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Go Fashion (India) Ltd
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Ladies and gentlemen, good day, and welcome to the Go Fashion (India) Limited Q2 and H1 FY '25 Earnings Conference Call. This conference may contain forward-looking statements about the company, which are based on beliefs, opinions and expectations of the company as on date of this call. These statements are not the guarantees 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. Gautam Saraogi, CEO of Go Fashion (India) Limited. Thank you, and over to you, sir.
Yes. Thank you. Good evening, and a warm welcome to everyone present on the call. I have along with me Mr. R. Mohan, our Chief Financial Officer; and SGA, our Investor Relation Advisers. I hope you have all received the investor deck by now. So those who have not, you can view them on the stock exchange and the company website.
I'm happy to share that we have successfully sustained our growth momentum despite the ongoing challenges in the apparel retail sector. In H1 FY '25, our revenue reached INR 429 crores, a growth of 13% on a Y-o-Y basis. Our EBITDA stood at INR 136 crores, a growth of 12%. Despite a softer demand environment, our EBITDA margins have roughly stayed in line and stood at 32%. This is due to the improved product mix and high focus on maintaining operational and cost efficiency.
Our full price sales accounted for 95%, with an average selling price of INR 759 for H1. Unfortunately, we made an error in the investor presentation, we have mentioned is actually the average selling price for quarter 2. For full H1, the average selling price is INR 759. In a challenging demand environment, this underscores strong customer loyalty and acceptance of our product and its pricing. Our brand's ability to not only rely on discounting sets us apart from our peers. Our unique product offering, combined with quality and competitive pricing positions us favorably in the industry. As demand begins to normalize, we expect the mass premium segment to lead in terms of growth.
From our internal strategy this quarter, we discovered an important insight, which indicated that sales were shifting from the smaller stores to the larger stores as the very small stores cannot accommodate a full collection. In response, we made a strategic decision to not renew the leases of the very small stores, due to which we have closed 13 stores. In these 13 stores, about 9 to 10 stores are pertaining to these very, very small stores, which are probably lower than 200 square feet.
Over the past next 2 quarters, we see ourselves closing 15 to 20 stores of this manner. We are confident that sales from the smaller stores will transition to a larger store in line with this approach. In H1 FY '25, we opened 54 new stores on a broad basis. And on a full year basis, on a full 6 month H1, we opened 41 stores at a net level. On a full year basis, we aim to open at 120 to 150 stores on a gross level and look to open about 100 stores at the net level. Our A&P spend as a percentage stood at 2%, which is in line with our previous commentary.
Coming to working capital and cash flow. We at Go Fashion strongly believe in sustainable growth backed by cash flows. Against the backdrop, we achieved a strong pre-IND AS operating cash flow of INR 55 crores in September 2024. This is due to strong focus on inventory and supply chain efficiency. Going forward, we aim to convert 50% of -- more than 50% of our EBITDA into pre-IND AS operating cash flow.
On the inventory front, we have maintained a focus on efficient inventory management, which has led to a further reduction in our warehouse inventory level. As a result, our inventory days have decreased from 104 days in March 2024 to 97 days in September 2024, marks showing a 17 days reduction. As we approach the festive season, we are witnessing encouraging improvements in footfall across our Go Colors store, fueled by growing, improving customer sentiment. We, with our wide selection of bottom wear, we are confident in our ability to capitalize the momentum and anticipate a strong recovery in SSSG and improvement in our P&L hygiene.
On way forward, our first step is to achieve low single-digit SSSG forward, which we are on track towards. Secondly, we would grow our footprint by increasing the number of stores in our portfolio. Lastly, we continue to focus on inventory optimization where it can be done to further improve our balance sheet. We expect our inventory to remain in the range of 90 to 95 days by March 2024.
To conclude, although retail demand in India is currently looking subdued, we expect it to pick up in the coming months. Several factors support in this outlook, including the festive season ahead, which typically boost consumer spending, a gradual recovery in economic conditions and a return to social events and bidding. Additionally, improving consumer sentiment and increased urban mobility and likely to drive footfalls in retail stores. These factors combined make us optimistic about a rebound in demand as we move forward.
With this, I would like to hand over the call to our CFO, Mr. R. Mohan for the update on Q2 and FY '25 results and financials. Thank you.
Thank you, Gautam, and good evening, everyone. Despite the challenging business environment, the company continues to witness a strong operating performance. First, I'll review financial highlights for Q2 FY '25. Our revenues for the quarter stood at INR 209 crores as against INR 189 crores in Q2 FY '24, the growth of 10% Y-o-Y. Gross profit stood at INR 132 crores, a growth of 15% Y-o-Y with a GP margin of 63.1% for the quarter.
Our EBITDA for the quarter stood at INR 64 crores as compared to INR 57 crores in Q2 FY '24, a growth of 12% Y-o-Y. Our EBITDA margin stood at 30.5%. Profit after tax for the quarter stood at INR 21 crores and witnessed a growth of 3% Y-o-Y. PAT margin stood at 9.9%.
Coming to the H1 FY '25 performance. Revenue stood at INR 429 crores in H1 FY '25 as against INR 379 crores in H1 FY '24, a growth of 13% Y-o-Y. Gross profit stood at INR 268 crores, a growth of 16% Y-o-Y with the GP margins of 62.4% for the half year. EBITDA for H1 FY '25 stood at INR 136 crores as compared to INR 121 crores in H1 FY '24, a growth of 12% Y-o-Y. Our EBITDA margin stood at 31.7%. PAT for H1 FY '25 stood at INR 49 crores as compared to INR 46 crores in H1 FY '24, a growth of 6% Y-o-Y. Our PAT margin stood at 11.5%. ROCE and ROE, excluding IND-AS impact as on FY '24 stood at 20.7% and 16%, respectively. Cash and cash equivalents stood at INR 238 crores as on 30 September 2024.
With this, we'll now open the floor for questions and answers.
[Operator Instructions] The first question is from the line of Rahul Agarwal from Ikigai Asset Management.
Firstly, just a clarification, you said 50% of EBITDA conversion into cash flow going forward, pre-IND AS, is that correct?
Yes, correct. Pre-IND-AS EBITDA into pre-IND-AS operating cash flow.
Okay. Perfect. And so EBITDA is after tax, right?
No, EBITDA is before tax, before depreciation, interest and tax.
No operating cash -- pre-IND AS operating cash flow after tax.
Yes, that's what. So.
OCF after tax. Yes, absolutely. Yes.
Okay. Secondly, I just wanted to get some sense around this entire consumer demand, right? I mean contradictory feedback across a lot of consumer products we are getting this quarter. Some -- maybe urban is going down, rural doing better, some pockets do better than the other around India. Just in your experience, how have you seen demand flowing through for your products across India regionally, pricing-wise, new products, where the demand is shifting really? Any color on demand and competition will be really helpful.
Thanks, Rahul. So the demand has been very slow, Rahul. I mean, honestly, we've not seen any real improvement. In fact, in July, August, we have seen decent improvement in demand. In fact, we were having a single-digit SSSG also by September 1 week. But unfortunately, September was a very weak month with slight early start as well. And the entire SSSG what we had in the first week of September just kind of became flat by September end. So the demand has been a little slow.
As far as regions are concerned, see, I mean, look, majority of our network are present in urban locations. So we have not seen a very big outlier urban versus rural. But if I take from a geography perspective, South has been a little slower than usual. Otherwise, West, North and East has been pretty much steady. South has been a little slow.
And what would you expect in your internal analysis going forward into next 4 months, because it's very critical for these festival days actually to turn out better. So any sense on that?
See, we are working towards the 15% to 20% growth. See, currently, last first quarter, we delivered a 16% growth. This time, we have delivered a 10% growth. So on an H1 basis, we have delivered about 13% growth. So moving forward, our company aspiration is going to be that we want to achieve growth between 15% to 20%.
Got it. Thirdly, I saw an announcement about Mr. Vijay Srinivas getting appointed our Head of MBO sales. Any thoughts around this as in -- is the company really planning something big here? Because I thought that was not focus area.
See, look, rightly where you said our focus area is EBO, LFS and online, more towards the online stream. But when we look around, a lot of brands have been doing really in MBO. See, many of the modern trade stores, the family stores across regions have graduated and they become a lot organized, where our presence is very weak. So we feel if we do selectively MBO well in these family stores, in these local family stores, right, I think there's a huge potential.
So I think that business over a period of time can become a small channel. Right now, it's -- right now, we are doing about INR 6 crores a year between next to nothing. So our idea would be to build it into a decent channel in the coming years. But doing it selectively, see, our idea is not to go [indiscernible] and go very big in MBO, because there are many risks in that business like discounting. So we want to do it in a very calculated manner, I would put it that way.
So let's say, INR 50 crore business in like 3 years out, is that what we're doing? Or we go to...
No very difficult to estimate right now, Rahul. I think, look, right now, we've just appointed a head. So probably over the next couple of quarters, we'll get a sense of a business plan what can come out from this business.
Got it. And just one, just a background of Mr. Srinivas. You mentioned the industry in the press release, but what was he doing previously?
He was into FMCG and he worked earlier in many FMCG companies and he has a very good experience in this MBO and distribution business. He has earlier worked in TTK and we has also worked in Café Coffee Day as well. So he's very familiar with FMCG and general trades.
Got it. And lastly, just on the stock lens, any update from the family side as what's really happening around that?
Right now, Rahul. There is no update. I mean honestly, we wanted to clear the pledge by December is what we had committed to everyone. But as of now, we don't have an update. We are working on it. The pledge is absolutely safe. There's no risk on the pledge. I would like to reconfirm that, the pledge is absolutely safe. But from a time line perspective, I'm unable to give a guidance right now, unfortunately.
Sure. So essentially, what we should expect is even then we have delayed or whatever happens like by March, we should at least expect the pledge to go down to 0, right then that much we can expect.
March -- see, I'm unable to commit March. See I'll tell you the reason why I don't want to tell March, because every time I've given a time line in the past, we've not met the time lines. So for me, giving a time line right now is very difficult. But I can rest assure you on one thing, it's on the top priority of the family to clear this at the earliest.
[Operator Instructions]. The next question is from the line of Prakash Kapadia from Spark PMS.
Yes. Couple of questions from my end. Gautam, we were very hopeful of that 4% to 5% SSSG and now if we look at some of the other consumer businesses commentary has not been positive. So are we still hopeful, confident of H2 being far, far better and the upcoming season would get us there? What has been the volume growth in Q2? And I think we have been alluding we'll open around 120, 125 EBOs. So how much have we opened in the first half and what would be the CapEx for that? And in case we see the muted demand continuing, would that continue? Or would you reduce the EPO expansion?
Thank you, Prakash. So I think, Prakash, we are very -- I also just mentioned earlier that we were very optimistic in the middle of Q2. But unfortunately, September was quite a low month. And the low single-digit SSSG, what we had of 2% to 3% in the beginning of September, just flattened out by the end of September. So it's unfortunate that September will be.
But look, we are very positive. I mean, look, what I've been hearing around is that many brands are saying that this sector is going to be a good sector. So I'm very optimistic, and we are going to be looking at targeting a growth of 15% to 20% on an overall basis. And I think hopefully, H2 should be better than H1. I don't see any reason why it shouldn't. And I think the mood among brands has been very positive. So I think we are working towards the growth of more than 15%.
As far as ASPs -- as far as SSSGs are concerned, so our -- for Q2, our SSSG was 0.54%. On a volume basis, it was minus 0.6% and for H1, our SSSG was 0.46%. And on a volume basis, it was minus 0.59%.
As far as store openings are concerned, on a net basis, we have opened about 41 stores in H1, and we are falling short of the guidance that we've given on a net basis. Actually, what has happened in Q2, we realized -- as our product collection has increased, our average store size is around between 300 and 500. In our network of stores, there are still some stores which are very small, some store might be 150 square feet, 190 square feet and those stores are not able to accommodate the range what a 300 square feet or 400 square feet store can take. And what we realize is that many of the customers when we did a small research among customers, many of the customers are finding it very difficult to shop, and they're organically migrating to a larger store in the same market.
And because some of these smaller store leases were coming to end, in Q2, we decided not to renew them, because we didn't want to get into a future commitment in these stores again. So we have shut about 10 stores in Q2 pertaining to size. So on a net basis, we've added 41. In H2, we are targeting to open about 60-odd stores on a net basis. And on a gross basis, we are going to try adding about 80 stores. So on a net basis, we will be at around 100 stores net for the full financial year against the original guidance of 120 to 150. So we have fallen short of that. But right now, we are quite confident that we'll get to over 100 stores on a net basis by March.
Okay. Okay. And then what would be the CapEx, if you could at least quantify?
See, it will be anywhere in the range of between INR 25 crores and INR 30 crores, but since we are generating healthy -- no, 22 -- yes, it will be around the range of INR 20 crores to INR 25 crores, since we are generating healthy operating cash flows in the line of more than INR 50 crores, I don't think...
I am sorry to interrupt, sir, but can you please rejoin the question queue for a follow-up question.
So since our operating cash flow is more than INR 50 crores, it is INR 55 crores for H1, I think CapEx will be well supported by the OCF what we generated.
The next question is from the line of Ankit Kedia from PhillipCapital.
First question is on the LFS category. We have seen a strong growth this quarter as well on a very, very strong base of Q1. But yes, the receivable days have also increased. And if I look at Reliance, which is 90% of your business, they are under pressure from their results. So what's happening on the LFS front? And how much of the inventory we have pushed for the festive? Because receivable days have increased.
So Ankit, I think receivable days are a little increased because we've added more number of stores in H1. And because we added a good number of new stores, the sales in those counters would not have really reflected, but we've placed the inventory, which is better in our books. So I think because of that slightly inventory days would be higher.
As far as festive is concerned, we have not done a lot of festive stocks dumping at the LFS end. I think the kind of base stocks what we maintain at an LFS level, I think it's been pretty decent, which should take care of festive. So we've not done any large number of dispatches as far as festive seasons are concerned for quarter 3.
As far as Reliance Retail and other LFS is concerned, I think if I average out of Q1 and Q2, I think the performance of Reliance Retail and overall LFS if I look at from an H1 perspective that is pretty decent. And we are expecting good decent performance in H2 as well.
Sure. My second question is on your store closure. While this year, you'll be closing around 35, 40 stores of the smaller size, can we expect next year also some store closures to come in the same proportion? Or...
Well, maybe another 10, 15, maybe another 10 stores next year, but I don't -- see, I'll tell you what has happened. We've covered the majority of the stores this year, a very small stores. It will -- even if it happens next year, it will be low single digit, maybe 4, 5 stores. But it's not going to be as big as this number.
So can we expect 130, 140 store addition next year on a gross basis?
Yes. Absolutely. Yes, absolutely. I know, in fact, I think on next year, I don't see too much of net -- we don't see too much of store closures. So on a net basis, we see ourselves guiding at 120 plus stores next year for sure.
Sure. My last question is on the A&P spend. While the first half, we have done 2% spend and you alluded that the second half could be better off as the demand comes in and you're hopeful that the demand will come in. So can we expect the higher A&P spend in the second half?
Not really, Ankit. Because, see, usually A&P spends are accelerated just before festive. We have kept our A&P spends in check, because the overall environment is very weak. See in a very weak environment when you spend too much on advertising, it does not really affect your performance too much. So we're maintaining the same hygiene level of 2% spend even in H2. So marketing sales spend as a percentage of revenue will not change.
And if I can just squeeze in one more question on gross margins. We have seen strong gross margin expansion in the quarter. Is it a one-off or we are seeing the low-cost inventory now really with the system and we can expect this trajectory to continue in the next 3, 4 quarters?
Well, Ankit, it's a combination of 2 things. One is, obviously, the lower cost inventory. That is one reason. The other reason is that there are certain products, see usually all our products carry the same line, but there are some products which are slightly having the higher GM and those products have done fairly well in Q2 and that is why you've seen a very strong GM of 63.1%. So I think on a steady state basis, Ankit, you can expect a GM of about 61% to 62%, it will range in that bracket.
The next question is from the line of Devanshu Bansal from Emkay Global.
Just a small follow-up on the previous question. Which are those products that have done well for us, Gautam? If you can just call out which have higher gross margin?
See, there are some -- there are few products in the pants category and there are some few products in the jeggings category, which has slightly higher gross margins and because of which it is reflecting in our GM.
Understood. And any new innovations that we have done for the upcoming festive wedding season, again, interesting new launches that we have done?
See, we are continuing to strengthen our pants and jeggings category and I think, look, some few product additions we keep doing through the year. But we have not done anything really -- we have not really come up with any special range, like how we had come up with an athleisure range earlier last year, there's no special range which has come out for festive, but we continue to strengthen our pants and jeggings portfolio by coming out with new colors and some new products as well.
Understood. Gautam, second, you're indicating that focus is on relatively larger stores, 350, 400 square feet. I guess just wanted to check on store productivity perspective, these stores will be having higher productivity, right, versus the earlier smaller stores that we are closing now?
In recent times, we have definitely seen that the 300, 400 square feet stores do better. Because from a shopping experience perspective, customers just prefer shopping in a slightly larger stores. Because our color range and our product depth has also has increased. The very small stores really don't -- are not really working very well. See, there are some stores which are continuing to do well. What we have done is we have taken a call in those stores where we -- in those markets where we have slightly bigger store and a smaller store, we have shut the smaller store.
And that does not mean completely our small store network will go away, that's not going to be the case. So wherever we feel that by shutting the smaller stores, the sales will move to another store in the same cluster, we have done it on that basis. So eventually, we don't see a loss of sales by shutting these 10 stores, what we have done this quarter.
Understood. Just a small follow-up, please, so that...
I'm sorry to interrupt, sir, but can you please rejoin the question queue for a follow-up question.
The next question is from the line of Sameer Gupta from India Infoline.
Most of them have been answered. So just wanted to ask this on the soft demand environment and challenging environment for the apparel retail that you mentioned in the opening comments. Now a segment of the market, which is value fashion, whatever data we have indicates that they are doing well. So I just wanted to understand how are you concluding that it is an overall demand environment, which is soft and we are not losing any share to, let's say, the other organized players? And the confidence that the festive will revive this, where is this coming from?
So, Sameer, I think, look, see we at Go Colors are operating in the mass premium range. Value retail might be doing well. But from a mass premium segment, things have been slow for quite some time. And I think from a category perspective, the mass premium category is something we've always targeted. And I think when I speak to the other retailers and all, all the retailers are having a positive mindset that this time festive might be good. So that narration is probably coming from them.
So we are quite optimistic that this time Diwali and post November and Christmas and New Year also we'll do a good number. So this -- so the narration on the slowdown was more from a mass premium segment. Yes, profits of value retail are definitely doing well. Our customer is the mass premium customer. So a value retail customers will not really eat into our sales as such.
Just a follow-up here, Gautam. So, one...
Sorry to interrupt sir, but can you please rejoin the question queue.
Madam, its a follow-up on the same questions, ma'am.
Okay. Sir, go ahead.
So, Gautam, I just wanted to understand this. So mass premium is doing slow first of all, how do we conclude this that it's the overall market, which is a problem and not only some of Go Fashion or some other retailers? And second is that isn't -- like are we sure that the consumers are now downtrading to the more value retailers kind of a thing?
See. See, in retail, Sameer, there is a premium segment, there is a mass premium segment, and there is a value segment, right? And there is a customer for each of these 3 segments. When I evaluate the other brands in the industry, everyone has been complaining about a little bit of slow down. Of course, there are some exceptions there, and that's always going to be the case. But when I speak to most retailers, the sentiment and the commentary is very similar. So I'm somewhere driving that conclusion from what little bit of research and the chat what I have been having with the other folks.
Got it. And downtrading question?
See on the downtrading question. Look, see, for the kind of product we have, Sameer, we are priced at the bottom of the pyramid. So I don't see value retail eating into our share. The customer who wears the kind of product we give they will definitely come back to Go Colors or any other brand in the mass premium segment, they have a similar product offering.
Sorry, you mentioned that you cater to the bottom of the pyramid. I didn't get that, sorry.
The bottom of the pyramid as far as mass premium is concerned. See for the kind of product offering we have in terms of specs, our pricing is the lowest -- is one of the lowest. So I think for the kind of value offering, what we are giving, I don't think value retail should eat into our [indiscernible], I don't see that happening.
The next question is from the line of Gaurav Jogani from JM Financial.
My question was regards to the inventory bit. You alluded in your opening remarks something on the, why the inventory was down. I didn't really catch it. If you can just repeat it, if you don't mind?
No, no, see actually, Gaurav, historically, we were carrying very high inventory in the books in terms of number of days. So over a period of time, we have rationalized inventory. So we had about, if I'm not wrong, we had about 120 days or something of inventory earlier and we have brought it down to 97 days. In Q1, we had 87 days on inventory and now we have about 97 days.
Obviously, inventory days have slightly gone up from Q1 because they are entering the festive season, so they're carrying slightly higher inventory. On a steady state basis, we see ourselves carrying inventory anywhere between 90 and 95 days. So compared to earlier quarters and years, we've rationalized our inventory a lot.
And the next question is with regards to the overall, again, the demand bit only, but it's more on the regional side. I think the data that suggests your -- most of the sales is coming from the southern part of India. So are you seeing -- and the store opening is also in that region itself. So any particular reason of opening more stores in the southern part of India and not the other parts of India? Anything that you can allude on this front?
See, our expansion strategy is not -- has not really too much to do with how a region is particularly doing in a particular period, right? See, for us, if a city has a potential where we can have multiple stores in the city from a consumption perspective, it could be opened in that city regardless if that region is weak or not. So I think our city selection has nothing to do with current trends. We go on the basis of the size of city and then we decide.
So no, this -- the question was because we have been seeing that you said that the North, West and the East part has been relatively stable versus the South, which has been a bit slower and hence, would it be a bit more prudent sense that the demand conditions that are more steady to open more stores there?
No, we are trying to. Definitely North and East is definitely one of our focus areas and because the base is weak -- because the base is low there, our growth rates also have been very encouraging. So we are opening in North and East. But at the same time, when we are getting very good store options and opportunities in the South. I think it's a good time to take it. Because when demand picks up, then we'll end up having a good location also in the market.
The next question is from the line of Prerna Jhunjhunwala from Elara Capital.
The first question is on ASP decline. What is leading to that ASP decline on first half?
Actually, Prerna, there was a correction. I mentioned in the opening remarks in the investor presentation, we actually by mistake showed only the Q2's ASP. The blended ASP for H1 is INR 750. So there's actually a 1% increase in ASP on a Y-o-Y basis.
Okay. I missed that. I joined in a little late. Okay. And sorry, I missed the number again.
It's INR 759.
Okay, INR 759. Okay. Then that makes sense now because.
We have ended up noticing last minute. So sorry -- apologies for the mistake.
No problem. I also missed the opening remark. So second question is on which -- where is the demand better in terms of categories? And where are we faring well? You mentioned jeggings and pants, but what about the core category of ethnic wear? And how is -- how do you compare it with your Western wear portfolio?
No. See, our core has been doing very well. So we have not seen any real decline or anything in our core categories. Core categories like leggings and churidars has been our historical products and we will continue to do now. Just as a company because the sales over a period of time have started shifting more towards the specialty bottom like pants and jeggings, our focus also is more on those kind of all product segments. But as such, are other categories like leggings and churidars, we've not seen any as such decline.
Okay. Okay. One more question, if I may? Just wanted to understand on how is the SSG -- what is the kind of SSG that you're building in for this 15%, 20% growth that you are looking in? I mean, what are your expectations with respect to [indiscernible] and generally we see some demand contraction also after festive season. So how could this be?
See, without being very over aspirational, I think, see, we're working towards a 15%, 20% number with the medium and -- low to mid-single-digit SSSG. So I think we're working towards that. So we are hopeful that we'll be able to achieve that in the coming quarters.
The next question is from the line of [ Saurav Mandal ] from RK Advisory.
So my first question is on your application. I have seen that in Play Store and the rating is very low, I think It's around 2 star and most of the problem says that they have problem with logging in or making the accounts. So can you tell me why?
No, Saurav, actually, what happened, we've not really launched our application officially yet. We had actually launched that application more from an internal training perspective. But because it was in Play Store, many customers downloaded as well. So we've actually not officially launched it yet. Over a period of next few months, we will be launching our app, sir.
Okay. Okay. That's answers my question. Now the second question is how do you do the omnichannel sales exactly like by brining the customer within the store and then they did not find the right fit or right color and you get the number or e-mail and you do messaging or give them an e-mail or...
Topically, what happens -- typically, what happens, Saurav, so I first start with the online part. In the online aspect when a customer places an order, the closest store in that region will deliver the product. So our aspiration is for customer is placing an order, do a local delivery freezing your network. And can we deliver it within 24 to 48 hours is our target. That is as far as web site is concerned.
As far as store is concerned, see, since we carry so much of inventory at a store level, the likelihood of a customer not finding their color and size is usually little less. But in that cases, sometimes we try converting the customer into an online customer. So then and there, we have a tablet, we convert that customer into an online customer and then the closest store in that particular region will dispatch. So these kind of omnichannel initiatives we are doing currently.
Okay. My third question is, our products are competitively priced and widely appealing including in smaller cities across various regions. Given this, could you clarify where there isn't a greater focus on expanding beyond the existing cluster and region? I know you have opening stores beyond your cluster. But why not leave cluster and go beyond the cities where you are not present?
No, we are going. In fact, we are actually doing that now. We're trying to go beyond our clusters and open stores in new cities, and that is something which is one of our key focus areas. And we will see a lot of that come in the coming quarters. But I think even if you do that, I don't think our ratio of our top 10 cities and Tier 2, Tier 3 cities, I don't think that ratio really changes, but definitely a strong focus is definitely there in cities where we are not present.
Okay. That answers the question. I was actually saying that because we are kind of taking on marketing initiatives through store opening, that is why I am saying that, but that answered my question.
The next question is from the line of [ Abhishek Badolia ] form Narnolia Financial Services Limited.
I just wanted to ask that your [indiscernible] LFS was INR 182 crores and your debtor was INR 89 cr. So your debtor days come about 159 days. So why is it so high? Can you take only LFS days for debtors?
See, the thing is the debtors which is in our books is actually inventory on the shop floor. The unsold inventory is because of accounting standards of debtors in our books. So that's why the number of days has always ranged between 150 to 155 days. So on an overall company revenue basis, our debtor days is between 37 and 40 days. But on a store level, it is high because the unsold inventory there is debtors in our books, because the LFS partner will pay us only after they've sold it. It's on [indiscernible] basis.
Okay. And you are sitting with around INR 238 crores of cash and you make around INR 53 crores of cash half yearly. What is really stopping you from rapidly opening stores? I mean next year also you have given a target of 120 gross stores, which has been constant for about multiple quarters. And even your cash flow generation has declined from to H1 to H1. So can you elaborate on the cash management strategy?
See, H1 to H1, the cash flow looked declined because last year was the year when we had reduced a lot of working capital and inventory. So last year effectively, the cash flow was a lot stronger. This year, we have not really reduced too much of inventory or working capital. So whatever PAT -- whatever EBITDA we have generated is converted into operating cash flow. So one of the reasons why H1 this year versus last year H1 OCF might look even different is because last year only we have reduced working capital.
As far as opening more stores rapidly is concerned, see, real estate sometimes can be very tricky. So we don't want to be in a hurry and open wrong stores. So that's why, see, usually I have told in the past also that if we evaluate 1,000 locations, we end up opening 120 to 150 stores, because we have a 12% hit rate. So we're trying to increase the number of stores we evaluate, and we formed a good busy team. So we're trying to improve that larger number of 1,000 stores and end of opening more. But in real estate, you have to be very careful. If we do a very strong and fast expansion, we can sometimes end up opening wrong stores as well. So we want to maintain a quality hygiene as far as store expansion is concerned.
The next question is from the line of Akhil Parekh from B&K Securities.
I just have one question from a competitive landscape perspective. So -- if I look at Tier 1 cities, stores in Tier 1 city. So have you done some kind of study in terms of what percentage of Zudio stores are there in close vicinity to Go Colors? Because a year back even kind of DMart acknowledged that there current segment is getting impacted to some extent because of increased competition because of players like Zudio. And we continue to see the footfall in Zudio remain very strong even during the last 3 months basically. So that is one, there is competitive intensity in the Tier 1 cities. But in Tier 2 and beyond, we have almost 35% to 40% of the stores.
Meesho, which operates in those geography has given an update that their sales have grown by 40% during the first 2 weeks of the festive season. So is there some kind of impact which probably we are not acknowledging in these 2 geographies, Tier 1 and Tier 2 and Tier 3?
See, we are largely more top 10 cities and majority of our network is there more in Tier 1 and top 10 cities. So for us, our experience has been very consistent, honestly. I mean, our presence in rural is not very high. So we've not seen a very difference in experience between rural and urban, honestly. As far as opening locations are concerned. See, look, Zudio has been doing well and there are many other retailers who are also bigger, so we follow all such retailers.
No. My question is, is the competitive intensity because of Zudio is impacting our sales in Tier 1 city? Or is the competitive intensity because of Meesho is impacting our sales in Tier 2 and beyond other cities
Okay. Sorry, I misunderstood your question. See, Zudio or any other large format store will not impact our sales. See, we are a very specialized bottom wear brand with so many color options and product options. So for us, competition would be really someone else who is doing the bottom wear in a dedicated manner. So that will be an apple-to-apple comparison. So right now, we don't see any of the large format store out there eating into our share.
Same holds true for Meesho as well you are saying?
See, honestly, online players honestly are not competition for us because online is a completely different bonding. So for us, like I mentioned, a dedicated brand in bottom wear selling online or offline would be the real competition. Meesho is still again a market place. So the same example for LFS and Meesho go hand in hand from that perspective.
Thank you very much. As there are no further questions, I would now like to hand the conference over to the management for closing comments. Thank you, and over to you.
I'd like to thank everyone for being part of the call. We hope we've answered the questions. If you need more information, please feel free to contact Mr. Deven Dhruva from SGA, our Investor Relation Advisers. Thank you. We wish you everyone a very happy Diwali and happy festivals. Thank you all.
On behalf of Go Fashion (India) Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.