Raymond Ltd

NSE:RAYMOND

Earnings Call Transcript 2024-Q1

[Operator]

Ladies and gentlemen, good day, and welcome to the Raymond Limited Q1 FY '24 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Ms. Priyanka Trivedi from Antique Stockbroking Limited. Thank you, and over to you, ma'am.

[Priyanka Trivedi, analyst]

Yes, thank you. So on behalf of Antique Stockbroking, I would like to welcome all the participants in the Q1 FY '24 Conference Call of Raymond Limited. I have with me Mr. J. Mukund, who is the Head of Investor Relations of Raymond Limited.

Without taking further time, I would like to hand over the call to Mr. Mukund. Over to you, Mukund.

[J. Mukund, executive]

Thank you, Priyanka. Good evening, everyone, and thank you for joining for our Q1 FY '24 Earnings Call of Raymond. I hope you would have received a copy of our results presentation. I would like to urge you to go through this along with the disclaimer slides.

Today, we have with us from the senior management of Raymond, Mr. S. L. Pokharna, who is Director of Raymond Limited; Mr. Amit Agarwal, Group CFO; Mr. Sunil Kataria, CEO of Lifestyle Business; Mr. Harmohan Sahni, CEO of Real Estate; and Mr. Jatin Khanna, Head, Corporate Development.

Now I would like to hand over the call to our Group CFO, Amit, who will give you the summary of company's quarterly performance before we open up for Q&A. Over to you, Amit.

[Amit Agarwal, executive]

Thank you, Mukund. Good evening, everyone. Thank you for joining us today for the earnings call to discuss the results for the first quarter of fiscal '24. Let me start with a brief overview of the market for the quarter.

As you may be aware that quarter 1 is a seasonally weak quarter with low consumer demand, given the absence of occasion and festive-led spending. Also the subdued sentiment across markets impacted brands across categories related to discretionary spending. Additionally, factors such as weather conditions have had a significant impact on consumer demand.

While there was a marginal uptick in consumer sentiment owing to the summer weddings in the month of May and June. However, the weather conditions such as heatwave across India, followed by incessant rain mainly in Northern India, led to lower walk-ins in malls and High Street retail outlets.

In the Branded Apparel segment, the early onset of the end of-season Sale in the month of June and higher discounting by large e-commerce online players have had an impact on the store sales as well.

Now let us have a look at the consolidated financial results for the quarter -- first quarter of fiscal '24.

Despite being in quarter impacted by subdued consumer demand, we were able to sustain a good performance and delivered highest ever quarter -- first quarter revenue of INR 1,826 crores with a growth of 4% over INR 1,754 crores in the first quarter of fiscal 2023. It is happening to see this as seventh consecutive quarter of consistent performance. The revenue growth was driven across B2C businesses of our branded textile and branded apparel and they're supported by B2B business of high-value cotton shirting in the domestic market as well as in the commenting business in the export markets.

At the EBITDA front, we recorded the highest ever first quarter EBITDA of INR 252 crores with a healthy EBITDA margin of 13.8% as compared to an EBITDA of INR 235 crores in the first quarter of fiscal 2023. Also during the quarter, denomination and remuneration commentary of the company on May 13, 2023, has granted 1,380,588 stock options, almost 2% of the total outstanding shares to the eligible employees of the company and its subsidiary under 3-month Employee Stock Option Plan 2023.

Accordingly, the company has recorded a cost of INR 3.9 crores during the quarter of June 30, 2023. Excluding the ESOP cost of INR 3.9 crores, the EBITDA would have been higher at INR 256 crores with a higher EBITDA margin of 14%. Most of the businesses contributed in delivering the highest EBITDA in the quarter with branded textile, garmenting and engineering leading the front.

However, real estate EBITDA was lower due to launch costs of the new project, Ten X Era. During the quarter, the company recorded exceptional item at the expense of INR 9 crores related to voluntary retirement scheme in one of the footings plants located in Chhindwara, Madhya Pradesh.

In the quarter, we announced and completed the slump sale of our FMCG business in our associate company, Raymond Consumer Care Limited to Godrej Consumer Products Limited for a total consideration of INR 2,825 crores with net of tax realization of INR 2,200 crores.

We have received the consideration and accordingly, the transaction stands concluded. As Raymond Limited holds 47.66% shareholding in RCCL, INR 983 crores related to share of Raymond Limited of profit on sale of FMCG business in Raymond Consumer Care Limited has been accounted for. Including this, we reported a net profit of total INR 1,065 crores in the quarter.

Now let me discuss about the segmental performance for the first quarter of fiscal 2024. The Branded Textile segment reported a healthy growth of 6%, driving sales to INR 688 crores in the first quarter of fiscal '24 as compared to INR 648 crores in the first quarter of last fiscal year. The growth was driven by strong volume growth in the B2C shirting business, a reflection of consumer offtake of our new casual wear category, an increased range of cotton and polyblends, which were well received by our trade partners and customers.

In the suitings business, the sales growth was driven through a combination of volume growth and increase in average selling prices due to mix improvement. Innovative product offering and gifting solutions for the summer weddings was well accepted by the consumers. Amidst the drop of summer wedding season, we witnessed traction of large purchases by our customers, leading to 8% growth in average transaction value as compared to previous year in the Raymond Shop Network, that is the TRS Network.

The segment delivered an EBITDA margin of 17%, marginally lower as compared to 17.6% in the first quarter last year.

Now let me talk about the Branded Apparel segment, which showed a healthy sales growth by 16% to INR 305 crores as compared to INR 262 crores during first quarter of the previous year. The top line growth was witnessed across all brands with Color Plus, Raymond Ready to Wear, Parx leading the front and well supported by Park Avenue and Ethnix By Raymond.

In a subdued consumer demand environment, we witnessed sales growth in our strong retail network of over 1,400 stores of the Raymond Shop, TRS and EBO with the increase in doors in MBOs and large format store, the sales growth was further amplified. The segment also witnessed an improved EBITDA margin of 6.4% in the first quarter of fiscal '24 as compared to 5.6% in the previous year. The improvement is mainly led due to operational leverage and efficiencies.

Now coming to our retail network. We continue to further strengthen our retail footprint by opening 37 new stores during the quarter, which led primarily by Ethnix by Raymond EBOs, along with new EBOs for Raymond Ready To Wear, Park Avenue and Color Plus stores. The expansion were across metros, Tier 1 and Tier 2, Tier 4 towns on a pan-India basis.

In line with stated strategy of Ethnix store expansion, we opened 15 stores during the quarter, leading to a total of 75 stores of Ethnix by Raymond as on June 30, 2023. The remaining stores were opened mainly for Raymond Ready to Wear, Park Avenue, Color Plus and the Raymond Shop.

Also during the quarter, we have closed some 39 stores, which is mainly a combination of relocation of stores and closure of some Parx brand EBOs as we are focusing on expanding the brand outreach through multi-brand outlets, MBOs, LFS and online channels in line with our stated strategy. Overall, as of June 30, 2023, our retail network stood at 1,407 stores spread across 600 towns and cities.

Now let me talk about the Garment segment, which reported a growth of 7% to INR 265 crores compared to INR 247 crores in the previous year due to continued higher demand from our existing and newly acquired global customers.

EBITDA margin for the quarter was 9.2% as compared to 6.1% in the previous year, mainly due to operating leverage and operational efficiency. Also, the capacity expansion in our plant is well underway as per plan, which will cater to the increasing demand in the coming months.

Let me talk about now the high-value cotton shirting segment, where the top line grew by 13% to INR 192 crores compared to INR 170 crores in the previous year, led by demand for our cotton and linen fabric offerings by our B2B customers in the domestic market.

EBITDA margin for the quarter was marginally higher at 10% as compared to 9.7% in the previous year, mainly due to operational efficiencies.

Also during the quarter from Raymond Luxury Cottons Ltd., which is a subsidiary company as part of buyback process purchased the entire shareholding of Cotonificio Honegger S.p.A., Italy, the erstwhile joint venture partner of Raymond Limited in RLCL for a consideration of INR 19.11 crores. Consequently, with effect of -- from June 9, 2023, RLCL is a 100% wholly owned subsidiary of Raymond Limited.

Coming to the performance of the engineering business, which is consolidated under JK Files and Engineering Limited on an aggregate basis, the sales were maintained at INR 209 crores in the first quarter of FY '22, similar to first quarter FY '23. In the domestic market, the demand momentum was well maintained, especially in the passenger vehicles, commercial vehicles and industrial sectors driving growth in wind years, flexi and bearing categories.

In the export market, we witnessed growth driven by Reindeer and other categories in a globally inflationary environment. EBITDA margin for the quarter was higher at 14% as compared to 12.8% in the previous year, mainly due to operational efficiencies and the impact of euro depreciation has also reduced. However, the devaluation of currencies in certain regions continued to impact the overall business.

Now coming to the Real Estate segment performance. We maintained a strong booking momentum during the quarter. During the quarter, we received a total of 215 bookings in our 3 projects for a total value of INR 330 crores, our 2 brand offerings of Ten X and premium offering under The Address by GS brand has been well accepted into the market.

In the Ten X brand offering, which includes 10x habitats and Ten X era, we received 174 bookings with a booking value of INR 237 crores, as compared to 157 units with a booking value of INR 175 crores in the first quarter fiscal 2023. The launch of Ten X Era project in February '23 contributed to the booking momentum as 80% of the units are already sold in the Ten X Habitat.

In The Address by GS premium brand offering, we received 41 booking with a booking value of INR 93 crores in the first quarter fiscal '24, as compared to 102 bookings with booking value of INR 270 crores in the first quarter of fiscal '23. With 87% of the inventory already sold in this premium brand, in July 2023, we launched The Address by GS Season 2 with similar configuration for which we have received an overwhelming response and we've made a booking of 50 unit -- plus units on the launch day itself.

The construction momentum in all the 3 projects is being maintained well. In the Ten X Habitat project first 3 towers have been delivered, which is 2 years ahead of the RERA time line in December 2022. And the tower 4 to 8 terrace slab has been completed and 27th and 28th slabs have been completed for tower 9 and 10 as respectively.

In The Address by GS, 7th and the 3rd slabs have been completed, respectively, in tower A and tower B. In the Ten X Era project excavation has been completed for Tower B and foundation work is in progress for Tower C.

The business delivered a sales performance of INR 234 crores, which is 18% lower as compared to INR 286 crores in the first quarter of fiscal 2023. The revenue recognized during the quarter is not comparable with the previous quarter, as we follow the percentage of completion metric, for revenue recognition, which is based on incremental percentage of completion of different towers in different projects. The EBITDA margin stood at 23% for the quarter slightly lower as compared to 27.5% in the same quarter last year.

Now let me talk about the working capital and cash flow. On the working capital front, in general, by the first quarter of the year is seasonally weak. However, from the month of June onwards, in order to cater the upcoming festivities and bidding seasons in second half, the working capital starts getting built up, especially the inventory as the lead time in the fabric business from raw material procurement to finished fabrics being available at the retail store is about 3 to 4 months.

The net working capital is stood at INR 1,583 crores as on June 30, 2023, higher by INR 318 crores as compared to INR 1,265 crores as on March 31, 2023, and higher by INR 260 crores as compared to INR 1,323 crores as on June 30, 2022. The increase is mainly on account of increase in inventory catering to the upcoming festive season and also due to construction costs and approval costs related to the new projects.

While the inventory has increased, given the seasonality, however, there has been a continued focus on efficient working capital management. We have seen strong cash collections in place, which has been able to help the reduction in receivables on an absolute term.

Now regarding cash flow, due to increase in net working capital for the quarter, our operating cash flows have been utilized to the tune of INR 149 crores.

During the quarter, we also incurred a CapEx of INR 58 crores, mainly in the ongoing capacity expansion in the garmenting and the engineering business and maintenance CapEx across our various plants in various businesses. With increase in the net working capital and post CapEx and interest cost related outflows, our free cash flow for the quarter was a net utilization of INR 260 crores.

Now let me discuss about the debt position of Raymond Group after considering the utilization after net of tax realization proceeds from FMCG business from sale in Raymond Consumer Care Limited. The FMCG business sale proceeds were INR 2,825 crores with an estimated after-tax realization of INR 2,200 crores. Post this transaction, the Raymond Group has become net debt-free 2 years ahead of stated guidance with over INR 1,500 crores of surplus cash available for future growth.

Now let me explain the utilization of the FMCG sale proceeds. In order to facilitate external debt reduction at consolidated level, Raymond Limited issued nonconvertible debentures to the tune of INR 1,700 crores to RCCL from the total INR 2,200 crores net available, INR 1,029 crores has been utilized for prepayment of external borrowings and balance amount in Raymond Limited and RCCL has been invested into liquid investments.

Our external gross spread, excluding accrued interest, stood at INR 1,071 crores with cash and cash equivalent of INR 1,806 crores. We will continue to utilize certain levels of our working capital required for the day-to-day working capital requirement in the normal course of business. The issuance of INR 1,700 crores NCD by Raymond Limited to RCCL is a temporary arrangement, which will be net of the and the completion of demerger.

This demerger will result into 2 independent net debt-free listed entities of pure-play B2C focused lifestyle and real estate business with significant liquidity surplus at the group level to spur future growth.

Coming now to the interest cost. The interest cost in the quarter is INR 79 crores, which is higher by INR 20 crores on a year-on-year basis as compared to 59 crores in the same quarter last year. The interest cost has increased on account of the following. Our borrowing cost increase on account of RBI rate hikes, which was increased by almost 225 basis points compared to first quarter FY 2023. There's an interest cost of INR 10 crores on the NCDs issued to RCCL, which will be netted off at the completion of the demerger as the effective date of the demerger is April 1, 2023.

Higher interest on lease liabilities on account of increase in the stores which are opened are being taken on a rental basis. Unamortized transaction costs for external long-term loan prepayment from the FMCG business case proceeds.

Now let me discuss about the current status of the operations and outlook. As we all know that most part of the country received incessant rain that impacted the agriculture output resulting in some somber sentiment as far as consumer demand is concerned.

The discretionary spend have been impacted the most primarily due to inflationary pressures and increased commodity prices. Adding to this, there has been extended duration of overall discounting, particularly in Apparel segment. The calendar year also has Adhik Maas that has pushed the festival ceremonies and biddings towards the end of the year.

With Pitru Paksha period now concluding in the middle of October, all festivals are delayed, especially weddings being pushed from November onwards. Given the situation, we expect the primary sales towards channel partners will also be delayed in order to make our products made available in the market for the consumers before the festive season commence.

In line with our stated guidance, during fourth quarter last year's call, we are on track to expand our retail footprint. We will be adding almost 200 stores in the next 12 to 18 months and will follow the asset-light franchise model. This will be driven by large store network expansion for Ethnix by Raymond to cater to fast-growing ethnic wear market.

In the Garmenting segment, export liver continues to be China plus one strategy, and the global retail industry is undergoing consolidation. We have a strong order book in place for the next couple of quarters. The capacity expansion is well under progress to cater to the increasing demand from our customers.

In terms of our raw material prices, while the wool, cotton and poly viscose continue to remain stable, however, prices of linen flag seeds have also been on increasing trend.

In the engineering business, we are witnessing that the domestic retail demand in consumer sectors are healthy, and we expect the same to continue. However, in the export market, the inflationary trend continues to be in the economy of European countries as well as U.S. and currency devaluation of certain developing economies. We are closely working with our customers in assessing the demand and catering to their requirements from raw material cost perspective, the steel prices have recently moderated soften after going through an inflationary turn for the last 2 years. However, we have the ability to pass on the same with the time lag.

In the real estate market, we continue to see growth momentum in the residential market. As you all are aware, that we created a benchmark in the history in the sector by delivering the first phase of the first project Ten X Habitat '24 delivering 24 months ahead of RERA time line and now with over 200 families residing there, the overall consumer confidence has been reinforced. The growing consumer query and interest is a testimony to the fact that Raymond Realty is now a brand to reckon with and has been the largest and fastest selling real estate developers in Thane market.

Recently in July, we launched a premium residential project with total RERA car area of about 1 million square feet with a revenue potential of over 2,000 square feet. We received overwhelming response with the 50-plus units being booked on the launch day itself. Regarding the net working capital, we have been consistently optimizing the net working capital in terms of number of days, and we continue to maintain the same. From a cash flow perspective, there is a continued focus to generate significant cash flow from the profitable growth of business.

Thank you now. I would request the moderator to open the forum for the question-and-answer session.

[Operator]

We will now begin the question-and-answer session. [Operator Instructions] The first question is from the line of Himanshu Nayyar from Systematix.

[Himanshu Nayyar, analyst]

To start with, if you can just give some more color on the demand environment, which clearly has been sluggish. So now do we sort of wait for things to improve externally? Or are we taking any extra efforts? Or are there any internal levers maybe like marketing or price cuts or some more product innovation or any of the other levers which we have internally to push growth higher until the time the overall environment does not improve?

[Sunil Kataria, executive]

This is Sunil Kataria here. I'll take this question. So I think -- thanks for asking this question, a pretty relevant question. But 2 parts to this. First is definitely, we are very optimistic that this environment is a short-term phenomenon, and this will improve once the wedding season kicks in post first half of October. So I think that's the first piece, which was we believe that, in fact, there is maybe a pent-up demand of the wedding season, which will actually play out very bullishly in the second half. That's the first part.

Now having said that, the question is, what is it in the half that is in our hands to stimulate growth further and rather than only waiting for the season to come in. So I think we have got a couple of levers and business of business. So for example, in our suiting business, we have done a series of product innovations in both the mass end as well as in the premium end of the market. And both of them, the mass end innovation that we've done in the product which is aimed at taking more and more share out of the multi-brand outlets has already rolled in the market and in the bookings, we have got a very good feedback.

We expect that to gain more momentum. And the premium and offering that we are looking at launching, that will be rolled out in October and early November. So that's the kind of product innovation support that we are looking at.

In shirtings, again, there has been a series of product innovations at the mass premium end, which again are giving us a lot of leeway. And we are seeing, it's also, if you see, reflecting the kind of growth that we already started getting in the shirting business.

We also believe we have a headroom to grow in the shirting business in terms of share distribution reach itself, and that is going to be a -- that is a very big lever in terms of expansion of our footprint of multi-brand outlets and shirting.

In Apparel, I think our results have been pretty strong. You are seeing a strong double-digit growth, which is happening out. This is led by a focus on improving product designs and product quality -- product portfolio. We have gone into casualization in a bigger way in Park Avenue and Raymond Ready to Wear. And at the same time, we are looking at expanding our footprints. The International business continues to be strong so I will not talk about that.

Apart from this, we have been investing behind brands and our marketing spends have gone up. From September onwards, just pre the season, you will see a lot of new marketing campaigns also hit in the market. So in a nutshell, with product innovation, go-to-market and marketing spend, we believe we are well placed to take advantage of the upcoming season or to stimulate demand.

Apart from this, we are going to be -- we have already started expanding stores. You will see this acceleration of stores over the next 9 to 12 months in a very, very significant manner across our apparel portfolio.

[Himanshu Nayyar, analyst]

Sir, just a small follow-up there. Is pricing cut a possibility? Because we hear that in the new collection, some of the players are resorting to price cuts to boost demand.

[Sunil Kataria, executive]

So okay, I think this pricing cut or increase, I don't think so we are going to do it only from a demand point of what we have a policy is we -- when we make new collections, we actually do a very good product portfolio, benchmarking exercise. Where we see, okay, are we well covered in the mass end of the segment? Are we well covered in the mass premium and the premium end? And that is where we actually relook at the mix.

And that is a mix we -- we had a relook at in the AW'23 season, which has just rolled out. And there is a relook, and we have also added spring summer '24, which will come there somewhere in terms of January end.

Plus, if you see end-of-season sales, this time started early. And that -- while it had a laggard start, I think it panned out -- it picked up pretty much in -- very well in the second half of the season. So that end-of-season sale also has panned out for us. So -- and in fact, if you see, there is 1 brand which is Parx, which is priced at the lower end of the market. There, again, we have taken some strong product portfolio introduction in that mass end of the market.

[Himanshu Nayyar, analyst]

Got it. Got it. Second bit is on the real estate piece. Now that is becoming a significant part of our portfolio. So I mean in terms of future visibility, can you provide some updates on any new projects which we might be looking at outside our own Thane land parcel? Or do you think next couple of years, the focus will be on developing this piece in multiple phases.

[Amit Agarwal, executive]

I'll just answer and I'll ask Harmohan to respond more. See, we have stated very clearly that our growth strategy is very clearly identified that we are going to utilize the Thane land. And I'm sure if you have seen our presentation, we talk about the 100 acres has a revenue potential of close to INR 25,000 crores, of which INR 9,000 crores has been launched of which 50% or most INR 4,200 crores, INR 4,300 crores has been booked. And recently, we launched further a project in Thane which is The Address by GS by Season 2. And we have already signed the JDA in the Bandra, which we should be launching in the next few months. But we have said clearly that we will have the expansion route through a JDA mechanism. So that is where we will expand. And Harmohan, if you're there, if you can add.

[Harmohan Sahni, executive]

Yes, yes. So as far as growth strategy is concerned, I think we've been clear right from the beginning and [indiscernible] away from there, markets have supported us well. So Thane is a good launching pad for the business, and it will continue to be so.

And outside of Thane, we are looking at expansion. First deal is already signed, as Amit mentioned, the Bandra deal. And we are expecting that to be put in the market shortly. Hopefully, all goes well this fiscal itself. We will see the launch of that project, subject to all the approvals being in place.

And as we go along, we continue to look at other joint development opportunity. And having said that, we are very cautious in our approach as to utilizing the capital very judiciously in terms of our growth because this is a cyclical industry, and these are good times. So it is very easy to get carried away. So very cautiously, we are looking at growth, but we see very good growth potential outside of Thane also, and the kind of response we've got from market participants and the deal flow that we have is very, very encouraging. But we are being very choosy in doing deals.

[Himanshu Nayyar, analyst]

Got it. Very clear, sir. And final question, sir, would be on capital allocation. I mean, I believe now we are sitting at more than INR 1,300 crores, INR 1,400 crores of cash on a consol basis. So do we -- and that is, as you say, is growth capital -- so I mean, do we wait for the demerger to finalize any further expansion plans? Or do we have a plan in place right now to sort of -- or at least a broad road map as to how we'll be utilizing the significant amount of cash plus the cash that we'll be generating going forward, which will be a significant number. So what is the broad allocation plan, if you can share something on that front?

[Amit Agarwal, executive]

Sure. See, look, we're sitting today with INR 1,500 crores plus cash. And as I mentioned that during the demerger process, the total debt of the lifestyle will move to the payment consumer care in the -- and the Raymond Consumer Care would have INR 2,200 crores of cash, and it will carry a debt from Lifestyle to the tune of INR 1,850 crores to INR 1,900 crores. So INR 300 crores, INR 400 crores of cash will sit in the Lifestyle business, and then you will have almost INR 1,100 crores sitting on the Raymond Limited, which almost includes INR 400 crores of real estate cash because we are a completely net debt free on the real estate side as well.

So to that extent, I think we have the plan. We have already initiated the plan on the lifestyle side. We are investing almost INR 200 crores of CapEx on the garment -- in expanding the garmenting lines by 1/3 of the capacity and which should be completed over 12 to 18 months. We are investing behind the technology. We are spending almost going to be again in the next 24 to 30 months on almost INR 100 crores on the technology side, especially in the Lifestyle business.

So like that, we have chalked out the plan. And on the real estate side, I think the question is that we want to be careful that we don't want to just go. And as we have stated very clearly, we are not buying any of the land. We will do only a joint development project, which will have enough and more opportunities available in the Mumbai market, MMR region. So that's the way we want to go. And just now the money has come almost 2 months back. So therefore, we have deployed into the liquid investment, and we will continue to explore the right opportunities and expansion plan in order to deploy the capital.

[Operator]

The next question is from the line of Rohan Kale from InCred Capital.

[Rohan Kale, analyst]

I have 2 questions. One is on Ethnix. If possible, would you be able to share maybe like how the growth has been in Y-o-Y in terms of [indiscernible]? Are we seeing any reasons that you maybe need to rework on anything? How are we sort of positioned there? That is one. And on the second part on the real estate division, I see another new launch on your website Invictus by GS, which says coming soon. So is it possible to maybe shed some light on that project as well?

[Amit Agarwal, executive]

Yes, absolutely there. So what I will do is I think Ethnix, it will be difficult for us to say the numbers because what is happening is Ethnix is just a start of the business. And you need to see clearly the cycle for the wedding, which happens actually in the month of November, December, as this is delayed because of the extra month under the Hindu calendar.

So effectively, any comparison right now because we're starting from a very small base would not be meaningful. So that is why I think for us, any commentary on the market perspective is better to be done after November and December. Sunil, you want to add something?

[Sunil Kataria, executive]

I think that's a point which Amit has already said. I think our clear focus right now is on getting -- making sure that we have the best-in-class product portfolio and designs and which I think today we can give a feedback very clearly is that from the stores which have got launched out and consumer feedback that we continuously get from the stores.

I think we have hit bulls-eye at least on the right pricing and the right product quality and design. So I think that is a piece which is very clearly established for us because that's heart of the whole strategy. The second piece definitely is that we have actually moved on to now 75 stores as we sit today.

And the focus is to really expand and double the store network over the next 9 to 10 months. And that's the second focus, which is happening. Come October, we are going to invest every -- and in fact, a month before that itself, we'll start investing heavily behind our marketing campaigns to make sure that we drive footfall toward the stores. And I think that's when we really get a sense of the footfall and the way the business pans out in these stores.

[Harmohan Sahni, executive]

Amit, I'll take the Invictus question. So the marketing strategy, the way we are approaching the real estate business is that we are trying to build 3 brand properties. And one of them is Ten X, which is an aspirational product, which was our first project with 3,100 units. And then the premium version was Address by GS, which was Signature Homes by GES. And the third product offering we have is in the luxury segment, which is going by the name of Invictus.

So the idea is to build these 3 brand properties and use them over and over again at different locations. We didn't run outside of Thane, as per our stated strategy that within MMR, we will be doing. So that -- so the Invictus is the luxury and very exclusive, very limited number of units, large apartments and these are all going to be not finished apartments where the consumer will come and finish them. And we haven't really fully launched that, but the RERA registration was done. In July, we've got a fabulous response on this product also. So we have a very high level of interest on that. So that's Invictus.

[Amit Agarwal, executive]

Just to supplement one thing. You see, we enjoy such a great market share for 5 consecutive quarters. We are the #1 market leader in the Thane market. Consistently, our products sold have been the highest. If I take 1, 2, 3, we almost, I think, 30%, 28% -- to 30% market share in the Thane micro market for 5 consecutive quarters.

[Rohan Kale, analyst]

Sure, sir. Just a follow-up on Invictus. So you mentioned about it being in the ultra-luxury segment. So will these be basically separate projects? Or will they be like maybe let's say out of a project with, let's say, 4, 5 towers, one of them will part of the an ultra-luxury. Just for a clarification on that.

[Harmohan Sahni, executive]

So all options are open in that sense, depending on the land that we are trying to develop each land will have its own characteristics and the planning constraint. So based on that, it can either be a separate gated community or it could be part of a larger complex where there could be some addressed by GS and some in meters, both possibilities reduced.

[Operator]

The next question is from the line of Prerna Jhunjhunwala from Elara Capital.

[Prerna Jhunjhunwala, analyst]

Sir, I would like to understand this branded apparel growth in this quarter a little more in detail. If you could share some channel-wise sales mix for the quarter and what really led to the growth apart from EOS?

[Amit Agarwal, executive]

Yes. I think very simple. You see the product range we have introduced. You know that we were a little bit a formal company, and there was less and less casualization in the past. I think the whole focus has shifted to significantly boost the casualization path. And secondly, you have also seen some bit of a store expansion, which is happening and with a very focus, which market needs what kind of a product that has helped us to achieve in the subdued environment also to gain and increase the products and the growth.

[Sunil Kataria, executive]

So just to add on to supplement this data, apart from one thing that we believe that the casualization piece that we have laid out in Parx but buffing of portfolio, in Park Avenue in Raymond Realty, I think that started doing well. We also have seen that the apart from our own retail channel expansion, which is helping us, we're also seeing what is coming -- where we think we are gaining market share is multi-brand outlets.

And also, there is a LFS organic expansion of the footprint, which is also helping us because we are now getting much more acceptability because we have a larger portfolio across multiple types of LFS. And I think, clearly, we have seen some gains happening across multiple types of LFS.

So I think it's a very, very -- I would say, all-encompassing gain across channels, which is our own retail stores, MBO, LFS as well.

[Prerna Jhunjhunwala, analyst]

Just a follow-up on this. If you could put in some numbers to this in terms of growth or market sales mix or something to help me understand...

[Amit Agarwal, executive]

So basically if you think Prerna what has happened is that we focused really on the Parx, which has helped us to grow especially with MBO and the LFS channel. Then you have also seen a growth on the general MBO expansion and we LFS where we are keeping our products.

[Sunil Kataria, executive]

And also, we are seeing actually now it's a twin strategy may be playing out for us that we are seeing both premium brands as well as the mass brands doing well for us. So we have seen pretty strong growth in ColorPlus and Raymond Ready to Wear, as well as Parx doing pretty well. So I think both sides are playing out.

One hand, we are getting -- thanks to the improvement in our product portfolios and focus we're getting inroads into maybe multi-brand outlets. And in LFS, it's happening both at the premium end of LFS as well as the value LFS, which is now coming back into play. And at the same time, brands like ColorPlus and Raymond Ready to Wear, which are more premium brands are gaining because we are doing well through our own stores, and there is also footprint expansion also happening there.

[Prerna Jhunjhunwala, analyst]

Understood. Sir, how much of your exclusive retail stores would be COCO and franchisee driven?

[Amit Agarwal, executive]

Yes. So total our COCO stores overall footprint are roughly around 10% to 11% of our total business and the rest are our franchisee stores. So we are very focused on making sure that -- see the strategy for us in COCO stores is that if there are some very, very marquee locations, which are high-end malls or even some very high-end High Street where, comps we know that, okay, the real rate cost may be have, but those properties are market property, then they actually drive a lot of brand equity per se apart from footfalls. Those properties we'd like to invest ourselves. But otherwise, we'd like to follow a more asset-light franchisee model.

[Prerna Jhunjhunwala, analyst]

Okay. Understood, sir. Next question is on garmenting piece. We saw 7% top line growth, but our EBITDA growth was 62%. Was any one-off advantage that we had in EBITDA? Or was it only input price driven? Or was it sales mix? Please help us understand this EBITDA expansion in garmenting business as well as sales mix in this garment -- which is driving the growth?

[Amit Agarwal, executive]

What has happened is you see this is exactly the China plus one playing fully well. Now previously, the customers who are buying from China, are starting to shift here. And some of the big players, very, very marquee players have come to us and who in turn give us comparatively better pricing for our products, and that -- and then you go to throughput more.

And if you increase the throughput, you get operating leverage and operating efficiencies. So it is let's just a bit coming from the sales price improvement, product mix improvement and a bit coming from the operational efficiency and operational leverage.

[Prerna Jhunjhunwala, analyst]

Okay. Sir, would you -- would it be fair to assume that volumes -- would volume growth would have been lower and price growth would have been higher because of mix improvement?

[Amit Agarwal, executive]

Yes, you're right. It will be volume growth is comparatively lower compared to the, what we call, price improvement because of the mix. And see, at the end of the day, what is happening is that we also have an opportunity right now as we continue to expand 1/3 of our capacity that some of the volumes which are a little low price, we will keep it when we have the expansion of the facility, which we should see some benefits coming as quick as in the next 6 months. So therefore, we are taking a better priced order right now and pushing some of the lower-priced orders to when we have the expanded capacity.

[Sunil Kataria, executive]

And one point is just like to add is that thanks to -- see, we are also doing one thing in our strategy. We are now expanding geographies globally in a very, very big way. So let's say earlier, we would have very strong clientele coming from markets like U.S. Now we are focused on new customer acquisition within U.S. But at the same time, you opened up markets in Europe, many clients.

And those are new customers which are coming into play are some very large global customers. And they are also opening along with new geography markets, they're opening new categories for us. So one of the pieces we are seeing is maybe shirts is becoming also a new emerging growth category for us within the whole mix itself. Thanks to new markets and new customers coming into play, which are driving almost fundamentally different mix itself for us. And as you know, shirts has a much higher [ revival ] rate and much higher turnover within a wardrobe than what a suit would have otherwise or jacket would have.

[Prerna Jhunjhunwala, analyst]

Okay. Understood, sir. And the expansion that we're doing for INR 200 crores in this business. Is it for only shirting? Or is it a mix of woven as well as hosiery products?

[Sunil Kataria, executive]

Now this is across trousers, jackets, suits and it's complete across the wardrobe.

[Amit Agarwal, executive]

Yes. And we don't do hosiery and we don't do woven.

[Sunil Kataria, executive]

Yes.

[Prerna Jhunjhunwala, analyst]

Okay. Okay. Understood. And last question on this segment only. Could you help us understand this new marquee customers. If you could name 1 or 2, which would just help us understand.

[Amit Agarwal, executive]

We are bit hesitant, reluctant to tell you the names, but I can tell you some of the top European names, which you can think in mens clothing, they are with us.

[Sunil Kataria, executive]

With global footprint. These are top European brand with global footprints.

[Operator]

The next question is from the line of Aliasgar Shakir from Motilal Oswal Financial Services.

[Aliasgar Shakir, analyst]

I had a question on the branded apparel business. So we have communicated our strategy to expand our network. So while we do that, what kind of margin trend we should build given that you will be rolling out aggressive network. Should we expect the margins in the near term to kind of see some impact because of the aggressive store addition or because this is going to be on a FOFO model, it may not have any material bearing and we should see continuous improvement in branded apparel margin. So in that context, how should be the 3-year trajectory and where should it settle the apparel margin?

[Amit Agarwal, executive]

Yes. No, thanks, Ali. I think we said that the way we are growing this business we are looking to 3 significant aspects of improving. Number one, what you need is a store expansion. And we have stated very clearly that in the next 3 to 4 years, we would take our EBO expansion from a current level almost double. We will open more than 450 to 500 stores over the next 4 years or so. That is a big expansion and exposure creates demand. That is number one.

Second thing, what is also happening is when you are selling and expanding of this level, you will automatically get a lot of operating leverage. So that is -- secondly, it will help us to improve the margin significantly. Third thing, as we have also talked about that we are very clearly investing behind these brands and making the products like the casualization on one hand, premiumization on the other hand.

Second thing, we will put money behind, as Sunil talked about immediately after the Shraad and such thing, we will put out a large marketing campaign. So my view is that we should be good in the range of 13% to 15% in the next 3, 4 years from now, which is in line with all branded players.

[Sunil Kataria, executive]

And one thing which really happens as we grew this now, we're seeing. See, finally, after you created great products, what matters in this category also is brand salience and brand awareness. Now you can actually go ahead and do large brand investments. If your footprints are stronger, your brand has got a scale in terms of reach.

Once -- as that has started happening, we are actually planning -- we are investing behind these brands also because we believe now we've got a mix buy and large right with the footprint, right? And we are going to do brand investment. Now it's a very difficult thing for me to do a brand investment and get return on it if I've got 40 stores or 50 stores per brand, it becomes a very different game at the moment. I have about 150 stores per brand. And that is, I think, going to play out, which also, in a way, become, I believe, kind of flywheel in itself.

You do good products. You could do brand investments. You have the right go-to-market, and it's a kind of good churning model in itself. We didn't drive scale. And that's I think the model we are trying to build.

We will -- in this entire game actually it will be a very critical driver for us. On one-off hand, we will try, as you said, Raymond Ready to Wear brands. We'll do Park Avenue and ColorPlus, which is in the normal apparel business. But any think there will be, again, a critical area focus. We have 75 stores. We are targeting to double this over the next 9 to 12 months, and there are investment campaigns which will happen behind Ethnix as well.

[Aliasgar Shakir, analyst]

Understood. This was very detailed. Just a quick follow-up. So 13%, 15% you were talking is post IndAs or pre IndAs and at what revenue scale we should be able to achieve that?

[Amit Agarwal, executive]

Clearly, this is the post IndAs because now everybody talks that kind of a number because very confusing to talk the other pre IndAs. So this is obviously post IndAs and what we are talking about today, we are on INR 1,400 crores, INR 1,500 crores kind of a run rate on the revenue side. I think we see, based on the store expansion and such things in the next 3 years easily hitting more than INR 2,000 crores, INR 2,200 crores of revenue.

And then when you are hitting the INR 2,000, INR 2,200 crore revenue, you should be able to achieve this 13%, 14%, 15% EBITDA margin, not a doubt.

[Operator]

Sir, the current participant seems to have dropped from the queue. We will proceed with the next question, which will be from the line of Nirav Savai from Abakkus Asset Management.

[Nirav Savai, analyst]

So my question is related to the real estate part of it. We have indicated in your presentation that we have sold 50 units of The Address by GS2. So would it be able to quantify the value of the sales for this project?

[Amit Agarwal, executive]

Very clearly, the recently launched project, we have said it's 1 million square feet with a INR 2,000 crore potential.

[Nirav Savai, analyst]

No, I'm trying to understand the 50 units, which has been sold. What would be the value of that 50 units which has got sold?

[Amit Agarwal, executive]

Since it is -- for this quarter, it is sold, we are not going out specifically and telling you. But it is Address by GS season 2. So it is exactly similar pricing or slightly better pricing compared to the Address by GS1. So you can just do the math.

[Nirav Savai, analyst]

And this Invictus is yet to get launched, right? I mean, or is it something which is already launched?

[Amit Agarwal, executive]

So [indiscernible] that it is soft launch has been done. We have got the RERA approval. We have not official, official made it a big launch, and we have already sold some of the apartments also in that.

[Nirav Savai, analyst]

Right. So we will see some contribution for these 2 projects in the second quarter?

[Amit Agarwal, executive]

Yes. But when you do the RERA start, we do not see immediately for the next 1, 2, 3 quarters really a big revenue because we follow the cost of completion method.

[Nirav Savai, analyst]

The presales point of view.

[Amit Agarwal, executive]

Yes. Yes. Presales, obviously, you will see, 101%.

[Nirav Savai, analyst]

On the second quarter onwards, these 2 projects will start [indiscernible]. In terms of the pricing, if I were to compare Invictus with The Address, what would be the premium if you can quantify in percentage terms, carpet area?

[Amit Agarwal, executive]

Harmohan, are you there?

[Harmohan Sahni, executive]

Yes. Can you hear me?

[Amit Agarwal, executive]

Yes, yes.

[Harmohan Sahni, executive]

So to begin with the premium is about 3% over Address by GS. And we are hoping to get a further gap as number of units sold has been very, very encouraging.

And just to add to what Amit was saying that in the quarter that we launched a project, there are 2 integrations, which happens, of course, are presales immediately gets a boost up because launch sales are always higher than in the sustainability sale. But what happens is that all the expenses relating to that launch start reflecting in the P&L. And as per the accounting policy, they have period costs. So these 2 implications happen every time a project is launched.

[Amit Agarwal, executive]

And just to add one more thing. When Harmohan mentioned 3%, you have to also assume from the cost side that the investor is a bear shell delivery. Whereas the Address by GL, you have a builder finished facility. And that also has a cost implication. So one should consider that aspect as well.

[Nirav Savai, analyst]

That's right. Right. And would it be possible to throw some light on pending receivables of what we have sold and what is expected in FY '24 from the sold inventory on the collection side? .

[Amit Agarwal, executive]

See, this is based on a milestone, the whole sales, what happens is based on the milestone completion that you reach the INR 27 crores, then you get some money collections and so on and so forth. So therefore, it is largely dependent upon the construction piece. Otherwise, when we have done INR 4,200 crores of sales, you can well imagine, I think we have collected from almost INR 2,000 crores, INR 1,700 crores, INR 1,800 crores we have collected, the balance is yet to be collected.

[Nirav Savai, analyst]

I'm just trying to understand, in case if we can get some numbers from the sales old receivables for '24, at least we get some idea about the kind of collections or pending receivables, which we would be getting this year.

[Amit Agarwal, executive]

No, I think that would not be appropriate because what happens is, it depends on the construction pace because as you keep continuing to construct, you will get the demand raise for the customers, and then they will make the payments.

So therefore, it is too premature for me to say right now that how much is the receivable because it has not yet become a receivable. Unless until you do this milestone activity, it will not turn out to be a receivable. I hope that is clear to you.

[Operator]

We have the next question from the line of Priyanka Trivedi from Antique Stockbroking.

[Priyanka Trivedi, analyst]

Yes. My first question is that you highlighted that we would be investing around INR 100 crores in tech. So what are the digital initiatives that we are taking in front end as well as the back end to bring in the efficiencies?

[Sunil Kataria, executive]

Okay. So I take this question. So in the license business, we have clearly laid out a road map, which is both a base tech upgradation model and then a digital enhancement model. And there is a project which will pan out over the next -- which has already started in full swing and would pan out over the 36 months or so.

The first and first big most project, which is currently underway, is an upgrade of our multiple legacy SAP system into a very advanced consolidated and integrated S/4HANA project. It's already kick started. We're in the middle of it. We expect to complete that in the period of by July, August, September in that quarter next year, and that will make sure that we are the state-of-the-art and one of the best enterprise goals in this industry in the country.

Apart from that, we have mapped out certain bolt-on projects on S/4HANA which are aimed at improving and optimizing. And I would say last algorithm-based B&M modules, production planning modules and also in terms of working on vendor management module, which we are doing. So that is another -- those are other 3 or 4 projects, which are already identified in the various stages of coming on board.

Some of them will go parallel with implementation. Some will happen in the second phase, which is post the S/4HANA implementation. Today, we have already shifted over from an older core system across all our entire 1,400 stores to completely state-of-the-art new post, which is Dynamic 365, and that has got completed and rolled out in the quarter 1 of this year. This gives us an ability to really get real-time data and analysis in terms of data from our various stores and link it or back to a supply chain.

The core thing which we are doing right now is we have set up a completely independent e-com and omnichannel teams within our business. It's a new capability, which we identified we need to build last year. It has happened over the last 6 months. Those teams are already taking place. And right now, as we talk, we have started building our -- and upgrading our omnichannel capability and what we'll call as endless aisle. And we hope to see that coming through also in the next 6 to 9 months.

So I think in a whole, these projects are going behind, a, upgrading the enterprise core and then building multiple omnichannel stroke supply chain enabled digital initiatives across those. We see, there are a lot of benefits. In fact, I will define the benefits, the benefit should come to these projects. One is obviously a huge amount of visibility of data, which will help us improve operating efficiencies across the organization.

Secondly, I think it would give us a huge visibility and analysis into consumer databases, whereby we can then drive very focused and micro marketing initiatives to drive a better price sell-through, upgrades on sales, uptick on production value, build size, et cetera.

[Priyanka Trivedi, analyst]

That was very detailed response. Sir, my second question was we've mentioned in the presentation that we've closed around 39 stores during the quarter. So are there any further planned closures in our Branded Apparel space? And out of the 200 stores that we are going to open during the year, how much of that would be excluding Ethnix?

[Amit Agarwal, executive]

So look, I think the closure what is happening is in this process, maybe I had opened a store on a certain place in the High Street, which does not cater to the wedding market. So then what we said was let us close this store and move 100, 200, 500 meters from that place and open a new store. And that store is under construction or such things. So we are not closing per se, store that we are closing. It is mostly relocation and some of the places where we are thinking that MBO can do a better job in terms of sales of our Parx brand, we are doing that.

[Sunil Kataria, executive]

Yes. And actually, you have 1 call, which we were very clear, I can actually remember in some of the earlier analyst calls -- investor calls also we talked about it that within our branded apparel, we have identified, and I'm talking the non-Ethnix business right now. We have clearly identified 3 power brands, which will be driven by retail footprint, which is Park Avenue, Raymond Ready to Wear and ColorPlus.

And in case of Parx, yes, we have shut down some stores because we are exiting the exclusive branded outlet strategy of Parx. We believe it's a mass premium brand. It requires actually a much far intense deeper reach, which can come to us through actually third-party reach, which is like multi-brand outlets, online channel, value LFS. And I think that's the area which will be -- through which we will be driving Parx and the strategy there will be to gain market shares. While in the other 3 brands, along with Ethnix as a fourth brand, we will be driving strategy clearly EBO strategy.

[Priyanka Trivedi, analyst]

Okay. Got it. And sir, my last question would be with regards to our ad spend. So how much of that has been incurred during the quarter versus the last year? And how is this expected to pan out for the year?

[Amit Agarwal, executive]

I'll tell you in terms of panning out. So I think what has happened is, as we have said that our sales and promotion and ad spend is in that range of INR 45 crores, INR 50 crores for the company, we are stocking at similar level of INR 45 crores, INR 50 crores. That is the way we have spent.

But in this quarter, the idea was obviously less because the big spend we need to do is closer to the wedding season, which we just talked about, especially on the Ethnix area, I think that is something which we will do on the ad and the sales promotion. We do not consider separately these 2. We consider as 1 bucket between ad and sales promotion. And obviously, you will see more activities during October, mid-October, November, that kind of period, where we will have larger sales activity there.

[Sunil Kataria, executive]

And as part of our non-operating exercises, there's a phasing, which is done because we know we have linkages of consumer footfalls to season, which is coming in. There are linkages to festive occasions and wedding in this kind of segment. So ultimately, the plans are made, the marketing campaigns are made in line to sync with those initiatives, and that is something which we will receive.

[Operator]

As there are no further questions, I would now like to hand the conference over to the management for closing comments. Over to you, sir.

[Amit Agarwal, executive]

Thank you very much, and we appreciate it. And we wish everyone all the best and look forward to talking to you in the next quarter.

[Operator]

On behalf of Antique Stockbroking Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.