Good evening, everyone. Welcome to Brainbees Solutions Limited quarter one of financial year 2027 earnings call.

This is Harsh Kabra, and I have with me Mr. Supam Maheshwari, Managing Director and CEO of the company; Mr.

Gautam Sharma, Group Chief Financial Officer; Mr. Vivek Goyal, Chief Business Officer of the company; and Mr.

Abhinav Sharma, Country Head of Middle East business operation. We also have Mr.

Anuj Jain, the Chief Business Officer of GlobalBees. Kindly note that this call is meant for analysts and investors of the company.

We wish to highlight that the call is being recorded, and by participating in this event, you consent to such recording, distribution, and publication. All participants have been muted as per the default mode, and participants will be unmuted once we open the Q&A forum for the members to ask questions, and after the presentation from the management concludes.

We will be covering the presentation in the beginning of the call, and we will thereafter open for the Q&A forum. We would like to point out that some of the statement made in today's call may be forward-looking in nature, and the disclaimer to this effect has been included in the presentation shared with you.

With this, I request Mr. Supam Maheshwari to take it over.

Good evening, everyone. Welcome once again to our first quarter of FY '27 performance.

Thank you for joining this call. I would request if you can put up the presentation, Harsh.

Currently, we can't see it.

Yes, sir. I'm presenting it.

Let me know once it is visible.

Yes. Go on the first slide, yeah.

Yes, sir.

Perfect. Thank you.

Yeah. Welcome once again.

I think yeah, we'll begin with our sort of a vision and mission. As you all are very familiar with that, I won't repeat it.

Baby's first cry is a special moment for parents, and at FirstCry, we continue to work towards an aim to make this very moment, as well as the all such moments of parenting journey filled with joy and happiness for all young parents. That's our mission so far, and we'll continue to drive that going forward as well.

We'll be covering today some of these points, and we'll begin with the first overall performance. Key highlights for the quarter one FY '27 performance from a consol business perspective, which is consolidating our India multichannel, our international business, GlobalBees, and other segments, which is primarily our preschool business.

Overall business has grown 13% year-on-year. This is the strongest revenue growth in last 5 years that we have demonstrated on a consol basis.

We have also demonstrated 34% improvement year-on-year basis on a consol basis on loss reduction after tax. Now we'll go into the segmental updates.

On India multichannel, which is our the core business segment reflecting the highest-ever, highest growth rates that we have been focusing on. You can see on the right-hand side the quarterly year-on-year sequential growth, and now in this quarter, we have demonstrated around 17.7% revenue growth rate, the strongest, again, in last seven quarters.

These are all, some of our initiatives that have been at play in FY '26 and even in FY '27 that we have been sharing with you, for last many quarters. With some of our initiatives in the offline channel as well, the GMV of offline continues to again grow in the mid-teens in quarter one of FY '27.

With all our current initiatives, which we'll speak in subsequent slides as well, both in online and offline business, we believe that the structural growth rate will remain elevated in the subsequent quarters as well. It's not just a one-off phenomena, is what we believe very strongly, given what all we have done as a homework, as an input to our business structurally, both from our online and offline business perspective.

Overall, India multichannel business continues to be PAT-positive for Q1 FY '27. Now moving to international business.

The revenue of international business grew by 12% year-on-year for quarter one. We, as we have mentioned earlier, we continue to focus on our sustainable growth while reducing our adjusted EBITDA.

Adjusted EBITDA for ESOP cost has reduced by 22%, 22.3% year-on-year basis in Q1 over Q1 last year. With respect to GlobalBees, we have delivered a flattish growth.

However, we have demonstrated a very significant improvement in growth of adjusted EBITDA by a factor of 308% from Q1 a year-on-year basis. Overall, a very strong performance from a India multichannel view, a strong growth rate powered by both online, offline structural improvement through our initiatives that we have undertaken.

International business continue to demonstrate, a sustainable growth and very laser-sharp focus on improvement of adjusted EBITDA from a losses perspective. Objective is to solve for becoming an EBITDA-neutral business as soon as possible.

Then GlobalBees continue to demonstrate a improvement in adjusted EBITDA. We'll go into a little more detail as we go forward.

Overall snapshot in terms of some more numerical data points. Overall consol business AUTC grew by 10% to 11.8 million.

The GMV grew by 12% to ₹2,807 crores. Overall revenue from operations grew by 13%, ₹2,106 crores.

Consol adjusted EBITDA grew to 4.24% versus 4.98%, ₹89.3 crores. Consol gross margin, likewise, to 36.5% from 38.5%.

Cash after profit to 2.4% to ₹50.8 crores at a consol level for Q1 for the business. Moving further, we'll just focus on India multichannel on the key initiatives that we have been sharing with you for last few quarters.

The three initiatives have really scaled very nicely. Very happy to share updates on all of these three.

RocketBees, which is our internal faster delivery framework that we had started roughly around start calendar year, start of the last year, and we have been updating on every quarter as it expanded. When we spoke last time in May for the March quarter, we have expanded from 62 to 72 cities.

The overall volume that we are covering today at the end of June quarter, as we had promised, we had targeted to take cover around 50% of our total online shipment under RocketBees umbrella. Happy to share that we have been able to successfully deliver that milestone, and and we continue to grow the network, and also witnessing 20% improvement in turnaround time from delivery perspective, and growing better growth as well as customer experience in a in a in a very tight sort of a, I would say, industry where customer experience matters the most.

This this this overall delivery initiative of RocketBees has been very successful, and we will continue to grow and work harder towards growing more area under the curve. Now on the FC Quick, while two quarters back, we had just started as an experiment, last quarter in March ending in May when we shared this update with you, we were in 5 cities and around close to 60,000 shipments in March.

We have now expanded our Quick from a, pilot to a solidifying our sort of a growth strategy, and now we have taken it in a full-fledged strategy to now 12 cities and delivered 125,000 shipments, almost a growth of 100%, more than 100% from March to June, just in 3 months alone. We continue to see very great customer satisfaction, and we will continue to grow with our framework of COCO stores, our infra of dark stores that we have built out, especially in some cities and some PIN codes, and our warehouses.

All of that collective framework has helped us to grow on the Quick, FC Quick, and on a RocketBees sort of platform. We will, as I said, we will continue to grow.

We had an overall ambition of growing to 10% of our overall shipment onto the FC Quick platform. We are, and in any specific sort of PIN code that we all will operate, we will aim to grow to 20% of our volumes.

We will continue in journey in that direction, and has really worked out very well. We have well-oiled our engine, and we'll continue to improve our assortment, continue to improve our overall TAT.

From 3 hours to many cities and many PIN codes, we have reduced it to 2 hours, and we will continue to work towards it further reducing it. Yes, of course, not 10 minutes and 15 minutes because we are dealing with a far larger kind of an assortment with fashion and, overall non-fashion.

The breadth of our universe in terms of our FC Quick is far larger and far superior, and serves every bit of a requirement that a young mother and a young father would look for. It really is solving the pain from a, the new generation or the new customer expectations that we are able to fulfill for Gen Z parents and and and millennial parents.

Third initiative that we have been speaking about, it's in full flow now. We had talked about that we will realign our product portfolio from a width to a depth strategy has really fully scaled out.

The impact of this was visible even in last quarter, and it continues in this quarter. It has helped us to drive footfalls, conversions, both of them, and we continue to deliver 15% GMV growth for our offline business in Q1 FY '27.

We are very extremely positive, bullish on all the three initiatives. We'll continue to scale the first and the second, and continue with our third refinement of the third initiative, which is, offline to continue to drive a new store growth expansion as well in the subsequent quarters because we had paused it a little bit to make sure that we align our product portfolio, we bring back, capital efficiency, and and then grow from there onwards.

We have seen that now for two quarters, and now we'll be expanding, as you will see in our subsequent quarters to come, the growth rate should remain elevated. With that, I think I've explained all the three initiatives in a as much detail, of course.

Any more questions, we'll take it at the end. Moving further, I will hand, ask Vivek to take over the further updates on the India multichannel.

Thank you, Supam. Some of the key updates on India's multichannel business.

We have continued sequential improvement on year-on-year growth in revenue with the strongest growth that we have demonstrated in India multichannel business in last seven quarters. Our diapering category continues to witness heightened competitive intensity during the quarter.

However, the same has started to soften a bit in this quarter, in the current ongoing quarter. Our non-diapering portfolio, contributing to 85% of our GMV, remains robust and continues to perform really well for us.

Our AUTC growth has been at 10%, orders growth is much healthier at 12%, and the GMV growth is at 12% as well. We can move to the next slide.

We have delivered a strong revenue growth of 18% Y-o-Y in Q1. This growth was accompanied by some moderation in gross margins on the Y-o-Y basis, which resulted in EBITDA margin being lower on Y-o-Y basis.

In order to explain the moderation of the gross margin, we will take a step back, and I'll take you to Q4, where the gross margin moderated by 280 bps, largely because of two reasons. One, competitive intensity in diapering category, which constitutes to about 15% of our business, putting pressure on our margins.

Secondly, the impact on gross margins in our manufacturing business because of rupee depreciation and increase in crude-linked raw material prices. While we recovered 20 basis points of this lost gross margin in Q1, we believe the margin recovery in subsequent quarters will be much faster due to the following reasons.

One, again, margin moderation, which was largely because of competitive intensity in diapering category, has started bouncing back since we are seeing the reduction in competitive intensity in market signals in the ongoing quarter. On the loss of margins in manufacturing business, we have started passing the increase in crude-linked raw material prices in manufacturing business to our customers and expect to fully recover it by the end of this quarter.

I think we can move to the next slide. I'll hand over to Abhinav for the international business updates.

Hi,

good evening, everyone. For the international business, in this quarter, Q1 of FY '27, we continued our focus on a sustainable growth, as we've mentioned in the previous quarters as well.

Q1 FY '27 revenue growth was 12% Y-o-Y with, more importantly, adjusted EBITDA losses reducing by 22% in the comparative quarter. As we all know, there are some geopolitical disruptions ongoing in the Middle East.

However, our Middle East business, both the markets, sustained a healthy growth and a higher potential. More importantly, it reflects on the higher potential when their environment is largely stabilized, hopefully, in the near term.

Our AUTC grew by 7%, GMV grew by 9% in comparative quarters, FY '27 versus FY '26. Next slide, Harsh.

We talk about sustainable growth on the back of expanding margins and reducing EBITDA losses. As you can see, we grew 12%, which came with also a gross margin expansion in the comparative quarters by about 280 bps, which then resulted also in the adjusted EBITDA losses by 22% in absolute terms.

In loss terms as compared to revenue, we had an improvement by 320 bps, from 10% to 7%. Harsh, next slide.

As you can see, we've mentioned over the last four or five quarter calls that we will be continuing to reduce our losses as we move forward and sustainably grow the business in the Middle East. FY '23, in comparison, if you compare FY '26 versus FY '23 full year, there has been a reduction of 1,500 bps in our losses.

If you compare the quarterly loss, comparative quarters, FY '27 versus FY '26 Q1, we have a 320 bps reduction in losses. Our focus has been on reducing these losses and our path to profitability while we grow the top line sustainably.

Anuj, over to you.

Thanks, Abhinav. Good evening, everyone.

The update on GlobalBees. Revenue has been almost flattish for the quarter.

This is this is a temporary state and not not a long-term structural change in the business, and I'll explain later why. Core categories of GlobalBees have grown by 2%.

The margin profile for core brands continued to be strong, and we posted a 4.3% adjusted EBITDA margin post-corporate expenses. A key factor that affected the growth was a planned transition in one of our core brands.

It is related to a longer-term normalization of business operations and involved a shifting of the business warehouse and inventory. This is a temporary and planned transition that should be complete in quarter two, and therefore, we expect the growth to bounce back starting quarter three.

If I assume that we had done the same business, for this brand as quarter one of FY '25 and take a very nominal growth, and on top of that, add the impact of Flipkart settlement, which is about 2%, the year-on-grow year-on-year growth for this quarter would have been in the high teens. That's why I was saying that this is not a structural change in the GlobalBees business.

We will very much be back on track by quarter three. This growth is entirely organic as our last acquisition was in September 2022.

Harsh, next slide. Okay.

What we've been doing is also focusing on expanding margin. If you see that while our there's been a slight drop in our gross margins, overall, our adjusted EBITDA has grown from 1% to 3.9%, and this continues to be a strong focus for us as we go as we move forward.

The overall momentum on the adjusted EBITDA continues year-on-year. We've been demonstrating a strong improvement in margin profile, and the same thing is visible in the quarter-to-quarter year-on-year change of 290 bps.

Like I said, we will continue to focus on improving our profitability as we as we go forward. Yeah.

Yeah.

This is our fourth business segment, which is the preschool business. Both revenue and the EBITDA growth was very strong in Q1.

A 47% growth in the net revenue from ₹13 crore rupees to ₹19 crores, and a 65% jump in our adjusted EBITDA from ₹3 crore rupees to ₹5 crore rupees in Q1 FY '27. Next slide.

Next slide, Harsh. Before I talk about the consol numbers, a quick recap on various business segment numbers.

While there's an impact on the adjusted EBITDA margin, which Vivek talked about, he explained in detail why the margin has dipped, and going forward, the recovery of margin should be much faster. Happy to mention that we have delivered a very good growth in the India multichannel business.

It's best in last seven quarters. International business, despite of the geopolitical tensions in Middle East, we have delivered a 12% growth and a very healthy reduction in our EBITDA, from 10% to 7%.

GlobalBees, while our flattish growth in GlobalBees businesses is temporary, we have focused on improvement of EBITDA margin, which has improved from 1% to 3.9% in Q1 FY '27. The school segment continues to do very well, a 47% jump in the revenue and 26% EBITDA compared to 23% in Q1 FY '26.

Combining these four segments, next slide, Harsh, we get these consol numbers: a 13% growth in revenue, best in last five quarters; and consol adjusted EBITDA, on a absolute value, more or less remain same, largely because of some impact on our EBITDA in the India multichannel business. However, we will continue to improve this in subsequent quarters.

One important thing I would like to mention is that while this is the adjusted EBITDA, 4.24% on the net revenue, we have increased our EBITDA by almost 80% on a Y-o-Y basis in Q1 FY '27 compared to Q1 FY '26.

If you adjust for the ESOP cost.

Yeah. This is after the adjustment of ESOP costs.

Yes. That's it.

Okay. Thank you, team.

We can wait for a minute for the queue to get formed, and then we can start with the Q&A. I request participants to raise their hands for asking questions.

We will unmute you one by one, and you will have the access to the mic. Please introduce yourself and the name of the organization you represent.

The participants are also requested to limit their questions to a maximum two. For any follow-up questions, you may join the queue again.

Okay. The first question is from Jay Laddha.

Jay, please unmute yourself.

Yeah. Hello.

Good evening, sir.

Good evening, Jay.

Hi, Jay. Good evening.

Yeah.

The numbers are very much good, and the whole business is totally recovered from the past losses. Now my question is related to the gross margin and manufacturing losses.

Basically, you guided that in Q2 FY '27, we will get fully normal, but you haven't mentioned that number anywhere. My curiosity is to know that in Q1, how much that has been recovered?

Is your question linked to the India multichannel business gross margin, Jay?

Consolidated related, overall. See,

if you see the Middle East business, see, gross margin on all the fronts, except the India multichannel business, has improved. Gross margin for the international business is continuously improving.

Gross margin, if we exclude the impact of the change in the revenue recognition done by Flipkart, I think we are more or less similar in terms of gross margin compared to FY '26, Q1 FY '26. Gross margin for the school business is also continuously improving.

That is evident from the improvement in EBITDA. Now what remains is the gross margin for India multichannel business, which Vivek talked about, that we have recovered around 20 bps.

What he has done is he has taken you to Q4, back to Q4, wherein we have lost around 280 bps of gross margin, out of which 20 bps of the gross margin is recovered. The two reasons which contributed to this loss of gross margin was: a, heightened competitive intensity in the diapering category, which has started easing out.

It's clearly visible, and we should see the impact on the gross margin in Q2. The second reason was the rupee depreciation and the increase in the crude-linked raw material prices, which we said that we have started passing on those price increase to our customers, and by end of Q2, I think we should be able to pass on the entire increase to the customers.

Okay. On both the fronts, you will see the gross margin continuously increasing or improving.

Okay. While, structurally, other factors will continue to help us expand the gross margins, which includes continuous increase in the home brand mix, fashion mix, negotiation of margins with third-party brands.

Yeah. Another question is that international segment, means break-even, means what period should be there?

FY '27 full-year guidance, means any updates related on that?

Gautam, you want me to take this?

Please. For the so,

Jay, on the break-even point, as far as timelines, I we would we want to avoid a specific quarter that we want to give out. However, what I can tell you about, the trajectory.

If you if you look at the last quarter presentation, there was one of the slides that showed you the gross margin sort of a trend in comparison to India at the same similar age of the business. We're very much there.

Secondly, as you can see, our input. These numbers, EBITDA and the growth and the gross margin expansion, are all output numbers, you know.

If you how do they how do we arrive at that? Input is where we need to be more so the comfort level should be coming from the input side of the business.

I can say that from an input side of the business, we continuously, focus on, without deviation, on reducing our burn and growing the top line. How do we do this?

One fundamental thing is improving our home brand mix in the in the top line of the top line. Second is also curating the brands that are high-gross-margin brands.

Third is, acquiring extremely high-quality customers at this stage in the business who have a, lifetime value of our liking. When you do these three things and obviously service levels, we continuously improve and work upon our service levels in the Middle East as well.

Once you do these things, the comfort comes from you see the numbers, EBITDA losses reducing, you see gross margin expansion, you see a sort of a early teens to mid-teens sort of a growth every quarter when you compare. Once we achieve once we are a we are at a stage where we believe our unit economics and our gross margin sort of stack up to allow us to be more aggressive and double down on our growth trajectory, which then, obviously, will give us the leverage, for the bottom line, I think that is where I wanted to explain how we are approaching the business in the Middle East.

Now having said all of this, we all know what's going on. We all know, the situation is not ideal, to speak.

We have taken, as a business, we have taken this as an opportunity rather than a challenge ecosystem challenge. Rather, we've taken it as an opportunity where we've seen our home brand continuously performing, continuous expansion in gross margins, and continuous sort of top-line growth.

From a comfort standpoint, there are many variables, many numbers that should give you a comforting sort of a feel, and this is for everybody on the call, comforting feel to where the business is heading. Putting a timeline, is probably, I would say, very tricky at this point in time, but sooner than you think.

Let's put it that way.

I think the great testimony is, basically, March '25 number was -16%, which has come down to -7% in Q1 FY '26, FY '27. In a span of 15 months, the losses has reduced by 9%.

It'll continue to go down as we go along, subsequent quarters as well.

So. I understand all the things.

Basically, the business is totally recovering from the past losses, and it's good to see that. Thank you.

Thanks, Jay. Thanks, Jay.

Next question is from Aditya Kumar. Aditya, if you can just unmute yourself.

Thank you. Good evening, everyone.

I have two follow-up questions, one on the growth and second is the margin. I will take first on the growth.

I think it's good to see exceptional growth in the multichannel business in the current quarter. We will be able to see similar type of growth in the coming quarter?

This is my question on the growth. On the margins, when we will be able to see and the management believe how we will be able to recover the margin we lost in the multichannel business?

This is two questions from my side.

Sure. Aditya, I think on the India multichannel, your question was in relation to India multichannel, right?

Yeah. Yes.

India multichannel, I think we demonstrated almost 18% growth, was the highest in last seven quarters, as we mentioned. We believe that for the next few quarters, it'll remain elevated as well because of the input that we have been sharing with you, the key initiatives.

All of them are focused towards our online and offline business. RocketBees has helped us to improve customer experience, improve 20% of the delivery TAT.

Now as we have just mentioned that it has gone to more than 50% of our total online volumes as a delivery framework. We have also started reverse as well.

I think with all of that, customer experience is bound to improve, and thereby, that is what we had visualized a few quarters back. That is what the business was suffering from.

We have fixed it. We'll continue to even improve further.

The growth will remain elevated on that front. Second, on the FC Quick, we've seen the numbers.

We just shared from 60,000 in March, in 5 cities, now in 12 cities, 125,000 numbers in June, almost doubling up. Also reducing our timeline from 3 hours in a few PIN codes and few cities to 2 hours, and our ambition is to even go lower.

With that, the customer experience is further improving. Obviously, on the offline side as well, we have demonstrated 15% GMV growth simply because of our assortment, product assortment that we talked about from a width to a depth strategy to be able to offer products to some lower price point as well without really having a material impact on the gross margin, which is what we have demonstrated.

We have tested success, we had planned it from an SS '26, and we saw the impact of this in Q4 of last year, and we continue to see the impact in Q1. With this, now we will double down on opening more stores as well, which will further accelerate growth.

With all of this and the improvement in the product availability itself is something that we have worked very hard, which we had also struggled a little bit in between because of a lot of geopolitical situations and to some of the brands and our footwear category. Some of those also have been fixed.

With all of these improvements, we continue to strongly believe that our growth rate will remain elevated in India multichannel for the subsequent quarters for FY '27. On the margins front

That is evident from if you see the sequential growth of the revenue in India multichannel business every quarter, right? From 7.5% in Q1, we have sequentially improved the growth from 7.5% to 7.9%, 8.9%, 11.4%, and now almost 18%.

On margin front, I think the explanation, is very simply given by both Vivek as well as Gautam. I think our 280 bps loss or drop in Q4, we believe we'll be we'll be recovering it, although there's a recovery of 20 bps only in Q1.

We believe we will have a much faster recovery. We are already seeing little, less competitive intensity than what we had seen for the previous two quarters.

The lesser competitive intensity, and this is all happening because of the market dynamics and everybody is trying to focus more on the gross margin and bottom line. With that, I think this exactly phenomenon happened in 2015, 2016 as well, and the same is happening again.

We had mentioned in our last quarter as well that it'll take four to six quarters to fully sort of normalize. We believe that the and which is which we have just started to see in Q2.

As we speak in this quarter, in both July as well as in August, we are seeing better, benign state in terms of competitive intensity, lesser than what we had experienced in the past, which will have an impact positive impact on the retention of gross margin, drawing back from that 280 bps or 260 bps recovery period. Second, on the crude-linked as well as the raw material price or the rupee depreciation, I think by end of this quarter, we'll be pretty much recovered from that as we pass on to the customer.

You will see the impact positive in Q2. Q3 onwards, you'll see a full, most likely full recovery.

I think with that, the margins will also come back. Growth will remain elevated.

We believe we we are back to, be happy in a state where we wanted to be. Obviously, we'll continue to strive even superior, even better outcome than what we just talked about, but I hope that answers.

Just to add on the margin front, actually, the remaining 85% of our business, which is non-diapering, will also continue to accrue higher margins with the levers of increasing fashion contribution and home brand contributions. Yeah.

Okay. Thank you, Aditya.

Next question is from Randeep Sen. Randeep, please unmute yourself.

Sure. Thank you.

Just inquisitive what is our right to win in the diapering space, given we've been seeing aggressive competition. If we see the overall ecosystem, someone walks into an Apollo Pharmacy, now Apollo Essentials have launched their diapers, or there are MedPluses in societies which are of 2,000-plus apartments.

MedPlus has launched their own diapers. Now are we in a market which is intensive competition, which we've been seeing for the last couple of quarters?

Now what is the school of thought at the management level to really crack this space? Thank you.

That's my first question.

Sure. Vivek, you want to go ahead, or should I take that?

Supam, I'll go ahead, and then you can carry forward from there. See, diapering is a complex category, and the consumer retention on the product is very critical.

That is where it is not easy for any brand like Apollo Pharmacies or any other private-label product to be able to have high retention rate because essentially it is being used on a baby. From that window, the real, I would say, disproportionate pricing kind of a strategy happens on the established brands, where other e-commerce players or quick-commerce players try to attract consumers with very, very aggressive pricing and for limited period of time.

That's what we have seen, as Supam was mentioning, had happened during '15, '16 period. That's been happening with the aggressive expansion of quick commerce over last two, three quarters.

We have already started seeing a bit of improvement in this quarter on the branded side of the diapering category, and essentially, everything else follows that. Fairly confident that the category itself will optimize over the next couple of quarters.

Supam, you want to add on anything on this?

No, I think and and, Randeep, we are also adding our FC Quick. If you if you think of it, customers who are very loyal or who would want to, remain in our platform because we offer the full destination of for babies and kids.

Young mothers and young fathers who are not solving for like a 10-minute or like Apollo Pharmacy or or any other, particular brand, most of it is available with us. Now we are also solving in 2 hours and 3 hours through our FC Quick in 12 cities, and we'll continue to expand there.

With that framework, we should be able to, retain those customers and and get a larger benefit. We remain very confident on that.

When when couple of quarters this is same playbook that has happened in, as I said, 2015, 2016. It's just going to be coming back in a different form because we had to do FC Quick.

At that time, FC Quick did not exist or that customer expectation did not exist. Now we are doing it with the revised or with the new sort of customer expectation.

Obviously, we have done fairly well in terms of, I just talked about how much we have done in FC Quick. With that, we believe that new onboarding of customers happens largely with us because of the FirstCry as a brand, as a ecosystem, as a destination, which all young parents or young mothers while they're pregnant, they all know about it.

We are their favorite. That sense, sort of a destination.

Rest, I think we have to deliver that service to continue to retain, which we are on that path. We only digress from a margin loss perspective from Q3 onwards, but we are started to see some recovery, and hopefully, we'll see a much faster recovery going forward as well.

Sure.

Sure. Noted.

My second question was with respect to our fourth business vertical, which is very small, and I understand the base effect and hence we are seeing aggressive growth. Just wanted to understand what is management thinking in terms of making this larger vertical, and is there a scope and opportunity of a merger and acquisition that we are exploring?

Case in point being the number one player, which is Kidzee, where the group is in shambles, it's a great opportunity. Are we thinking through of building with a model which is growing at 100% per year versus or a big-bang acquisition to make this a larger vertical?

Look, I think we will continue to grow. Currently, we have almost 500-plus preschools under our umbrella as FirstCry Intellitots.

We will continue to grow for sure rapidly. I think the salience is in our curriculum framework that we have built, in the disciplined framework of what we have built as technological framework as well as curriculum framework and execution framework.

While these three frameworks are already in place, we understand the franchisee operations that we have run even in our offline business for our stores. We are able to, with our FirstCry brand, which is the largest destination for mothers, baby, and kids, we already know the kids and the babies and kids for our preschool business in every catchment in the country, pretty much.

For our natural ability to be able to partner with far more number of franchisees and business partners in the preschool to continue to grow expansion in new and new cities and within the cities, same cities, in more dense areas. That we will continue.

I won't be able to comment on the M&A. It's too early.

I don't think we are looking at it yet. We have a very solid organic growth path forward, and we believe over a period of time, we should not be looking for less than 1,000 preschools over a next couple of years.

Randeep, on your point of a lower base, see, structurally, the business will always have a lower revenue. It will never contribute a significant amount to the overall revenue because it's a royalty-based model, right?

If you convert this revenue to the revenue accrued at the franchisee end, probably you can multiply it by, see, almost multiple times to get the actual revenue being made by franchisees.

We remain quite bullish on that, is all I would say, and we'll continue to grow organically on that business. I think we have still few years before we'll become a very big force on a preschool side of the business.

This strategically fits very well as well because most of our kids and the parents that are associated and part of our preschool sort of framework are power users for FirstCry as well, from a retail perspective.

Okay. Thanks, Randeep.

Next question is from Percy Panthaki. Percy, if you can just unmute yourself.

Yeah. Am I audible?

Percy. Yes.

Yeah. Just wanted to understand this margins in Q4 for the India multichannel business was about 7.3%.

Now it is 5.7%. This sequential deterioration that we have seen, is it largely because of the crude-linked inflation?

Percy, we actually spoke about if you go back to our Q4 presentation, you will see a 280 bps drop, right, from a year-on-year basis. The two factors that we had articulated were continued in diapering competitive intensity, which started from Q3, which continued in Q4, was there in Q1, and now it's started to sort of get moderated and become better.

The 280 bps was a combination of the impact on our margins from a diapering perspective and the crude-linked as well as the rupee depreciation part. The first one we talked about, it will take four to six quarters.

We have started to see improvement from this quarter, Q2 onwards itself, because of slightly lesser competitive intensity, as we all know what is happening outside the market in terms of the other players and all focusing on the gross margin and bottom line because of most of them are getting into public market or already in public markets. Having said this, on the second point, which was the crude-linked and the rupee depreciation, was largely coming from our manufacturing sort of setup, where it takes time to pass on all the input cost to the customers.

By end of this quarter, we will completely be able to pass on all the increase of these crude-linked and rupee depreciation. You would still continue to see, and from Q3 onwards, obviously, it'll get normalized.

You'll see the impact of that in Q2 as well, by end of this quarter, we should be able to do it completely. With that, a significant part should be able to claw back from Q3, and then, obviously, the first part will take maybe Q4.

I think that's where we are. Rest, 85% of the business, which is non-diapering, will continue to improve gross margins as well.

With that, we remain what we had originally promised. In long life of a journey of a company, we all go through some of these surprises.

I think we are well focused, well sharply sort of delivering and focused on improving our gross margin back to where it was and back to the journey that we have to improve it further from there. We'll recover back this 280.

20 is recovered. 260, we'll recover back, and then we'll grow back where we had wanted to reach.

I hope I answered.

Does this mean that second half of the year our Y-o-Y EBITDA margin should at least be equal to previous year for the India multichannel business?

The 280 bps dramatically should reduce, is what we will say. Yes.

Percy, the impact of the margin lost because of the competition in diapering category will take some quarters to get back in the business, while the margin lost because of the rupee depreciation and the crude-linked raw material prices will be fully recovered by end of Q2 so that it will be completely reflected in full Q3.

Yeah. Sorry, this 280 basis points which you're talking about is what?

Is it Q1 '27 compared to Q1 '26? Is that the 280 basis points you're talking about?

No,

no. This is basically the numbers of Q4 versus Q4, all right?

That's a Y-o-Y comparison of Q4 versus Q4, where we have seen gross margins declining by 280 bps. Sir,

my question was more on the EBITDA, and again, only for the India multichannel. Q4 is actually 200 bps Y-o-Y.

My question was also that Q1 has further deteriorated also from Q4 level. I think I am asking a slightly different question versus what you're addressing.

No, Percy, what we're talking about is basically a Y-o-Y comparison. If you see the Y-o-Y decline in EBITDA in Q1 versus Q1 last year, it's a 290 bps decline on a Y-o-Y basis, right?

Correct.

Now the bridge of this 290 is 260 coming from the gross margin reduction, which we have started seeing from Q4 onwards. Q4, we have lost a gross margin of 280 bps, which came down to 260 bps in Q1 on a Y-o-Y comparison, right?

The remaining 30 bps is basically a combination of the increase in the logistics cost because of our logistics initiatives in RocketBees and FirstCry Quick and a positive recovery of the margins because of the operating leverage which we have got in the marketing spends and the fixed cost. That's the bridge of 290 bps.

Understood. Secondly, just some accounting hygiene.

Your India revenue growth is 18%, but the GMV growth is 12%. What explains that?

As our India multichannel, it's a combination of our online, offline, and our manufacturing.

Yeah. This is a combination of these three things.

Plus, Percy, if you see the GMV, GMV is basically, it represents the MRP of the product, right? There was a GST2, what got implemented in Q2, right?

Some minor impact is because of that also, which led to a reduction in the MRP, and that's the reason you see some difference between the GMV growth and the net revenue.

Understood. That's all from me.

Thanks, and all the best.

Thank you, Percy.

Thanks, Percy.

Thanks, Percy. In the interest of time, we'll take the last question.

The next question is from Harsh Gokalgandhi. Harsh, if you can just unmute yourself.

Yeah. Hi.

I hope I'm audible.

Yeah.

Yeah. Just two questions from my end.

Firstly, on the India multichannel business, just wanted to understand what's the delta of profitability for a diaper business versus a non-diaper because given that it's just 15% of our business and yet impacting gross margins significantly. That's my first question.

Secondly, just wanted to understand what's our share in this whole diaper category versus competitors? Those were the two questions I had.

Harsh, having been in this business for almost now 15 years plus, diapering is one of the important categories while solving for what we have set out as a mission from a mother's perspective and young parents, father's perspective. We took multiple steps in our journey earlier to ensure that we will be able to build a profitable trade while doing a diapering sort of a business.

In the early years of our business formation, we had to bleed, but those were very, very early years of our formation or of our journey. Over a period of time, not only we partnered with our other partner brands, we also built our home brand, which helped us to retain more customers as well as improve our margin profile.

We settled that trade when some of our horizontals in 2015, 2016 came. That trade was settled after the increased intensity of competition during '15 to '17 period.

Everyone was happy with their share of diapering as a category, their growth rates, their margins that they would want to make, and so we were. With that, we continued our journey from 2017 to 2024 absolutely smoothly while improving our gross margin, while improving our EBITDA margin as a total overall business because the customer who buys this diaper also buys some other products.

We can't lose that customer, and it builds a sort of a cohort as well. As I said, it's an intrinsic part of the need of the young parent when the child is from a newborn to especially up to 2.5 to 3 years.

Having said this, this is a very recent phenomenon with more capital entered into the fray and led to more competitive intensity. This we talked about in last two quarters.

This is transitional. This is absolutely unsustainable.

As we speak, this quarter onwards, because of certain things that are playing out in the market, I don't have to say it, we all have observed it, some of the IPOs getting postponed and some of those events happening, has helped to get more sanity into the market, and I'm pretty sure that over a period of next few quarters that this will be completely normalized. With our FC Quick, we will give back some service that our customer is looking for.

With our home brands, you'll continue to retain those customers with a superior product. With all of that combination, with our basket size and all of that, I think we will be back in shape as how we managed during '15, '17 period.

We'll manage this during this period as well. I think this is more of a transitory period, nothing structural, and hopefully, in next two quarters, you will have far more visibility on that, which we'll demonstrate.

Fair enough, sir. Just on my first question on the delta of profitability for a diaper segment versus the non-diaper, if you can just help me understand that.

All I can say is look, as we speak, obviously, the delta has increased between diapering and non-diapering. It's a very commonsensical sort of a point since you're talking about the reduction due to diapering.

Obviously, rest of the business is delivering healthy sort of margin in fashion. We deliver more than 50% of our GMV in fashion, and more than 50% of our business is also in home brands.

Both of that leads to a fairly healthy margins because the delta obviously is quite meaningful.

We don't make losses in diapering, yeah. Yeah.

Because, yeah, that is not what we do as a business, but we believe that the delta will shrink over the next few quarters when the diapering margins also come back from positive levels to far more positive levels that we used to have in early part of FY '26.

Understood. Fair enough.

Thanks a lot, Supam.

Thank you, Harsh.

Thanks, Harsh. We have some more time.

We can take up one last question. The last question is from Archana Menon.

Archana, if you can just unmute yourself.

Thank you so much for the opportunity. Supam, my first question was on the India multichannel business.

On the offline side, we have seen the growth improve, but could you help us understand a little better as to what are the kind of changes that have been made, and beyond the revenue growth number, what are the other KPIs which have been improving that you're tracking?

Sure, Archana. Look, I think fundamentally, when we had visualized we were in Q2 of last year, we had, talked about very clearly that we were witnessing, challenges on customer experiences due to poor delivery on the back of third-party framework, which was also struggling in in its own ways, and I won't go in that direction of why was that happening.

We struggled as a as a company because, our our goods were from 10 grams to a 30-kilogram toy car. We are like a mini horizontal in that sense, and it's very difficult for to to manage and be able to deliver the customer experience as what we had expected.

Given that, we we took those steps. First step was introduction of our own framework, which is RocketBees, which we started somewhere in January, March, a period of 20, I would say, '26, and then full year, quarter-on-quarter, day-on-day, literally day-on-day, we built that framework from, 0 cities to now 72 cities, from 0% volume of our third-party, all 100% third-party to now RocketBees delivering more than 50% of our volumes already.

We promised two quarters back that we will deliver 50%-plus by June end. This is what we have delivered.

This is the one KPI that we are able to check on a day-and-day basis that delivery TATs of our customers under the RocketBees framework is 20% superior, and with lesser RTOs and so on and so forth. There are many benefits of this.

I can't tell you how a young mother and a young father will be elated to see their, goods arrive and and and the whole family is very happy, and it has an impact on repeat, it has an impact on further cohort of those customers, which will reflect over a period of time because many customers have experienced this, many customers are yet to experience. FC Quick is an layer on top, which we started again December last year as a pilot, and today, as I as I mentioned, we have doubled our volumes from March from 5 cities from 60,000 to 125,000 in June in 12 cities.

We have seen, again, very happy faces, great customer experiences. This is what we had experienced in early part of our journey when, when we had no such challenges on delivery side.

These are two input areas that we continue to dial down, double down on this. Then third was the offline, which we had said middle of last year that we will, change our product assortment a bit from, width to depth, ensuring we can have some lower price points as well, improve our conversions and footfalls, which exactly what happened.

Very strong volume growth that we are able to deliver in our offline channel, and leading to a 15% GMV sort of a growth, both in Q4 as well as in Q1. We believe now our expansion of our new stores will really take off, which we had kind of, more or less paused in we were conservative from a capital efficiency perspective, and now we will we have already pedaled down on that path.

You will see some of those new store growth coming up as well. The the So with with with all of this, I think we we feel that our growth will continue to remain elevated for India multichannel, with all the inputs and the KPIs that we are tracking is, as I just speak about, the pain points that we were trying to solve.

There are many more KPIs, that we track, but I'm just trying to tell you the pain points KPI that we are very happy to report. Literally every day in the morning is that KPI flashes on our screen, which is which gives us a smile or which gives us a challenge to even solve further.

We will continue to drive all the two initiatives more and more aggressively. We have still a lot of headroom to grow on the first two initiatives.

Third one is fully sort of delivered, but now we'll do a more store expansion, and there are more optimization on product assortment, even in the offline, but not from from a perspective of width to depth, but there are more opportunities there as well, which we'll solve in the subsequent sort of a quarters. We believe very strongly about the growth, because of the input variables that we have put in.

Thanks for that, Supam. Just two more questions from me.

Firstly, if you could share your store expansion plans for the coming years? Secondly, what would be your salience of non-diapering consumables?

Personal care or any other consumables, and how are you looking at competition on that side from QC?

On the second one, I think we will add close to around 100

Around 100, yeah.

Around 100 stores is what

On a net basis. This is net of attritions, if any.

We'll be able to add that for this fiscal year. That's the answer to the store expansion question.

Obviously, FY '28 will be even better because we were waiting for this transition to happen that we just spoke about. We will do all of this expansion in the remainder of the quarters.

For the full year FY '28, obviously, it should be even better because we would have had no loss of a quarter or a preparation of a quarter. On your question QC versus

On the non-diapering consumables, we continue to grow as per the overall business trajectory. There's no challenge in that, as well as the margins remain healthy there.

What would be the salience of that part, Vivek? For your India revenues?

It's around close to 15% of our GMV is what we had mentioned even in our last quarter, and yeah, that's 15%.

Okay. Thank you so much.

Yeah. All right.

Thank you. Thank you.

Thank you, everyone.

Thank you

very much. Thank you.

Thank you. Thank you.

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