Thanks, Danish. Hello.

Welcome, everyone, and thank you for joining us on the Arvind Fashions Limited earnings conference call for the third quarter ended 31st December 2025. I am joined here today by Kulin Lalbhai, Vice Chairman and Non-Executive Director, and Amisha Jain, Managing Director and CEO.

Please note that results, press release, and earning presentation have been mailed across to you yesterday, and these are also available on our website, arvindfashions.com. I hope you had the opportunity to browse through the highlights of the performance.

We will commence the call with Kulin providing his key strategic thoughts on our third-quarter performance. Post that, I will hand over the call to Amisha to take us through the financial performance and the business highlights.

After the end of the management discussion, we will have a Q&A session. Before we start, I would like to remind you that some of the statements made or discussed on this call today may be forward-looking in nature and must be viewed in conjunction with risks and uncertainties we face.

A detailed statement of these risks is available in this quarter's earning presentation. The company does not undertake to update these forward-looking statements publicly.

With that said, I would now turn the call over to Kulin to share his views. Thank you, and over to you, Kulin.

Thanks, Girdhar. A very good afternoon to you all.

Thank you for joining us for the Q3 results. I am very happy to share that this quarter we have seen the highest year-on-year growth in several years.

We have grown at consistent double-digit growth rates over the past few quarters, which demonstrates that our growth drivers have fallen in place. The demand environment was stable, and we achieved a 4.5% growth led by healthy LTL growth of 8.2% in the retail channel and around 50% growth in the direct online channel, leading to an overall 18% growth in EBITDA with a 40 basis points margin expansion.

Our PAT adjusted for the one-time wage code related charge has also grown by 65%, which shows strong operating leverage coming through. Moving forward with a strong addition in square footage, a healthy LTL growth, and robust growth in our direct online and adjacencies, we hope to maintain this growth momentum.

We continue to stay focused on our mantra of profitable growth resulting in further improvement in return on capital employed. Arvind's re-acquisition of a 31.25% stake in AYDPL reinforces Flying Machine's strategic importance within the AFL portfolio with the brand positioned as a key growth driver in the denim-led youth fashion market.

I would like to now hand it over to Amisha Jain to take us through the specifics and more details about our financial performance.

Thank you, Kulin. Good afternoon, everyone.

Wishing you all and your families a very, very happy New Year and a warm welcome to the investor call for the quarter ended December 31st, 2025. Q3 of FY26 marked another strong quarter for us with revenue growth of 14.5% driven by consistent execution across our direct-to-consumer channel.

We delivered a robust 8.2% like-for-like growth, nearly 50% growth in online B2C, and a sustained double-digit secondary growth in our wholesale channels. In the quarter gone by, NSV stood at 1,377 crores as against 1,203 crores in the previous year same quarter, and our EBITDA was 195 crores versus 165 crores.

We continue to grow our direct channel. These together now account for nearly 63% of sales, a 260 basis points higher share over last year.

Retail growth is very healthy at double digit with very good like-for-like at 8.2%. Our expansion gathered pace, and we've added over 41,000 square feet of retail space in this quarter.

We are in line to open 1.5 lakh square feet in FY26. Our strategy is to pivot our online sales towards online B2C, and that is also yielding really good results.

Our online B2C grew by nearly 50%, taking its share to 17% with significant improvement in channel margin. Coming to wholesale, the wholesale channels also grew double digit with some billing of Q2, which was impacted by GST transition earlier.

That got moved into this quarter. Both MBO and department stores secondary sales have also witnessed a very strong double-digit growth.

Now moving on to brands, during this quarter, we acquired Flipkart's stake in Flying Machine. We believe Flying Machine offers a tremendous growth opportunity, and going ahead, it will operate with a very sharply positioned role, a Gen-Z-focused unisex fashion brand anchored in on-trend expression with denim at its core.

Flying Machine will launch its dedicated D2C platform in fiscal '27, creating a direct-to channel more directly communicating to the consumers, building relevance, community, and cultural momentum with our Gen-Z consumers. At a brand level further, US Polo continued its momentum and grew exceptionally at over 25% led by impactful execution across all consumer touch points.

Growth in other brands was nearly to high single digit. PVH brands' growth was impacted due to geopolitical supply chain disruptions and transition towards new GST regime where GST rates have increased from 12% to 18%.

Talking about other categories, those also grew really well and almost all of these growing in excess of 20%. These were predominantly led by footwear, which is now back to a very high growth.

We believe that the disruption caused by implementation of BIS norms is now behind us. Overall, adjacent categories grew at 23%.

Among the other metrics that showed improvement are inventory freshness and gross margin. Inventory freshness is at an all-time high, and gross margin is improved by 50 basis points.

We continued our focus on advertising spend. Among the balance sheet metrics, overall working capital remained stable.

Inventory buildup was to mitigate any geopolitical disruptions. This has also helped us improve freshness and on-time season launch.

Coming to the P&L, the growth in EBITDA at AFL in Q3 is 18.2%, a 40 basis points led by gross margin improvement. Since there was early onset of festive season and wedding season, we entered EOSS a week earlier than usual.

Overall discount was higher, but better channel mix, cost efficiencies, and selects have led to improvement in margin. In this journey of profitable growth, the PAT, which is excluding code on wages impact in Q3, is at 44 crores versus a growth of 65% over last year.

The growth in PBT is nearly 20%, again excluding code on wages. As we enter last quarter of the year, we are reasonably confident of maintaining our growth rate.

We will continue our store expansion, and we hope to achieve a net square feet addition of 1.5 lakh square feet for this year. Our consistent execution on product, in-store experience will help us deliver a healthy double-digit growth in retail and direct-to-consumer channels.

We also expect that the government initiatives will aid higher consumer disposable incomes leading to a demand improvement across categories in the medium term. The outcome will of course depend on how the market environment shapes up.

Thank you.

Yes.

Hi, sir. Congratulations on a very good set of numbers.

If I heard right, you said US Polo growth is 25% for the brand, which is almost at 2,000 crores. What drove such a huge growth in this quarter?

Thank you. Thanks for your question.

I think that's a great question, and I think we're quite excited to see the way some of the growth drivers around US Polo are shaping up. I think kind of if we were to talk about how some of the initiatives that were put in place, one large thing that we've been talking about is product.

I think the one thing that we're seeing is that US Polo product elevation is extremely visible in the market. The consumer is taking that really well.

We've been driving premiumization, and that is another trend that has worked extremely well for US Polo. All in all, I think from a product assortment point of view, our strategy is on point, and I think we've been growing extremely well.

The second thing is we did double down on how our distribution looks like in US Polo, and our retail expansion has been targeted towards that. Shutting down of non-performance stores, but predominantly expanding retail has also led to significant growth.

The third piece is that the other categories have been doing really well, and we've doubled down on that especially with US Polo. If you look at it from that perspective, innerwear, footwear, kids, and women's wear have clocked upwards of 20 25% growth as well.

I think from all in all, I think our growth drivers in US Polo have been significant. We've also seen, coming back to direct-to-consumer, growth driver for us, we've also seen an 80% plus growth in online as well, right?

Overall when you look at it, all channels firing, retail doing extremely well, and online channel doing really well, that has led to the growth of US Polo.

Okay. Understood.

My only concern is that this isn't a case of channel filling or inventory stuffing which led to growth in the near term?

Our like-for-like in US Polo Overall from a retail point of view, the retail growth is at 23%, and our like-for-like in US Polo is at 11%. The other important thing to note is it's our mainline business in retail and our direct-to-consumer business that has actually grown faster.

When you look at our wholesale numbers also, our wholesale while it is at double digit, if you were to remove the outflow from of Q2, actually between Q2 and Q3, we are actually in line with the standard growth of wholesale as well. It's really the consumer offtake that is driving US Polo.

Okay. That's a very good number to hear actually.

Congrats.

Thank you. Yeah.

Second thing is a little bit of bookkeeping question. If you look at employee costs, they are grown up by 23% this quarter.

Is it a one-off or how should we read it?

Sure. I think there are two parts to it.

Employee benefit expenses have gone up slightly in this quarter, more sort of putting in some money towards employee welfare expenses, which is a one-off, and also some of it is the ESOP charge. I'll also highlight one thing.

As we spoke last time also, I talked about some of the growth drivers, and one critical growth driver that we had highlighted was our investment towards data AI and consumer centricity. We've kind of ramped up hiring there, and that's what you're seeing as well in the consumer intelligence piece, and also invested towards some of the strategic pieces.

While we've done this, what you will see coming next year is that these numbers should come in line with the growth of the business as well.

Okay. Most of it is a steady, structural basis.

We'll see a similar kind of 80 crores run rate going forward.

Hi, Girdhar here. There could be small, one-time which will drop off some of the staff welfare kind of a thing.

Otherwise it would be pretty consistent like this.

Yeah. Okay.

That's it from my side. I'll join the queue.

Thank you, sir. Thank you, ma'am.

Thanks.

Thank you.

Yeah. Good afternoon, ma'am.

Congrats for good set of numbers. My question is on Flying Machine.

Now since we have consolidated it and we have brought the brand under our PT. Now we will definitely look to redefine the strategy for the brand.

How much time will it take brand to really get back to its original growth rate or maybe from when we can see brand really start performing and adding materially to the growth and profitability of the company?

Sure. Great.

Thanks for the question. I just want to kind of step back and talk about, Flying Machine holistically.

If you were to kind of look at from a market point of view, we believe that there is a tremendous opportunity in front of us in Flying Machine. As you can see from a denim point of view, there's a large gap between the number one player in the market and rest of the brands.

We have a belief that Flying Machine with its equity that it holds and the positioning that it has had, we believe that it can be one of the largest denim players both in men's and women's segment. Tying to that also, one big thing that one big push you will see is us addressing the Gen-Z consumers in the market, right?

From a portfolio point of view, Flying Machine is actually really, really well-positioned to kind of take on that space, right? That's why we're bullish about it.

Now given that, we will also see that our channel strategy will align that way. We will have a bigger, bolder digital strategy.

You will see us launch the flyingmachine.com in the coming fiscal year, and some of those initiatives will start lining up as we start, working closer towards the market in terms of how we're targeting the consumer, serving the consumer, and addressing the consumer from a product portfolio point of view. Now having said that, what you will see in this quarter, what the way we've performed, we've seen a 17% like-for-like in Flying Machine in the stores as well.

Our B2C on Flying Machine has grown by about 40%. Department store has grown by about 35%.

To the to the question that you're asking, we're already seeing green shoots. We're already seeing that the brand is, sort of on its path, and we will need another couple of seasons, maybe two to three seasons, where you'll start seeing the brand sort of coming into its more of its mainstream growth as well.

I would also emphasize that it's already on that path. Now obviously, given the movement, given that we've now bought this stake, etc., what you will see us do is line it up better in terms of how it we will cater to the Gen-Z consumer through other marketplaces.

It's it opens up a few more avenues for us as well, and we are quite bullish about it. We will see momentum in this brand continue over the next few seasons.

Ma'am, my related question to it is since you are making it more a Gen-Z-focused kind of a brand, how will be the pricing differentiation will be with some of the brands which are already there in the market? Some of the premium brands which are already there in the market and their focus might be something else, but you are focusing more from the Gen-Z kind of a brand concept.

Will there be any material price difference which will be available in the market?

See, I think when you look at Flying Machine, it is actually very well-positioned to be this strong youth denim brand. When you look at the product-market fit, I think it's got actually a phenomenal product-market fit as well.

Our products are priced exceptionally well for the value that we're offering. From that perspective, I feel that from a consumer point of view, it's actually very well-poised to serve that segment of the consumer.

Okay. Thanks for the understanding, and all the best for the quarters ahead.

Thank you.

Hello. I hope I am audible.

Team, my question is when I have to look at non-controlling interest which has dropped quarter on quarter and also on a long-term run rate. What explains it?

Is it PVH? The growth issues at PVH, and what would that be if you can elaborate on that?

Hi, Priyank. Girdhar here.

You see in the last quarter, there was this code of wages impact on the PVH business, which subdued its profitability by some bit. There was a FM model change also where we moved to a different model with a couple of our partners.

Because of which, we had to reverse some of the sales and take a negative position on the P&L. Those are the two which explain the large part of the drop.

However, having said that, I think when the GST was rolled out, there were some headwinds on the PVH business early in October and sometimes till November, post which business has stabilized. I think there was a price increase and consumers found it a little difficult to absorb and buy.

Since middle of November till December and now, we are seeing quite healthy growth, and those numbers are coming back. Largely, it is attributed to some slowdown in PVH in the early part of the quarter, a labor code impact.

Largely the PVH impact early in the quarter was because of the GST where prices had to be increased.

I couldn't get the first point: move to the different business partners. Could you explain me that?

What was the change in the business model?

Yeah. For the Flying Machine, we had to move to an SOR model with couple of our partners.

Whatever was the inventory, we had to take it back. We started recording sales on a secondary basis.

The residual inventory at that transition time had to be recorded as a reversal of sales in our books, which increased the loss, and hence the minority interest went down.

I think the only point is that given the GST transition from 12% to 18%, we did pass on and increased prices there. I think there was an interim blip that we saw in terms of that ticker shock, but what we've seen now is that the sales are stabilizing over there.

Got it. Ma'am, when I have to just reconcile the like-to-like numbers, US Polo would have grown at 11, FM at 17, PVH might have seen slight decline.

If the numbers are so high, the balancing number comes only for Arrow, which also would have been negative? How does this reconcile on a total 8% like-to-like growth that we have reported?

See all our brands have grown. While we've grown overall at a 15%, our brands sans US Polo have grown at about single digits, and like-for-like, for example, you were talking about for FM has grown at about 11%.

PVH has also grown. The thing with Arrow has been that there have been two things.

One is we did see a little bit of a supply disruption because of the movement of goods from Bangladesh, and some of the key inventories were a little delayed into the market, which got streamlined a little bit post November, and now we're kind of on track, right? That movement led to our participating into the wedding piece a little later, which impacted Arrow a little bit.

While Arrow has grown, it has grown in early single digits. Overall, what we see now is that all our brands are actually on a pretty solid positive growth.

Sorry, I am just reconciling the numbers again. You said US Polo like-to-like growth would have been early double digits and FM also 11%.

Is that right?

Sorry, say that again, please.

Just getting a clarification on the numbers that you spoke out. US Polo would have been 11% and even FM, Flying Machine, would have been 11% on the like-to-like growth?

Share of, Priyank, share of FM is very low. While the number is double digit, the share is very low, and hence, on an overall basis, the weighted average will still be 8%.

Got it. One last thing on overall strategic part, when I have to look at 9 months performance, despite a solid performance on the top line, what we are yet witnessing is yet on the EBITDA level, the uplifting has been done only via gross margin gains.

The gross margin makes, of course, with the retail going up is also going up. It's not completely populating down into the EBITDA margin, which means that we are yet on a investment journey for our brand.

When do we see the gains coming from the operating leverage and not only via gross margins, which will give us a confidence that the brands which were expected to turn around are actually performing well?

I think if I were to step back, as you may have noted that we've expanded our margins by 140 bps over the last two years with a focus on cost and other efficiencies. With confidence on growth around double digit, we believe that operating leverage is possible in the business, and we expect EBITDA to grow more than 15%.

I think that's something that you've seen consistently as well. We have seen operating leverage year-over-year on fixed costs, excluding the one-time cost as well, right?

I think with all of that in place, we have also said that we want to make sure that we will continue to invest towards advertising as well, and we do to spur growth also. I think we are in line with that kind of an investment, and given our growth trajectory, we're confident that we will be able to see more than 15% in terms of EBITDA growth.

All right. Thank you.

Hi. Thanks for the opportunity, and congrats on good set of numbers.

Just wanted to start with could you help us understand the strategic rationale behind increasing the online B2C contribution and which of the three objectives it is primarily aimed at? Is it growth, profitability, or working capital efficiency?

I think at a broad level, we've called out that direct-to-consumer is a key growth driver for us, and us kind of getting more and more closer to the consumer. It does a few things for us as a consumer organization, as a brand organization.

As we stay closer to the market, our learning and understanding of the consumers increases, and how we kind of pull that back into a feedback loop, not just from the way of how we're communicating to the consumer, but also from a perspective of how we're serving the consumer, the learnings around product, and our entire value chain, right? There's one large element of saying that as a brand, we want to be closer to the consumer and want to make sure that we are center of culture, adapting to whatever the consumer is shifting towards, and we are able to do that faster.

Hence, we've always maintained that we would like to take this number of us from a direct-to-consumer point of view, we do want to take it to about a 75%. We are at 63% if you were to look at it from our share of business point of view, right?

A second point is, I think, it allows us to actually also maintain pricing and keep that in check. It allows us to continue to control the discounting, allows us to kind of again bring some of those gross margin and EBITDA numbers in check, right?

I think that's the second piece of it in terms of how it will enable us to improve overall structural economics of the business as well.

Got it. Yeah.

Second, just wanted to know you spoke about the distribution interventions that we would have made in US Polo to deliver this kind of robust growth. First, if you can elaborate a bit on distribution intervention that we would have made recently.

Second, what is the white space or total universe which is available, the way you see it today, which gives you visibility of 2 to 3 years growth in this particular brand?

The first part of your question was on distribution for US Polo, right?

Yes, yes.

Okay.

Called out.

See, I think I'll kind of go back to again saying that as a growth driver, right, I think there are a couple of things that we had called out. One is retail expansion, second is kind of doubling down on focus on making sure that we drive retail efficiencies and hence like-for-like growth, the third being digitization in general, right, and obviously driving adjacent categories.

Now when you apply this to US Polo, it's firing on all of these fronts. In terms of retail stores, we've been at a pretty solid expansion trajectory.

By the end of this year, overall at a portfolio level, we will add net 1.5 lakh net square feet addition is what we will end up doing. US Polo obviously is driving a good chunk of this.

At the end of the year, US Polo will be at about 400-plus stores, and we would have added close to 60 stores in US Polo. Having said that, US Polo is clocking very well in terms of the retail like-for-like also.

Plus on top of that, when we look at the online play in US Polo, I think what we're doing is ensuring that the right product is reaching the consumer through this online channel as well, and there we are also seeing that the growth in online of US Polo as a brand is actually pretty strong. All in all, if I were to look at it, our direct-to-consumer channel strategy is actually playing out really well for the brand.

Perfect. Last one, if I may.

What's your read on the health of inventory and working capital as it's today because at least on paper, it looks like it has grown faster than 9-month revenue growth?

I will take that. You see health of inventory, we are perhaps at the best ever health of inventory.

Our inventory which is more than 2 years is lowest ever, I think, the last 3, 4 years. Yes, I agree that the inventory levels seem a little higher, but please understand that we are nearing an election in Bangladesh in February.

To de-risk some of those issues and almost 15% of our product comes from Bangladesh. To de-risk that, we actually took a conscious call to inward some of the inventory in late December, which is showing up.

We believe that this is transitionary. As situation stabilizes, we will come back to normal inventory turns of between 3.8 to 4, somewhere there, actually.

Thanks, and all the best for coming quarters.

Thank you.

Thanks for the opportunity. Couple of questions from my end.

You've been guiding and achieving the mid-teens growth over the last few quarters, and you've been talking about some of the tailwinds over the last few months. Given some of these tailwinds, shouldn't growth aspirations now be slightly higher than what we've been targeting and achieving of that broadly 11% to 14% sales growth range?

Also, it'd be helpful if you could comment on adjacent categories. How crucial is that to our growth strategy?

What is the contribution of adjacent categories to our sales now? Lastly, what would top 10 cities be contributing to our overall sales?

Those are my questions. Thank you.

I think, thanks for the question. I think when you look at our growth over the last few quarters, and as you pointed out, I think we've shown significant momentum, and that's also on the back of again the strategic growth drivers that we had set up, right?

The team has been really focused on ensuring that we drive solid execution behind the strategy that we've kind of put together. Now we continue to be confident that we will be able to post double-digit growth for this year, right?

Now, as you mentioned, in terms of the tailwinds which are external, the government stimulus and the GST rationalization, etc., we do believe that in the medium term, that should help build the consumer demand, and we remain hopeful that will contribute as well. Having said that, I would still say that we are confident that we will maintain our trajectory of growth between 12% to 15%.

We have been delivering at the little higher end of that, and given the growth drivers that are in place, we believe that we'll continue to clock in that direction. In terms of the second question that you asked around the adjacent categories, overall from a portfolio point of view, our five brands are actually pretty solid.

As I had mentioned last time as well, that for us, we do believe there is significant room for us to grow within this portfolio. Our other categories, obviously, are a key driver of that.

Having said that, the mainstream business, and I'll come back to the conversation on all our brands, the mainstream business actually, which is more from an apparel point of view, actually keeps clocking in the same rate as well. Adjacent categories are critical because as you look at our brand, consumers are expecting this, and our brands are actually more from a lifestyle positioning point of view.

These are end-to-end brands, and hence, for us, the adjacent categories are critical. In terms of when I look at brand by brand, I think overall from a portfolio point of view, about 25% odd of our portfolio sits within the adjacent categories, and this drives significant growth.

We do believe there is headroom for growth over here. Footwear has come back to 20% plus percent plus, and so is innerwear in that range.

Women's has clocked about 50% plus growth. While women's is still in very, very early days, but our belief is that these are some of the growth drivers of the future.

While we continue to drive it, I will kind of still emphasize that our mainstream from an apparel point of view, actually it's quite heartening to see the way our brands have been growing in the men's apparel space as well.

Okay. Okay.

If you could have that top 10 cities contribution from here on, how does growth pan across? Is it pan-India?

Is it more aspirational? Is it beyond the top 20 cities?

Some color or contextual help.

Overall, if you look at our brand portfolio, we are present across about 150 cities. We will close the year at about in the entire portfolio, we'll close this year with about 1,000-plus stores within our portfolio.

We do believe there's a pot potential for us to expand within the top tier cities further, and we will only keep going in that direction. We will also try to we will continue to improve the boxes, the size of the boxes, and our retail expansion will continue from a net square feet addition as well, right?

From that perspective, to answer your question, we do have a focus on the top-tier cities, and we will continue. On the specifics, we will get back to you on those numbers.

Sure. Thank you.

Hi. Thank you for the opportunity.

Hope I am audible. My first question is on channel mix.

When do you see this growth in online D2C stabilizing or mean to reversion in this channel?

Can you

repeat the question?

My question was on channel growth. When do you see this growth in online D2C stabilizing?

You have been going pretty well in this channel. When do you see the growth reverting to mean?

Over the last 4 years, we have been actually trying to de-focus on B2B while increasing our focus on B2C. I think the importance of both the channels will always remain.

As we go ahead, I think B2B is largely used during the large scour event plus some other events that are there. B2C will be a continuous focus.

As of today, we see there's a big traction and that seems to be a quite a lot of natural demand which is coming. We are currently clocking more than 50%, and yes, at some point, this will become stabilized.

We believe that it could be overall online growth will continue to grow at 12 to 20% to 30% year on year at least in the next near future.

Okay. That's really helpful.

Is this one of the biggest driver for gross margin expansion for you?

There is surely an advantage of increasing share of the B2C where, as Amisha said earlier, we are able to control the pricing and discounting. However, I think a large part of our improvement is coming from both retail as well as B2C.

This expansion should continue going forward as well, right?

Yes.

Okay. Okay.

The next question was on can we see the success of adjacencies in other brands like Arrow and FM? Is that possible?

See, I think every brand has its journey. Currently, we are building adjacencies categories where we believe there is relevance, and we will continue to drive that.

The scope of that and the scale of that is something that we will drive from where the brand stands, right? As we are looking at Arrow and FM, we've been on this journey, and Arrow is a little ahead of FM in terms of the direction and how the brand is now positioned and turned around.

While we're on this journey, whenever it is relevant, wherever it is relevant, we will start driving additional sort of build-out of some of these other categories. It's more to do with the way the brand is built out, and I wouldn't kind of have a say that all brands will kind of go at the same pace on that.

Thank you so much. That's it from me.

Yeah. Wanted to again get the like-for-like for the FM.

Was it 11% or 17%?

The like-for-like for FM is 17%, but like I had said earlier as well, I think we need to keep in mind that it's a very small part of our from a retail portfolio point of view.

Understood. Can you give the like-for-like for Arrow and the PVH brands?

Usually, the brand-wise data we don't share. I'm happy to connect with you offline so that we can discuss some of these.

The reason I was asking, wanted to know on at least the formal offtake in the market. How is it, considering that there is a marriage season

coming,

yeah?

When you look at the quarter, right, wedding season was earlier this year, and like I had mentioned, for us, Arrow has been doing well. It's coming to the place slowly as we kind of drive the transformation of this brand.

We are getting to a place, and in a couple of seasons, we will see a shift there as well further. We are seeing an offtake, but having said that, Arrow participates more from a formal wear point of view.

For us, the thing is that we partake in a very minimal level from a wedding perspective. Our observation on a formal market would be only limited to the scope of what we cater to.

Okay. The last question on the margins on I know you don't give brand-wise, but can you give a color when Arrow and FM can break even or move to a reasonable number in EBITDA margins?

Arrow, as we speak, post-Ind AS is profitable. Obviously, there is a journey between the brands.

Flying Machine, as we have said earlier also, I think it's still work in progress, and it is about 2 to 3 quarters behind Arrow. We are hoping that end of next year probably we'll see some EBITDA profitability in that brand.

Got it. Once it stabilizes, whenever, a year down the line or so, where do you see the margins stabilizing at, range?

Arrow can reach mid-single digit, in my view, within a year, and Flying Machine, as I said earlier, can near a break-even number.

Okay. Thank you.

Yeah. Thank you for the opportunity.

Ma'am, my question is on the overall demand scenario. If we see that many of the value retailers have specifically highlighted that the demand is very soft, and they have given reasons like it's overall subdued demand along with the competition that is there.

For Arvind, how is the premium segment performing? Also just want to add in this, one of the largest value retailer in quarter two said that the initial GST benefits actually went to the large ticket items, and they said that it will gradually flow to the discretionary side like the apparels.

Are you seeing any on-ground trends regarding that and overall premium segment how it is doing, the customer trends, given it's almost 1 month has already passed in Q4? Thank you.

I think for us, again going back to our strategy, we have been following a premiumization strategy, and that we have seen has been doing well. The demand from a consumer point of view has been actually pretty solid for our brands, and that stability we see, and we are expecting that to continue in Q4 as well.

While it is only a few weeks into Q4, we remain hopeful that we should be maintaining our trajectory of growth in the 12% to 15% zone as we've communicated. I can't comment on the value retail part of it, but I will say that from a GST perspective, we do believe that some of these initiatives should come back to boosting demand in a positive way in the medium term, while we may not have seen an immediate effect.

Okay. Understood, ma'am.

My next question is on the Q3 growth. You said that there was some spillover from quarter two.

What could be the normalized growth for Q3? If we can exclude the spillover?

I think the impact could be less than a percentage, I would say. Not much.

I think the way to read it would be if you look at MBO between Q2 and Q3, it would look at a normalized growth of MBO, both put together.

Yeah.

Okay. Understood.

Thank you, ma'am. Thank you, sir.

Thank you.

Yeah. Congratulations for a good set of numbers.

I wanted to ask about margin levers on four subdimensions. I'll just take each of the subdimension one by one and ask you if I may.

Firstly, you mentioned operating leverage, right? Now I wanted to understand apart from let's say the spreading out of overheads over a larger number of stores, etc., what are your sources of operating leverage, and how do you see that panning out in the near future?

Okay. What is your next question?

Keep going.

Yeah. The other three is premiumization.

How important is premiumization to you and how much is that contributing to margins? The third question is cost control.

How important is cost control and where are the areas of cost control? The fourth question is the increasing percentage of online sales from the current 17% to whatever they might be in the future, how much will that contribute to improving margins?

Have I captured all the margin levers, or are there any other significant margin levers that I have missed out on?

I think at a broad level, I'll say that premiumization is a very important strategic lever. When we look at our product portfolio across our brands, we have been driving a premiumization strategy.

What we have seen is that the consumer is responding really well to that. While they are premiumizing, the product-market fit is actually quite phenomenal, and our brands are all positioned in an aspirational part of their own individual segments, right?

From that perspective, premiumization is a very critical part of our strategy. Overall, as we've also communicated, premiumization is kind of driving that as well.

Our focus has been both on product strategy, getting the right assortments out, and ensuring that we are driving premium within that segment as well, right, while offering great value to the consumer. Further, this has led to GP improvement as we've worked on the COGS side of things.

At the same time, our focus has been to kind of continue to reduce discounting at an overall level as well. I think all in all, that part of the strategy kind of hits very hard.

We've also maintained that as a company, we are very, very sharply focused on driving operating leverage, and hence you will always see EBITDA growing faster than revenue, and that obviously brings in to the question that you asked. Obviously, cost controls are part of it.

Over the last 2 years, you've seen about 140 basis points sort of an improvement in margin expansion with our focus on cost and efficiencies, and that includes fixed cost, etc. We continue to remain focused over there.

We will keep driving it. As we drive our channel expansion, we do believe that opex will remain in line, and that should lead to EBITDA expansion as well.

Operating leverage kind of comes and flows from there as well.

I'm sorry. I didn't get any specific answers to my questions.

I asked about what is the source of your operating leverage. In terms of premiumization, could you explain what are you doing actually in terms of your assortment, etc., that is leading to premiumization?

What are your initiatives in cost control, and does the increasing percentage of online sales increase your margins in any meaningful way? I would request you to give me some specific color on these questions.

If I were to kind of go back to premiumization, and I think we can talk about the merchandising strategy. For us, premiumization comes in two parts, right?

How are you looking at the brand and elevating the product portfolio in general so ensure that the product mix is what is right from a consumer, from a market, and a channel point of view. For us, premiumization comes in two lenses: one is a channel segmentation and ensuring that the product mix that we are aligning for that particular channel, for that particular store is matched to what the consumer segment is, and our merchandising strategy and our merchandising grid is getting more and more sharper and aligned to a more sharper segment of a store of one, right?

That's one part of it. The second, from a premiumization point of view is you'll see significantly improved product and innovation being brought to the market.

That also at a very solid, I've kind of mentioned this earlier also, very, very solid product-market fit over there. What we are offering from a price-value equation point of view is also extremely good.

While maintaining the aspirational quotient of the brand, premiumization is being driven both from a product mix point of view, from the individual product and innovation offering point of view, and how we are giving value to the consumer. That's all in all from our premiumization point of view.

Does that help you?

No,

not very much. I'm still not getting an answer of the source of your operating leverage because I understand operating leverage a little better in a manufacturing situation.

In a retail

No. I can answer that.

You asked two questions. I think we'll kind of park the premiumization part because I think you're talking about both in the same breath.

Premiumization, I hope you understood that part of the merchandising strategy, and maybe we can park that question.

Now, what I understood you said on premiumization is that basically you're improving the product quality and you're improving innovation. That's what I got.

Okay? I don't quite understand what your linkage to merchandising to premiumization was.

At least I didn't understand the connection.

If you want, we can have a separate conversation because I think merchandising is the key part from a brand merchandising grid point of view, and product mix and product innovation are key drivers. I think, yeah, if you're trying to relate this back to manufacturing, maybe there could be a separate conversation on it.

If I could just come in here on a couple of examples of operating leverage in the business, I think first of all, on gross profit, one of the things we are seeing is constant sourcing advantage with scale. I think one of the ingredients into GP is when you have larger scale, you are able to get sourcing efficiency.

Of course, as Amisha was saying, we are working on better full price sell-through and bringing our discounting down. That's not necessarily operating leverage, but that's one of the very large things that is going into GP enhancement today.

On the selex side, the best way to think about operating leverage is through the lens of productivity. When your LTL is very high, your store-level fixed costs remain the same, but your revenue goes up faster.

LTL,

when it is in the high single digits, you are getting operating leverage on your selex, which is again, a good operating leverage point. Then, below your channel margin is your overall company fixed cost.

We've

reached a scale now where the fixed costs of the company will not, in the years to come, grow as much as the scale of our CBA growth and our revenue growth. That is a third source of operating leverage.

At three levels, you will be seeing operating leverage coming into the company.

That that helps. In terms of cost control, and in terms of percentage of online contribution, how does this what are the cost control initiatives that are still relevant to you apart from what you've already mentioned in this list?

In terms of does the percentage increasing percentage of online also improve your gross margin?

I'll just take online, and then Amisha can talk about cost. See, online, we look at in all our channels a metric called CBA, which is your contribution margin.

Our online channel contribution is very similar to our offline direct contribution margin. In terms of any shifts between channels is not going to have a very major impact on our overall EBITDA because they are similar from a channel profitability perspective.

I hope that clears your question.

Yes, thank you. That's helpful.

Okay. Thank you.

I finally got the answers to my questions. Thank you.

Good afternoon, and thanks for the opportunity. Congrats on a good set of numbers.

I just wanted to get some understanding on the ASP. How is it balancing?

Is it more towards the higher-end brands or the lower-end brands, if you could provide me some clarity on that?

Pooja, different brands have different positioning, and Amisha can add, and Tommy, CK, of course, are in the premium segment. CK, we call it as a bridge to luxury.

Tommy is of course premium. Different brands have different ASP, if you could be more specific, or we could of course catch up offline also, but we need more specific question.

I'm willing to ask that how is the overall ASP shaping up? Is it more towards the premium brands?

Are they contributing more or is it the lower-end brands that are contributing more?

I think if you were to look at our portfolio, our portfolio outcome is a mix of how our overall mix of the brands, right? We have our brands that are staggered up from Flying Machine that is positioned as a denim-oriented youth brand to as we scale up to US Polo's positioning, laddering up to Tommy, and then to CK.

An individual brand from that perspective will sort of, overall from a portfolio mix point of view, the ASP will obviously inch towards the weighted average of these brands as well.

Correct. That's what I wanted to understand that how is the segment-wise from the higher-end brands or the lower-end brands?

You're seeking segment-wise Which kind of segment are you seeking? We can probably understand this question offline a little better.

Maybe we can connect with you. Girdhar can connect with you, and we can understand this better and maybe respond to you.

Sure, thanks.

Thank you.

Hello? Hello, can you hear me?

Hi, Amisha. This question is to you.

Given the background, what in your sense is the market for denim in India? When you sort of look at that market, barring Levi's, there has been no other brand which has been constantly amongst the top five.

I'm just trying to understand, what we hear and read is the top 2, 3, 4, 5, that number keeps on changing. When you look at the growth rates of Spykar, Killer, Lee, Wrangler, all those brands, and even if I include FM in that breath, FM is at mota-moti 400 crores for the last 4, 5 years.

What gives you the confidence that the initiatives that you'll take will actually drive growth from here on because in the past also we've done a lot of things in the FMP's, but something sort of doesn't work out. I just wanted to understand is it a category problem?

Is it a brand problem, or what is actually happening underneath?

I think I can, given the denim category in general, we do believe that we have actually a very solid opportunity ahead of us. At the same time, our brands are very well-positioned to cater to that category.

Even even if I were to just talk about our entire casual wear portfolio, which is which is laddering up from Flying Machine to US Polo to Tommy and to CK, denim as a category, we are looking to serve that, and we believe that we have an opportunity to lead in each of these consumers demand spaces at that particular consumer cohort. We believe that we can kind of drive, to a number one player in all of these spaces.

Now coming back to the specific question, I think for us, the way we will go about building our brands is we are ensuring that we are A, catering to the consumer and ensuring that we are catering to the specific consumer need. That's the first step of it.

Then what we will line up is three big things which will lead yield the results that we're seeking. I think it's important that we have the right product portfolio, and we feel extremely confident that with Flying Machine, we've kind of honed in on, and as I've seen now the recent seasons, we've honed in on what the right product portfolio is from a consumer point of view.

We're building out the assortment and ensuring that our overall our merchandising strategy is aligned from that consumer profile point of view. That's step one.

Step two is we're also sharpening the way we serve and reach our consumer, and that is another critical piece of it, you know. How do you speak to that consumer?

How do you how do we serve that consumer is an important part. We are actually doubling down on our marketing capabilities and going after this part of it.

I have spoken about this earlier as well. As part of our strategy, we are ensuring that we are going to segment the market.

We're going to make sure that we are going to start communicating in a in a more sharp manner and in a more current, digitally oriented world and this consumer. We're going to kind of drive that as well.

The way we are going to build the brand is going to be a second significant piece of how we will go about it. The third is have ensuring that we are serving the consumer through the channel of choice.

This particular consumer sits within a certain type of channels, and we want to make sure that we are catering to that consumer that way as well, right? How do we go about a social media strategy?

How do we go about our digital strategy? How do we make sure that our digital commerce, our retail is lined up to serving the consumer as well, right?

That's that's what we're after, and you'll see us come out from a brand point of view in a more sharper way. Having said all of that, brands are built over a period of time, and us what we are now seeking to do is build this consistency and consistently season over season, ensuring that we are we have a sharp brand positioning, and we continue to cater to that consumer, right, with the right cultural hooks, with the right, medium of communicating with the consumer.

To the question you're asking, I'm actually extremely confident and bullish. I do believe that we have a great opportunity to take on this market.

We do believe that, building out a brand of India and building out this brand for the youth is is also going to be a pretty solid positioning and the future of Flying Machine. Having said that, I do believe our brand other brands like US Polo, Tommy, and CK are all extremely well-positioned to service the consumer cohorts they service, service that consumer from a particular price point perspective as well.

Okay. My second and last question is, when you look at the overall business, last 2 years, if I just dial back, 4.5% growth and FY25 8.5% growth.

Obviously, US Polo and PV

Hello?

1:30 [unclear].

Danish, are you there?

No. I will reach out to the person who was speaking, and I will finish the call.

Thank you, everyone, for joining us on the call today. If you have any more questions, please feel free to reach out to us, and we would be happy to answer them offline.

Danish?

Yes.