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Raymond Ltd
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Ladies and gentlemen, good day, and welcome to the Raymond Limited Q2 FY '23 Conference Call hosted by Antique Stock Broking Limited.
I now hand the conference over to Mr. Abhijeet Kundu. Thank you, and over to you.
Thanks on behalf of Antique Stock Broking, I would like to welcome all the participants in the Q2 FY '23 conference call of reminded. I have with you Mr. J. Mukund, who is the Head of Investor Relations of Ron Limited. Without taking further time, I would like to hand over the call to Mr. Mukund. Over to you, Mukund.
Thank you, Abhijeet. Good evening, everyone, and thank you for joining us for our Q2 FY '23 earnings call of payment. 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 discover slides. Today, we have with us from the senior management of Raymond, Mr. S. Fukuda, who is Director of Raymond Limited; Mr. Amit Agarwal, Group CFO; Mr. Sunil Kataria, CEO of Lifestyle Business; Mr. Harmohan Sahni, CEO of Realty Business; and Mr. Jatin Khanna, Head of Corporate Development.
Now I would like to hand over the call to our Group CFO, Amit, who will give you the summary of the company's quarterly performance before we open up for Q&A. Over to you, Amit.
Thank you, Mukund. Good evening, ladies and gentlemen. Thank you for joining us today for the earnings call to discuss our results of second quarter for the fiscal 2023.
First of all, I would like to wish you all a very happy Diwali and a new year. I hope that all of you had a wonderful festive season with your near and year 1. It has been a much awaited occasion for all of us in India and the festivities have assured in a spirit of optimism and hope.
Let me now start with giving you a brief overview of the second quarter of the current fiscal. It has been a strong quarter that has seen encouraging demand with life returning to normalcy. Majority of physical offices have resumed and work from home has now more or less taken a back seat. We have also seen an increasing number of social gatherings owing to festivals and travel and tourism bouncing back with vigor. All these factors have been good contributors in maintaining a healthy momentum in consumer sentiments that witnessed consumers being on a spending spree.
As far as Apparel segment is concerned, the end of season sale extended till mid of August, and we witnessed lower discounting by brands in the market. In addition to the surge in shopping for festival, we also saw an uptake in our new product offering in terms of design and functionality. We have been consistent about delighting our consumers with freshness in collections across our store network.
Now let us jump into the second quarter of fiscal '23 performance. Raymond Group has embarked upon a journey of enhancing profitable growth and has maintained the momentum on a quarter-to-quarter basis across businesses by capitalizing on existing offerings, along with a new range of products and services. Our sustained focus on cost and working capital optimization has reaped results in improving our performance across businesses. We're happy to share that our second quarter of fiscal '23 has recorded the highest ever quarterly revenue and EBITDA. This quarter performance is the fourth consecutive quarter of record performance.
Our consolidated revenue have grown by 38% to INR 2,191 crores from INR 1,583 crores in the second quarter of fiscal 2022, driven by strong demand across all businesses in both domestic and export markets. I am delighted to share that we have clocked highest of our revenue and have achieved highest quarter 2 EBITDA of INR 358 crores with an EBITDA margin of 16.3% in the last 10 years. It is hard to share that we have a profit after tax of INR 159 crores, which is a growth of 198% as compared to INR 53 crores in second quarter of last year. Also as compared to pre-fundament levels of same quarter, we have delivered profitable growth across segments with the revenues in second quarter of fiscal '23, higher by 15% versus INR 1,913 crores in second quarter of fiscal '20 and an EBITDA margin at 16.3% in second quarter fiscal '23 was higher by about 390 basis points versus 12.4% in second quarter of fiscal '20. Our second quarter reported profit after tax of INR 159 crores is 89% higher as compared to INR 84 crores in second quarter of fiscal '20.
Now let us go through our segment price performance for the quarter. Branded Textile segment maintained quarter-on-quarter strong performance with a top line of INR 912 crores and a robust EBITDA margin of 22.3%. The top line grew by 26% as compared to previous year same quarter sales of INR 722 crores. The revenue performance was driven by a strong demand for premium product categories across suiting and shirting fabrics. The trade channel sales grew at the backdrop of strong bookings driven by product innovation that were well received by our trade partners. In addition to the strong festive demand, there was sustained demand for the office with an encouraging response to our casual wear categories by the customers.
In the suiting business, reopening of offices led to a resurgence in demand for Woolrich blends and premium poly visco category that is an app choice for suit and travel. In addition to the exotic and exclusive collections, the newly launched stretchable and sustainable collections, including Spanx, Supernova and Technosys, Techno Stretch receiving a promising response from customers at cost. Our social initiative, garment exchange program in association with Kunj, which was executed across our 1,000-plus strong TRS network, the Raymond shop network, has received great response at about 3 lakhs pond garments were given to the lesser privileged sections of society under the close Forward program.
Now let me talk about our B2C shirting business, new seasonal collections inviting latest designs and comfort, which is offered by premium quality cotton and linen drove higher realizations and better product mix. As India went on a shopping street, our 1,000-plus TRS network stores spread across 600 cities reported 26% growth in average transaction value as compared to pre-pandemic second quarter fiscal '20 levels. The increasing disposable income and the exposure to newer fashion trends have resulted in consumers widening their wardrobe choices that are suited for different occasions beyond work. The segment reported a robust EBITDA margin of 22.3%, driven by a diversified product mix in suiting as well as shirting fabrics and enhanced operational efficiencies.
Now let me talk about the branded apparel segment, which showed a very strong sales growth of 67% to INR 370 crores as compared to INR 221 crores during second quarter of previous year. As mentioned earlier, the resumption of normalcy along with the launch of our products, inviting new design assets in line with global fashion trends are resonating well with consumers as they are seeking freshness in their bottles.
Our performance was driven across all brands of Park Avenue, Colas, Raymond Ready to base and PARP, which offers a plethora of options for consumers to dress up across occasions. We have been optimistic about the ethnic wear as a segment, given the increasing demand for the category as a patient and we have launched collections while ranging from same smart ethics to bedding there and expanding our presence in the segment through Ethnic by Raymond. The performance was driven across our retail network of EBOs and the TRS.
During the first half of the year, we have opened 21 EBOs on a net basis. Currently, our EBO network is performing well. And as we have received an altering response from our customers for our new collection in 4 product portfolio and casual category. There are plans underway to make us strong for it into the ethnic segment through our brand, Ethnic by Raymond until date, we have got an overall 5 stores. The segment reported an EBITDA margin of 9.7% as compared to 3.4% in the same quarter to this year, driven by continued operational efficiencies.
Now let me talk about the retail network. During the first half of the year, we have further strengthened our retail footprint with net addition of 25 stores across Metro Tier 1 to 4 towns, making a total count to INR 1,376 crores spread across 600 tons advantages of September 2022 from reining 151 stores as of 31st of March 2022. Amid the backdrop of strong consumer sentiment, we witnessed strong traction in secondary sales with significant improvement in average transaction value. As mentioned earlier, the TRS network reported a 26% growth in average transaction value as compared to pre-pandemic levels, respectively.
Now let us talk about the Garmenting segment, which reported a strong word of 25% to INR 266 crores compared to INR 212 crores in the previous year due to higher demand from our existing and newly acquired global customers. with a key export market of U.S., Europe and Japan continues to grapple with inflation and supply chain issues. However, the continued adoption of hybrid work culture, there has been a growing consumer demand for office wear, and we have been coiling increasing the bulk business and tailored clothing from customers. Given our strong capability in the manufacturing fabric as well as Garmin, increasingly, we have acquired new customers on account of vendor consolidation, along with the China plus 1 strategy adopted by leading global brands who prefer integrated suppliers to be their core partners.
The EBITDA for the garmenting business in the quarter was INR 23 crores with an EBITDA margin of 8.7%, while it was INR 22 crores of EBITDA in the previous year. The EBITDA was impacted due to increase in the order intake as we're adding workforce to cater to the increased demand, and we are supplying to high-end global retailer, adequate training is to be imported to the employees in order to ensure high-quality product delivery, which resulted in increase in the employee cost.
Let me talk about the high-value cotton shirting segment, where the sales grew by 42% to INR 211 crores compared to INR 148 crores in the previous year due to higher cotton fabric sales in the domestic market, along with the demand tailwind from B2B customers. The segment reported an EBITDA margin of 13.2% for the quarter as compared to 17.4% in the previous year, lower mainly as the inventory consumed for production was at a higher cotton prices and as we know, the ability to largely pass, we have been able to pass on the increase in cotton prices over customers with the time line.
Now let us have a look at the performance of the engineering business, which was consolidated under GTF and Engineering Limited in the quarter 3 last year on an aggregate basis. Sales grew by 4% to INR 228 crores as compared to INR 219 crores in the previous year. In the domestic market, the demand momentum across sectors was maintained for most of our product categories, [indiscernible] Power to continue to perform well. In the export market, the inflationary environment and depreciation of euro currency, our B2B customer has deferred certain orders as they are discussing a slowdown in the secondary demand.
On an aggregate basis, the business reported lower EBITDA margin of 12.8% as compared to 15.5% in the previous year. The margin was lower mainly due to higher steel prices, continued higher freight costs and depreciation in the euro, which was partly offset by the higher productivity and efficiency measures.
Coming to our U.S. business, which is in the real estate segment, has been gaining greater heights of success. And I'm delighted to share that for the second consecutive quarter, we have been rated #1 in Hana market with projects being #1 and #2 in terms of value of units sold in the region. This rating has been done by CRE-a, a leading real estate research platform. our premium quality offering in 1 and 2 BHK projects of Tenet and premium 3 and 4 BHK projects of address 5G, which is backed by fast-paced construction activity has been well appreciated by the customer. We are on time to deliver home in the first tower, 2 years ahead of Fera timeline and numerous first-time homeowners will get the key to their dream homes in December 2022.
The sales grew 3x to INR 247 crores from INR 81 crores in the previous year. And the EBITDA margin stood at 25.6% as compared to 20.6% in the previous year. The top line growth was mainly due to higher number of bookings in both the projects with construction momentum being maintained. Our first project, Tenet received 120 bookings in the current quarter, higher than 107 bookings 50s in the same quarter of the previous year. In total of 4,186 units have been booked as of 30th of September 2022, which accounts for approximately 85% of the total inventory launch with a booking value of over INR 2,200 crores.
Our new premium residential project by the name The Address--, which was launched in third quarter of fiscal 2022 continues to receive great response from customers with 68 bookings during the second quarter. The total bookings made for this project accounts for 349 units, which is, once again, 85% of the total inventory launch with a booking value of INR 834 crores. It gives me an immense pleasure to state that within 11 months of the project launch, about 64% of the total inventory has been booked.
As far as construction is concerned, our fast-paced construction activity continued in all 10 towers of the NX project as well as on the 2 towers of the Atres project. Let me talk about the pace of the construction. In the 10x project that otherwise construction status is as follows: the lift installation electric fitting interim work in progress for the first over 1 and 2 and 3. In tower 4 internal finishing works are in focus. Tariffs completed above tariff works are in progress for Tower 5, 6 and 7. Plasterwork is in progress for Tower 8. 11 cap book has in progress for over 9 and 9 slab was resin progress for towers.
As far as our second project, the Atres is concerned, columns above 4 m and completing work is in progress for Tower8 and columns as a podium first class and completing work is in progress for tower 2.
Now let me discuss on the operating costs, working capital and the cash flow. As far as operating cost is concerned, our OpEx to sales ratio is lower at 24.6% as compared to 26.8% in the same quarter last year and 50.4% of pre-COVID levels of second quarter of fiscal '20. On an absolute basis, while our revenues have increased by 38% to INR 2,191 crores. Our OpEx cost increased by 27% to INR 540 crores as compared to previous year same quarter. Also as compared to the pre-COVID levels, while revenues have increased by 15% on a absolute basis. However, our OpEx cost has decreased by 7.2% to INR 540 crores in second quarter of fiscal '23 as compared to INR 582 crores in second quarter fiscal '20.
At Raymond, we continue to stay focused on costs and numerous initiatives undertaken that have been instrumental in achieving desired cost efficiency, which we have regularly highlighted over the last 2 years. And however, with a sustained focus to drive growth and building a strong brand equity for the future, we're investing in advertisement and sales and promotion expense.
As far as the working capital is concerned, with our continued focus on efficient working capital management, during the quarter, we have been able to reduce the net working capital to 62 days, which is lower by 7 days on a quarter-on-quarter basis from 69 days in June 2022 and by 11 days on a year-on-year basis from 73 days in September 2021. To cater to the strong festival in winter revenue season in second half of this year, we deployed working capital primarily in production and sales, which resulted in increase in inventory and receivables. Hence, on an absolute term as compared to June 2022, the net working capital is higher by INR 169 crore to INR 1,492 crore in September 2022 versus INR 1,323 crores in June 22, Q2.
From a cash flow perspective, at the backdrop of strong profitability, we generated operating cash flow of INR 119 crores and free cash flow for the quarter is INR 55 crores. The cash flow generated from the operating businesses were partly utilized for funding of the working capital and the free cash flow was utilized for debt reduction.
As far as net debt is concerned, the gross debt stood marginally higher at INR 2,096 crore as of September 30, 2022, as compared to INR 2,049 crores as of 30th of June 2022. We continue to maintain strong liquidity levels with cash and cash equivalent at INR 810 crores as compared to INR 739 crores as on 30th of June 2022. The cash and cash equivalent is a combination of cash and bank balances, short-term investments and certain long-term investments with maturity the long-term hold which can be liquidated on a short barter.
Overall, our net debt reduced by INR 24 crores, and it stood at INR 1,286 crores as on September 30, 2022, as compared to INR 1,310 crores as on 30th of June 2022. In an increasing interest rate scenario, we have been able to reduce the average interest cost borrowing cost to 7.65% in second quarter as compared to 0.79% in the first quarter, led by change in borrowing. There's a marginal increase in the interest cost in the second quarter at INR 63 crores, which is higher by INR 4 crores on a year-on-year basis, which is mainly due to higher utilization of working capital facility during the quarter.
Overall, our net debt to equity ratio has marginally improved.
Is the operator here?
Yes, I think there is some drop. Yes, we're reconnecting the call with the management.
[Technical Difficulty] Ladies and gentlemen, we have the management back connected.
Yes. Sorry for this. There were some suite connection. We are back. So overall, our net debt-to-equity ratio has marginally increased from 0.45x in March 2022 to 0.48x in September 22, which is also at a comfortable level.
Now let me talk about the current status of operations and the near-term outlook. The October month was full of festivities and we have witnessed greater demand for our products and services in this period. Also, we have witnessed improvement in average transaction value in our retail stores. Also, we received good bookings by the trade partners for the winter wedding season, with the upcoming winter wedding season, starting from mid of November, we expect the momentum to continue in both Branded Textile and Branded Apparel segment, but at the same time, we're closely monitoring the impact of demand in the current inflationary environment.
With regard to store expansion, we are in line to have 70 stores in the current year across India, driven by Ethnic by Raymond store expansion to cater to the ethnic wear market. In the Garmenting segment, export levers continue to be helping us with China Pason strategy and the global retail industry undergoing a consolidation field. We have order book in place for the next 2 quarters. From a raw material perspective, the wood and the oiliness prices have remained stable. Over the last couple of years, the cost prices have increased significantly. However, recently, the prices have stabilized but remain at a higher level as compared to pre-pandemic levels. However, we have been able to largely pass it on to our customers with a bit of a time lag.
In the engineering business, we are witnessing the domestic retail demand in consumer sector remain healthy, and we expect the same to continue. In the export market, where we cater to multiple secretors across geographies with inflationary trends in economies of European countries and U.S. We are working closely with our customers in assessing the demand and catering to the requirements. From raw material cost perspective, the steel prices have been an inflationary trend and for the last 1.5 years have recently gone. Also, we have the ability to pass on the fine even though with the time line. However, the freight rate continues to remain the core area for monitoring that there is a shortage of containers, which is resulting in de shipments as well as higher freight costs. In the real estate market, we expect the growth momentum in residential markets to continue the construction activity are infusing in both of our projects, and we stay on course to start delivering flags in 10x project ahead of RERA time line by nearly 24 months.
The recent rate interest rate hike by RBI, 1% metro sales imported by central government and increase in GST rates on those contracts from 12% to 18% and increased input prices for the real estate are being closely monitored. From a net working capital perspective, over the last 2 years, we have optimized our net working capital in terms of number of days, and we would aspire to maintain those levels on an annualized basis.
Overall, we would like to state that our debt guidance of being a net debt free company within the next 3 years is on course. The net debt is expected to be substantially reduced through a combination of free cash flow generated from our business and proceeds from corporate actions such as our engineering IP. At Raymond, we are committed to create an organization that upholds our value of trust, excellence and quality in all what we do. We value your support and look forward to being together with each one of you in this general. Thank you very much. Now we are open for questions.
[Operator Instructions] We have the first question on the line of [ Dasari from Karma Capital. ]
Thank you once again for amazing kind of numbers. So I just wanted to understand that since that now we've been growing quarter-on-quarter have been doing so well. So and we're doing better than pre-COVID. So what kind of base do we assume right now that will be sustainable in terms of revenue and margins? Should quarter to be taken as the base for our future growth or due to some seasonality quarter 2 or quarter 3 would be better? So you see some explanation regarding that?
Yes. Actually, thank you. The business has a seasonality. There's no doubt about it. We will have the wedding season, festive season, which would be a peak, so to speak. And we all since we sell primary to our dealer network franchisee network, Q2 seems to have a very big push. But also, we know, as I talked to you, that in the Q4, we have a large number of marriage date, almost 48 marriages are there in the Q4. So we see a good momentum for our business. And I think our focus is clearly, we have built a strong base and grow the base from here.
So if I could summarize, we feel that quarter 3 and 4 could be better than quarter 2 and quarter 2 could be a decent base for us in terms of our margins as well as revenue, right?
Actually, as I said, in quarter 2, we have shipped out. So we have invoiced for meeting the demand for the customers to our dealer network in the quarter 3. So quarter 2 is already at a higher level because that has picked up all the benefits of the fiscal season. Okay.
Okay. So could you just help out and maybe what are our plans for next year or maybe some kind of guidance for FY '25 or what is some short-term kind of growth in terms of revenue and margins? That would be very helpful.
Yes. At this juncture, we are not giving really a guidance in terms of the revenue and profitability.
Okay. That answers most of my questions and cover a done a great job looking forward to you in the next call.
[Operator Instructions] We have the next question from the line of Priyanka Trivedi from Antique Stock Broking.
My first question is on the Branded Apparel business. Could you give us a sense on what would be for the existing stores and like-for-like growth over Q2 FY '20 leverage?
Yes. I'll ask Sunil to respond to you.
Yes. This is Sunil here. So I'll give you broad estimates. So I think a like-for-like growth story because we had also done a reduction in number of stores during provider rationalization. So our like-for-like store growth right now Pecos decent healthy double-digit growth rate that you see.
Okay. And in terms of the margin, the margin that we've delivered this quarter of almost 9%, do you think that could continue in the coming quarters?
Yes. I think the focus on delivering margin is very clear. We have done a very strong cost rationalization exercise over the last year itself. I think the clear 2 areas of focus in the branded apparel business for us will be. But now, a, we are ramping up our product portfolio. So I think that will be one very big area that you'll see us doing. In fact, one team, which I want to put further forward would be that we will see going forward from next quarter onwards to the next year is the casualization them, but that's a very big opportunity. So product portfolio rational expansion is happening.
Secondly, you may have already seen right now a lot of brand investments have started happening after a gas now. So that's the second area we're doing. And third, as Amit also mentioned, we are looking at store expansion. But while doing all this, we expect to make sure that we have healthy EBITDA margins here. We want to hold that.
Yes. And just to add, the best part is the operating leverage. And if you see across our businesses that the operating leverage has improved our margins. As we talked about core, our OpEx cost used to be at 20%, and now we have been able to bring it down to 24.6%. So to that extent, that is truly the benefit which we are going to see in improving the margin.
Okay. Got it. And just on the casualization theme that you mentioned, what would be the share of cash is right now? And what are you targeting it to work?
So okay, I would not able to give you an exact number because if you see 2 of our brands itself are currently cats. So within a 4% -- so that's not the right way to look at it. The way I look at we have portfolio of brands between Raymond, Park even, Colas and Park, out of which past and Kalata 100% casual bet. And the 2 brands which are Raymond and parking are more skewed towards formats. So the theme which I see is what I'm saying is that even within the brands like Raymond and Parkman, we see a foray into casualization should start happening. While 2 of our guys in many cases are scheduled banks.
Okay. Got it And last question is on the real estate business. So just wanted to understand the project revenue and the cash flows that we are targeting from the address by GS project over this time of next 3 to 4 years?
So look, between these 2 projects, we are targeting very clearly revenue to the tune of INR 4,200 crores to INR 4,300 crores, and we expect free cash flow generation to the tune of INR 1,200 crores between these 2 projects.
We have the next question from the line of Ritesh Badjatya from Asian Market Securities.
Firstly, congratulations on the good side of the numbers. So I have a couple of questions. First one is on the garmenting margins. This quarter, we have reported about 7.5%, 7.3% kind of the margins. So just wanted to understand, it is just 1 quarter phenomenon? Or is it a normalized margin also going ahead?
Maybe I think you've done all your questions, and then we can respond to the question.
Okay. So one is this on garmenting margins. Another one is on the real estate side. So in the address by GS, we have seen the collections of INR 200 crores, INR 4 crores against the total booking of INR 34 crores. So it is still just 25% on the collections. So what are -- so how do we see the collection in the coming period? Thirdly, in the real estate side on the Q-on-Q, if we look at the numbers, there is a drop in the saleable area as well as number of units also. So is it because of the higher interest rate actually impacting the demand? Or how do we look at going ahead in this particular aspect? And lastly, we have seen some news regarding ban on the new construction year, Sanjay Gandhi National work within the vicinity of 1 kilometer. So is it impacting us by any chance? And what is the status there? Okay.
Maybe So first question regarding garmenting, I will ask Sunil to respond. And the real estate Harmon will respond as some response.
So yes. Okay. On the garmenting business, if you see that one of the biggest pieces which are working in our favor, and I the context the margin there as Amit mentioned, the China n-plus strategy is leading to a lot of global top players working on us, coming out towards and working with us in the future on the strategic basis. So we have been able to, in the last 1 year, get into very strong alignment with some of the top global brands. Now as a result, what happens, it is a business which has got a highly skilled deliver force. And to meet the global quality standards, you have to make sure that you have great capacity expansion in terms of manpack and we, you have to train them well. So what you end up doing is you end up recruiting manpower cycle around 6 months in advance of a the lines are being put.
So in the light of the strong demand that we are seeing with strategic tie-ups happening with global brands, we are ramping up land part so that we can get them paid and make them fully skilled before they really start working on these high-quality lines. And that is one of the reasons why you're seeing pantry correction on the margin. But actually, this is something which is an investment of the future. we are very happy to see this happen because what this case is this helps us get into a space where we can go and which was even better, stronger alignment. So I think that's the only piece, and this actually should be treated as an investment which is happening currently in our business. Okay.
Okay. So the present workforce addition as well as present our capacity on the government side, what kind of the business growth we can see over the next 2, 3 years? Or do we need also to do some investment. Is there any mindset you have that you have to do some investment on the garmenting side in the next 1 or 2 years?
Maybe. So look, if you can see just the demonstrated performance compared to last year, we have demonstrated a 25% growth in the revenue already. And we see a very clear plan to grow this business as we get more and more opportunity. India is becoming a large textile export destination as people want to move out of China, diversify their supply chain. So we are fully there we are taking the facilities in order to cater to the needs for whatever demand it comes. And therefore, we are training our people, we are adding people. We are adding lines and we continue to grow this business. We see there is a great opportunity for us in terms of taking it to a very different level. And as I mentioned, operating leverage will help us in improving the margins as well.
Okay. So any plans for expansion also in this garmenting side -- on the foreseeable future?
Yes, agree clearly. So what is happening is that we have, in fact, one of the biggest successful pieces for us in this business has been, a, we have increased orders from an existing customer, but we also beat a very strong pipeline and new go -- the way we see it, we are evaluating a very strong expansion, which will happen over the coming years in terms of meeting this increased tie-up that we're doing strategic customers.
Just to give a perspective, we don't need a significant amount of CapEx. There's a small CapEx which we do. And depending upon and the time taken to estimate that CapEx is also not very large. So when we get a customer, by the time the order starts to be executed, we will be able to install the line. But clearly, we have a big plan in this to take this business forward. And on the real estate, I will ask Harmohan to on respond.
We have. Yes. So there are 3 questions that you asked on -- so I will answer the last one first, which is the pending on the national part. There's no impact as far as we are concerned on that. And in any case, Supreme Co port has already clarified for Bombay that 1 kilometer distance does not exist. So it does not have an impact on anyone as of now. So that has already been clarified by in any case, we are not in the vicinity of that, so it will not have an impact even if it was there.
Your second question was relating to interest rate impact on the demand. As far as we are concerned, we are not seeing any impact on that is not going to interest rate increase because as far as Indian consumer is concerned, anything less than 10% is still considered cheap for home loans. So people have seen very high interest rates in the past as far as home loans are concerned. And a profile of our projects is mainly in Tenex, only about 60% people have taken home loans and addressed by GS, barely 10% to 15% have taken home loans. And as of it is also equity. So going forward also, we don't see any significant impact on our demand as far as interest rates are concerned.
And your third question was relating to cash flows of address by GS impacted only INR 200 crores against a fair value of approximately INR 80 crores. So all these sales are on construction-linked payment plan basis where, as you are aware, I mean, that's a normal practice in the industry. And as the construction progress goes on, the collection will happen. We rarely come out of ground as far as I guess we GS is concerned, we are in the parking levels and just the amount of the basement level. So it's a very healthy and strong collection that we've got already of INR 200 crores, which is approximately almost 30% of the total sales value we already have collected. So as the construction progresses, the balance will be collected over the next 2 to 3 years.
Just last one on the branded apparel side. Last quarter, there was some write-off of about INR 98 crores. So for this quarter, this high growth is the reason of this backfilling of this thing or this is a sustainable number going ahead also in that branded acres?
Just there was no write-off of INR 98 crores in the last quarter. And it is the growth in the business. And if you see that the ban has been consistently growing for the last 4 quarters, building up the Apparel business. So there's nothing of kind of a write-off or anything of that nature in the last quarter.
We have the next question from the line of [ Sachin Kasera from Swan Investments. ]
Two questions. One was on the debt. You mentioned that because of the season, there's a lot of inventory in the one. So can you give us a sense as of the IPO proceeds, what type of rate reductions we can see in H2 of FY '23?
Just -- so look, we are not going to give a specific guidance in terms of the number, what it would be. But as in nature, and we have the demonstrated performance that first half is the build phase for the working capital. And in the second half, people sell our dealer network, franchisee efforts, sell the inventory and pay the receivables which gets created on the second quarter and the first quarter the inventory. So that is what we are going to see. As far as the IPO proceeds are concerned, we have clearly outlined that whatever the IPO happens proceeds happens, it goes directly further debt reduction. However, when we talk about in the next 3 years, we will be a net debt-free company. It is based on the strength of the significant cash flow being generated by the businesses because we don't have a large CapEx cycle to run. So all the cash flow generation and the working capital management will go towards debt reduction, which has been clearly shown if I look at it in the last 8 quarters, we have reduced the debt by over INR 800 crores on that debt basis.
Sure. But end of the year, on a full year basis, do you see the working capital for the current financial year being lower than last.
So what happens is it will not be lower than the last year. However, what will happen is that the EBITDA generation will support the funding for the working capital and the free cash flow generated thereafter would be used towards debt repayment.
My question was more in terms of number of days, not the absolute number.
As the number of days. So if you see, we have already reduced from June to September, and we see further reduction going to be there in the by March. Sure.
My second question was you mentioned that you've got some very good inroads and good order booking on the garmenting side. So if you could give us some sense what type of order increase we have seen? And what type of traction that we could see in utilization currently and the ramp up we could see going ahead?
I think, yes. I'll take the question. So if you see what is happening for us right now as a result of this whole China plus 1 strategy. I think one test I want to give you is that we are right now built a very strong capability as a business unit in the garmenting business. there's a strategic realignment, which is happening globally as a result of this, and people are looking for players who are vertically integrated and you can deliver very high-quality garments. And we are one of the players which has got both these capabilities. So that is one context you have to keep in mind. That gives us a huge headroom to go for the vacant space, which is coming across as a part of this China plus 1 strategy. Some of the customers, which I can share in terms of a couple of indicative names, which have come to us, and we are in 2 very strong tours with them is, for example, some of the leading global players would be there. So that is something which you'll have to keep in mind. Some of those names I may not be able to tell you right now.
No. But I'm not asking for specific numbers, but can you give us some sort of indication like if your order booking, if you could share the number of the order booking or if you could share?
I don't do the order booking, but if you see, we have delivered a 25% growth right now. And I think we are very confident of delivering such kind of a strong, healthy double-digit growth going forward also. We have pretty strong confidence. And as was mentioned in the call also, we have clear visibility over the next 2 quarters, but we also believe that we will keep this momentum going.
No. I was saying if you could at least share if your order booking was INR 100 in March or last year September, what is it today? What is the percentage increase in order booking, if you not a specific order booking number per se?
So Yes, it is in the range of 25%. We have increased the order book compared to the last period.
And what would be the utilization levels currently in the second is how much of headroom do we have before we may have to do any more CapEx there?
So this is a constant process that we continue to invest into the line. So we will have, by the time we get the order, as I mentioned, it is a question of 6 to 7 months while you start executing the order. And it is in this time frame, we are able to install a new line. So therefore, we are not going to have a situation that our utilization, our lack of equipment will prevent us to execute an order. And between both India and Ethiopia, we are at a utilization level of 80% to 85%.
And also maybe just one more thing to add here is that we have also got a very strong program on improving our productivity and efficiencies. And that is also something which is coming in handy very much on your current capacity itself.
Sure. And my last question was on the real estate segment. The reported margin around 25% EBITDA so in this, how is the land cost is at historical value, which I believe would be very low? Or is it the revalued cost of the land? And hence, because if the cost is at historical value, then the EBITDA margin should be significantly higher.
Yes. So the land is at historical value. And if you see the secular trend on the margins, it has been an upward trend over the last few quarters and it is continuing to rise as compared to last year also, we've improved it by 5 percentage points. And before that, I mean over the last 1.5 years, 2 years, we have actually doubled the margins from 13% to 25%. And you will see an upward trend, albeit it will be a marginal portend but that's the kind of margins you will see.
And you please understand also this is our first project, which we have started to build. We have created a team of 200 people, and we have a large vision for the real estate business. As you know, we have signed on JD project. Now we are not going to buy the land. We will invest and build the real estate business through the Beyond Hana will be through a JDA project. So you need to build that infrastructure so that you can efficiently construct it. As you know, for us, the execution is the key and the sales velocity. And that is the reason why we are able to deliver 2 years ahead of RERA time lines.
That's understandable, sir. and commendable, but what I'm saying is that when we look at some of the other listed peers also, despite buying land at the current market value, their EBITDA margins are similar to what we report. And hence, in Mumbai, the land is the biggest cost. And then this 25% margin looks to be quite low because in our case, the land cost is almost very, very negligible. And when could be a little more because we right now are building a larger organization. But still optically seeing why a very comments logic, this 25% market looks quite low for the Elite segment.
Every player has a different strategy that we are following. Now I mean we have our own strategy. We are focusing on growth as far as this business is concerned. And if you see the spectrum of margin ranges between 20% and goes all the way up to 45%, 50%, depending on the player that you look at. And each one has its own strategy. Some of them are focusing only on margins and not a very high growth. Over the last 30, 35 years, also, they have not seen too much growth. I mean, if you look at our growth numbers, we have hit almost 1/3 of some of the large players who are you are referring to as high margin, but their growth has been pretty low. Their return on capital employed has been pretty low. I don't want to dwell too much on what competition is doing, but each one strategy is different. If you buy into our strategy, our strategy is more predicated on growth and a reasonable margin.
We have the next question from the line of [ Surya Narayan from Sunidhi Securities. ]
Congratulations for a good set of number. Yes, my first question is towards the real estate base. So what I understand from the follow-up question of the PS person. Is that my understanding is correct if I say when the Navitas is more or less it is completely nearly booked and more of revenues to flow from the others by GS, will the margin be rising from here onwards?
So let us start to understand the way the accounting is done is based on percentage of completion method. So if you see almost 2/3 of the project is sold. And in terms of the construction pace, also almost, let's say, 50%, 55% has been constructive. So therefore, you're recording the revenue based on the completed completion method. So you have still a lot of revenue to be booked on the 10X project itself.
Second, on the addressed, it has just started. Therefore, the revenue on these addressed by GS is always going as of now, it is lower. And going forward, as the construction takes is you will get more and more recording of revenue. As far as profitability is concerned, obviously, in a 10x project, which is a 1BHK, 2BHK pricing will be slightly different compared to a 3BHK and 4BHK project. And it is a premium less. And at the end of the day, the construction cost, either you construct in an AP road or you construct in Honey is broadly the same. It is the question is only about the pricing and the benefit and the margin which you get. Therefore, the cane pricing, based on the cane pricing, the margins are appropriate. We have done a detailed work on this basis.
So how about the premiums are the deals is generally compared to 100? Can you just contain or any ballpark figure realize realization for.
So the margin difference between the 2 projects will be roughly in the range of 250 to 300 basis points.
And the second question is related to the number of square foot that teams to be going through an in the second half. What is the plan in both the cases in the Tensor this year and for the next year?
So in H2, the entire project of 10x will be in the market. So whatever is remaining will be launched. And as far as address is concerned, that also will be fully launched in H2.
See, look, the fundamental factor of the matter is that almost 2/3 of the total inventory has been sold and the project -- each of the project has at least 3 to 4 years to go. So we are calibrating our inventory as well as our sales in order to maximize the realization. So therefore, we will watch the market very carefully, closely to see at the point of time, we released some units, we take a price increase in order to get that. So therefore, we will not be specifically giving you the number of units which we are planning to sell in the second half of the year. We are calibrating based on the number of units as well as the price increases which we take.
So since your question is more on growth, I think the growth will firstly come from our Bandra project. So we have another project coming up in Bandra in quarter in the second half, which will help us grow.
That is in JD, sir? That is the JD yes, that is the date.
So what kind of possibilities from there?
No. So as we said now, the JDA project, we start once we have a decent amount of approval, then only we start the project. Therefore, we are in the process of getting approval. So it is difficult for us to say whether we start in 1 month, 2 months or 5 months. So therefore, as and when we get the approvals in place, we will announce that when we are starting that project.
And given the test completion method, the benefit of that will accrue only in the subsequent year. So you won't see any immediate impact of that in the numbers.
So what is the current sites of the of the band?
So it's currently under planning and approval.
Okay. So when are you expecting it to start?
Sometime next year. Okay.
And regarding textile, just I wanted some clarification of elaboration regarding the ethnic business as to what is the number of stores, EBS or whatever we have launched so far in this year? And what is further to be launched in the subsequent period. And overall, for the next year also because this is the first year. So the next year, what is the kind of strategy we are having, whether we will be having exclusive outlets or will be clubbing under the remorse. So what is the color of that?
And secondly, whether we will be manufacturing all those items or we will be outsourcing from different artisans across India. So what the competitors are bid. So what is the strategy – manufacturing strategy is still starting with regard to ethnic...
Yes. Okay. So I'll take this question. So let me answer your second question first in terms of the manufacturing to sourcing strategy. So as you know, in the ethnic business, the product lines are very, very unique in terms of craftmanship. You have a different kind of segments like from Charan East to Bundles to Cartagena and the smart ethnic so hence, what we try to do is that we obviously try to use the best-in-class fabric from Raymond itself as much as possible in terms of ceremony India. But since it's a very craftsmanship work, the model would be primarily getting it made and sourced at different places through artisans, as you say. And we are building right now a very strong and very unique vendor base of different segments across the country. So that's our point in terms of our sourcing strategy.
In terms of our expansion plans, we are pretty much on track to right now do a 70 exclusive brand outlets this year. and that is a number that we are gunning for Netrix. We already have got reached 50% of that mark. We have 35 already right now. And as I speak right now, we have visibility of almost other 10 to 15 stores, which are under various stages of fitment renovation, it out right now. So I think that market is very much clearly in sight, and that's our goal. We have launched recently very, very fresh collections, which are very unique to the brand at entity of ethnic. And I would like to really appreciate that in the last 45 see as the festive season has begun in, we are seeing a very strong acceptance of our collections. So this is a business, as we know, is a very, very unique business. Raymond is one of the biggest right to win, and we are all on track to all ramp up very strongly.
Okay. And regarding the export inquiries, just wanted to understand which part of the globe, we are getting inquiries, whether it is related to U.S. market or Europe market or anything what are the traditional we presence improved and whether the new markets are opening up our...
What happened to this business. One is there are obviously new markets opening up in parts like Australia, Europe as well. But I think one of the biggest theme, which is paying out for us is the strategic alignment, which are happening with the top global players who may be headquartered in one country, but the businesses that they are asking us to cater to are pan-group businesses. So in that sense, it is not uniquely placed to one geography because these customers actually cover a large part of the world itself. I think that's a theme which is playing out really for us. Apart from some of the geographies like Europe also opening up very actively for us.
And truly, the diversification of supplier base, and that's the benefit which we are going to get, and we have seen that. Some of the people who have not come to India, they have come to India and have started to partner with us for the exclusive sort of supply of garments. And let us not forget that we are a uniquely positioned that I start manufacturing right, the fabric, the tailoring and the garmenting and shipping it out. So to that extent, we have this unique advantage.
Okay. And sir, regarding the large fashion were so are we partnering with some -- something like a 7 platform of nitrogen platform. So what the industry is aligning to where the significant traction elsewhere is being seen. So what is the digital strategy in there because people love to see for stocking happening through digital mode. So what is the case in...
So I think the question which you're asking is what is our e-commerce digital omnichannel strategy? Is that a question, if I get it right?
No, not really. It is related to the question between retail there is a strategy with the many companies are adopting the hypers and platform, which we were just going to. So whether we are inquiring who are going in the direction for the virtualization of the design. I mean before somebody can buy a place order, we want to see what in things. So what do you...
If I get your question right. I think what you're asking for is that there is -- there's obviously a bit of the question I was asking is a bit on Metabo question that there's a lot of augmented reality and virtualization of design which is happening... That's question So I think to be very honest, I think that Metabo piece is a little earlier premature piece for us right now because I think this as a theme also is very premature piece, and we'll take it as things evolve going forward.
And lastly, sir, regarding the total in our fixed and as a group. So how much is the outsourcing component because if you combine everything, it is around 70 plus 72% to be precise, like year-ending it was 75%. So out of that, how much is the total outsourcing component in our business?
So look, outsourcing, we have the manufacturing facilities right from -- we used to call from the ships back to the manpack. So we have got right the yarn fabric manufacturing, finishing facilities for both suiting, shirting, garmenting, we are doing the tailoring and ending it out. It is only in the branded apparel segment where we get the shares of the trousers or the suits staged outside of Raymond. And that's the only place where we get the outsourcing. Rest, the uniqueness with us is that we have an integrated facility, everything we do in-house.
[Operator Instructions] We have the next question from the line of [indiscernible], an individual investor.
Am I audible?
Exactly you are.
Congratulation on a good set of numbers. I've got a couple of questions. One is in quarter 2, there's an exceptional item of INR 10 crores. So if you can explain this amount, that would be helpful. So second is regarding the CF IPO. So we have been seeing since last 2 quarters that we are waiting for favorable market condition and all. Now as far as domestic market is concerned, it is almost at all-time high, and the primary market is floating with a lot of IPOs these days. So I'm just wondering what are we waiting?
Okay. Good. So first of all, a simple housekeeping question on the exceptional loss. So 3 things. Basically, we if you look at it, we had a -- in one of the LFS channel customers, there is an expected provisioning for a credit loss to the tune of INR 20 crores. At the same time, what has happened, there was a glass building at one of our office premises at Kane, which had got burned down. And we got a final settlement claim of INR 11 crores out of that. So it is a gain. And the third one is on the JK file, we had to dispose of certain land and reduced certain number of people so that offset it between INR 5.0 crores and INR 5.5 crores. So that is a net INR 10 crore of exceptional loss, which has been booked during the quarter.
So that's one. And as far as JK IPO is concerned, first of all, when you talk about, I think the primary markets are still the way we have been talking to our investment bankers that it is still not that conducive. And the purpose of our IPO was not to say that it is bringing the money into the business for growing either at engineering business or at the Raymond Limited level. We have very clearly outlined the purpose of doing this IPO was to bring the money and deleverage the balance sheet and make a debt-free company. So we are not in that hurry, so to speak, that I have to do and desperately I have to do it today to tomorrow. What we have the card available is till February. We are talking to our investment bankers and watching the market very, very closely. And in an appropriate time, we will do that IPO.
Okay. But sir, the proceeds will be used to repay the debt. So earlier, we had the market will reduce the cost on interest repayment.
That is true. And that is why this was planned. So in February, when we got the card immediately, the Russia Ukraine was started and you all know then what all happened. So that is why we are in very close contact with our investment bankers to see that how and when can we really launch this issue.
I would now like to hand it over to the management for closing comments.
Thank you very much, everyone, and look forward to talking to you in the next quarter's earnings release.
Thank you. On behalf of Antique Stock Broking Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.