Vedant Fashions Ltd

NSE:MANYAVAR

Earnings Call Analysis

Optimistic Outlook Amid Wedding Seasons and Brand Growth

The company shows an optimistic qualitative outlook for the second half of the year, expecting significant growth driven by numerous wedding dates and festivals like Diwali. Trade receivables stand at 64 days due to expansion efforts, which saw an addition of 252,000 square feet in retail space. The brand Twamev is set to expand, looking to open 4 to 5 more exclusive brand outlets (EBOs). Mohey, similarly tracking positively, has also seen successful metrics and is set to understand its standalone model with new flagship stores. Historically, H2 contributes more to annual revenue, varying from 35% to 38%. Online B2C channels have witnessed phenomenal growth rates, although they represent a small percentage of overall sales, about 3%.

Optimism for the Second Half of the Fiscal Year

Executives expressed optimism for the latter half of the year, fueled by positive qualitative factors, although specific numbers were withheld until the next earnings call. A key tailwind for the company is the wedding industry, where optimism abounds regarding the number of weddings expected in the third and fourth quarters. Confidence is high for a substantial volume of wedding-related business in the near future.

Wedding Season Prospects and Revenue Impact

Regarding the wedding industry, which significantly influences revenue, there are 12 auspicious dates in Q3 and 29 in Q4. Traditionally, Q3 sees a preference for weddings, but logistical constraints at times limit the capacity to host all events. Festivals like Diwali also boost Q3 revenues. On the whole, management is confident in an overall increase in wedding numbers in the second half of the year.

Receivables and Inventory Analysis

The receivables days stand at 64 days based on a trailing 12-month period ending in September 2023. This is an increase compared to the previous year, partially attributed to the opening of new store spaces totaling approximately 252,000 square feet, which naturally led to higher trade receivables. Lower revenues also contributed to this increase in receivable days. From an inventory standpoint, a build-up typically occurs in September, but this year's build-up was reduced due to wedding and festive activities occuring later in November.

Expansion and Performance of Twamev Brand

The Twamev brand is reported to be performing well with positive feedback from consumers. Currently, there are four Exclusive Brand Outlets (EBOs), with plans to sign 4 to 5 more in the near term. The strategy is to reach 8 to 10 EBOs, thoroughly analyze this business model, and then decide whether to scale further.

Mohey Brand Growth and Store Expansion Plans

The Mohey brand shows strong performance metrics, outperforming company averages. Store conversions and other key performance indicators are on the rise. A few smaller EBOs have been launched, and a flagship store in Bangalore is in progress but delayed due to construction inefficiencies. The company plans to operationalize it soon, which will serve as a key benchmark to evaluate and possibly scale the Mohey-EBO model.

Seasonal Revenue Contribution Patterns

Historical data suggests H1 typically contributes about 35% to 37% to annual revenue, but this can decrease to around 35% in years when H1 is weaker due to seasonal demand shifts. The company avoids giving specific guidance but acknowledges that contributions can vary based on seasonal trends.

E-Commerce Channel: Thriving Online Sales

E-commerce has emerged as the best performing channel in terms of growth over the last six months, driven by the successful relaunch of their website. Conversion rates and search engine visibility have improved, although the overall share of online sales is still about 3%. Products priced under INR 4,000 are tracked distinctly, and these account for about 8% of the e-commerce share, which has been experiencing a phenomenal growth rate as of now.

Earnings Call Transcript 2024-Q2

[Operator]

Ladies and gentlemen, good day, and welcome to Vedant Fashions Q2 FY '24 Earnings Conference Call hosted by IIFL Securities Limited. [Operator Instructions] Please note that this call is being recorded.

I now hand the conference over to Mr. Sameer Gupta from IIFL Securities Limited. Thank you, and over to you, sir.

[Sameer Gupta, analyst]

Thanks, Yousuf. Welcome, everyone. Good afternoon. And without further ado, let me pass the line to the management. We have from Manyavar Mr. Vedant Modi, Chief Revenue Officer; and Mr. Rahul Murarka, Chief Financial Officer. Over to you, Vedant.

[Vedant Modi, executive]

Thank you very much. Good afternoon, and a warm welcome to all the participants. I'm Vedant Modi, the Chief Revenue Officer of the company. Thank you for joining us today to discuss the Vedant Fashions Limited quarter 2 and first half financial year '24 results. I'm joined by Mr. Rahul Murarka, the Chief Financial Officer of our company. I hope everyone got an opportunity to go through our financial results and investor presentation, which have been uploaded on the stock exchange as well as the company's website.

Let me take you through our quarter ended and first half yearly performance of financial year '24. In this quarter, we continued with our network expansion strategy and have successfully rolled out approximately 35,000 square feet of net retail area in the second quarter of financial year '24, aggregating to 1.2 lakhs of square feet net rollout in the first half of financial year '24. As of September 2023, Vedant Fashions' EBO area stands at 1.59 million square feet, spanning across 669 stores in 260 cities and towns globally. The national EBO footprint tally is at 653 stores spread across 248 cities and towns.

In line with our strategic market expansion plan, we have successfully opened four exclusives from eight stores in the first half of financial year '24. We have a strong and healthy pipeline for new rollouts planned for the remaining part of the financial year. Vedant Fashions is predominantly a wedding centric business with a special focus on Indian wedding and celebration wear apparels. It is pertinent to note that our business is highly concentrated on the Indian wedding calendar. As discussed earlier also, in any given period, wedding days can shift over months or quarters based on astronomy. This quarter also, particularly July month was an extension to quarter 1. And as expected, we witnessed significantly low weddings in H1 largely as compared to last year, which also impacted our performance.

However, with the onset of Navaratri, we have noticed good traction and positive trends on comparable days basis last year. Moreover, since last year first half of financial year '23, was a clean period after COVID without any restrictions. It had a spike effect coupled with good wedding calendar in the first 6 months. Hence, financial year '24, both Q2 and first half numbers are not identically comparable with last year. We expect this to normalize in the second half period driven by higher wedding dates and festive seasons ahead. Further on comparing our performance with normalized peak over the financial year '20, our overall customer sales grew by 58.9% in quarter 2 financial year '24 versus quarter 2 financial year '20.

We have strategically planned to use this sluggish period of quarter 2 financial year '24 to upgrade and generate our existing retail stores to the tune of 1 lakh square feet being fully renovated this quarter. This upgradation helps us to match with the new retail brand identity, providing our guests a unique brand experience.

We witnessed SSSG growth of 21.3% in quarter 2 financial year '24 over quarter 2 financial year '20, excluding the stores under renovation. In this quarter, we focused on further enhancing our brand dynamics and business dynamics with store upkeep and renovations and by adopting a 360-degree marketing approach through initiatives ranging from category-based marketing from Manyavar case, brand campaigns for new brands such as Twamev, collaboration with multiple influencers, digital marketing to increase our campaign effectiveness for our women's wear brand Mohey. We also effectively ran Rakhi and Independence Day campaign to foster further growth to the celebration by category and received very positive response thereby further reinforcing Manyavar as a celebration wear brand.

We have recently partnered with global star, Mr. Ram Charan as our brand ambassador, having a massive appeal in South India. Overall, we have left no stones unturned in the form of best network expansion via store rollout in first half and have done 360-degree marketing campaigns. And that's even gone regional with onboarding of south-based celebrities for the first time.

Also in terms of merchandising, we are fully geared up with the best inventory on the floor backed by strong moats of our world-class auto replenishment system and robust back-end dynamics. To further foster our growth in second half filled with wedding season and festivities ahead.

With this, I will now hand it over to Mr. Rahul Murarka to take you through the financial performance of our company. Thank you.

[Rahul Murarka, executive]

Thank you, Vedant. Namaskar, and good afternoon, everyone. I would like to highlight the key financial performance metrices for the quarter and half year ended 30th September 2023, based upon the consolidated financial statements.

Starting from H1 FY '24 update, the reported revenue from operations is around INR 530 crores, and the sale of our customer is around INR 691 crores. The revenue during the period, including Q2, got impacted mainly due to significant lower wedding dates compared to last year. H1 FY '23 was a full -- first full screen period after COVID, coupled with full-fledged wedding season. Hence, the days period of H1 FY '23 was not a normal period to compare performance. On comparing our H1 FY '24 performance with H1 of FY '20, which was a normal period. Company's revenue from operations grew by approx. 58%.

The company continues to report industry-leading gross margins of around 66.6%. The EBITDA margins are around 46%, and EBITDA stood at around INR 244 crores. The company reported a healthy PAT margin of 26.5% during H1 of FY '24, and the profit after tax stood at around INR 141 crores. Moreover, the PAT generated during the trailing 12-month period of September '23 is about 108% of net working capital employed.

Further, the company also witnessed significant growth in impact by approx. 99% in H1 FY '24 over H1 of FY '20 based upon internal management MIS. During Q3 of September '23, the company continued to report healthy cash conversion ratio of approx. 75%, which has been computed based upon operating cash flow over that during trailing 12 months.

Now turning to Q2 FY '24 performance update. The company reported revenue from operation of around INR 218 crores and sale of our customer is around INR 270 crores. On comparing our Q2 FY '24 performance to Q2 of FY '20, which was a normal quarter, our revenue from operations grew by approx. 67%. The company continues to report industry-leading gross margin of around 66.4%. The company reported PAT margin of 22.3% during Q2 of FY '24. This was impacted on account of negative operating leverage due to lower revenue and the profit after tax stood at around INR 49 crores. Further, the company also witnessed significant growth impact by approx. 224% in Q2 of FY '24 over Q2 of FY '20 based upon internal management MIS.

Since we are wedding-centric business, our performance in a particular period may vary based upon spread of wedding days across the year. We are hopeful and positive for H2 and full year as a whole, owing to wedding and festive seasons in H2 during this financial year.

Thank you, and Namaskar everyone. We can now move to the Q&A session.

[Operator]

[Operator Instructions] First question is from the line of Nihal Mahesh Jham from Nuvama.

[Nihal Jham, analyst]

The first question is, Vedant, you alluded that the comparable days for Navaratri have seen a decent growth. If you could just give a sense of how that is. And as you look into Q3, at least when we see the wedding calendar, we see that the data reasonably higher versus last year. So that is a tailwind for the quarter. But just wanted your thoughts on how you're looking at the festive and the upcoming wedding season also.

[Vedant Modi, executive]

Thank you for that question. So like I mentioned, when we compare our performance for the last 15 days of October with the onset of Navaratri starting at about 15th of October this year, we've seen a very good traction at the store level, every parameter that we track from a retail perspective, be it footfall, average bill value, average basket size, everything has seen a good uptick. Overall, a very exciting last 15 days we've had. While I can't share any numbers because this is something we will share in our next earnings call. Qualitatively, things have been very good, and this gives us a very good hope for the second half of the year and the way things should pan out.

And exactly, as you mentioned, there is definitely some level of tailwinds from a wedding date perspective and also from the number of wedding perspective. So the string of people we talk to in the wedding industry, everyone looks very optimistic about the number of weddings that are bound to happen in the current quarter we are operating in, which is quarter 3 and also quarter 4 after that. So overall, exciting times to come.

[Nihal Jham, analyst]

Sir, just to understand that one, I think last year, what had happened is that there was some shift of wedding to Q4 based on how the wedding calendar played out. In this year, are you expecting that Q3 will see a maximum share of the weddings on the business we do? Or there could still be some adjustment that could end up playing out?

[Vedant Modi, executive]

So Nihal, to be very frank on this question, this is something we always at the beginning of the year, try to estimate. But this is one very tricky question for us to even kind of try to figure out. From a date perspective, there are 12 dates in Q3 and about 29 dates in Q4. However, people typically prefer to get married in Q3. But sometimes what happens is the infrastructure of the country can't support the number of weddings that are prone to happen. However, on the other side, there are also mega festivals like Diwali, which bump up our revenues in Q3. So all in all, it's a very difficult question to answer. But H2 as a whole, we are very confident on having a very large number of weddings happening.

[Nihal Jham, analyst]

Understood. That's helpful. Vedant, the second question was on receivables. I do understand we've seen a higher store addition in terms of 1.2 lakh square feet versus 0.7 lakh square feet that we did in H1 of last year. But just considering that the festivities are a little later than what they were last year, is this receivable build up a normal phenomenon or there is something I just want to highlight, just for clarity.

[Rahul Murarka, executive]

Yes, Nihal bhai. So on your receivable days, according to our working, it is 64 days based upon trailing 12 months September '23 numbers. So basically, if you see that compared to last September '22, we have opened around 252,000 square feet. Now as we open stores, it results into increase in trade receivables as a onetime impact. So that is one of the reasons when we compare our receivable days as on 30th September '23 to '22, we see a higher receivable days. Also due to lower revenue, we see that it has inducted into higher receivable days. But otherwise, from an inventory build-up prospect, generally, there is an inventory build-up in September. But this time because the weddings and festivities are later in mid of November, and hence, it has been lower compared to last September, I would say.

[Nihal Jham, analyst]

Sure. If I may just take one last question. That if you could give any comments on how Twamev and Mohey are performing and if the rollout of, say, Mohey that we've discussed a few quarters back is something you plan to scale up anytime soon?

[Vedant Modi, executive]

Perfect. Thank you for that question as well. So from a Twamev perspective, the whole management actually spent a lot of time interacting with consumers in the Twamev EBOs. And the entire momentum looks very positive. Consumers have great things to say about the product, about the retail experience and we see very good numbers coming in better than we expected initially.

So overall, Twamev seems like a very good brand and profound to grow over the coming quarters. So right now, we have about 4 EBOs. We are about to sign about 4 to 5 more EBOs in the coming months. And the idea is to have about 8 to 10 EBOs properly study a model and then take a call on scaling to the next set of EBOs. And overall, Twamev has been performing really well.

From a Mohey perspective, very similar to Twamev, all the things that we track for Mohey have been improving. So if I break it down into 3 things: overall sales, SSSG and the rollout of Mohey in the current Manyavar-Mohey concept. All the 3 numbers are very strong, much higher than the company average. Conversion rates at the store level have been increasing so has all the other metrics, including inventory turnover ratio and the kind of feedback we received from consumers. So I'm very happy with how Mohey is performing.

From a Mohey-EBO perspective, we have rolled out the first smaller set of EBOs. So Mall of Asia in Bangalore has opened up. We've also had a smaller mall EBO opened up in Patna. However, the major flagship that we are about to open in general Bangalore is still in the works. Due to some construction-related inefficiencies, it's taken a little longer than we anticipated, and the idea is to have it go live as soon as possible. And that is the main store that we are kind of banking on to understand the Mohey-EBO model and then take the call from that point on.

[Operator]

Next question is from the line of Gaurav Jogani from Axis Capital.

[Gaurav Jogani, analyst]

Sir, my first question is with regards to the sales breakup generally between H1 and H2. We have -- in normalized scenarios, we have seen that H1 typically contributes to around 36% to 38%, whereas H2 will be the balance. Given there has been a shift of the festive season in H2 now, so do we anticipate a shift in the contribution from H1 to H2 towards more the H2 side? And if any percentages that you can help us guide? What have you seen the percentages in the earlier years when there has been a wedding, the season shift?

[Vedant Modi, executive]

Thank you for that question, Gaurav. So if I kind of talk about the typical average which we've seen over the years has been 36%, 37%. In some years where the H1 has been weaker due to seasonal demand shift, we've also seen years where it's been 35%, 36%. So it's very difficult for me to tell you. And as a company, we don't give any guidance, per se, to tell you what it exactly will be in the coming year. But typically, in bad sort of H1, it's about 35% of the year's contribution. While in good ones, it's typically 38%.

Last year was a very different phenomena for us where it was 42%, which was more of a one-off scenario. And the idea would be to work on a lot of our non-wedding focus areas such as building up Rakhi, Independence Day over a mid- to long-term horizon, and build up the H1 business as well as we move forward. But talking about the past, those are the kind of numbers we witnessed.

[Rahul Murarka, executive]

But given that you're very positive and concurrent on H2, I mean, you have to see how much deviation is here from the historical period what we have observed in addition to 35% to 37%. I mean there is a possibility that there would be -- I mean, we'll have to see how we progress and actually see it accordingly.

[Gaurav Jogani, analyst]

Sure. And sir, in terms of the contribution from the online, if you can guide us how the contribution from online has been shaping up over the past couple of years. And in the past, Vedant, you have talked about certain initiatives that you have been taking to drive the higher savings of the online sales. So anything on that front, if you can highlight or any initiatives that you can highlight there.

[Vedant Modi, executive]

Sure. Thank you for that question. So we actually went live with the new Manyavar.com website in April. And since then, we've seen a great growth when it comes to our B2C channel, and we've been witnessing phenomenal growth rate as of now as well. And overall, our conversion rates have improved, our SEO has improved, our overall market share in the keywords we operate and has improved. It's been our best-performing channel in terms of growth over the last 6 months.

From a share perspective, the channel share is still very small, which is about 3-odd percent. The way we internally track this data is that e-commerce, the share we actually track as products under INR 4,000. So over there, the share is almost 8% to 10% is led by e-commerce. So that share has also been performing well and been growing. And with Manthan's strategy also coming in, which gives us that support in the INR 800 to INR 2,000 price range, helping us in marketplace growth.

So all in all, overall e-commerce business has been growing really well in a very high positive trend. And given the fact that the next 12 days is Diwali, all our teams are very excited to see what the new website can -- in terms of bringing massive number of Diwali consumers to our platforms.

[Operator]

[Operator Instructions] Next question is from the line of Manish Poddar from Invesco Asset Management.

[Manish Poddar, analyst]

I just had two questions. First one was, have you taken any price increase?

[Vedant Modi, executive]

So thank you for that question. And Manishji, as you know that we don't take any direct price increases per se. The endeavor is to continue on our task of adding more value that we provide to our guests. And in that endeavor, we've continued to invest in our products, come up with better merchandises and drive our overall ASPs for products by introducing better merchandising. So there is no price hike per se, but ASPs within each category has been growing as we move into the festive season.

[Manish Poddar, analyst]

Any sense, let's say, this like-for-like which you plow, how much would be, let's say, mix-led growth?

[Vedant Modi, executive]

Apologies, I couldn't get you right now.

[Manish Poddar, analyst]

So let's say in the like-for-like number which you have, the decline number, I'm just trying to understand in that how much would be, let's say, mix-led growth if you are to -- any sense one can get up there? Launching new products with getting the higher sales...

[Vedant Modi, executive]

Overall, from a like-for-like perspective, the degrowth was majorly led on the account of volume. From an ASP perspective, things were quite good. And on account of -- when you talk about mix, it was a similar story where we track at a POS level, grooms versus non-grooms. And overall, the non-groom business was better off than the groom business, owing to the fact that the business was slow due to less number of wedding days, at least for the first half of the year.

[Manish Poddar, analyst]

Okay. And just last one, Vedantji, any sense you can get, let's say, how would -- given a lot of peer set or both unlisted and listed peers are scaling up in this category. Any sense would we have that -- are we losing share? Or is just actually demand not there primarily because of weddings and this date shift?

[Vedant Modi, executive]

So there are multiple perspectives here. So one is at a city level, whatever, let's say, organized competition has opened beside us, those particular stores compared to the city average have not changed too much. And at the same time, there are multiple cities and states where no organized competition has even entered. But the sort of slowness we saw was similar across those cities and states as well. So I think it's more from a demand angle and the market is very large to host more than one player. And it's not really a fact of new peer set entering the market, but more a fact of the entire wedding industry shifting and, to some extent, also on overall slowness in the consumer discretionary space.

[Operator]

[Operator Instructions] Next question is from the line of Karan Gupta from Varanium Capital.

[Karan Gupta, analyst]

So my question is related to the inventory management system...

[Operator]

Mr. Karan, may we please request you to use handset.

[Karan Gupta, analyst]

Yes. So my question is related to the inventory management system...

[Vedant Modi, executive]

Apologies, we can't completely understand what you're saying. Is the question around our automated replenishment system and how that works?

[Karan Gupta, analyst]

Yes. Related to that, but any steps we are taking? It is better than peers in terms of inventory management system, not auto replenishment system. What the activity you are performing, right, is kind of activities like other wedding players are performing towards much of replenishment of inventories, in terms of design or in terms of pressure trends...

[Vedant Modi, executive]

Perfect. Thank you for that. So I mean, the way I would break up this question is into multiple parts. So in our case, we have about 20 years of consumer preference data across India. And as India by category is slightly different, consumer trends and behaviors change basis city and state. So we've identified what sells where in which part of the country. Our designers have access to that data, and we ensure that we follow a scientific method of designing where we utilize all that data to come up with relevant designs. And then those designs are planned well in advance basis what sells where and which part of the country, and then they are replenished to those respective stores only.

So just because the whole process is slightly confidential in nature, I can't talk about it in a much deeper way. But I think overarching way, some of the data points I can share with you is that our overall deadstock is typically always less than 4%, less than 3%, which is an industry-leading number globally. So this is one of the lowest numbers for any brand across the globe and that is what leads to our profit margin numbers, which are on a normalized year about 29, 30%.

So in a nutshell, that is the system we use. From the basis of how is it differentiated in an organized retail space, we are the only ones or one of the only ones that uses an in-house build replenishment system completely developed by our internal teams and with our internal strategies. Most people use productized versions of this replenishment system available for anyone to buy. Whereas we've customized this solution to how the Indian wear market works and function, and it's based on that from rounds up.

[Karan Gupta, analyst]

Okay. Fair enough. Next is in like -- see, in overall growth which you see, some of the brands are trendsetters. So we as fashion setters, we can say, in that set upfront, [indiscernible] very sensitive segment or we are trying to perform like you say in the Holi, maybe it's Raksha Bandhan. So we are also assuming the event kind of segments where the different parts of India have different festivals over the long term -- year. So have entered into this segment [indiscernible] trend setters, as I say.

[Vedant Modi, executive]

So from a trend-setting perspective, we have a large creative design team as well. So any possible trends that we understand from a global perspective, which might be based on colors or different cuts that is happening or that might be happening in India, we test out all of those particular design themes and we try to see what is working in our case. That is first.

And secondly, what I understood from your question is our merchandising fit for festive wear. So absolutely, we work a lot on the festive merchandising of things, having a great product range for people to wear across Raksha Bandhan, Diwali, Independence Day and so on. And there has been a large push in our entire Kurta set range where we have invested a lot from a design perspective and really up the game in the overall Kurta set game.

And at the same time, I think I also heard a little bit about kids in your question. So from a kids perspective as well, we've been building up merchandising and the presence of kids has been growing from a retail perspective as well with us having larger flagship stores. That gives us the ability to give kids good enough presence in all our stores. And that whole design piece is already taken care of from the back end, and we continue to invest in better merchandising and adding more value to our guests.

[Karan Gupta, analyst]

Okay. So it's fair enough. The last question is on behavior. If you notice this thing, the last 20 years as the [indiscernible] are standing in the queue, you are thinking about the Vedant Fashions section marquee we have, which is, let's say, [indiscernible] any kind of kurta set or the family set, which is significant [indiscernible]. So any kind of behavior [indiscernible] in the next 15 days. So if you have to buy as soon as possible...

[Vedant Modi, executive]

Apologies, I really couldn't properly understand your question, but I'll still attempt to answer some pieces of that.

[Karan Gupta, analyst]

Is my voice is breaking?

[Vedant Modi, executive]

Yes. It's not very clear. I mean your voice is coming through, but it's not very clear.

[Karan Gupta, analyst]

Yes, the basic question is on behavior. If you notice if you have a large data of consumer behavior, like if you have limited stock of any of your brand, let's say, put it, let's say, the saree, if you have a limited brand, if you have limited stock, in the consumer behavior like Vedant Limited have stock -- Vedant Fashions, I have buy a dress, that's certainly possible. Otherwise, it's fully managed in 15 days, that's 1 month. So I have to buy this. Human behavior, I was just asking.

[Vedant Modi, executive]

Yes. I mean in our case, the way it works is that we try to ensure whatever products are selling in whichever part of the country gets replenished as soon as possible. If not, then the closest product to that gets replenished to that particular store as soon as possible. So that's the kind of mindset we try to work on.

From a consumer perspective, I think the route we take is we want to comfort a consumer. Whenever they walk into a Manyavar store, they will find something for themselves. And having the promise of having relevant products for every guest walking into our store, which ensures a great conversion rate. I think some of the references which you might be referring to is of Veblen goods where there is a sort of need of demand created by limiting supply of certain products, which is not the kind of area where we operate in with Manyavar as of now. And in the future, if this is of interest, we will explore how something like this will work.

[Karan Gupta, analyst]

Okay. Sure. One more question on -- so in the previous question, [indiscernible].

[Vedant Modi, executive]

Sorry, but the voice is really not clear.

[Operator]

Sorry to interrupt Mr. Karan. We please request you to reconnect to the conference as your voice is breaking. I think there's a network issue at your end.

Meanwhile, we'll move to our next question from the line of Devanshu Bansal from Emkay Global.

[Devanshu Bansal, analyst]

So Vedant, wanted to check H1 has been slow for us. So any signs of stress that you are seeing at the franchisee relationship level? Also as a company, what steps do we generally take to provide some comfort to our partners when there is a weak demand scenario?

[Vedant Modi, executive]

Thank you for that question. So to be very honest, I think all our partners understand the fact that H1 last year was slightly better than it usual is. And I think everyone understands the fact and is really geared up for H2. And that's been the common theme across our partners. Majority of our revenue comes from partners that have been operating with us for more than 5 years, 6 years now. The top 50 partners actually contribute to 80% of our business, and we have a very close relationship with them in order to have a dual line of communication between how business will perform.

So I think everyone is really excited about H2, and that has not been an area of concern at all. Typically, when you ask me from a closure perspective, right, we would have 1% to 2% of stores closing in a given financial year. And of those stores, in many cases, these stores are actually run by larger franchisees who have multiple stores. So at the franchisee group level, even those stores don't hurt the franchisee at all. So from that perspective, if there is a one-off case, we definitely add on a marketing level of support for that particular store and try to push up the sales of that store. And the endeavor is to work on our stakeholder growth where franchisees actually act as a very, very important stakeholder to our company.

[Devanshu Bansal, analyst]

Got it. Any additional incentives, et cetera, also that you provide or maybe some historical precedence is there, which you can highlight wherein the growth slowdown and you sort of ended up giving higher incentives to your partners?

[Vedant Modi, executive]

So from our perspective, this has never happened. We've always stuck to our model. We are a very transparent company. Every single franchisee in our system has the same franchisee model, which is either the 18% of the 29.5% plus GST model. There is no comma, full stop difference also between anyone's agreements. And we stick to the same incentive model, no matter the conditions. And in our entire history of the company, we've seen very good sales. We've seen very happy partners.

And from the perspective of incentivization, we have a franchisee score card system. So any franchisee that scores above 80% on our score card, are the partners we prefer to grow our fleet to it. And we are the first ones who get access to any news to that whereabout to open. And given the high ROI that a Manyavar franchisee makes out of any of the stores that are opened, then that in itself is a very large incentive for people to work hard with us and grow within our company.

[Devanshu Bansal, analyst]

Great, Vedant. Secondly, wanted to check from a product innovation point of view, if I picked it right from your commentary, you indicated that you have sort of certain time has gone into merchandising for this upcoming festive wedding specifically. Can you highlight a few innovations or product innovations that you have specifically come out for this festive which will sort of give better product value proposition to customers versus peers?

[Vedant Modi, executive]

Absolutely. So product innovation is something, which is a continuous process in our case. So we've worked on the quality of the fabric we offer. We've tried to make it softer. We try to make it more resistant from all possible angles. And at the same time, we've also really worked on things which are trending. So let's say, this particular year, Chikankari has been in high fashion, mirror work has been in high fashion. So we've worked on our range for those products.

So product innovation in our case is a weekly or fair where decisions are made on a weekly basis, and we try to upgrade our product quality every single week as we move further. And that will always be the endeavor for our company.

[Operator]

Next question is from the line of Mr. Sameer Gupta from IIFL Securities.

[Sameer Gupta, analyst]

First question is that, see, I understand that first half this year has not -- has suffered a low -- high days effect. But just to emphasize, even if you have to block a double-digit growth in FY '24 as a whole, this would imply a sharp 27% kind of a secondary sales growth in the second half.

Now based on your history in years where wedding dates have both skewed. Do you think this is a number which is not an issue? Or will this -- and it will be solely driven by the wedding mismatch, date mismatch this year? Or will it still require some amount of pickup in the overall consumption level, which we understand has been kind of weak for most players that are operating in the overall apparel retail space? That would be the first question.

[Vedant Modi, executive]

Thank you very much for that question. So from a perspective of numbers as a company, we don't give any guidance. However, you're very right with those figures in order to achieve double-digit growth at the financial year level, those are the numbers which we would have to achieve. Definitely, our endeavor would be to get to those numbers, and we will do everything possible. And that is why as a company, we've left no stone unturned in terms of opening the most amount of square feet we can in the first half of the year, having a great merchandising plan, having great marketing initiatives and so on. So that is the [ indirect form ] of our company in order to have great growth during the second half of the year, but I won't be able to comment on those exact numbers.

From a historical perspective, we've definitely seen Q3 numbers being very good. And there definitely is that level of hope of continuity. And that said, over the last 2 quarters, we have felt a little bit of slowdown from a consumer discretionary aspect. And with festive on setting into India, I think the hope will also be that those things turn around and consumers again back to going to retail stores to the full extent as it was in the last couple of quarters before the slowdown actually started.

[Sameer Gupta, analyst]

Got it, Vedant. That's very helpful. Secondly, on Mohey, so just trying to understand the broad strategy here. Now is it going to be very similar to how you're doing with Twamev, opening some marquee 10, 12 stores and then looking at it as a pilot? Or here, we have actually a very large kind of experience because the brand is in place since 2015, and we already are present in around 120 Manyavar stores, if I understand correct. So can we just from the first day or itself, rollout our EBOs like without a pilot or it will still be a cautious wait-and-watch approach and looking at the results of the EBOs, then decide the further strategy here?

[Vedant Modi, executive]

So definitely, we will always take a more cautious approach. And the reason for that is while our confidence on the brand is very high, the way both the models work would be very different. So in Manyavar-Mohey, there are certain advantages which come in. So you have the ability of cross-selling to the Manyavar consumers that are anyways walking into the store.

On the flip side, in Mohey, you have the advantage of giving a very special experience to the brides walking in who will then spread the word of mouth of that magical experience. So from a retail perspective, both the models will actually work slightly differently. And that is why we will take a cautious approach of piloting with a couple of marquee stores understanding the model before we push the button of going high on opening those number of stores.

[Sameer Gupta, analyst]

Got it. One last question, if I may squeeze in. Have there been any price cuts this quarter? Have you taken any price cuts?

[Vedant Modi, executive]

No, absolutely, no price cuts were taken. In fact, our ESP is as healthy as ever, and we've been performing well on that perspective from every individual category perspective also. So we are quite happy with the work that is being done on the value addition side of things and the overall premiumization story for our company.

[Operator]

Next question is from the line of Varun Singh from ICICI Securities.

[Varun Singh, analyst]

So my question is on the retail area expansion. Given that now we are adding more of flagship stores, so I mean our total area expansion has been quite healthy over the last 2 quarters. So given that context, would you like to revise our annual store retail area expansion aspirations for medium term?

[Vedant Modi, executive]

Actually, Varun, on the flip side, this year, we were very cautious, and we changed our business development strategy almost 2 years ahead of time because we were already anticipating some sense of slowness in H1 overall. And that is why we are geared up to open a larger share of stores in H1 and in October as well as a month so that these set of stores are able to bring in all the business during the festive season of H2. So this is -- business development planning is a 2-year, 3-year sort of a horizon that we work on.

And these decisions were actually taken ahead of its time rather than it being something which was more of a short-term decision-making. So we would ideally like to stay with our guidance of about 16% retail footprint growth at a CAGR level, which is what we work on. And while we would like to grow faster, there are some certain limitations from a supply side as well. So as a company, we want to stay efficient from the perspective of cost and from the efficient from all supply side angles, and that is how we want to take growth forward without compromising on any other metrics that we track.

[Varun Singh, analyst]

Understood. And secondly, on Twamev, if you would like to share any insight given that we have scaled up this format to now around 669 stores.

[Vedant Modi, executive]

So I mean, from an insight perspective, I think what I can tell you is that consumers are really liking the product. We are seeing very high conversion rates better than we were anticipating for a new brand. So that has been a very positive side of things.

The second thing, like I had mentioned in my last earnings call as well that the women's split to men's, we were expecting it to be slightly more towards men, but rather more towards 45% women and 55% men to 50% each. So that's the kind of horizon we're playing at, which is very positive overall. And that has also given us the confidence of continuing to open larger stores because we have to give ample amount of space, both to men and women offering. However, that said, men business is expected to pick up in this month as men even in the case of Twamev seem to shop closer to the festive season, while women might actually be shopping slightly ahead of time. So there are a lot of things which we need to understand over a period of one full financial year for each store before we actually turn those insights into strategies for the company.

[Operator]

Next question is from the line of Prerna Jhunjhunwala from Elara Capital.

[Prerna Jhunjhunwala, analyst]

Sir, I would like to understand how much would be the groom versus non-groom sales in any financial year...

[Vedant Modi, executive]

So actually, we don't share that particular number on a quarter-to-quarter basis. But on a typical average, if I have to say that let's take a large financial year number that the groom's average bill value is much higher. So almost 45%, 50% of our business was derived from grooms at a revenue level, while the number of bills were relatively lower.

[Prerna Jhunjhunwala, analyst]

Okay. Okay. And given that you were expanding Twamev towards initially faster than Mohey. Could you just help us understand what the challenges in Mohey which is why you're going slow on Mohey? And also some insights on the deadstock data given that you were operating this brand faster than you're now 7, 8 years. So whether the stock in women's business is higher than men's? And how are you dealing with the change in fashion in women versus men?

[Vedant Modi, executive]

Sure. Thank you for that question. So taking the first part of it, I mean, both the brands have very different teams internally. So different set of team works on Twamev and a different set of team works on Mohey. And both the things are -- we are working on them parallelly. So it's nothing as if one brand is being prioritized over the other.

In the case of Mohey, we faced certain constraints from a construction and overall real estate perspective, which was out of our control that led to this delay. And from a focus perspective, the focus on Mohey is extremely high and that is why we've actually rolled out some certain smaller EBO stores. The flagship will also come to life extremely soon.

From a deadstock perspective, Manyavar has set an industry-leading number across the globe. So while all our -- the entire remaining side of things is definitely higher than Manyavar in terms of deadstock. But if you compare it to the industry average, it is still a very, very good number that we operate on.

And from a trend-setting perspective, we have a very, very talented design team working on lehengas and sarees, and we've been updating our overall mood for Mohey every single quarter. And you could check out Mohey social media to see how the brand is progressing in terms of its design and the kind of language it speaks.

[Prerna Jhunjhunwala, analyst]

Okay. And if I want to just understand the ASP of brand Mohey as compared to competition, where we are facing it and where do we actually want to target Mohey? Visit category to premium, super premium, luxury, how do we see Twamev versus Mohey in women?

[Vedant Modi, executive]

From a lehenga perspective, Mohey's ASP for a lehenga is about INR 22,000 to INR 23,000. Twamev, it is much higher than that. It would be in the range of 3 to 4x of that. And that is because the brand positioning and the target audience we're going after is very different. Again, from Mohey, this number is very difficult to compare because Mohey actually operates in a very sweet spot where if you look at the market, there is unorganized players operating out of, let's say, markets like Chandni Chowk in Delhi. And then there are the super high-end designers.

Mohey is one of the only established national brand that operates in the mid-premium price points offering the lehengas in those particular price points. So it doesn't really have a proper comparable to it. However, we feel based on our market study that INR 20,000 to INR 25,000 lehenga ASP price point is a very sweet spot for any working bride looking to get married. And this is something that does not hurt their pocket at all, while fulfills all the aspiration they might have or walking into a great and beautiful store in a great location, backed by celebrity ambassadors and so on.

[Prerna Jhunjhunwala, analyst]

Okay. And Twamev women, how are you positioning it if one can...

[Vedant Modi, executive]

So Twamev is absolutely a bridge to luxury brand, and the idea is to operate in a price point where lehengas start at about INR 50-odd thousand, go up to INR 2 lakh and thereby the ASP would range between INR 70,000 to INR 80,000, but it's really soon to comment on how this would shape up over the next 6 to 7 months because we are very new to Twamev women's merchandising play. And we are also learning that part of the business and working on the same.

But the overall positioning is different from an entire -- the way the store is designed to the kind of marketing we are doing on it. So it is aimed more towards a luxury designer wear segment with the prices being much lower compared to what designers operate at.

[Operator]

[Operator Instructions] Ladies and gentlemen, we will take this as a last question for the day. I now hand the conference over to the management for the closing comments.

[Vedant Modi, executive]

Thank you very much to all the analysts for joining the call. It's always a great learning to hear all the questions from you. Really looking forward to meeting again post the festive season of Q3, and thank you very much for attending, and namaskar.

[Operator]

Thank you. On behalf of IIFL Securities Limited, that concludes this conference. Thank you all for joining us, and you may now disconnect your lines.