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Edited Transcript of VMART.NSE earnings conference call or presentation 5-Aug-19 5:30am GMT

Q1 2020 V-mart Retail Ltd Earnings Call

NEW DELHI Aug 14, 2019 (Thomson StreetEvents) -- Edited Transcript of V-mart Retail Ltd earnings conference call or presentation Monday, August 5, 2019 at 5:30:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Anand Agarwal

V-Mart Retail Limited - CFO

* Lalit Madangopal Agarwal

V-Mart Retail Limited - Chairman & MD

* Samir Misra

V-Mart Retail Limited - COO

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Conference Call Participants

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* Abdul Karim

HDFC Securities Limited, Research Division - Fundamental Analyst

* Abhijeet Kundu

Antique Stockbroking Ltd., Research Division - Analyst

* Abneesh Roy

Edelweiss Securities Ltd., Research Division - SVP

* Akhil Parekh

Elara Securities (India) Private Limited, Research Division - Analyst

* Ankit Kedia

PhillipCapital (India) Pvt. Ltd., Research Division - Research Analyst

* Hardick Bora

Union Asset Management Company Private Limited - Co-Fund Manager

* Harish Bihani

ICICI Prudential Asset Management Company Limited - Equity Fund Manager

* Himanshu Nayyar

Systematix Shares & Stocks (India) Ltd., Research Division - VP of Consumer and Retail

* Sabyasachi Mukerji;Centrum Broking;Analyst

* Shirish Pardeshi

Centrum Broking Limited, Research Division - Senior Analyst

* Tejash Shah

Spark Capital Advisors (India) Private Limited, Research Division - VP of Research

* Vishal Biraia

Aviva Life Insurance Company India Ltd. - Analyst

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Presentation

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Operator [1]

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Ladies and gentlemen, good day, and welcome to V-Mart Retail Q1 FY '20 Results Conference Call hosted by PhillipCapital (India) Pvt. Ltd. (Operator Instructions) Please note, this conference is being recorded.

I now hand the conference over to Mr. Ankit Kedia from PhillipCapital (India) Pvt. Ltd. Thank you, and over to you, sir.

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Ankit Kedia, PhillipCapital (India) Pvt. Ltd., Research Division - Research Analyst [2]

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Thank you, Vikram. Good morning, everyone. On behalf of PhillipCapital, it gives us immense pleasure to host V-Mart Retail for a discussion on its Q1 FY '20 earnings conference call. From the management, we have Mr. Lalit Agarwal, Chairman and Managing Director; Mr. Samir Misra, COO; and Mr. Anand Agarwal, Chief Financial Officer. We will start with a small overview by [Mr. Lalitji] on the business and its outlook. Then to Mr. Samir Misra on the sales and marketing, followed by Mr. Anand on the results. Over to you, sir.

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Lalit Madangopal Agarwal, V-Mart Retail Limited - Chairman & MD [3]

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Good morning. Thank you, Ankit. Good morning, everyone. I know it's raining hard in Mumbai, and thank you for everyone being on the call in spite of that. Good. So exciting quarter once again. We have seen all sorts of stuff happening. Market -- the voice that we have been hearing from the market was a little dull, and this is what's given -- this is what is reported in the industry. So yes, it is a little dull in the ground level. People are not going out -- all out in the open to spend. And we have seen some amount of low spending by consumers, but we are -- but what's the strategy that you might use was to drive extra customers and for industrial customers from the market to build this growth. But overall, I think largely, we don't -- we can't find any particular reason for that kind of downfall, or grim or dullness. We are just seeing consumer confidence are little low, and we are seeing that coming from largely from -- pretty largely from the unorganized traders and then the small business houses and business communities, who are central government people, farmers, and stuff. But we are seeing their consumption levels may be going down, and then their spending level going down. We can't find any stress on their income level. So their income level continues to be where it was. Maybe some of the trading income of the people who have small businesses, their income [haven't] gone down because of some liquidity crunches that we are able to understand. So overall -- but yes, there is a lot of escalation. People want to consume. People want to buy, and people still want to come out in the market, try out -- we're seeing some try out the kind of promotions, which are there. And people don't lose out on any kind of such benefit plans first of all, is what we're seeing.

So overall, I think it has been a good quarter for the industry also. People have been able to pull up their sales that we're seeing from end of season sale coming up little early in the market, in the fashion industry. So that has impacted a little bit of June number for us also a little bit. But otherwise, I think it has been a great quarter. We have done our piece. We have actually been concentrating more largely on the macro pieces, largely on our strategic organizational structure pieces, our infrastructure [support] pieces. So we have been focusing more on those large pieces, where we can actually push up a little of growth a little higher. So -- and then we are able to manage this growth. So -- and we have been largely able to succeed on a lot of those initiatives that we have been doing for the last 2, 3 years. We are able to see them, and we have -- we've also opened up [and remodeled] stores in the last quarter. We have plans to open another stores in this quarter. So we will see -- we will see a lot of activity coming up here. We are -- we know it's cautious time, the voice that I'm hearing. So we are cautious, but we don't want to be down with our [little] growth plan, so we will try to grow in the future. I would like to introduce Samir here, and then bring up -- ask Samir to give little more insight about what the business was and what the business is, but Samir is our Chief Operating Officer, who has been with us for almost 1.5 years. So over to you, Samir. But please, kindly take them to the -- to what we are seeing in our business and what we see first of all. Please go ahead.

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Samir Misra, V-Mart Retail Limited - COO [4]

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Thank you, Lalit, and hi, everyone. So as Lalit mentioned that our -- the market has been generally hit in Q1, and it's not been, as we see, as we would have expected. And our effort has been to ensure that the brand is more visible and we are accessible to our customers. And that's been our priority #1, and most of the time, which we are running more in Q1, whether it's in the marketing, vision merchandising and some of our other store excellence initiatives, has been to support, to pass one that Q1, how do we increase consumption, and largely also to certain of provisions for us to accelerate growth.

And [if you are back], we have had more than generous lead campaigns, and we do really well. And this is -- that our total growth for the quarter 1 is at 25% overall sales, with 5.2% SSG and 6% volume growth, which also new stores and our new store openings (inaudible), so total growth in terms of number of stores has been 27%, and quarter 1 ended at 227 stores.

In Q1, we have attempted to put in best practices in terms of customer centricity processes, not in stores and [in office], and a very large initiative of (inaudible) structure, which we have put in in the entire chain. This is to ensure that our agility towards what consumer demands are, what kind of fashion do they want, vision making back to the [woman's] head (inaudible) business head, so that our agility towards our consumer, which has been our #1 promise in last 15 years, and we have been busy to also put that back in place.

We've also added factors of digital excellence, right to the store manager to regional manager, to consumer business head and driving it back to head office in various functions, so that we are adopting digital excellence practices right to our (inaudible) store level.

So Q1, a large proposition was to drive new customers, and we have been largely successful in driving new customers in each campaign. This is the largest customer acquisition, which took place in 30 days of Ramadan period, which also we would like to add that we worked with a certain [individual] in that period. So most of our efforts have been to ensure that fashion at store level to play the [STM] merchandising planning is on track, and consumers get what they would like to buy, but not increasing our stock level but ensuring that our inventory is lean and more fashionable. And this has overall driven our SSG growth in total of [INR 30 crores].

And now I'd like to introduce Anand Agarwal, who is our CFO, and handing over to you, Anand.

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Anand Agarwal, V-Mart Retail Limited - CFO [5]

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Hi. Thank you, Samir and Lalit, for a good nice (inaudible). So let me just start quickly with (inaudible) sales and how the company has performed on the P&L front. And then I'll also like to take you through the big change of Ind AS, which is driving the numbers very differently this quarter, not only for us but for all the corporates.

So starting with sales, we've had a good quarter with 25.4% growth and a SSG of 5.2%. We've seen growth all around in all geographies and especially in the UP market, which is our core market which has led the growth with the highest SSG rate.

In addition, we also opened 13 new stores, again, distributed all across India, major contributors being 3 in UP, 2 in Bihar, 2 in Madhya Pradesh and 2 in Assam and the rest all distributed through (inaudible) . Not really added new states this quarter, but we hope to look at new geographies or [nearing] geographies in the later part of the year.

Tier 4, as we have been continuously talking about in at least last 4 or 5 investor calls, it's still a big opportunity for us. And we continue to keep evolving Tier 4, and we continue to place our bets on Tier 4, and we will look at that area in our growing manners going forward.

Customer demand, as both Lalit and Samir talked about, has slightly been cautious, but still, we believe that there is a strong customer pool, which is waiting to happen. And we still want to leverage our product strength and our marketing strength with the right quality at the right prices to capture all of that. So (inaudible) and (inaudible) both grew at 22%, which is again, a very good, healthy sign of same-store sales of 25% growth. And the big factor that we also saw this quarter was the increase in ASP by 1.6% apparel. So it's been a challenging move, and while for the last almost 1.5 years, we've been -- strategically been trying to position the pricing mix of the merchandise at the lower end to cater to especially Tier 3 and Tier 4 territories, but we saw a good fill-ups in this quarter, with better merchandising, increased better price points to give our ASP growth of 1.6%.

Men's, as a category, also grew the highest for us, followed by women's. So we saw a very good appreciation of the products that we were able to give at the counters. And actually, the growth that we saw, while it was aided partly by the strong customers and promotions that we were able to put in, but also the very strong merchandise that was there on display, really helped us increase the throughput from these stores and also improve the inventory.

Now if I look at the inventory, we've seen inventory improve by 10 days, which is a significant achievement given the fact that we were able to increase the sales also by 25% and despite the fact that we opened 13 new stores during the quarter as compared to only 8 last year. So there was a significant rationalization of inventory, at the same time, increasing the sales, which only meant that we had to better the quality of the inventory. And we look forward to keep improving on the inventory front even more, with all the wealth of technology and the improvements in efficiency that we've been building in manpower for the last 1.5, 2 years.

Q2, on the other hand, should see a slight buildup in the [inventory], because there is a early puja, and all the rest of the festivals are at least 15 days postponed, so we would like to start up for the busy puja season and the festive season. But irrespective of that, we should see improvement in days of inventory across all parts of all categories of the business.

If I look at the margin, we've been acquiring more customers. We've been disruptive. We are known to be disruptive, and we were not different this quarter. We've acquired more number of customers than ever. And Lalit also talked about and Samir also mentioned, we've given more attractive offers, and we will continue to keep being disruptive in the market and keep gaining market share.

There has been a slight improvement in the shrinkage percentage compared to last quarter. Last quarter, we -- quarter 1 of FY '19, we had a shrinkage of 1.3%, which was better to 1% this year. There is a slight decline in the gross margin percentage because of the higher consumer offers that we ran, although it was partly compensated by the reduced spend in marketing and advertising. If you recall, last year, same quarter, we ran our television commercial using celebrities, which was not done this year. So as a result, at an overall level, advertising, marketing spend almost remained slightly higher than last year, but largely driven by consumer offers.

If I look at the expenses, the rest of the expenses, barring manpower, are in line with the growth in sales. Manpower expenses grown by around 22%, which is largely driven by our continuous build up on the quality, capability and efficiency of the middle and the senior layers of management. As Samir also mentioned, we are building up the normal structure to be more agile, to be more near to the market in terms of decision-making. We are strengthening the mid-layers. We are strengthening -- we are significantly adding in marketing, operations, business development, projects, all parts of the organization, especially the supply chain, with adding -- we are looking to improve efficiencies all throughout. So we are getting big on the future. We are trying to build up the V-Mart for taking the same level of data growth that we have been known for in the past. And that means that we are building up all parts of the organization in a paced manner. This buildup has been happening not only in the last quarter but has been happening for the last 1.5, 2 years, and we'll continue to invest in manpower and technology and process as we move forward.

Coming to the most part -- the most important part of the financials, the big change has happened in the Ind AS. We have adopted [Ind AS IFRS 15] as is mandated for all corporates. It's -- the concept is to equate borrowed capital with borrowers -- bought out assets, and to ensure that there is clarity in terms of how we look at numbers.

So the basic principle (inaudible) being that all leases, which are more than 1 year and having value of more than INR 3.5 lakhs need to be capitalized to create a right-of-use of assets, which has basically left 2 things, one on the P&L side, which basically has [vouchered] in, ensuring that our rentals, which were earlier included in the EBITDA line are now taken out of the EBITDA line. So there is a rental impact of around INR 18.6 crores, which is 4% of revenue, which means out of EBITDA, and therefore, your EBITDA is now looking larger by 4%.

The corresponding impact on the P&L moves into 2 parts -- is by splitting in 2 parts, one is on the debt equation, which grew by about INR 14 crores or roughly 3.1% of revenue. And the other part is around INR 11.8 crores, which is the notional interest cost, which gets included under the financial expense. Now that goes up by 2.6%. Now therefore, if you net out the rental benefits and the increased cost of interest, there is a net impact of INR 7.4 crores, which is roughly 1.6% on the PBT side.

Now this 1.6% or INR 7.4 crores is a notional expenditure because of the Ind AS IFRS 15 adjustment. And while notionally, it will get evened out in the long run, but because of the straight-lining impact, but if I look at the growth trajectory of the company and the way that we want to consolidate and grow further in the business, I have a sense that we will continue to see a slight impact on PBT going forward on a medium- to long-term basis, because we will keep adding at least 25% to our store base, and it will mean that we will keep having more and more number of new stores, which will further increase the impact of interest costs in the overall lease calendar.

If I look at how this has -- this will also impact the ratio. While rupee will come down by around 1.8%, return on earnings might come down to around 1.5%, and the debt-to-equity ratio will go up by around -- will go up to 1x. While actually, we may not really have any debt, but because of the reclassification of leases, notionally, the books will look like having a debt of around -- debt-to-equity ratio of 1.

If I look at, therefore, the outlook to conclude, I think we are in a build-up phase. We are building up on people. We are building up on process technology. There is a lot of focus on analytics and automation. There is a lot of focus on digitalizing operations and being more agile, and we continue to have faith in the capability of the overall economy to a broad, even higher level of consumptions. And being the disruptor that we are, we will continue to get big on how we are able to grow the business at the same rate that we've been known to grow this business so far.

So with that, I think I'll leave the floor open for questions. Thank you so much.

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Questions and Answers

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Operator [1]

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(Operator Instructions) We have a first question from the line of Abneesh Roy from Edelweiss.

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Abneesh Roy, Edelweiss Securities Ltd., Research Division - SVP [2]

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Sir, my first question is on the gross margin and the pricing. We have seen last 2, 3 years, focused on improving the pricing to the customer in light of the competition. So are we getting close to the bottom there, because clearly, now competition also must be feeling a lot of pain because of your aggression in terms of pricing? And how are you determining how much to cut in terms of pricing? Is it largely discount and promotion-led? Or are you also cutting in terms of the rack prices?

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Anand Agarwal, V-Mart Retail Limited - CFO [3]

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So hi, Abneesh. While you are partially right within -- we've not really been cutting pricing. We've been slightly been more aggressive, and we've been aggressive on 2 counts. One is that we have not increased pricing. So we have remained at the same price points that we were there for the last 7, 8, 10 years, 15 years, and we continue to provide the same quality of the merchandise at the same level of pricing. While I cannot be for sure about the competition, that is something that we've been able to do because we've been growing on quality terms, and we are also investing a lot behind technology and also behind our manufacturer suppliers. So there's a consolidation that we've been doing in terms of controlling or improving our sourcing cost, and that is one reason why we are able to improve on the pricing range. Having said that, the other part is that, yes, we've been slightly been aggressive on the consumer promotions and which has, therefore, led to a slight depression in the gross margin at least for this quarter. Now given the fact that the customers and the markets are in a slightly subdued stage, I have a sense that there will be some amount of depression or there will be some amount of stress on the margins, at least for some part of this year.

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Abneesh Roy, Edelweiss Securities Ltd., Research Division - SVP [4]

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And in terms of your ad spend-to-sales ratio, you have saved around 110 bps. So that was surprising because you're doing so much new stores and also driving your promotions. So what was the reason for that?

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Lalit Madangopal Agarwal, V-Mart Retail Limited - Chairman & MD [5]

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Thank you, Abneesh, for the question. So the 3 months in the quarter, we increased our marketing spend in the -- during the campaign months or even Ramadan and putting our energy behind it. But when the consumption was low, we kind of de-bracket from the marketing spend. So we were able to optimize marketing between the months. And also Anand mentioned that last year, we had the celebrity campaign and television campaign, which we did not do, which also resulted in certain [optimization] of our marketing spend. But I hear very clear that we will go on out and be aggressive, and there is a certain need in the economy, and then consumers would come and buy into our stores. And our consumers are largely driven by need in terms of festivals and seasonal changes, and our big campaigns will be light a year on that.

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Abneesh Roy, Edelweiss Securities Ltd., Research Division - SVP [6]

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And in terms of sentiment in Tier 3, Tier 4, are you seeing last 1 month any improvement because rainfalls have improved significantly? And liquidity also versus what it was in Q1, there is some improvement. Are you seeing any signs of improvement? I'm not asking on a same-store sales growth number in, say, the first month of Q2, more in terms of on-the-ground sentiments.

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Lalit Madangopal Agarwal, V-Mart Retail Limited - Chairman & MD [7]

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So far, I mean there is certain -- certainty around these markets will maintain in Q1. But we always think that there is a huge consumer base, which we target. And thereby, we are -- we think that the campaigns coming, which will come in Q2, which is the puja, Diwali and Chhath, which we think will be very -- in Q2 and Q3, which will be very promising for us. And we will put our best foot forward rather than looking at how sentiments are which is, as you rightly said, probably maintained at this point of time.

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Samir Misra, V-Mart Retail Limited - COO [8]

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Abneesh to answer your question -- Abneesh, to answer your question straightforward, we don't see any [consumption] in store [traffic]. There is a hope. There's a hope coming on the consumer side that we're receiving. But actually, we have seen a negative trend [so far].

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Abneesh Roy, Edelweiss Securities Ltd., Research Division - SVP [9]

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Even in the last 1 month?

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Samir Misra, V-Mart Retail Limited - COO [10]

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Yes. Consumers are not feeling too happy and not -- the feel-good factors are -- have not been there. So whatever we have seen for the last 1 to 1.5, 2 months also has not been very, very great, but I think it will improve around festival times. That is what you really want to understand and know-how is the customer behaving, and once the rainfall is over. So as of now, we have to hope.

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Abneesh Roy, Edelweiss Securities Ltd., Research Division - SVP [11]

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And sir, because sentiments are down in terms of rentals, are you getting any benefit of that because you're able to negotiate harder?

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Lalit Madangopal Agarwal, V-Mart Retail Limited - Chairman & MD [12]

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No. I mean sentiments are not down so that as much as owners are giving us lower yield rentals. And that's why we said it's a sentiment at this point of time. There is no large share of data to say that owners should give us probably a lower rate. So -- but yes, we have been looking at same rentals of what we have been looking at last quarter and last year Q1 and Q2.

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Operator [13]

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We have next question from the line of Himanshu Nayyar from Systematix Shares.

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Himanshu Nayyar, Systematix Shares & Stocks (India) Ltd., Research Division - VP of Consumer and Retail [14]

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Sir, firstly, on our -- generally, we try and maintain a balance between growth and margins, but this quarter, we've seen a big divergence, a 25% growth and a 300 basis points decline in gross margins. So I understand that we're trying to push sales. So at least for this year, do you think this trend should continue of growth rates being really strong and our gross margins much lower than historical levels?

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Anand Agarwal, V-Mart Retail Limited - CFO [15]

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Hi, Himanshu. Yes, there is added stress on the margins. One, because Q1 also see some amount of liquidation happening. There was a early [USF] as well, and we streamlined inventory significantly. Also because we reduced the advertising spend, we increased the spend on the consumer offers, which is partially visible in the decrease in the gross margin. But yes, given the sense of the market and the difficulties in which footfalls are coming into these stores all across, there will be higher consumer spend and there will be higher promotions, which we think we will need to run. And therefore, there will be some pressure on the margins as we move forward.

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Himanshu Nayyar, Systematix Shares & Stocks (India) Ltd., Research Division - VP of Consumer and Retail [16]

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Okay. Second question is, given the cautious or the weak demand sentiment that we are seeing, so for this year specifically, is there an intentional scale down in the growth in our retail footprint? Or we are going to continue expanding our stores at a historical run rate?

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Anand Agarwal, V-Mart Retail Limited - CFO [17]

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So we will continue to expand at around 25% to our operating area. And because we understand that stores we do not open only for 6 months or 1 year, there is -- these are long-term effects. And we firmly believe that the customer and the market is too huge for us even to contain a 25% growth rate. So we will continue to believe in that philosophy and continue to expand.

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Himanshu Nayyar, Systematix Shares & Stocks (India) Ltd., Research Division - VP of Consumer and Retail [18]

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Any specific geographies you can talk about which you might be looking to enter this year then?

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Anand Agarwal, V-Mart Retail Limited - CFO [19]

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No specific geography. We continue to work on a structure-based model as we've been working for the last 15, 16 years. And we will continue to evaluate all territories which are in our existing territories or adjoining our existing territories.

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Himanshu Nayyar, Systematix Shares & Stocks (India) Ltd., Research Division - VP of Consumer and Retail [20]

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Okay. And final question, just on this Ind AS, you explained the P&L impact. If you can just also explain the balance sheet impact a bit in terms of the change in numbers on the asset and liability side? Because I believe you'll have to adjust something from the retained earnings as well, right?

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Anand Agarwal, V-Mart Retail Limited - CFO [21]

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Adjustment of the retained earnings because like every other retailer and almost all of the corporates, we have followed the Ind AS modified retrospective method 2, which does not require any adjustments to be made to the retained earnings, so there is impact that you will see in the balance sheet of around INR 400 crores. There is a right of use of asset created on the asset side and a corresponding liability under other certain -- other noncurrent liabilities of a equivalent amount.

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Himanshu Nayyar, Systematix Shares & Stocks (India) Ltd., Research Division - VP of Consumer and Retail [22]

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Okay. So just the INR 400 crore gets added on both sides?

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Anand Agarwal, V-Mart Retail Limited - CFO [23]

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Yes.

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Operator [24]

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We have next question from the line of [Ayesha Mohta] from CD Equisearch Pvt Ltd.

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Unidentified Analyst, [25]

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Sir, what is the rationale of aggressively expanding your footprint when online stores look certain to disrupt brick-and-mortar stores?

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Lalit Madangopal Agarwal, V-Mart Retail Limited - Chairman & MD [26]

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Sorry, can you repeat that question, please?

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Unidentified Analyst, [27]

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So what is your rationale for aggressively expanding your footprint when online stores look certain to disrupt brick-and-mortar stores?

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Lalit Madangopal Agarwal, V-Mart Retail Limited - Chairman & MD [28]

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Indian apparel [and retail merchandise] 19% to 21%, and online is 1% to 2%. And if there is a -- as Anand explained, there is a large base of consumers whom we are targeting. So I think we don't see any sort of disruptions from online players. We don't open stores just for 3 months and 6 months, but for overall medium- to long-term strategy. So we don't see any large impact of online players responding to kind of negate our acceleration in terms of growth.

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Unidentified Analyst, [29]

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But sir, the online presence is also increasing. These people are offering like so many discounts, for instance, when it comes to Amazon and Flipkart. So is there any competitive [strength] over there?

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Anand Agarwal, V-Mart Retail Limited - CFO [30]

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I think, see, these kind of geographies that we target and we are strong in, there is very limited impact of online that we have seen, very, very limited impact of online. That customer is slightly different. Whatever little online shopping is happening in these territories is mostly of goods which are electronics, mobile or white goods. We've not really seen a lot of traction happening on the apparel side. Having said that, we, ourselves, see online as an opportunity for us. It's not that online is a [set]. We ourselves put ambitions to be an omni-player, a significant omni-player. We will be launching our own lead platform in the coming months, and we would want to see and capitalize on that opportunity. But as of the moment, we are firmly sure that the segmentation that we have with the customers in terms of our product quality, product variety and the price points that we offer, we are not really competing with the online players, and it's a separate space.

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Unidentified Analyst, [31]

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Okay. And sir, what is a sustainable volume growth?

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Lalit Madangopal Agarwal, V-Mart Retail Limited - Chairman & MD [32]

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Volume growth?

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Unidentified Analyst, [33]

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Yes, sir.

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Anand Agarwal, V-Mart Retail Limited - CFO [34]

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We've [taken into account] 22% -- 21% for the last 7, 8 years, and we would want to keep maintaining that figure for the -- at least for some times to come.

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Unidentified Analyst, [35]

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Sir, 22%. So like in FY '19...

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Anand Agarwal, V-Mart Retail Limited - CFO [36]

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It was around...

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Unidentified Analyst, [37]

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Sorry?

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Anand Agarwal, V-Mart Retail Limited - CFO [38]

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That's the top line growth CAGR for the last 7, 8 years.

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Unidentified Analyst, [39]

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No, no, sir, I'm talking about the volume growth like same-store sales growth, sir. I'm talking about the volume growth, not the top line growth.

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Anand Agarwal, V-Mart Retail Limited - CFO [40]

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Same-store sales growth as well as volume growth should be between 5% to 8%, if you want to ask for a long-term projection.

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Unidentified Analyst, [41]

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But sir, in the past, like you have grown at 13% also like in FY...

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Anand Agarwal, V-Mart Retail Limited - CFO [42]

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There are times which are very opportunistic, and there are times which are disruptive, so we will leverage all of those times. So one year may not be so conducive, very strong in terms of same-store sales growth, but I can't really predict the future. I can only look at the parts and sales at our CAGR. If I look back for the past 7, 8 years, has been around 8% for volume growth and same-store sales growth, and that is something that we would still want to target.

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Unidentified Analyst, [43]

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Okay, sir. And you will still continue with your aggressive store expansion as that, even if you're not very sure about the growth that you have [witnessing] of late?

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Anand Agarwal, V-Mart Retail Limited - CFO [44]

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So I will not call it aggressive. We will call it contained and conservative. We will -- we've been growing at a pace which we can profitably manage. Our focus is not only to grow, but our focus is to grow profitably and through our own cash accruals.

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Operator [45]

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We have next question from the line of [Eita Mehta] from Vallum Capital.

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Unidentified Analyst, [46]

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Sir, I have 2 questions. Sir, why has there's been no -- why are the stores been reduced in Tier 2 cities? And like from 44 to 26, how can this happen? And also what will close in FY '20?

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Anand Agarwal, V-Mart Retail Limited - CFO [47]

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That's a very good observation. There is some reclassification that we have done. This is how we are looking at the market, and the revised nomenclature we will put out on our website shortly. So there is actually no closures which has happened. It's just the remix and the [region] of how we look at the territory slightly differently.

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Unidentified Analyst, [48]

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Okay. So further expansion that you would have in those Tier 2 and Tier 3 cities is still the same?

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Anand Agarwal, V-Mart Retail Limited - CFO [49]

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Absolutely.

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Unidentified Analyst, [50]

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Okay. And sir, could you give a number on how many stores have we opened this year?

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Anand Agarwal, V-Mart Retail Limited - CFO [51]

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We will add around 25% to our base, so that should be around 55-odd stores.

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Unidentified Analyst, [52]

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Okay. And sir, one more thing, what has led to this improvement in SSG in terms of sales and volume, both when you, yourself, mentioned that there has been a subdued demand? And also like whether this 20% sales growth has come from the new stores only.

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Anand Agarwal, V-Mart Retail Limited - CFO [53]

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So the SSG or the overall growth has been a mix of how we've been able to attract the customer to our stores through the various communication mechanisms and also the attractive consumer offers and promotions. So while April was not a very good month, but for the balance part of the quarter, I think we were able to pull up how we were performing. It is a very aptly aided by also the very good quality of inventory and fashion that we were able to provide to the customers. So yes, 25% overall growth, and therefore, 5% same-store sales growth means 20% is coming in from new stores and less than 1-year stores. So there are 44, 40-odd stores, which are less than 1 year and not included in the like-to-like calculation, so but should also getting counted in the 40% -- sorry, 20% growth versus last year.

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Operator [54]

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We have next question from the line of Tejash Shah from Spark Capital.

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Tejash Shah, Spark Capital Advisors (India) Private Limited, Research Division - VP of Research [55]

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First, just one clarification. Our ASP in apparel has increased Y-o-Y and even overall realization has improved. So what led to such a sharp gross margin contraction considering that ASP shows a very healthy trend?

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Anand Agarwal, V-Mart Retail Limited - CFO [56]

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So Tejash, that's exactly what I was just mentioning. That's largely to do with the higher amount of consumer promotions and various offers that we've been running. We've been also liquidating stocks. We've also been rationalizing the inventory, which is also reflected in the significant improvement in the days of inventory. So overall, we want to keep the balance sheet very, very healthy, very lean and especially the inventory position extremely healthy, so that we are able to provide much fresher and better choice to the customers in the upcoming festive season.

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Tejash Shah, Spark Capital Advisors (India) Private Limited, Research Division - VP of Research [57]

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But sir, in spite of a higher share of liquidation, our ASP has improved. So is it then that procurement cost has gone up or there was an adverse mix playing in the overall revenue?

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Anand Agarwal, V-Mart Retail Limited - CFO [58]

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It's not really that the procurement cost has gone up. We are pretty much very static there in terms of how our pricing with our suppliers has worked. I think one is that the mix has slightly changed for the better. And also the second is that we've run slightly more aggressive customer offers and promotions, which has led to this slight de-growth in this quarter.

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Tejash Shah, Spark Capital Advisors (India) Private Limited, Research Division - VP of Research [59]

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Sir, second, as we understand there is a severe pressure on value retail as well because of the slowdown. So in light of that, is the current slowdown blessing in disguise from the perspective of [competitive intensity, which was] increasing for last 2, 3 years? Are you seeing any correction there?

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Anand Agarwal, V-Mart Retail Limited - CFO [60]

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So (foreign language), Tejash, we've not really seen any correction happening so far, but signs of stress are definitely very, very visible across the market. While we have grown in the value retail segment at a slightly healthy rate, but I can't say the same for most of the other players. And there are definitely significant signs visible. And I have a sense. In fact we talked about this in our Q4 earnings call as well. There is some amount of consolidation, which might happen in this sector.

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Tejash Shah, Spark Capital Advisors (India) Private Limited, Research Division - VP of Research [61]

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So practically, would you like the slowdown continue for a while?

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Anand Agarwal, V-Mart Retail Limited - CFO [62]

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No, definitely not. I think the market is too big and opportunity is very large for everybody. We would not really want a slowdown like a situation to happen or even sustain.

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Tejash Shah, Spark Capital Advisors (India) Private Limited, Research Division - VP of Research [63]

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Sir, second, there was also a talk of national retailers trying to match your footprint or looking to enter your geographic areas. Is there any update on that? And how is the competitive scenario from national players into our region?

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Anand Agarwal, V-Mart Retail Limited - CFO [64]

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So national players are entering our market, and that's been on for past 2, 3 quarters. And I think it's a welcome move because the market is too big for any one player, 2 player or 3 players to do well. And when they come into the market, I think the market grows in terms of consumption and thereby we are not -- we take it as a positive sign for even our business. And obviously, a lot depends on who can provide merchandise of -- keeping in mind the consumer need in our geographies. And we're very excited to ensure that fashion in terms of what we offer, how does the consumer react and how well they kind of patronize us.

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Tejash Shah, Spark Capital Advisors (India) Private Limited, Research Division - VP of Research [65]

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Are they offering -- are they playing in the same price point as ours or is theirs slightly premium?

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Anand Agarwal, V-Mart Retail Limited - CFO [66]

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So they are slightly premium to us, depending on which retailer, but probably 20% to 30% higher pricing than us. But I think I'd like to make a point that fashion doesn't mean just on pricing, on what price on, but how does a consumer perceive that merchandise to be. And last so many years we might have gotten understanding of consumer need, and that consumer's understanding of fashion, which, I think, depends on currently what value does it [perceive]. But yes, to answer your question directly, they are higher pricing.

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Tejash Shah, Spark Capital Advisors (India) Private Limited, Research Division - VP of Research [67]

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And lastly, we have spoke about disruption in our opening remarks. If you can speak about -- if you can explain what all disruptions we have brought in, in the last 12 months. Is it on pricing or product or largely under retail experience?

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Anand Agarwal, V-Mart Retail Limited - CFO [68]

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I think, Tejash, it's been an all-around foray. It's not one single thing that we've done. We've been -- as I said, we've been building the organization for the last 2, 3 years. There is disruption happening inside as well, and there's disruption, therefore, happening on the shop floor and also in the communication. So how we communicate to the customers, we're changing -- we've been changing that for the last 1 year. How we visually merchandise at these stores, that has been undergoing significant changes. If you go and visit our stores now, you will come and you will witness the kind of changes that have happened. And definitely, it's a disruptive change, because, in our segment, the kind of displays that we are now putting forward and the kind of merchandising that we are now doing is very different from what we used to do 1 year back or 2 years back. If I look at the product, fashion [quotient] and the freshness of the product, we are changing the entire -- the supply chain mechanism and the efficiency, which is definitely getting reflected in the days of inventory improvement and also the telcos of a lot of merchandise. So there's a lot of disruption, which is happening, which is internal. And therefore, it is also leading to a change in how the customer perceives and comes to our stores, not only driven by offers, but also looking at what is the new positioning and offering.

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Operator [69]

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(Operator Instructions) We have a next question from the line of Abdul Karim from HDFC Securities.

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Abdul Karim, HDFC Securities Limited, Research Division - Fundamental Analyst [70]

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We are witnessing flood-led situation and over-raining situation in Bihar and some part of the UP. It will impact the demand. And at the same time, you are expecting the good demand in festive season. So could you throw there some light?

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Anand Agarwal, V-Mart Retail Limited - CFO [71]

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So Abdul, this is -- while it's a very unfortunate -- it's very unfortunate that there are some parts of the country where you have flood like situations, but equally, at the same time, there are some parts which are also going through drought. And actually, if you look back at the last many years, the situation has not really changed. So last year as well and last to last year as well, there were areas which were under flood and there were areas which were also under drought. And it's a mix of how we maintain the sales shares between the geographies that we operate. So obviously, there will be some pressure in some months, and therefore, typically, July and August are very ill months. And once the situation gets better starting from September, we see consumption and the customers back into the stores during festive times. And actually, the festive times are very conveniently organized around the harvest calendars and the agricultural produce months. And therefore, you see a lot of consumption picking up around those times for almost all sectors.

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Abdul Karim, HDFC Securities Limited, Research Division - Fundamental Analyst [72]

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Okay. And Mr. Lalit, could you give the aspirational target of the store opening in the next 1 to 2 years?

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Lalit Madangopal Agarwal, V-Mart Retail Limited - Chairman & MD [73]

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Abdul, we have been -- I think Anand and Samir has been speaking about it, and we just continue to feel that there is enough opportunity in the market. And there are enough towns and locations where actually a store like V-Mart can do very good. And as [I've been speaking] about our overall organization structure and the infrastructure growth that we've been targeting is in line with what we are expecting. And we are now ready to accelerate our rate of expansion obviously. So we continue to be bullish, and we will slightly target at least more than 50 or 55 stores per year. We opened 44 last year. So we'll -- I think we'll -- we hope to do a good count. So we are targeting. Let's hope. Let's understand. But yes, we will always do stores addition on our own terms and then the process that we want to. We will not just go blindly to all out in the market to acquire properties with any kind of prices and without looking at our EBITDA levels. So ROI and cash balance payback is a very broader criteria. And also the cost of expansion within our control geographies that will be driving our expansion.

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Operator [74]

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We have next question from the line of Sabyasachi Mukerji from Centrum Broking.

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Sabyasachi Mukerji;Centrum Broking;Analyst, [75]

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On the reason behind the gross margin fall of 300 bps, I could understand that Q1 has been a tough quarter and the weak consumer sentiments, and probably you are going aggressive on discounts, consumer promotion. One more thing on the operating margin front, I also see a decline in line with the gross margin, but also that your employee expenses have gone up almost 32% Y-o-Y and sequentially it is around 14% higher. I just wanted to understand, has there been new hirings? Or is it anything to do with the new store openings only?

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Anand Agarwal, V-Mart Retail Limited - CFO [76]

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Sabyasachi, this is a mix of both. So yes, there have been new store openings. So as I mentioned, there are 13 new stores that we opened during the quarter. So yes, there is an addition because of that. And also we are strengthening the organization. We are strengthening the top and the middle layers, and we have added a new growth structure in the last quarter, which is now in a build-up phase. And we will -- we've been growing our employee plans, at least from the last 3, 4 quarters. If you look back not only in this quarter or also in the last quarter, but throughout the last year, I think we've been investing in people, in process and also in technology, and all these 3 costs, therefore, our investment that we are doing for the long term.

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Sabyasachi Mukerji;Centrum Broking;Analyst, [77]

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Could you just speak more on the zonal structure, the zonal heads? Have you hired them externally? What are their performance KRAs? Is it on sales or on margins as well? Could you just speak more on that?

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Samir Misra, V-Mart Retail Limited - COO [78]

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So the zonal structure and the zonal business heads have recently been put into place in Q1. And they are, overall, in charge of processes and e-mail for their zone. Having said that, it's recently been done, and thereby there is also their efficiency -- the performance efficiency will come through in the coming quarters. Their overall market understanding, consumer understanding, being agile, far more leaner processes around -- because you have to look at the market, and sales and profitabilities (inaudible) areas.

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Sabyasachi Mukerji;Centrum Broking;Analyst, [79]

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Okay both sales and profitability. Okay. Okay. Just one thing on the Ind AS. What is the impact on other operating income? I see your entry there on the comparables.

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Anand Agarwal, V-Mart Retail Limited - CFO [80]

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Other operating income is a slight impact of some commission income that we'll see. It's not a very significant amount, but that's some commission that we -- for rental that we received for shop-in-shop in some of our stores.

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Sabyasachi Mukerji;Centrum Broking;Analyst, [81]

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Okay. Okay. On the new stores that have been opened in the last quarter, probably in Q4, I'm talking about in Assam, Meghalaya and Himachal, I just wanted to understand how those stores are doing.

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Anand Agarwal, V-Mart Retail Limited - CFO [82]

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So far Assam, Meghalaya -- all of these are new territories. So -- and they are not included in the same-to-same stores count, but they are doing reasonably well. It's a mix of Tier 3 as well as Tier 4 and also Tier 1 stores. And I think most of them are doing well, almost 60 -- 70% of them are doing as per our expectations. There are some challenges that we've seen in some of the territories, which are new and nascent for us. And we're trying to crack that market because that market still holds a large customer base, and we are still wanting to expand more in those territories.

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Sabyasachi Mukerji;Centrum Broking;Analyst, [83]

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Okay. I see you have closed down 2 stores in Delhi and Jharkhand recently, I think. On 2nd of August, you've had one notification in the PAC. Could you just mention the locations and the reason behind the closure?

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Anand Agarwal, V-Mart Retail Limited - CFO [84]

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We mentioned the location, one is in Delhi, one is in Jharkhand. And I think the closure is because of not so much as the stores were not performing. One was a lease expiry, and basically we were not able to renew the lease. And the second was because we had relocated that store to a bigger and a better store in the same market, and therefore, we had to close the existing store.

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Sabyasachi Mukerji;Centrum Broking;Analyst, [85]

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Jharkhand, you mention the...

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Operator [86]

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Sorry to interrupt sir. Would you like to come back in the queue?

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Sabyasachi Mukerji;Centrum Broking;Analyst, [87]

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Yes, sure.

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Operator [88]

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(Operator Instructions) We have a next question from the line of Shirish Pardeshi from Centrum Broking.

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Shirish Pardeshi, Centrum Broking Limited, Research Division - Senior Analyst [89]

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Just a few questions. One is that we have seen the improvement into the shrinkages. What exactly we are trying to do here?

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Anand Agarwal, V-Mart Retail Limited - CFO [90]

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There is an improvement in shrinkage, which is largely driven by improvement in the process and use of technology at the warehouse and the supply chain. If you look back at the quarter and also the last 2 quarters, you would see that there has been a continuous improvement in the shrinkage. Having said that, we provide for obsolescence, and shrinkage actually includes the actual shrinkage at the stores plus the provision that we keep for any unforeseen shrinkages in the future. We would still want to maintain that as a conservative measure. We would still want to ensure that the shrinkage -- while we will control the actual shrinkage on the ground, but we will still want to provide for shrinkages at a overall level of around 1.2%, 1.1% for the full year.

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Shirish Pardeshi, Centrum Broking Limited, Research Division - Senior Analyst [91]

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I do understand, Anand, what you're saying. My only point is that is there any some more juice, which is left? Because you've spoken a lot about technology. Is that all these stores are covered under this new program?

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Anand Agarwal, V-Mart Retail Limited - CFO [92]

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Yes. All these stores are covered. It's a program. It's not just a program. It's implementation of better process and technology in terms of how -- what we supply, where we supply. So all stores are covered. All parts of the organizations are covered, which concern supply chain, the warehouse and also the upcoming new warehouse that we will build somewhere in East India. That will also get covered. So I don't see there's a lot of juice left in shrinkage. As I said, we will still want to conservatively maintain shrinkages around 1.2% for the full year.

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Shirish Pardeshi, Centrum Broking Limited, Research Division - Senior Analyst [93]

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Okay. My next question is on J&K. What is our sales exposure in J&K?

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Anand Agarwal, V-Mart Retail Limited - CFO [94]

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J&K, it's only 3% to our sales. We have 3 stores in J&K. So 2.9% of sales mix -- sales share come from J&K.

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Shirish Pardeshi, Centrum Broking Limited, Research Division - Senior Analyst [95]

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Okay. Just one last quick question. We have opened one store in Kashmir. Now that is 9,800 square feet, I could make it out from your presentation. What is the footfall we are getting there? And if you can share the sales per square feet there.

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Samir Misra, V-Mart Retail Limited - COO [96]

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I don't remember the exact footfall and the sales per square feet, but that store does quite well for us and has been there for some time. So it's a good place for us.

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Lalit Madangopal Agarwal, V-Mart Retail Limited - Chairman & MD [97]

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Shirish, we may not be answering individual question, dear. Don't ask about project details and the stores there. It will be difficult for us to tell you in front of the competitors also.

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Operator [98]

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(Operator Instructions) We have next question from the line of Vishal Biraia from Aviva Life Insurance.

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Vishal Biraia, Aviva Life Insurance Company India Ltd. - Analyst [99]

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Sir, what is the contribution of private label? And how has it moved?

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Anand Agarwal, V-Mart Retail Limited - CFO [100]

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Can you please repeat the question?

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Vishal Biraia, Aviva Life Insurance Company India Ltd. - Analyst [101]

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Sir, what is the contribution of private label for you?

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Anand Agarwal, V-Mart Retail Limited - CFO [102]

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Private label is around 2/3 of the business, roughly around 66%, 67%, and we continue to remain optimistic on increasing the private label share.

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Vishal Biraia, Aviva Life Insurance Company India Ltd. - Analyst [103]

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To what level would be comfortable for you?

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Anand Agarwal, V-Mart Retail Limited - CFO [104]

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We will not increase it beyond 75%.

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Vishal Biraia, Aviva Life Insurance Company India Ltd. - Analyst [105]

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Okay. So you mentioned that there could be a potential consolidation in the value retail segment. Would you be interested in acquiring any of the fresh players?

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Anand Agarwal, V-Mart Retail Limited - CFO [106]

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Not really. It is -- we've answered this in the past as well. There are not a lot of quality effects, which are there. And we remain conservative. We remain very simple in our approach. We still feel there's a lot of opportunity in the market for ourselves to grow on our own.

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Vishal Biraia, Aviva Life Insurance Company India Ltd. - Analyst [107]

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Okay. And what has led to the decline in inventory (inaudible)?

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Anand Agarwal, V-Mart Retail Limited - CFO [108]

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It's a mix of factors. One is definitely process improvement on the supply chain side and also use of the technology and also some amount of liquidation that we have driven across our territories in the [USS] period.

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Operator [109]

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We have next question from the line of Harish Bihani from ICICI Prudential AMC.

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Harish Bihani, ICICI Prudential Asset Management Company Limited - Equity Fund Manager [110]

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Sir, I have a simple question. You had a certain margin target in mind at the end of last year and in the recent weeks, too. So -- and this is pre-Ind AS all the adjustments which are there. So what's the number that you're looking at both the current view that we are in and all the changes that's happening? So what's the EBITDA margin number that we're looking at for the year?

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Anand Agarwal, V-Mart Retail Limited - CFO [111]

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So Harish, we had mentioned that in the call last quarter, 9% is something that we are targeting. We should look at in that range. I see that this year is going to be slightly difficult if you look at how the consumer sentiment and the markets have behaved so far. So there may be some pressure, but still internally we would want to target that same level of number.

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Operator [112]

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We have next question from the line of Hardick Bora from Union Mutual Fund.

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Hardick Bora, Union Asset Management Company Private Limited - Co-Fund Manager [113]

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Just one question, Anandji, on the Ind AS impact. Of the INR 7 crore-odd negative impact we've seen on PBT this quarter, what you said is that if the current lease base of asset base is maintained, this will reverse over a period of time. But because we are going to grow our asset base, the impact might remain. Is that what was indicated?

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Anand Agarwal, V-Mart Retail Limited - CFO [114]

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Yes, that's correct.

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Operator [115]

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We have next question from the line of Abhijeet Kundu from Antique Stockbroking.

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Abhijeet Kundu, Antique Stockbroking Ltd., Research Division - Analyst [116]

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My question was on one, in terms of vendors, have you reduced your number of vendors? I mean with all the technology that you're using now, have you done that? And what has been the reduction in -- I mean your -- if I see -- what has been the reduction in vendors year-on-year basis? That is one question. And secondly, on the product pricing part, are we doing anything on narrowing the pricing range because in value retail that really makes a difference in many cases? So just 2 questions.

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Anand Agarwal, V-Mart Retail Limited - CFO [117]

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So far I believe -- so on the vendor side, yes, it's been an exercise that we've been doing for the last 1 year, almost. There is some consolidation that we are doing with the vendors. So we are trying to encourage and promote vendors who have the ability and the capacity to grow with us and also have the required infrastructure or the investment capability to invest in infrastructure, which can keep pace with our requirements. So yes, there is reliance on bigger and better vendors. That further does not mean that we are not -- we are only removing vendors. We are also adding vendors wherever the need is, if we can get access to better quality and better quality standardizations. So I don't really have a exact number of how many vendors we would have streamline out of the system, but suffice to say that there is some improvement program, which has been happening for the last 1 year, and there is a thought-out strategy on how we will manage the vendor base as we grow bigger.

The second part of your question is on the product pricing. So I don't see that we are really narrowing down on product pricing because we cater to a large genre of customers and with very disparity in income levels, and also Tier 4 cannot really be compared to a Tier 1 kind of a income level, and therefore, the [consumption] pattern. So we are present at multiple price points. And in fact, we increased price points at the higher level. While we were really very strong in the lower price points, we've increased presence in some areas in only high price point as well.

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Abhijeet Kundu, Antique Stockbroking Ltd., Research Division - Analyst [118]

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Okay. And due to this liquidity crisis, any of your vendors are facing any problem? I mean in terms of operations. Is that a threat in the first place?

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Anand Agarwal, V-Mart Retail Limited - CFO [119]

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No, absolutely not, not to the best of my knowledge, because we being a cash-based company, we, in fact, actually encourage our vendors to get back to us and take help wherever the need is. And we've been running our early payment program for at least 2, 3 years now. And our vendor base has actually benefited. And we've tried to ensure that we'll decrease our payment cycles in this tough period for them.

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Abhijeet Kundu, Antique Stockbroking Ltd., Research Division - Analyst [120]

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Okay. Last question is have you -- so essentially, you have been making your investments in manpower across operations. So have you made investments in manpower in the product development side? And have you reduced -- try to reduce the lead time of introducing new fashion, because that is -- that -- you were saying that you want more fresh fashion across your stores, and that will really -- that has been driving your footfalls as well?

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Anand Agarwal, V-Mart Retail Limited - CFO [121]

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Yes, absolutely, yes to both the questions. So we have improved and we have inducted team members in the product development side, which definitely does not only mean product designing. We have invested very heavily into quality. We have more -- our products are more standardized across vendor bases, across manufacturers. We've put in more robust teams to ensure that we have a better quality of product going out in the market. And also in terms of the freshness of the product, we have pinned down on the product's life cycle by ensuring that we have -- we are able to provide faster access to the customer of fresh fashion.

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Operator [122]

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We have next question from the line of Akhil Parekh from Elara Capital.

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Akhil Parekh, Elara Securities (India) Private Limited, Research Division - Analyst [123]

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My question is on UP and Bihar market given that we have almost 55% of our stores in these 2 states. Would we be able to quantify how much we have benefited in these 2 district in terms of number of district -- percentage of districts and percentage of talukas?

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Anand Agarwal, V-Mart Retail Limited - CFO [124]

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So our guess is that both these markets are fairly large. We have not really -- if I look at the Tier 4 opportunity available in these markets, I think, we would not have penetrated even probably half of the market, which is available in these 2 states, if I were to look at only these 2 states.

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Akhil Parekh, Elara Securities (India) Private Limited, Research Division - Analyst [125]

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Okay. And how about Tier 2 and Tier 3? Because if I remember correctly, Lucknow, for example, ran almost few organized stores of real-time substantial presence. So how would that penetration level be in Tier 2, Tier 3 markets in these 2?

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Anand Agarwal, V-Mart Retail Limited - CFO [126]

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Actually, Akhil, the way that we are seeing the market develop is that the market itself is evolving as we are evolving. So 4 years back, we used to have 4 stores in Lucknow. And today, we have, I think, 14 or 15 stores. And we continue to look at even newer properties and new locations in Lucknow. So if I were to answer this question, probably, 3 years back, we would have anticipated Lucknow. But today, we are looking at a Lucknow in a new light, and we probably can open 10 more stores in Lucknow. So I don't really know what is the size -- real size of the market or even one particular city. Talking about a full state is very, very difficult to answer.

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Akhil Parekh, Elara Securities (India) Private Limited, Research Division - Analyst [127]

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Got it, sir. Maybe one last question, private label. You have maintained our standards that like we will keep our gross margins at similar level to our other inventory. So has this -- is it safe look like gross margins for private label as of now or we have started pushing the price?

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Anand Agarwal, V-Mart Retail Limited - CFO [128]

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No. As of now, we are still keeping the margin on the private label very same, very similar. And we would definitely want to have or charge differential pricing or differential margins only if we are able to provide essential quality or a better quality or a differentiation on the product label apart from only design.

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Akhil Parekh, Elara Securities (India) Private Limited, Research Division - Analyst [129]

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Got it. And in terms of visual preference, like last time you had mentioned that there are separate groups within the store, which highlights private label. Have we done this rollout across the stores or in some of the stores?

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Anand Agarwal, V-Mart Retail Limited - CFO [130]

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So it's a gradual process. So if you look at the new stores that we opened, I think there is some amount of in-store branding that we have started to do. But for the older stores, as they get into refurb mode, they will also get the same experience.

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Operator [131]

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Thank you. Ladies and gentlemen, that was the last question. I now hand the conference over to the management for closing comments. Sir, over to you.

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Lalit Madangopal Agarwal, V-Mart Retail Limited - Chairman & MD [132]

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Thank you once again. Thank you very much. And we continue to be aspirational and bullish and also aware of the market situation of the kind of activities which are rolling around, the kind of developments, which have been mentioned in the economical area. But we are a long term player. We continue to do some activity trading at a 3- to 5-year horizon at least. And we believe that the economy is bound to grow. We believe that the consumer -- even consumers -- the middle and the lower middle class of consumers are tend to grow. So we will continue our focus on those expansions. We'll continue our focus on besting our customer experience and besting our ability to serve them. So we continue to remain adept, and see you and then talk to you in 3 months' time. Thank you. Thank you for being there.

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Operator [133]

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Thank you very much, sir. Ladies and gentlemen, on behalf of PhillipCapital (India) Pvt. Ltd., that concludes this conference call. Thank you for joining with us, and you may now disconnect your lines.