Raymond Ltd

NSE:RAYMOND

Earnings Call Transcript 2023-Q4

[Operator]

Ladies and gentlemen, good day, and welcome to the Raymond Limited Q4 FY '23 Earnings Conference Call, hosted by Antique Stockbroking Limited. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. Abhijeet Kundu from Antique Stockbroking. Thank you, and over to you, sir.

[Abhijeet Kundu, analyst]

Thank you. On behalf of Antique Stockbroking, I would like to welcome all the participants in the earnings call of Raymond Limited. I have with me Mr. J. Mukund, who is the Head of relations -- 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, Abhijeet. Good evening, everyone, and thank you for joining us for our full -- Q4 FY '23 earnings call of Raymond. I hope you would have received a copy of our results presentation. Today, I would like to urge you to go through this along with the disclaimer slides.

We have with us from senior management, Mr. Amit Agarwal, Group CFO; Mr. Sunil Kataria, CEO of Lifestyle Business; Mr. Harmohan Sahni, CEO of Realty business; and Jatin Khanna, Head of Corporate Development.

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

[Amit Agarwal, executive]

Thank you, Mukund. Good evening, ladies and gentlemen. Thank you for joining us today for the earnings call to discuss the results of the fourth quarter of fiscal '23. Let me start with a brief overview for the quarter. The quarter took off slowly as the discretionary spends were less at the backdrop of inflationary pressures, resulting in toned down impulse purchases by the consumers. However, the winter weddings provided some tailwinds to the quarter, and that's an uptick in our fabric and apparel offering. As the quarter progressed, we witnessed increased momentum in trade channel, and we saw order booking in the primary channel for current summer wedding season.

Now let me talk about the fourth quarter of fiscal '23 performance. We are happy to share that the fourth quarter fiscal '23 recorded the highest ever fourth quarter revenue of INR 2,192 crores, a growth of 8% over INR 2,032 crores in the fourth quarter of fiscal 2022. This is the sixth consecutive quarter of record performance. The revenue growth was driven across all B2C and B2B businesses in domestic markets and Garmenting business in exports as well as Engineering business also.

I'm delighted to share that we recorded highest ever quarterly EBITDA of INR 379 crores with a healthy EBITDA margin of 17.3%, as compared to an EBITDA of INR 358 crores in the fourth quarter of fiscal 2022. All the businesses contributed in delivering the highest EBITDA in the quarter with Branded Textile, Branded Apparel and Real Estate leading the front.

During the quarter, we generated free cash flows led by improved profitability and net working capital reduction and further reduced net debt by INR 243 crores, leading to a lower net debt at INR 689 crores as on 31st of March 2023, as compared to INR 932 crores as on 31st December 2022.

During the quarter, the company recorded certain exceptional items amounting to INR 93 crores, which included an expected credit loss of trade receivables and write-down of inventories in apparel amounting to INR 76.5 crores. This is mainly related to the provision on account of a large format store that faced operational issues and impacted the industry, including other businesses.

Other exceptional item includes an expense related to offer for sale, reimbursement of stamp duty claim against property, plant equipment as per arbitration award in favor of company and retrenchment compensation in Engineering business of tools and hardware amounting to INR 16.8 crores were written off.

We reported a net profit of INR 194 crores for the quarter, as compared to INR 263 crores for the same quarter last year. However, we had considered a onetime deferred tax adjustment of INR 177 crores in the fourth quarter fiscal '22 and in this quarter, fourth quarter '23, of INR 65 crores. So therefore, the adjusted PAT would have been INR 129 crores in the fourth quarter fiscal '23 as compared to INR 86 crores in the fourth quarter of 2022, an increase of 50% on a year-on-year basis.

Now let me also talk about the full year performance, which, on a consolidated basis, the financial year 2023 has been an accomplishing year, full of milestones, as Raymond delivered, on a consolidated basis, highest ever revenue of INR 8,337 crores, reflecting an increase of 31% compared to previous year revenues of INR 6,348 crores.

We also delivered the highest ever EBITDA of INR 1,322 crores with a margin of 15.9%, which is a 50% increase compared to the previous year EBITDA of INR 881 crores, reflecting the EBITDA margin of last year of 13.9%. We also recorded highest ever net profit of INR 529 crores, doubling from INR 260 crores in the previous year.

In the landmark year of delivering highest ever revenues, EBITDA and net profit, Raymond clocked a healthy double-digit top line growth of 31% during the year, led by a strong momentum and robust performance across all of our businesses. With the record performance of fourth quarter '23, Raymond has demonstrated a strong revenue and profitable performance for 6 consecutive quarters.

As far as our B2C business of Branded Textile and Branded Apparel is concerned, we successfully leveraged the core strength of our brands, coupled with our wide distribution network across the country. Given the fact that FY '23 had incremental wedding deals, we witnessed a strong demand for customers for our products, especially for wedding celebrations as well as festivities.

In the export market, adoption of China Plus One strategy and vendor consolidation adopted by global brands continued to drive the performance of our Garmenting segment. The Engineering segment performed well with resilient demand in the domestic market, while export orders were impacted due to significant challenges of global inflation, euro depreciation in the first half and devaluation of currencies in certain geographies.

Now about the Real Estate performance, we performed very well during the year along with significant milestones being delivered. The total value of the bookings for the first -- for the 3 projects amounted to over INR 1,600 crores during the year. The first 3 towers in the Ten X Habitat project, our first project, were delivered 2 years ahead of RERA time lines. In the newly launched project, Ten X Era, 100 units were sold within 7 days of launch. Overall, with increased sales and cost optimization, the company has been able to report highest ever annual PAT of INR 529 crores in fiscal 2023. For the year fiscal 2023, the Board of Directors have recommended a dividend of 30% for the year.

Now let me discuss the segmental performance for the fourth quarter fiscal 2023. In terms of our Branded Textile segment, we reported a top line of INR 902 crore, a 2% growth over INR 886 crores in fourth quarter of fiscal 2022. And EBITDA margin stood at 21.8% in the fourth quarter fiscal '23, as compared to 22.7% in fourth quarter 2022. The quarter witnessed contrasting trends as we witnessed moderate consumer sentiment impacting the secondary sales during the first half of the quarter. However, this was made good when eventually the sales picked up at a later stage of the quarter due to primary channel bookings for the current summer wedding season.

Additionally, the quarter also saw an average transaction value grew by 27% as compared to Q4 of the previous year across our Pan-India The Raymond Shop networks. We continued our marketing initiatives, product innovation in suiting and shirting fabrics, including linen and we focused on casualization to provide the requisite impetus to our sales. Thus, the segment reported a robust EBITDA margin of 21.8%, led by enhanced operational efficiencies.

Now let me talk about the Branded Apparel. Branded Apparel segment showed a healthy sales growth by 19% to INR 332 crores, as compared to INR 279 crores during fourth quarter of previous year. The top line growth was driven by incremental customer conversion, especially in EBOs and MBOs.

In our portfolio brands, the growth was led by ColorPlus, Park Avenue, and newly launched Ethnix by Raymond. The segment also witnessed incremental healthy EBITDA margins of 15.8%, as compared to 11% in the previous year. Now the margins improved due to higher sales and increased operational efficiencies as we closed some of the nonperforming stores, reduced redundancies and reduced discounted sales products.

Now coming to our retail network. We continued to further strengthen our retail footprint by opening 50 new stores during the quarter, led primarily by Ethnix by Raymond EBOs, along with new EBOs for Raymond Ready to Wear, Park Avenue and ColorPlus stores. The expansion was across metros, Tier 1 to Tier 3 towns on Pan-India basis. In line with the stated strategy of Ethnix store expansion, we opened 16 stores during the quarter, leading to a total of 61 stores of Ethnix by Raymond as on 31st of March 2023. The remaining 34 stores were opened for Raymond Ready to Wear, Park Avenue, ColorPlus and The Raymond Shop.

Also in line with our strategy for maintaining the healthy retail store portfolio, we have closed almost 42 nonperforming stores. On a net basis, during the quarter, we added 8 stores, leading to a retail network of 1,409 stores as on 31st of March 2023, spread across 600 towns and cities in India. Amidst the backdrop of winter wedding season, we witnessed strong traction of large purchases by our customers, leading to significant improvement in average transaction value. And as mentioned earlier, the TRS network reported 27% growth in average transaction value as compared to previous year.

Now let me talk about the Garmenting segment, which reported a very strong growth of 44% to INR 305 crores, compared to INR 213 crores in the previous year, due to higher demand from our existing and newly acquired global customers. Given our strong capability in manufacturing fabric as well as garments, increasingly, we have acquired new customers on account of vendor consolidation, along with China Plus One strategy adopted by leading global brands who prefer integrated suppliers to be their core partners. EBITDA margin for the quarter was 6.6%, as compared to 3.4% in the previous year, mainly due to operating leverage and operational efficiency.

In terms of High Value Cotton Shirting segment, which has reported a growth of 7% to INR 187 crores, compared to INR 175 crores in the previous year. Segment sales grew by 7% in Q4 '23 versus previous year, led by demand for our cotton and linen fabric offerings by our B2B customers in the domestic market. The segment reported EBITDA margin of 10.4% for the quarter, as compared to 8.6% in the previous year, mainly due to better realization and operational efficiencies.

Now let me talk about the performance of the Engineering business, which is consolidated under JK Files & Engineering Ltd. In the current year -- current quarter, on an aggregate basis, the sales grew by 7% to INR 219 crores in Q4 '23, compared to INR 205 crores. In the domestic market, the demand momentum was well maintained, especially in the passenger vehicles, commercial vehicles and industrial sectors driving growth in ring gears, flexplate and bearing categories along with files.

In the export market, we witnessed growth driven by ring gears category and well supported by other key categories in a globally inflationary environment. However, the EBITDA margin stood at 14.9%, compared to 16.6% in the previous year, mainly due to devaluation of currencies in certain countries.

Now let us talk about the Real Estate business. During this quarter, we launched our third project, Ten X Era, in Thane in February 2023, and received an overwhelming response from the customers. We received about 100 bookings within 7 days of launch. This performance reaffirms our customer confidence and acceptance of our high-quality product, coupled with a fast-based construction momentum in the ongoing project. In our 3 projects in Thane, we received bookings for 300 units with a value of INR 473 crores during the quarter. Overall, 80% of the total units have been sold in the first project, Ten X Habitat, as well as in the second project, The Address by GS, and 25% of recently launched units in the Ten X Era project.

Coming to the operational and financial performance, the construction momentum in the 2 existing projects of Ten X Habitat and Address by GS maintained well. The business delivered a strong sales performance of INR 289 crores, along with an EBITDA margin of 24.3% for the quarter.

Now let me talk about the detailed project by project. Our first project, Ten X Habitat, received 114 bookings in the current quarter with a booking value of INR 148 crores. In total, we have sold 2,451 units have been booked as of 31st of March 2023, which accounts for about 80% of the total inventory with a booking value of INR 2,550 crores.

Our premium residential project, The Address by GS, which was launched in the third quarter of fiscal 2022, continued to receive good response from customers with 44 bookings in this quarter. And the total bookings made for this project amounts to 434 units, which is also about 80% of the total inventory, with a booking value of INR 1,142 crores.

In our new project, Ten X Era, we received a total of 141 bookings during the quarter for a total value of INR 204 crores. Overall, during the quarter, we received 300 bookings for a value of INR 473 crores. The total booking value for all the 3 projects for the full year FY '23 has been close to -- over INR 1,600 crores for 938 booking units.

Now let me start about the project-wise construction details. In the Ten X Habitat project, the tower-wise construction is as follows: As stated earlier, we have received occupational certificate for the first 3 towers. And from tower 4 to 8, the terrace slab has been completed; and tower 9, 25th slab completed; and tower 10, 24th slab has been completed. As far as the progress on the second project is concerned, The Address by GS, for tower 8, second flow slab has been completed; and tower B, still floor slab has been completed. In our new project, Ten X Era, the excavation work is in progress.

Now let me talk about the operating costs, working capital as well as the cash flow. In terms of an operating cost for the quarter, our OpEx cost for the quarter was INR 562 crores, as compared to INR 506 crores in the same quarter resulting -- same quarter last year, resulting in the OpEx to sales ratio being slightly higher at 25.6%, as compared to 24.9% in the same quarter last year. With a sustained focus to drive growth and build a strong brand equity for the future, we are investing in advertising, sales promotion and retail expansion for future revenue growth potential.

Accordingly, our advertising and sales promotion costs have increased to INR 35 crores in the fourth quarter, compared to INR 32 crores in the fourth quarter of last year, resulting in A&SP cost to sales ratio being at 2.1%, compared to 1.6% in the same quarter last year. Also there has been an increase in the cost, mainly on account of inflation, which has impacted retail and other incidental costs.

On the working capital front, we developed continued focus on efficient working capital management. During this quarter, we have been able to reduce the net working capital to 53 days, which is 2 days lower on a quarter-on-quarter basis from 55 days in December 2022. We have seen strong cash collections in place, which has been able to help the reduction in receivables. On an absolute terms, our net working capital is lower by INR 51 crores to INR 1,265 crores in March '23, vis-a-vis INR 1,316 crores in December 2022.

Now regarding cash flows. On the backdrop of strong profitability during the quarter, we generated significant free cash flows, which has been primarily used for debt reduction. Our gross debt stood at INR 2,100 crores as on 31st of March 2023. And we continue to maintain strong momentum in maintaining liquidity levels with cash and cash equivalents of INR 1,400 crores, as compared to INR 1,090 crores as on 31st December 2022. The cash and cash equivalents are a combination of cash, bank balances and short-term investment. Overall, our net debt reduced by INR 243 crores and stood at INR 689 crores as on 31st March 2023, as compared to INR 932 crores as on 31st of December 2022.

The interest cost in the quarter is INR 64 crores, which is higher by INR 7 crores on a year-on-year basis, as compared to INR 57 crores in the same quarter last year. It is an increasing interest rate scenario, our interim borrowing cost has increased to 8.9% in the fourth quarter, as compared to 7.9% in the third quarter, and higher interest on lease liabilities on account of increase in the stores which are opened has been taken on rental basis, as well as the notional interest due on the deferred approval cost for the real estate projects. Overall, our net debt-to-equity ratio, which is already at a comfortable level of 0.33x in December 2022 has further reduced to 0.23x in March 2023.

We spoke about the recent corporate initiative, which the group took. We have undertaken the deleveraging initiative and sold our FMCG business to Godrej Consumer Products Limited. The consideration for the sale has been received by our associate company, Raymond Consumer Care Limited, on it. And accordingly, the transaction stands concluded -- completed. The proceeds are being utilized to repay external debt of the Raymond Group. As we speak today, INR 600 crores NPDs have been issued by Raymond Limited to RCCL, and the proceeds from the same is being utilized for repayment of external bank debt.

Now let me talk about the outlook, which we see in the marketplace for the first quarter. The current quarter started with moderate consumer sentiment in the month of April as the secondary sales were low. The K curve recovery continues to play as the discretionary spend has been impacted for the low-income household while there is an upsurge in consumption of high-income household. However, from the end of April and early May, we are witnessing an uptick in the consumer sentiment, given the wedding season in the month of May and June. We expected the related demand to gain momentum in the coming days.

From retail store network, strong focus exists on building retail excellence, and we are geared up to expand the store network, mainly through asset-light franchisee model, to open about 200 stores in the next 12 to 18 months. 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 levers continue 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.

In terms of our raw material prices, we look at it that the wool and the poly viscose continues to remain stable. And over the last couple of years, the cotton prices have increased significantly. In the recent quarter, the price has stabilized, but continued to remain at a higher level as compared to pre-pandemic level.

Also, over the last few months, there has been increase in the price of linen flag seeds. However, now it is maintaining at higher level. However, we have been able to largely pass the price increases to our customers with a time lag.

As far as the Engineering business is concerned, we are witnessing that the domestic retail demand in consuming 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 and U.S. and currency evaluation of certain developing economies. We are closely working with our customers in accessing the demand and catering the requirement. From raw materials cost perspective, the steel prices have recently moderated -- moderately softened after going through an inflationary trend for the last 2 years. However, we have the ability to pass on the same with a time lag.

In the real estate market, we continue to see the growth momentum in the residential market. The construction activities are in full swing in both of our projects. And the construction activity has started in the recently launched Ten X Era as well. We expect to stay on course.

Regarding the net working capital, over the last few years, 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's a continued focus to generate significant free cash flows from the profitable growth of the business and our asset-light expansion model is very well in place.

As far as the CapEx is concerned, from retail store expansion, as already stated, it will be a franchisee model. However, we will be opening some flagship stores at certain critical marquee locations. In the Garmenting business, to address the increasing demand for our products, we are investing into line expansion, and expanding capacity in growth categories in Engineering business.

Overall, including the above, the growth CapEx and maintenance CapEx of our plants, we expect to invest around INR 200 crores to INR 225 crores in fiscal 2024. Overall, the company expects to be on a profitable growth momentum.

Now we'll be happy to take questions.

[Operator]

[Operator Instructions] The first question is from the line of Chetan from Systematix.

[Chetan Sharma, analyst]

Firstly, can you tell us what will be the drivers for the EBITDA margin expansion in branded apparels from 11% to 16%?

[Amit Agarwal, executive]

Will you want to give all your questions, and then we answer? Or do you want us to do?

[Chetan Sharma, analyst]

Okay. I will tell you my questions. Second is on how has the growth been in suitings vis-à-vis shirtings during the quarter? And can you also put some light on the order book growth for Garmenting during this quarter? And lastly, can you tell us about the JDA status of the Mumbai project?

[Amit Agarwal, executive]

Garmenting and fourth one was JDA. Okay. So -- Sunil?

[Sunil Kataria, executive]

Yes. So I'll take the questions. Okay, so first, let me tell you -- there is a question on the suiting versus shirting growth that you're talking about. So I think as you know that we have been investing heavily behind both the segments in terms of category development, our tasks too are slightly different between suitings and shirting.

In suitings, since we are a very strong market leader, we will develop the category. We are doing this at the premiumization. In shirting, we believe we have a huge headroom to grow in terms of market share gains. So within the 2 segments, we have focused one on premiumization in suitings. And secondly, in terms of shirting, we are focused on linen growth as well as the mass end of the market.

So we have done these 2 strategies, and that is continuing to be the critical strategies going forward. We have seen very sharp gains in terms of volume growth in both these markets, which are much ahead of the market trends. And that is something I can tell you, versus -- shirting versus suiting, the shirting growths are obviously much faster than the suiting growth, given that we have much higher headroom to grow.

[Amit Agarwal, executive]

Yes. I think that is what about the suiting and the shirting growth. Now let me talk about the apparel, Garmenting and the JDA project. As far as apparel margin, you see, the focus has been very clearly, we have always spoken, there is an operating leverage piece. And as you see that we have been able to increase almost 20% sales quarter-on-quarter, we have been able to get that operating leverage.

Second, we have been consistently rationalizing some of the stores, which has not been profitable. We have taken out those stores, which has helped in improving the margin. Third thing, what has also happened is, certain level of discounts, certain quantum of discounts, which we were supposed to give in the marketplace, we have been able to manage the sales achievement of INR 332 crores by giving a lower sales or the proportion of such discounted sales are lower.

And I think that has a big support. And our whole philosophy going forward is how to control the discounts on that. That's the 3 major reasons in terms of getting -- third -- fourth thing is, obviously, the casualization, which we are doing consistently, is helping us to get more and more full pricing.

Now as far as the Garmenting, you see, we are very, very comfortable in terms of having the order book. It ranges between 3 to 5 months every time. It is not something which suddenly it goes to 8, 9 months or suddenly it comes down to 2 months. We are maintaining that lead time of anything between 4 to 5 months, and we are exactly in that spot. So we are looking, so far as we speak today, comfortably August and September level of order bookings.

As far as JDA project, we told you that we continuously are looking into this project. As and when we get the full approvals in place, we will launch that project.

And I think Sunil would like to add some of the points.

[Sunil Kataria, executive]

Yes. There's one point which I also want to add to the point which Amit has already shared on the apparel margins. See, one of the big focus areas for us also has been improving retail excellence efficiencies within our current stores. So one thing which we have seen in this quarter is also a very, very sharp and handsome growth, which is in like-for-like growth or what you call the same-store growth across all our brands in quarter 4. So that has been a pretty strong growth also for us driven by retail efficiencies.

[Operator]

The next question is from the line of [ Shreyans J. from Swan Investments ].

[Unknown Analyst]

This is [ Shreyans from Swan ]. My first question is, sir, if I look at your cash flow statement, we're seeing some increase in inventory. So could you explain that from INR 259 crores, we're seeing about a INR 525-odd crore increase in inventory. And also, could you explain the bifurcation of this?

[Amit Agarwal, executive]

Yes. I think broadly what happens is, the inventory increase is primarily to cater to the market. As we continue more and more on through the EBO stores, you will see this inventory being made available with a new fashion, new trend. As we continue to open more and more ethnic stores, who will see those inventories being made available so that there is a wider choice available.

And the sales pickup in any of the new stores which we open, it doesn't happen from today to tomorrow. It takes a maturity, anything between 6 to 12 months. So therefore, what we are trying to do is, as we have opened almost 60 stores in terms of in the last 6-odd months, we are putting the inventory in these stores, which is going to be sold over the next few months. And therefore, you have seen an inventory build.

And the other thing on the shirting side, also, we have launched some of the new collections, which are just going out into the market based on the seasons requirement, that has also helped require to be increased of the inventory. And maybe if -- Sunil, you want to add something on the inventory?

[Sunil Kataria, executive]

Yes. So I think one of the major pieces -- see, we are very, very cautious about buildup of inventory, and that is something an area which we track very closely at our operating level. So I think one of the biggest pieces you will see across that 3 levers for us is one is the largest lever is what Amit talked about is store expansion. Second, we are also doing casualization.

So we are also trying to improve certain new product ranges and launch them within our current stores as well. So I think these are 2 areas which will play a role in terms of some inventory increases that you may see. But otherwise, we are very cautious in terms of tracking how the whole inventory movement happen across our stores.

[Amit Agarwal, executive]

Yes. And just to supplement, we have also the Real Estate business, and you know we talked about the Ten X Era project, which we have just launched in the month of February. So you would see that the kind of approval expenses and such things we have been paid, I think almost INR 150 crores is on account of that also, which has been invested behind these inventories, which once you start selling and making a little bit more construction, on the percentage of completion method, you will start seeing reduction of the inventory and moving to the revenues, which is the nature of that business.

[Unknown Analyst]

So if I want to sum whatever you said, so out of INR 525-odd crores of increase in inventory, INR 150-odd crores would be in the Real Estate business and the balance would be your apparel and your textile business. Is that understanding correct?

[Amit Agarwal, executive]

Broadly, yes.

[Unknown Analyst]

Okay. Sir, my second question is on the Ethnix. So could you just give us a broad sense on the numbers that you're doing and where are we in terms of the profitability in that business?

[Amit Agarwal, executive]

Can you repeat -- I didn't get the question properly, sorry.

[Unknown Analyst]

My question is, where are we in the Ethnix business? What kind of numbers are we doing? And are we -- where are we in terms of profitability?

[Amit Agarwal, executive]

So look, Ethnix business has just started. We are opening the stores, putting -- making the advertisement, bringing -- making the customers aware. So at this juncture, it is more in an, what should I say, incubation or just starting -- taking off this business. So you would not really see the profitability at this juncture.

However, we continue to make the higher gross margin north of 65-odd percent, we make the gross margin. And for me, that is the most important test that are our products being accepted or not, which is being accepted and delivering us the gross margins. Post that, if you have the store and the support and the branding advertisement, that comes on top of it.

[Unknown Analyst]

Okay. My other question I had is, sir, we're seeing an increase in investments from INR 65 crores to about INR 314 crores, which is sitting in your noncurrent investments. So this is -- is this amount that you've received from GCPL that is sitting in your noncurrent investments?

[Amit Agarwal, executive]

No, no. So what happens is, you see there is an investment in one of the associate companies, which had eventually an investment into Raymond Consumer Care. Because our value has been identified of the Raymond Consumer Care and therefore, I have to consider in the books a write-up of that investments to the current market value. Previously, I think it was considered at a much lower level compared to the INR 2,825 crores. And that is one of the primary reasons for the increase in the investments.

[Unknown Analyst]

Okay, okay. And my last question is, sir, what kind of ROCEs should we now look at going ahead, 2 to 3 years' perspective?

[Amit Agarwal, executive]

Look, I would not like to give you a future guidance, but I can tell you what is my demonstrated performance. My operational ROCE is in the range of 27%, 28%. And look, the fundamental of the business is -- now as a company, as the Raymond Group, we are sitting with a INR 1,500 crore of liquidity available post the FMCG transaction, and which will enable us to drive growth both in the Lifestyle business as well as in the Real Estate business.

And we have very clearly outlined that how the Lifestyle business is going to grow, how the Real Estate business is going to grow. Real Estate, I have still 60 acres at Thane land, which I can develop. And since my inventory is already sold to the tune of 80% in the first 2 projects, I need to launch some of the projects in order to take forward. And the margin is very clearly proven, is in the range of 25-odd percent.

Similarly, on the Lifestyle side, if I look at it, there's a great opportunity for us to build upon through the distribution network expansion, which we talked about. There's a big plan for distribution expansion. Ethnix, which -- we control the wedding space, so to speak. Wedding -- it would not be possible in the country that the wedding happens and the Raymond suit does not get cut. So similar is an opportunity for me in the Ethnix to take a larger market share with our retail expansion.

So I look at it. Second is shirting. Because we are introducing new price points, new ranges, we see a growth opportunity in the shirting, as well as the typical apparel brands, be the Park Avenue, ColorPlus, Raymond Ready to Wear. So these all brands have their growth trajectory set out.

[Operator]

The next question is from the line of Priyanka Trivedi from Antique Stock Limited.

[Priyanka Trivedi, analyst]

Congratulations on good set of numbers. Sir, my first question is on Ethnix business. So what would be the revenue of Ethnix for the quarter and for the year?

[Amit Agarwal, executive]

Sunil?

[Sunil Kataria, executive]

Yes. Okay. See, right now, I would not give you an exact number in the quarter, but I'll tell you the way we look at Ethnix stores. As Amit said, see, we are in a very incubation stage in terms of Ethnix, and we have right now reached around 61-odd stores March end. And even as we talk, the numbers are ramping up every month very strongly. The bright benchmark for us to -- and keep KPIs really to benchmark our Ethnix business would be the store which, let's say, stabilize after 8 to 9 months.

We have certain kind of benchmarks that we would like our stores to reach in 8 to 9 months and certain benchmarks that we would like to reach -- our stores to reach in 12 to 15 months. How are they doing? And that I can tell you that the kind of sales per square feet metric, the kind of conversion metrics that we have set for ourselves. On those, the Ethnix stores, which are stabilizing, they are, I think, in a pretty healthy zone right now.

We, at the same time, are doing investments in terms of advertising and as well as what we call as localized catchment marketing. And that, I think, is building up pretty well for us. So I think that is where I would say that the way Ethnix stores are ramping up right now. We are pretty satisfied with the trajectory of growth that we are seeing per square feet within the stores.

[Priyanka Trivedi, analyst]

Okay. Okay. And sir, in terms of the total store addition of 200 that we are doing, how much of -- I assume around 100 of them would be from Ethnix, so balance would be -- around 100 would be for the other apparel brands or -- right?

[Sunil Kataria, executive]

Yes. So that's what -- the target is to do another 100-odd stores for Ethnix. And the rest would be split between 3 brands, which is Raymond Ready to Wear, Park Avenue and ColorPlus.

[Priyanka Trivedi, analyst]

Okay. Got it. And, sir, we highlighted that we have increased our ad spends, and it contributed around 2.1% of the total sales for the year. So are we looking to increase that number going ahead? Or would it be more or less in that range itself?

[Amit Agarwal, executive]

Yes. Look, I think very clearly, we have spelt out that we want to make sure that these brands are seen very properly. And that is why we would invest for the next 1, 2, 3 years behind this brand. And very clearly, we would go out and spend on the normal spend anything between INR 60 crores to INR 70 crores more on a yearly basis behind these ads in order to create a proper visibility so that we can demonstrate that these brands have a very strong [indiscernible] and coming very strong revenue growth. And that is exactly the purpose behind these brands and the ad spend.

[Priyanka Trivedi, analyst]

Okay. And sir, in terms of the store rationalization for TRS that we did for this quarter, are we -- are there any further rationalization going to happen going ahead? Or are we done with it?

[Amit Agarwal, executive]

Look, store rationalization is a continuous process. I cannot say that it is done or it was not done. Because what happens is we are very focused on 2 things. As Sunil rightly pointed out that the KPIs set for the stores is sales per square feet. We have a time frame that X store will deliver in this time, in this city, INR X per square feet. If it is not delivering, we may give a few months grace, and if it is not working out, we will have to take a hard call.

We cannot continue to have this position that we drag, drag, drag. And that is why if you see that even in the last year, we did shut some of the stores. But we are very clear the store expansions will be on a drive. It's a big part of our growth strategy, but something if it doesn't work out, you have to take a hard call, and we are prepared to take a hard call.

[Priyanka Trivedi, analyst]

Okay. Got it, sir. And sir, my next question would be for the engineering businesses. So if you have to look at the auto numbers, the revenue has declined 6% on a year-on-year basis. Any particular reason for that?

[Amit Agarwal, executive]

No. You see, basically, what happens is in the auto sector, very simple, that the first half was completely impacted because of depreciated currency in Europe. Because we have, in the auto side, almost 2/3 as export. And it's because -- and it was significant in the, what is this called, European market. And because of the currency, which got impacted, partly it got offsetted because of the good demand in the domestic market. So that's the reason for the drop in the auto segment. But in the last 2 quarters, we are seeing a decent jump.

[Priyanka Trivedi, analyst]

Okay, sir. Sir, and lastly, on our Real Estate business, so 2 questions on that. What would be the potential of our Ten X Era project in terms of revenue as well as the cash flows? And the second would be that the land parcel that we are having, how much of that would be transferred to the Lifestyle business and how much of that would stay in the Raymond business? And that's it from me.

[Amit Agarwal, executive]

So let me first give you the answer for the second one. As I mentioned, INR 1,500 crores is the liquidity, which we would have available based on 31st March pro forma numbers of 2023. Now going forward, obviously, all of our businesses are significant cash flow generating, which will further add to the kitty to the cash flows of the business.

So what we are considering is that we would be net debt-free business and have this INR 1,500 crore appropriately allocated in some period of time to see that how each businesses would require the growth and the capital to make sure that they achieve the long-range plan which has been prepared by each of the businesses.

Harmohan, are you there?

[Harmohan Sahni, executive]

Yes, I'm there. Can you hear me?

[Amit Agarwal, executive]

We can hear you. Please talk about Ten X Era project.

[Harmohan Sahni, executive]

Yes. Ten X Era, the revenue potential and the cash flow potential is about INR 1,400-odd crores. So we've just begun and we've sold about 100 units. Whatever we had launched, about 25% of the inventory -- of the launch inventory has been sold. So we are expecting, over the next 3.5, 4 years, the execution period, we will realize about INR 1,400-odd crores from that.

[Priyanka Trivedi, analyst]

In terms of the cash flows, right?

[Harmohan Sahni, executive]

Cash flow as well as revenue book.

[Amit Agarwal, executive]

No, revenue will be INR 1,400 crores. Obviously, the EBITDA will be the net free cash flow available for this -- for future growth, would be in the range of 25% of that.

[Operator]

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

[Prerna Jhunjhunwala, analyst]

Congratulations for the performance. Sir, just wanted to understand your Branded Apparel business. Could you help us with brand-wise performance in the quarter and the year?

[Amit Agarwal, executive]

Yes. Sunil will take that question, brand-wise apparel performance.

[Sunil Kataria, executive]

Okay. So as I mentioned earlier in the call that in terms of our strategy, we have identified 3 power brands within Branded Apparel, and I'm keeping Ethnix aside because that is another segment altogether that we have launched and it's in incubation stage.

So the 3 power brands focused for us is Raymond Ready to Wear, ColorPlus and Park Avenue. And across all the 3 places we have seen, we have started investing guidance towards expansions. We are very clearly seeing trends, which are positive across all 3 brands. So it is very difficult to actually, if you ask me, differentiate between -- that is there any brand out of this which is a laggard or any brand which is outperforming. But clearly, we are seeing trends in terms of the Park Avenue, as we have started doing casualization, our share of casualization has started increasing, and that is driving a very healthy growth.

In terms of ColorPlus, what we see is that we have a very strong loyal set of customers which repeat. In fact, it may be one of the best in the industry. The repeat and retention scores of our ColorPlus consumers, that again continues to drive our very, very high bill values. And Raymond Ready to Wear, where, again, our journey has started on casualization. We are seeing that percentage also continues to grow. So between the 3, I would say all the 3 power brands are doing pretty strong double-digit growth across.

[Prerna Jhunjhunwala, analyst]

Okay. So if I want to understand casual versus occasion and formal wear, then do you -- would you mean that formal and other portfolio is witnessing some sort of slowdown currently as compared to casual segment?

[Sunil Kataria, executive]

No, it is not, in fact. In fact, if you see formal wear, interesting part of this -- I mean in our shirting growth, which is a ready to stitch growth, although it's not Branded Apparel, we continue to see good growth happening in formals. It is not that formal is slowing down versus casual. It is just that our presence in casual early was lower. So obviously, our bases were lower on casual.

Now as we started doing casualization journey, obviously, the growth rates of that will be very different because the bases are small. So our saliency is shifting between formal and casual. Since the bases are so different, it doesn't mean that one is going slow versus other. That would not be a right comment, I would say.

[Prerna Jhunjhunwala, analyst]

Okay. That helps. Sir, second question is on EBITDA margins. You reported very healthy EBITDA margin, 15.8%. How would you -- how should we see this margin on a sustainable basis? And maybe in the next 2 to 3 years, with higher sales, should we assume that the margins could only be better from here?

[Amit Agarwal, executive]

No. Look, I think what we have got -- this one quarter, we got this 15.6%. As I said, there was less of a discounted sales proportion. But going forward, the markets of the apparel, especially in the 3, Park Avenue, ColorPlus as well as Raymond Ready to Wear, you will see the discounting, which is summer season sale, and these all sales keep happening and you have to discount.

Now what I think is we are going to get a significant operating leverage as we continue to grow the store's retail footprint and with the support of the advertising and such things. So what I talked about earlier of INR 60 crores, INR 70 crores of an additional investment behind these advertising spend. If you take out that for the next 1, 2, 3 years, I think we are very comfortable to say that we should be getting more in the range of 14%, 15%. And post 2, 3 years, we see very clearly a 15% EBITDA margin. I don't see a problem in delivering 15% EBITDA margin.

[Prerna Jhunjhunwala, analyst]

Okay. And what would be the revenue mix between EBO versus MBO?

[Amit Agarwal, executive]

So I think, look, EBO, we are expanding. But you see the uniqueness which Raymond Group has the reach which it has created over so many towns. And that MBOs, if you see, to a smaller city, which is a Tier 5, even that MBO would keep a Park Avenue shirt. And I think that is going to be a healthy mix. But I would say we continue to open the EBOs, and we will see a growth. In terms of EBO percentages, I will ask Sunil to give a specific number.

[Sunil Kataria, executive]

Yes. In fact, in Raymond, there is one unique piece that we have to keep in mind, as we are expanding our branded apparel strategy, one is very clearly, as we've talked about that we're going to open another 100-plus stores in Branded Apparel business, non-Ethnix. So that itself is going to lead to EBO expansion.

Second part of our EBO mix would be driven by the fact that we want to -- as we do this advertising spends, we would like our throughput per existing store itself to increase. So the EBO growth would be much, much faster than any other channel driven by 2 facts. One will be new stores opening, which will have their own gestation period, but they will obviously continue to add footprint and has increased salient.

Second is we believe that as advertising spends go up, as casualization happens, as we enter new segments, will drive much more throughput to our current stores. That's one part. The second part of our strategy, which actually while they are not really EBOs, but the fact is we have 1,000-plus kind of Raymond stores with us. Now which also sell apparels for us. So they are, to our mind in that sense, a captive MBO or captive retail points for us, where there's no competition, but we sell our multi-brand retail also there. So they also -- would also benefit from apparel throughputs happening through advertising.

Now between these 2 channels, we expect them to, over a period of time -- in fact, TRS is already -- the Raymond stores are already pretty big for us. We expect, over a period of time, between these 2 stores, the EBO and the Raymond stores, to become roughly be around 2/3 of our overall business.

[Prerna Jhunjhunwala, analyst]

That's helpful. Sir, on Branded Textiles, what should be the growth strategy? And where do we see the Branded Textile segment growing? And we've done very good EBITDA margins this year, so now are these margins sustainable?

[Amit Agarwal, executive]

Yes, the margins are sustainable because we have been in this bracket of Branded Textile around the 20%, 21%, which we should continue to maintain. There is no doubt about it. One quarter here and there, we don't talk. But in general, these margins are something which is sustainable. .

And look, the Branded Textile has got 2 large components. One is the suitings and one is the shirting. We see a great opportunity for us in the shirting segment, and we believe that can drive significant growth going forward. Sunil, you would like to add something?

[Sunil Kataria, executive]

Yes. So -- see, again, we don't -- I think one piece which we've been talking now recently in many of our calls is that the Branded Textile itself has 2 segments. And the roles and the opportunity in the 2 segments are very different. In fact, it is a fallacy for us to believe that the brand -- the overall textile business has slowed down because there are subsegments which we need to see differently.

We are a very strong market leader in suitings. There, our job is to develop this category and drive value growth in that category through a very -- through a premiumization route. And there, you will expect a strong revenue growth -- we will try to drive revenue growth there. In terms of shirting, we believe we have a huge headroom to grow in both the mass end of the market and maybe the premium linen end of the market.

So there's a premium strategy there, there's a mass end of the strategy there. And there, driving market share would mean that we'll get both volume as well as value growth. So you should see this opportunities, 2 very diverse and different set of opportunities, and we believe shirting has a huge, huge headroom to grow.

[Prerna Jhunjhunwala, analyst]

So can we assume 15%-odd growth in this segment driven by shirting business?

[Sunil Kataria, executive]

I wish it was so easy to give such a firm number or percentage in businesses. But I would say, range would be the thing. What we are aspiring for. We are aspiring for a high single-digit growth in terms of suitings business driven by premiumization. And we would like to drive, again, maybe a double-digit growth in terms of shirting, in that range going forward. So I think these ranges are more important rather than getting locked into one number.

[Prerna Jhunjhunwala, analyst]

That's helpful. Last question on Garmenting and High Value Shirting segment. On your current capacities, what would be the optimal revenue that we can do?

[Amit Agarwal, executive]

So if you look at on the Garmenting, we are utilizing our capacities to the tune of 87% to 90% month-to-month, depending upon the product, maybe jacket is more complicated compared to a shirt. So basically, we are at 87% to 90%. And therefore, we are considering this expansion of building additional lines over the 12 to 18 months. We are putting almost 30% increase in the capacity in the next 18 months.

And as far as High Value Cotton Shirting is concerned, there also, we are utilizing the capacity. But in the High Value Cotton Shirting segment, we have the opportunity that you can buy the gray fabric from the market. And we are known for finishing the high-quality finishing of the fabrics, which we will continue to expand. And as the market grows and we participate in the growth of the market, we should be able to increase that segment as well.

[Prerna Jhunjhunwala, analyst]

One on Garmenting. You are adding capacities in India or in Ethiopia?

[Amit Agarwal, executive]

Between the 2 places, both the places.

[Operator]

The next question is from the line of [ Chaitanya Rao ], an individual investor.

[Unknown Attendee]

Many congratulations for a great set of numbers and exceptional FY 2023. Actually, all my questions are rather answered earlier. So just wanted to confirm where I've missed. Earlier, you have stated that the 60 acres of land is [indiscernible] for further development. So is my inference correct that this is excluding the 3 projects which Raymond has already offered?

[Amit Agarwal, executive]

Yes. 60 acres is available after these 3 projects, yes. That's correct.

[Unknown Attendee]

And is it possible for you to say at present that what have you all thought about doing of this 60 acres of land or if it is for further [indiscernible]?

[Amit Agarwal, executive]

I think as and when we have the announcement of the projects, you can consider that as that point of time, we announce that project because it is premature for me to say what I'm going to do. But we are going to develop. You have seen the success, the way we have delivered, demonstrated our capability in terms of the construction pace, sales velocity. We feel very confident that we continue to have a decent market share in the Thane micro market. And obviously, we want to give the best quality of living to the people who want to buy in our project.

[Unknown Attendee]

So the 60 acres of land will also be considered for the reality space only?

[Amit Agarwal, executive]

Yes, it's for Real Estate business. Yes, yes, yes. It will be in the Raymond Limited.

[Unknown Attendee]

Okay. Okay. Got it. And next, I wanted to confirm that regarding the INR 15 crore cash you were stating from the sales proceed of the GCPL, this thing. Am I right that you have not yet confirmed that actually what you will be using and how will we go about this INR 15 crore, this thing, cash?

[Amit Agarwal, executive]

Yes. So we will allocate -- basically, it is based on the certain debt and the certain cash, which is there in respective businesses. Based on that, we will define that how we are going to utilize this money.

[Operator]

[Operator Instructions] As there are no further questions, I now hand the conference over to Mr. Amit Agarwal for his closing comments.

[Amit Agarwal, executive]

Thank you very much for participating in the call and looking forward for taking the discussions into the next quarter. Thank you.

[Operator]

Thank you, members of the management team. Ladies and gentlemen, on behalf of Antique Stockbroking Limited, that concludes this conference call. We thank you for joining us, and you may now disconnect your lines. Thank you.