDA for Q4 FY '24 stood at INR 108 crores, as against INR 91 crores, has a growth of 18% year-on-year. And for FY '24, EBITDA stood at INR 449 crores as against INR 336 crores, recorded a growth of 34% year-on-year.
EBITDA margins for Q4 FY '24 stood at 7.1% and for FY '24, stood at 7.2%. PAT for Q4 FY '24 stood at INR 41 crores as against INR 36 crores, a growth of 12% year-on-year. And for FY '24, PAT stood at INR 184 crores as against INR 123 crores, showing a growth of 50% year-on-year. ROCE, ROE on an annualized basis for FY '24, stood at 17% and 13.4%, respectively. The working capital days as on 31st March '24 stood at 74 days which was mainly due to stocking of inventory to meet the demand during the upcoming and ongoing summer season.
Both the gross debt to equity and net debt to equity stood at 0.5x and the net debt-to-EBITDA stood at 1.4x. Our cash flows from operations stands at healthy INR 160 crores for FY '24. As a result, the cost of borrowings got reduced by 7% year-on-year in FY '24 in spite of 26% increase in the investments in inventory and receivables. For FY '24, same-store growth rate stood at 8.4%. For FY '24, around 45% of our revenue came from large appliances, 42% from mobile and 13% from small appliances, IT and others. About 98% of our revenues comes from the retail segment and the top 5 brands contributed around 60% to our revenues.
With this brief presentation, I open the floor for Q&A. Thank you everyone.
[Operator Instructions] The first question is from the line of Devanshu Bansal from Emkay Global.
Congratulations on our strong margin performance in FY '24. This time around, OEMs have reported very strong numbers for AC sales. However, the same is not reflecting into our top line growth for this quarter. So Karen, what is the reason for this? If you can elaborate on this, please?
See usually with seasonality products now. Firstly, what we look at or what I would suggest personally to look at not one month or a quarter end period, I would just to look at on an annual basis or a half yearly basis, say usually internally look at it from Jan to June. And then it depends on when the peak keep summer starts up in the region that we were operating, so I would say that March last week picked up really well for Hyderabad, April 1, we really with for Telangana country market. Second week was really peak for Andhra country market. So we will look at a blended growth number, and we're really happy with what numbers we've delivered.
So probably, you would see that reflection on the growth of that particular category when we would talk about Q1 FY '25 numbers in the coming times. But then we're quite happy with what we performed. So last year, if you look at our March numbers, the base itself in March and April was very high again. And then last year, the festival period of Ugadi was in March compared to that happening in April this year. So periodically, we would look at the peak coming in different periods. So these are all localized festivals, localized periods, all these matter a lot. [Foreign Language] in line with what you would hear from the market coming through.
Got it. So you're saying Jan to June should more or less reflect with what OEMs.
[Foreign Language] because for them, the primary happens when they build it to us, right? And for us, stock up, we stock up as early as Jan-March. So for them there, that quarter number looks higher compared to what we start selling only March, April, May.
Got it. And Karen, 1 more follow-up on this. So whatever OEMs are reporting, so that should be reflected in only part of our business, which is AC, Ref, cetera. or that kind of a growth can be sort of reflected in overall business as well.
[Foreign Language] schooling products go up. So not like a Diwali quarter where all product categories go up equally well. So this will only be focused on the cooling product category, air cooler, air conditioners, refrigeration products. you would only see a spike majorly spike or the major growth coming in these categories first compared to follow by mobile IT as the category, then audio, the home appliances. Washing machine, like, for example, would be a little much lower compared to other quarters in this quarter because the cooling product demand goes up. So it is not necessarily that all product categories would give you a similar demand trend.
Got it. And cooling in Jan to June is what percentage of your business Karan.
Overall blended to [indiscernible] 15%.
For first half of the year as well, Jan.
For the annual, I'm talking about.
Okay. Got it. Got it. And you indicated that the premiumization trend is going on well, but our ticket size growth was 2% for full year. Just wanted to check in is this a reasonable level to bake in? Or this was an aberration and trend should improve from here on?
So it only depends now you say television [Foreign Language], but not necessarily that it would reflect in the ASPs going up as well, practically.
Got it. Got it. And last question from me Karan. This working capital has increased by about 20-crore in FY '24. And we have opened about 33 stores. So this implies about INR 7 crore per store. So is this the optimal level of inventory that we stock in a new store? Or there was some comment around stocking up, et cetera, as well? So your thoughts on that, please?
So the 2 periods that you actually have to look at in our business or especially with us, is that summer quarter before that we start picking up inventories. So 31st March [Foreign Language], our inventory levels are around INR 900 crores plus. That is majorly because [Foreign Language] number one. Number two, the second period that you will look at is during Dasara Diwali. So that is a period when we again start picking up a lot of inventory across categories. So these are 2 periods where you will see a higher inventory count. And the [Foreign Language] quarter usually ends up by 31st of December. So you would see a lower inventory number there. But the peak of the seasons would come in October, November and summer period, that is March, April, so these 2 quarters, you would see a higher inventory levels on the books. And so is the working capital requirement higher as well.
Typically for a new store, what is the inventory that you sort of.
Around -- So the display are the 2 things there. Again, if it is the only display purchase would be around INR 2.5 crores. And usually, the over-the-counter product like mobile phones, kitchen appliances, accessories, laptops, we have the backup in the store. So that would be another INR 50 crores, INR 70 crores of stock, INR 50 lakh to INR 70; lakh of stocks. So that would be around INR 3 crores of stocks in the store of a new opening.
[Operator Instructions] The next question is from the line of Pasi from IIFL.
Sir, looking at your North cluster sales last year, Q4, was INR 53 crores. Now it is INR 69 crores, which is about a 30% of growth. I think, correct me if I'm wrong, the number of stores itself Y-o-Y would have gone up by more than 30%. So why is it that we are not seeing a ramp-up in the sales per store?
So very rightly said that you would look at a INR 52 crores to INR 69 crores jump in Q4, that would add up to around 30% approximately in growth, but the new stores that we added up in Q4 versus Q4 our net financial period was in the 30th of March of '24, so we launched 6 new stores during that period itself on the last 2 days of the quarter end. So it is not that -- so the sale that you actually see or the growth that you actually see is from the like-to-like stores only, whereas the new stores were all open on the 30th of March itself. 2 days prior to the year-end.
So sir, what would be the -- if I take a quarter average -- weighted average for the number of days, how many stores were opened in Q4 FY '24 in North cluster?
6 stores.
No, no, no. I'm saying total number of stores which are open in Q4 waited for the number of days they were opened, there would be about 14, 15 stores, right?
Yes. So we were operating 14 stores totally in that region before and we've added up 6 more stores during that period with plus 1 MBO as well, 1 EBO as well. So out of which the opening of the stores were only there for 2 days for that quarter in Q4 for 6 stores.
And similarly, sir, can you tell me the average number of stores which were operational in North cluster in Q4 last year?
14 stores.
Sorry?
14, 1-4, stores.
No, no. In Q4 last year, how many stores did we have in North Cluster?
In Q4, in Q4 last year, only 14 were operational versus this year, in Q4, it was 21 stores.
Okay. So basically, there has been no store there's no addition [indiscernible]
[Foreign Language].
Understood. Understood. So the SSG growth in the North region is like 25%, 30%?
[Foreign Language].
Understood. Understood. So how does this work out in terms of store economics, so supposing if we have to get to, let's say, pre-Ind AS EBITDA margin of, let's say, 5% to 6% in North cluster, what kind of sales per store do we need, given the economics there, given the rental would be maybe a little higher or whatever else, what kind of sales per store will give us a 5% to 6% pre-Ind AS EBITDA margin in North cluster?
So North cluster will give us that number up for the INR 35 crores average per store.
INR 35 crores.
Yes, net of GST.
Understood. Because you see the reason why I'm a little confused on this is that if we look year ago where North was not there at all, we were making maybe around 5.5% pre-Ind-AS margin on the entire company. And at that time, our sales per store was about INR 45 crores.
Correct.
So why is it that we will make the same margin in North India at 35% instead of 45%, I thought it would be more than 45%, given that the rental, et cetera, would be a little higher.
Yes. So see, the Delhi -- so the numbers that you've been discussing right now, that pertains to most of the stores that we bought out there, especially the higher rental stores. So we've invested a lot in buying our property. So the actual rent would not be there in terms of the calculation.
Okay okay, sir rental [indiscernible] and that is why.
Exactly, exactly.
Understood. Understood. Secondly, can you give us some idea on what kind of SSSG you are targeting for FY '25 at an overall company level?
So without -- so including the new stores, [Foreign Language] we look at stores, which we opened, which are operational the whole financial year, -- so for those stores, we will look at a comparable number of 9% to 10%. And including the newer store opening, we would look at because depending on which quarter, we open the store. So we would look at a blended growth of around 15% plus comfortably.
Understood. And last question, in FY '25 on a full year basis versus full year FY '24, do you see any levers for margin expansion, EBITDA margin expansion? Or would it be roughly at the same level as FY '24?
Sir, if you see there's already an improvement that has come in place. So you would see a similar line of EBITDA margins coming up because in our industry, it has become very difficult to actually extract higher margins because the cost of rental, manpower, advertising, so a lot of things involved, especially now with dislike payment credit card penetration going up, NBFC cost going up. So these are all costs that we actually can't control because it is linked to the mode of payments and all. So I think we would look at a similar number also going forward.
All right. And final question, if I look at mobile category, we all know it is a low margin category, but it is also a high throughput category. So at gross profit per square feet, the absolute rupees gross profit per square feet, is it inferior to other products or it would be in line with other products?
So if you look at the absolute number in terms of percentage, it definitely would be lower than the larger [indiscernible] in the category. But then if you look at the churn, so what we look at mobile as a category, we would rather look at the number of rotations of the churn that you would do for that category. So in that sense, it would [indiscernible] to a similar percentage.
[Operator Instructions] The next question is from the line of Manoj Gori from Equirus Securities.
Sir 1 question.
Sorry to interrupt you sir.. May I request you to please use your handset.
Is it better now?
Much better, sir, please continue.
I have 1 question. If I look at the overall breakup of probably if I derive the revenues for smaller appliances, mobile phones and large appliances. There has been -- there seems to be some impact on the small domestic appliances during the fourth quarter. And that by some margin to probably as for my calculation, it should be more than 30% decline. Is that understanding correct? If yes, probably, how do you look at the world of domestic appliances going forward? Any outlook on this?
Okay. So actually, if you look at the kitchen appliances and other categories that we've demonstrated, when we say, other categories, the majorly pertains to LCDs and other product categories, which -- we were in the midst of revamping in the store level, and we wanted to introduce newer brands and streamline that was is because that product category is king, cases, headphones. There are a lot of change of models or attrition there in terms of loss of unsold products. So we had to take a strong step where we had to revamp the whole category again and start up from scratch, create a model where we've tied up with brands where they take the stocks back after every quarter, whatever talks are left with us. So that don't have loss of inventory at the end of the year or that stock with us. So that is why we had stopped the sales for that particular category in a way. And now we see that growth coming back again on track for those categories as well.
And to an extent, like Ultra, grinders or mixes or rice cookers, in the kitchen appliance category, there we see a steep degrowth is because of the utilization of the product because now everything is like ready to make, easy to make. So people are now actually picking up ready to make rather than cooking or making that do at home. So that category is where we see a major degrowth whereas categories like fans, water heaters, water purifiers, vacuum cleaners, we see decent growth coming in.
So probably, the growth rate might differ for -- at least for in the near term for this category.
Absolutely, absolutely, you're absolutely right.
It should be back on track somewhere around on the expected line somewhere around from second half of '25.
Hopefully, because we've added new categories as well. So like right now, we're focusing on building category as well. So opines along with microwaves, built-in appliances, built-in ovens, so that is the category that we've been expanding because the ASPs are quite higher there compared to the traditional microwaves who have been hub and chimneys. So in the coming times, we are experimenting with a few of the stores like 78 stores right now in this quarter. So probably in the coming quarters, if you see good results come coming in, that will add up to a higher value coming forward.
Right. Sir, my second question would be on the North market. So probably, this is the first full summer probably undisrupted summer that we are witnessing in the North market. How was the overall experience been into these markets probably, if you can throw some light on the learnings and how do we see this market moving ramping up for us in the years time frame?
So if you can share your thoughts on that would be helpful.
Right. So definitely, no complaints on North as a market in terms of the heatwave going on there, definitely supporting us with a sellout. Productivity per store is what we look at, that is also on track. But then when we look at the market side, that was the reason that we entered that market, right? So when we look at the market size, we would rather now start looking in the future at how do we capitalize on that growth story there, how do we grow more, how do we deepen our store, increase our productivity per store like the way we do back home in Hyderabad and Telangana so that is a future goal for us now. We would not -- I mean, the numbers are good, but then there is nothing that in terms of to be happy what numbers we're delivering, there is a long story for us to grow there. It will take a lot more time for us to establish ourselves there. But we are quite happy with what is happening in the market today.
Right, sir. Sir, lastly, you targeted to achieve that breakeven by fourth quarter of FY '24, and you are almost done that. Where do you see yourselves by end of FY '25 in terms of margin trajectory into North market?
So in terms of growth rate, it will be in line with what you've seen. So we'll see that kind of number coming in especially now. So right now, we are in a good summer there. I don't know how long the summer is going to last probably might last for a couple of weeks, probably a month. So we are ready with the stock, we're ready with the stores. So it all depends on seasonality product doing quite well there, number one.
Number two, in everything, if you look at the average during the other months and during the upcoming Diwali season this year, I think if things are on track, we should be doing decently good growth there in that region.
And so on the margin trend should be.
Margins will all remain the same more or less because they'll be adding up of new stores as year as well to expansion in Delhi going to -- or that region is going to be heavier than other regions, so our focus is going to be on that region right now. So definitely, you would see a similar margin throughput only until unless, the stores get matured in the next couple of years, they start delivering a higher throughput. That is when we would see all the costs coming under control because right now we're spending a lot more on marketing. So once those things come under control or in line with what we do back home, then you would see a higher EBITDA margin coming through from those stores.
[Operator Instructions] The next question is from the line of Ankit Kedia from PhillipCapital.
2 questions from my side. If you see one of your competitors, [ Croma ], over the last 1 year, has expanded that right format aggressively, which is the [indiscernible], we sell up for iPhones. And we have other players also expanding that. Are you seeing a lot of your premium customers move out of your store and buy from those type of reseller stores or iPhone in the market. Two, is that business model very different and in your core Hyderabad market, you could contemplate such a store format yourself and retain those customers and expand in that iPhone category.
Good evening, Ankit, we also do have some disclosure scores for Apple, especially in our Tier 2, 3 towns and if given the right opportunity, right chance, we would like to expand that exclusive brand outlet format as well. But running -- always running an exclusive brand from a store is limited to a particular product range or a brand, right? And the limitation in terms of how much you can deliver out of a store, so there is an advantage that your brand exclusive is a disadvantage that the store sizes are smaller, the throughputs are lesser, you're limited to a certain category of products, whereas the multiband give you a leeway of selling multiple range of products and a higher range of product with the larger store format.
So exploring an opportunity is always open with us. We already have that format with us, and that's doing quite well for us. So given so that is all decided by the brand, especially with Apple. So they tell us where to open or they tell us which market to look at next. And then definitely, initially for those stores, the cost is a little higher because the investment goes from the retailer first and then Apple as a contract of reimbursing it over a few quarters. So the business for Apple, anyways with us in our multi-brand store is also increasing. At the same time, what we've proposed is to renovate few of the zones of Apple in our existing stores and make the display area larger so that customers can experience a wider product range from Apple and add more leads with the similar concept of what an exclusive Apple store would have. So that, again, is a pipeline and so given an opportunity with any brand or any product category, we would like to expand with them in either other formats, either give them a higher space area as per the throughput in our multi-brand stores that come out with an exclusive brand outlet opportunity, but then exclusive brand opportunity would be more through the manufacturer or the OEM to decide and then move forward rather than the retailer himself.
So what will -- when you say are [indiscernible] we have already done that. So these are like the EBOs, what we have in these MBOs and with a larger share given to Apple for you in those markets. Talking from a Telangana perspective to maintain your market share, right in that state, would that be from important for you to not let other players get that real estate also in a mall or next [indiscernible], selling the same products and accessories [indiscernible].
Very, very truly said. So a few of the key areas or markets where we already have our MBO stores where we feel that productivity of this particular category is going up if Apple or any of the brand feels that there's a requirement of an exclusive brand outlet, then obviously, you will be the preferred partner or if we get an opportunity, we don't leave it. So we have stores beside our multi-brand stores also our stores on a stand-alone area where we don't have a multi-brand store, but an exclusive store for [indiscernible] of the brand. So it works both ways. And as we correctly said, the emphasis is not to open an exclusive brand after to retailer share. But at the same time, we have an opportunity to grow in our multi-brand outlets as well, especially for mobile phone because it is a very dynamic category and a very big category.
So I would compare it to like an ocean compared to other categories, which would be much smaller in size. So there the demand and supply makes a lot of difference. So we've got to keep a lot of other things under check for selling mobile phones than just having the pricing there.
Sure. My second question is on your FY '25 store opening. Do you see in Telangana and Andhra marked there enough spaces in Tier 2, Tier 3 cities for you to continue to expand? And do you think there is a smaller store format between 2 cities can also be worked out like a hub-and-spoke model where you can open up 4,000, 5,000 square feet. So if a customer wants to give a 2-day delivery kind of a thing while you cherish giving a same-day delivery for ACs and others, but predominantly in a smaller city, while you can have a store, but a smaller store with a 2-day fulfillment [indiscernible].
Absolutely right again. So given an opportunity there if the market has demand are less a smaller-sized stores, we will do that. Obviously, we would not open a really big store, but if you look at our Tier 3, 4 town stores that we opened lately or we're opening right now and expanding because the market is still untouched a few of the areas in Andhra and Telangana both. So there we limit ourselves to something between 6,000, 7,000 also, so not necessarily, but 4,000 are a little smaller, would be a little smaller for us, but 6,000, 7,000 is what we would look at rather than doing a 10,000, 15,000 square feet store.
So let me put it the other way. If I look at 3 years out, right, where you are opening around high-teen stores in these 2 states. Do you think that growth can continue for 3 years for you to open these stores and we can pilot with that 6, 7 [indiscernible] format see the experience today and then probably expand 2 years out?
See, that can be done. So suppose we see, again, we do want to lock ourselves into a certain format of stores. If given an opportunity, market grows that store particularly delivers a higher number, probably we might do a second store in the same city. Like, for example, after 5 years of operation in Guntur in Andhra Pradesh we opened 2 more stores at the same time in that city. So we have 3 stores. But our competition at 8 stores in that region, the same city periphery. So when I look at my overall number, especially coming in from Andhra, today my Andhra store delivered approximately INR 800 crores plus of business, right? But if I look at my direct competitor there, which is SonoVision, Visit Digital, these are all guys which are upward of INR 700 crores, INR 800 crores, INR 1,000 crore, INR 1,500 crore business. So we see a great opportunity. Our store count is less than half in terms of bigger partners like Reliance also. SonoVision at 60-plus stores. We are still operating in 38, 39 stores in that region. So we still see that there is a huge opportunity for us to go, especially with the underpenetrated mobile phone as a category there.
So today, if we look at our product mix in that region, especially on mobile phones, it is still a little underpenetrated compared to our other city stores. So we feel that there's a huge opportunity for mobile as a category to grow in our store for larger appliances to grow in our store, for air conditioners to grow in our store, especially with the new store openings that we're doing there right now.
Sure. And my last question is on the warehousing in Delhi. When you started, Delhi, the idea was initially, you need to keep a lot of inventory in Delhi because we have, there's a number of stores and as a number of stores, we will get the leverage out. So today, where you have mid-teen stores in Delhi NCR region, how does that throughput play out? And are you happy with that warehouse capacity? And has the inventory remained the same or is the store level inventory happening in the deli market? And is that playing out according to the plan?
Yes, that is on track. So whenever required, so we already have like 14 stores in pipeline today in Delhi NCR region for the next 12 months, right? So we Opened 6 on the 30th of March in Q4 FY '24. And then we have got under 14 in the pipeline will open in the next 8 to 12 months, right? So when we know that something is opening up and something is going to come up in the next couple of months, we would rather look at our warehousing to be ready to take up those stores as well in the future. So that's how we plan and we got 3 way [indiscernible] now. So now once we expand further downward in Haryana or towards Gurgaon, will probably come up with one more warehouse in that region because right now, we would be doing Delhi City, UP and then Haryana and then penetrate further down in these regions.
So then we would eventually need more warehouses in that region. So as per time, we would definitely expand and grow. Right now, it is in sync with what we would need and this being summer season anyway is stocked up more and we filled up stocks in the warehousing required for the summer period.
[Operator Instructions] The next question is from the line of Miyush Gandhi from Cognizant Capital.
Am I audible?
Yes.
I just wanted to know what are our plans in terms of new store openings for the year? You mentioned 14 in NCR, how are we planning overall?
So we would be doing around 30-plus stores in this financial year, out of which we've already opened 6 in the first quarter itself and then another 5 are getting ready, which are due opening in the next 30 to 40 days. So probably this quarter, the first quarter itself, you will see an opening of first 10 stores out of the 30 store count that we planned for this financial year.
Okay. Okay. Fair enough. And I just wanted to maybe get a sense from you as the density of our own stores in South region increases, are you seeing any signs of cannibalization -- cannibalizing.
Definitely. In fact, we try to cannibalize our own stores because what happens, especially for the peak days or the bigger days, because our competition works in clusters. So usually, you don't want to lose a lot of sales from your top performing stores or growing stores, right? So you then try to cannibalize your own stores a little bit because when you tap into a new geography, new market in that same periphery and try to create a new customers along with cannibalizing your own customer base from your existing stores nearby.
Yes, I understand that overall throughput increases, but what it also causes is that per store sales goes down and also the return on capital employed also starts reducing. So any sense on how you -- how do you.
So this is a calculation on how and when we do it. It is not necessarily that we start doing is try to cannibalize the stores, which is a INR 30, 40 crores on an average. So whenever we try to do it even for all the stores which are INR 100 crores plus for us, for example, that way.
Okay. Any sense on how the return profile for our tire to Tire store, like the experience of new stores that we've opened in the last 2, 3 years, how is it -- are they at par with the company average? Or are we diluting a little bit there? Any sense on those.
So definitely, yes, the throughput would be a little lower than your metro cities because of your premium product selling there or your high end not selling in the larger number there in terms of the volumes are there, but the value or ASPs would be a little lower comparatively right, number one. Number two, so in line with what growth we would growth look at for those as coming in year 1 year to year 3, whereas the base for that critics I open a store in Hyderabad, I would look at INR 30 crore, INR 35 crores in year 1, then eventually go to INR 45 crores, INR 50 crores a year 2 and then averaging around INR 60 crores in year 3 onwards, right, for our Hyderabad store. But if I look at a store in a Tier 2 or 3 years to, I would start looking at INR 25 crores, INR 30 crores in year, then INR 35 crores in year 2, then stabilize it by INR 40 crores in year 3 onwards. So that is the throughput that I would look at there because the incremental growth coming in would not be higher than 15%, 20% for the first few years. Then eventually stabilizing at around INR 35 crores, INR 40 crores on average once we start maturing from there on.
The next question is from the line of Gautam Goel from HCMR Private Limited.
So my question is basically, like, could you please explain us more on the store unit economics? So like what is the CapEx investment? Working capital, so already mentioned that you probably around INR 2.5 crores to INR 3 crores. But like what's the CapEx investment? And like what is the payback period and like a breakeven for us or in the store.
Sure. So we would -- so how to do the math is, we'll say, proximity for taking a [indiscernible] store. We will look at our CapEx investment around INR 2,500 square foot, so that would be on INR 2.5 crores for making up the store and then another INR 2.5 crores of inventory. And this inventory would be majorly for the displays of stock and then a little bit towards the backup stock for the over-the-counter product delivery from the same store. And then during seasons in different seasons, that is 2 big seasons in year, then we would look at this number going up a little higher for the backup inventory, especially for summer if it's cooling products and for all the product mix during the [indiscernible] Diwali period in October, November quarter. That is how we look at around INR 3 crores, INR 2.5 crores of inventory in INR 2.5 crore of CapEx, around INR 5 crores is what we look at. It has a store cost initially when you set up on new store of 10,000 square feet area.
All right. So what is the breakeven for that? Like any breakeven or payback period that.
Yes. So for existing market the brand well known or opening in AP, Telangana, Hyderabad. So what we would look at is the breakeven would be around 12 to 14 months because we are as much established here, there are no additional cost or stuff like that. Whereas if I look at our Delhi NCR market, which is quite new to us, which is 1.5 2 years approximately. So that region would give us that turnaround in 20 to 24 months.
20 to 24 months. All right. And certain questions like what would be our growth expansion for like the next years? Like, so are we exploring new spaces, new cities and all, new states? Or like we are contented by the fact we will just grow more in Hyderabad, Telangana, Andhra Pradesh and Delhi NCR region.
So right now, for example, we are quite new in Delhi NCR and then there a lot of huge periphery available in Delhi NCR, right? So we're talking about the whole of GT Canal Road, [indiscernible] and then eventually Punjab, we're talking about Western UP right now, where we already have stores in, say, Ghaziabad and Noida, then we expanded to Greater Noida in the coming times and from there up to now, the whole of UP is available for you.
When you're talking about AP, Telangana as a periphery, you're talking about borders of AP Telangana that are available, probably Orissa in the next coming years, that way, the geographies that we are present in, we would like to explore a few of these regions nearby, especially strengthening ourselves more up not because that is more of a bigger market size than what we would do down south here in the neighboring states like Orissa for us.
So like basically we are saturated in like states like Andhra Pradesh and Telangana, so we're not like majorly focusing on expanding there. We are focusing on the North market, right? Am I correct?
So right now, right now, it will be more off of 50-50 mix up north and down south because there are a lot of markets that we don't even have a store, so AP Telangana expansion will go on. And then with that, what happens is organically every year, whichever city you've already entered in the past, you would see a new market developing in the same city. So organically, also you need to expand in those territory because if you start losing out your competition or you don't get the benefit of inventories, marketing and all. So there's no point of the opening new territory when we not captured our own territory completely first.
Okay. Got it. And just last question from my side. So from the revenue point of view, what is the split between the financing and direct purchases in the urban metro cities and in the Tier 2, Tier 3 terms?
So the total blended would be around 65%, 35%. 65% being through credit card, [indiscernible] financing or other financing activities on the floor versus 35% through UPI, direct payments and cash payments. So that is the major split across metro as well as upcountry market. It will be a difference of 1% or 2% year on year.
Okay. And this is for Tier 2, like this number for financing, I guess, would increase a bit for the Tier 2 or Tier 3 stores?
No, yes, it's similar line only. So there, what happens is, in fact, South and West in India, anyway, Tier 2 towns also quite strong with NBFCs whereas you talk about the East or fewer pockets up north, then the transactions on NBFCs would be a little lower because the penetration there on debit card, credit card or other financing activities would be higher there.
The next question is from the line of [indiscernible], who is a retail investor.
So I noticed that the company's product mix is -- the revenue from mobile phones has increased from 37%, 38% to 43%. So could you give guidance on the future product mix?
The product mix for mobiles or these other categories will more or less remain in the same tune. So you will not see a drastic jump here, but then as I told you that earlier on the call also like a few of our markets like in Andhra also, if you look at the penetration there for mobile phone is still a little lower. I would look at that going up by 1 or 2 more percentage in the coming time, but it will not drastically change from year on going forward.
Okay, sir. And an extension to that question, could you guide us on the gross margin that you enjoy in each of the segments between mobile phones and large appliances and small appliances?
So [indiscernible], I will give you a broader number. So for blended number, it would be what you would see on the balance sheet around 15%. And the lowest, I would tell you would be around 7% to 8% for IT Mobile as a category. And the larger appliances will be upwards of, say, 17%, 18%. So that would be the average out for the blended would be around [ 15% ] for all product categories.
Ladies and gentlemen, we will take that as a last question. I would now like to hand the conference over to the management for closing comments.
I would like to thank all of you for joining into the call. I hope that we were able to answer all your questions. And for any further inquiries, you may get in touch with us or our IR partners [indiscernible] . We will be happy to address your queries. Thank you once again, everybody.
On behalf of Electronics Mart India Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.