Vedant Fashions Ltd
NSE:MANYAVAR
Earnings Call Analysis
Q3-2024 Analysis
Vedant Fashions Ltd
Vedant Fashions appears poised for growth with the expansion of its retail network, adding approximately 52,000 square feet of retail area in Q3 FY '24, culminating in a total of 1.72 lakh square feet across 9 months. The company now operates 673 stores globally, underscoring a strong pipeline for further rollouts.
The third quarter of FY '24 witnessed a notable 11.1% growth in customer sales compared to the previous year. Although October started slow due to an inauspicious period affecting sales, the festive and wedding seasons thereafter saw a remarkable recovery. The company's Exclusive Brand Outlets (EBO) experienced a surge of 30.7% in customer sales and a thriving Same Store Sales Growth (SSSG) of 17.3%, reaching all-time daily sales highs during the 60-day celebratory period.
Vedant Fashions demonstrates its commitment to cultural representation and inclusivity through strategic brand development. The company's focus on regional preferences and partnerships with celebrities and influencers has enhanced brand visibility and connection with diverse consumer demographics.
Financial performance remained stable due to proactive business strategies, despite challenges such as fewer weddings and a slowing economy. The company's robust systems and market awareness have allowed it to maintain impressive gross and EBITDA margins of 67.8% and 51.1% respectively, reflecting its solid business foundation.
The company reported a 5% growth in profit after tax at INR 158 crores for Q3 FY '24 and an impressive 123% PAT for the trailing twelve months ending December '23. Despite fewer weddings and a sluggish consumer sentiment, particularly in Tier 2 and Tier 3 cities, Vedant Fashions held a strong cash conversion ratio of approximately 85%.
While new stores generally take 2-3 years to mature, the company continues to see profitable productivity in both new and older stores, ensuring benefits for the company and its franchisee partners. Additionally, the upcoming roll-out of flagship Mohey stores is anticipated soon, with three smaller EBOs already operating across the country.
The unusual timing of the Shraddh period at the beginning of October, followed by a weaker December end, curtailed overall sales momentum, despite a robust performance during the primary festive and wedding period. The company acknowledges the discrepancy between the number of auspicious wedding days and the actual number of weddings, as well as the impact of subdued consumer spending, which played a role in not meeting Q3 expectations.
You don't have any saved screeners yet
Ladies and gentlemen, good day, and welcome to the Vedant Fashions Limited Q3 FY '24 Results Conference Call, hosted by Axis Capital Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Gaurav Jogani from Axis Capital. Thank you, and over to you, sir.
Thank you, Tushar. Good afternoon, everyone. On behalf of Axis Capital, it's my pleasure to welcome you all to Vedant Fashions' earnings conference call. Today, we have with us from the management, Mr. Vedant Modi, Chief Revenue Officer; and Mr. Rahul Murarka, Chief Financial Officer. Thank you, and over to you, gentlemen.
Thank you very much, Gaurav. Good afternoon, and a warm welcome to all the participants. I'm Vedant Modi, the Chief Revenue Officer of the company. Thank you for joining us today to discuss the Vedant Fashions' Limited Quarter 3 and 9 months ended financial year 2024 results. I'm joined by Mr. Rahul Murarka, who is the Chief Financial Officer of our company.
I hope everyone got an opportunity to go through our financial results and investor presentation, which have both been uploaded on the stock exchange as well as the company's website. Let me take you through the quarter ended and 9-month performance.
In this quarter, we continued with our network expansion strategy and have successfully rolled out approximately 52,000 square feet of net retail area in the third quarter, aggregating to 1.72 lakh square feet net rollout in the 9 months of financial year '24.
As of December 2023, Vedant Fashions' EBO area stands at 1.64 million square feet, spanning across 673 stores in 262 cities and towns globally. The national EBO footprint tally is 657 stores spread across 250 cities and towns. We have a strong and healthy pipeline for new rollouts planned ahead.
In Q3 financial year '24, our overall customer sales grew by 11.1% over quarter 3 of financial year '23. In Q3 period, October month was significantly impacted due to an inauspicious start period. However, with the onset of festivity and major wedding season, we witnessed some accelerating trends.
Our EBO customer sales grew by about 30.7% and SSSG sales grew by 17.3%, during the period of 60 days, starting from Navaratri as compared to last year. 60 days comparable periods starting from Navaratri in this quarter, we witnessed a good Diwali season and also recorded the highest ever daily EBO sales in the history of the company.
In this quarter, we have also added another feather to the Taiyaar Hokar Aaiye marketing campaign. With our strategic partnership with Megastar Ram Charan, we have successfully launched a unique campaign depicting a timeless tale of relationship between a father and his son during his son's wedding.
We've also launched a festive-based Diwali ad campaign during the quarter. We are thrilled to announce our entry into the history of South India with the introduction of the Vivaham collection. Panchakacham and Veshti sets, we are marketing campaign with Ram Charan and celebrity actress Sobhita Dhulipala.
This collaboration and launch is a testimony to our commitment to authentically embracing the cultural richness of South India. This strategic move not only allows us to cater to region-specific unique preferences but also reinforces our brand's dedication to diversity and inclusivity. We have also leveraged brand building for Mohey with celebrity associations, real brides and leading stylists.
Our 9-month period's performance is majorly a reflection of our first half performance. This is majorly attributed to the significantly lower weddings in the current year, coupled with generic -- the general economic slowdown impacting consumer sentiments and also a higher base effect of last year post-COVID.
Overall, our preparedness in terms of every aspect of business and market consciousness, like network expansion, multidimensional marketing, adequate and appropriate inventory and merchandising management, backed with robust auto replenishment systems and back-end dynamics have helped us effectively maintain strong financial margins and profitability metrics, reflecting resilient fundamentals of the business.
With this, I will now hand over the call to Mr. Rahul Murarka to take you through the financial performance of our company. Thank you.
Thank you, Vedant. Namaskar, and good afternoon everyone. I would like to highlight the key financial metrics for the quarter and 9 months period ended 31st December 2023, based upon the consolidated financial statements. Starting from Q3 of FY '24 performance update, the company has reported revenue from operations of around INR 475 crores, delivering a growth of around 7.5% as compared to Q3 of FY '23.
The company continues to report industry-leading gross margin of around 67.8% during Q3 FY '24, the EBITDA margins by around 51.1% and the EBITDA stood at around INR 242 crores, with a growth of around 7.4% compared to Q3 of FY '23. The company reported best-in-class PAT margin of around 33.2%, and the profit after tax stood at around INR 158 crores, with a growth of around 5% compared to Q3 of FY '23. Sale of our customer is around INR 650 crores, with a growth of around 11.1% as compared to Q3 of FY '23.
During Q3 FY '24, October month was significantly impacted due to inauspicious Shraddh period. However, our EBO customer sales grew by approx 30.7% and SSSG growth was around 17.3% during major wedding and festive period of 60 days, starting from Navratri as compared to last year's 60 days comparable period starting from Navratri. Now, coming to 9-month FY '24 performance update. The company reported revenue from operation of around INR 1,004 crores and the sale of our customer is around INR 1,342 crores. The company continues to report industry-leading gross margin of around 67.2%. The EBITDA margins are around 48.4%, and EBITDA stood at around INR 487 crores. The company reported healthy margin of around 29.7% during 9 months of FY '24, and the profit after tax stood at around INR 298 crores. Moreover, the PAT generated during TTM December '23 is about 123% of net working capital employed based upon internal MIS.
On comparing our performance with 9 months of FY '20, which was a normal period, not having an impact of pent-up demand, the company's revenue from operations grew by approx 53% and the PAT grew by approx 80% based upon internal management MIS. The company has a track record of generating significant cash, driven by a healthy cash conversion ratio. During TTM December '23 period, the company reported strong cash conversion ratio of approx 85%, which has been concluded based upon operating cash flow over PAT and internal management MIS. During 9 months of FY '24, the company's overall performance got impacted due to significantly lower weddings nationally, general slowdown impacting consumer sentiment, coupled with higher base effect of last year post-COVID. However, the company has been able to effectively maintain strong financial margins and profitability metrics, reflecting its resilient business fundamentals. Thank you, and Namaskar, everyone. We can now move to the Q&A session.
[Operator Instructions] The first question is from the line of Sameer Gupta from India Infoline.
Sir, firstly, the last 12 months, if I look at, the customer sales growth has been around 2.7%. And even if I take an average of the SSS over the last 4 quarters, it is around minus 7. So just wanted to get some trends based on your performance are there any specific trends related to category segments which are witnessing more pressures, maybe, let's say, groom-related or immediate family members, wider entourage, which of these is seeing more pressure, non-wedding related? And any bifurcation between stores where you have opened new stores in the vicinity or older store versus newer store age-wise, is there any performance divergence that is happening that any trend would be helpful to understand?
So broadly, if you look at our business, when we look at different categories, because there has been a large marketing-driven focus on our wedding attendee business, the overall growth has definitely in the last 2, 3 years, come from that segment. So if we talk about segments, the non-groom segment has definitely worked better for us, more from a marketing angle as well, which has led to better footfalls at the store over the last 2, 3 years, if I talk about it overall. And from a new store perspective, typically, stores take 2 to 3 years to mature. And we see similar patterns as things continue. Even when we open larger stores next to our already existing well-performing stores, typically, these are in areas where the store's productivity is extremely high, and we continue to witness very good productivity in the older store as well. Even though it might take a small hit, the overall number is still very, very good from all angles of profitability for the company and the franchisee partner of that particular store.
Got it, Vedant. So next corollary to this question would be that over the last 12 months, maybe wedding dates may be lower. But typically number of weddings might not be dropping down. So what is really happening? Are we losing share to unorganized smaller players who are back? Any sense of these numbers would be great to understand.
So our overall take on the situation is that it's a mix of 2 main things. One is there was a slight bit of pent-up in last year. And that as well, coupled with Adhik Maas plus lower number of wedding days in this overall year has led to total number of weddings being slightly lower in this year. And this is kind of -- when we talk to all the people in the industry, this includes banquet hall owners, 5-star hotels, event organizers, we see an overall trend where everyone is kind of commenting that the business this year has been lower than last year.
The other factor also which is more impactful to our newer categories, which is our festive-based sale and our overall non-groom business is also the fact that we do see a bit of economic slowdown across the board, especially in Tier 2 and Tier 3, which is what we are witnessing.
Got it. I'll come back in the queue for any follow-up on this. Second question would be on Mohey. So -- I mean, see, we had been given a commentary that it will be 6, 7 stores in FY '23 itself, if I go back, let's say, to previous quarter calls, and it is January '24 now. So -- I mean we are yet to open the flagship store. So what really is taking this long? And in any case, this is going to be a pilot for the first few years, why not launch these and try and understand or get learnings rather than keep delaying and getting the perfect store, just your thoughts on this?
No, I completely understand your point here. And this is something which is slightly out of management control. The overall delay was something which was a mix of parties, and it was slightly out of our control. Otherwise, we would have definitely liked to have achieved it earlier. The store would be rolled out anytime in the upcoming quarter. And we have already actually piloted with 3 smaller EBOs for Mohey, which are already live in different parts of the country. And the flagship will also be live very soon.
The next question is from the line of Nihal Mahesh from Nuvama.
Vedant, my first question was for this quarter, you alluded specifically, say, to the period of October 15 to December 15, let's say, starting Navaratri and 2 months down, where the SSSG was obviously very strong at 18%, whereas for the full quarter as a whole, it ended up being negative 2% despite the fact that last year's base was a negative 9% in terms of SSSG. So was it primarily the start period of the first 15 days of October or even the last 15 days of December were muted because of which the overall performance ended up being so divergent to the 2 months that you are highlighting?
So the thing that majorly hurted us was the first 15 days of October, primarily because these first 15 days are typically never a Shraddh period. The Shraddh typically takes place in quarter 2, which is anyways a lull period and is completely okay given the current business dynamics. However, last year and the preceding years, typically the first 15 days of October, is also a pretty good decent time of doing business. That being heavily impacted, the idea was for us to overcome that entire stress in the remaining 75 days. However, even the last 15 days of the -- when there is another maas that kind of is put in the last 15 days of December and is typically always a weaker period, we expected this time for it to be better off, but that was not the case. However, the 60 days, which we got clean, which was festive and auspicious shopping period, the performance was very good during those 60 days.
Yes, I think Vedant answered the question.
I think Nihal is not on the line right now.
Okay. So the next question is from the line of Varun Singh from ICICI Securities.
Okay. So, Vedant, my question is, this quarter, I understand first 15 days and last 15 days in December impacted by Shraddh and Malmas, et cetera. But like if we compare base quarter compared to this quarter, so number of wedding days has been kind of 2x. Yes. So given this context, how should you -- I mean, how would you be judging the current SSSG number that we have clogged?
So, Varun, there are a couple of things here. Firstly, wedding days are higher by 2, 3 number of days higher in this quarter. The second perspective is while there is a good correlation between the number of weddings that happen in the country and the wedding dates, it is not directly correlated or directly proportional to an R-square of 100%. There can always be years where there are slightly higher days, but less number of weddings happening. And that is something which we have been noticing from the overall pattern of the country. And this is quite evident when we talk to the network of MBO distributors and dealers or be it any banquet hall owners, anyone related to the wedding industry. So while there were slightly higher days compared to last year, we still feel that overall number of weddings were still muted or slightly lower than overall last year. And on top of that, there was an effect of slightly lower spending on consumer discretionary items, which was witnessed across consumer companies.
Right. But having said that, I think discretionary, our -- the category where we belong and the kind of discretionary consumption that it caters to, there, I think, a little bit of whatever slowdown in other discretionary thing, et cetera, because frequency of buying is extremely, extremely low in our category. So -- I mean, do you really think that the sector slowdown has any correlation or a direct correlation with the slowdown in revenue growth in our case?
We are not talking about the sector per se. We are talking about general consumer sentiments, which we felt based upon our ground surveys that it was kind of soft, which we also felt that 1 of the reasons why the Q3 expectations were -- Q3 did not deliver as per our expectations as well.
Okay. And I mean, in that context, next quarter number of wedding days, I mean, which is the only trackable number that we have, fortunately, unfortunately, whatever. So like next quarter, it is hardly 7%, 8% more or almost equivalent to last year weddings. So how are you -- I mean, what are your -- what are the kind of expectations that you are building for the fourth quarter in terms of business?
Varun, ideally, we would like to see the entire quarter before commenting on this. But overall, the quarter this year is slightly more spread out compared to last year. So we feel that the tail end of this quarter should be slightly stronger. But at the same time, given that we've seen about a month of January, things look relatively soft and not as per overall expectations, which we would have.
And your reasoning for the softness, is that consumer sentiment?
Yes. So like I mentioned, our overall understanding is there is a mix of a couple of elements here. Overall, consumer softness from a sentiment perspective. The second point also being slightly lower number of weddings, which is a result of pent-up last year. And overall, the hit of Adhik Maas, Malmas overall that we have in this year on top of low number of wedding days...
No, no. Actually, Vedant, my question is meant only for fourth quarter, not for financial year?
Yes. So fourth quarter, there are 2 things. Like I mentioned, we would ideally like to see the entire quarter in play and then comment on the quarter because this particular quarter stretches till the end of March, unlike last year. So the expectation is that March overall will be better -- much better than what we have seen last year. But at the same time, January as a month has been slightly slow.
And the next question is from the line of Nihal Mahesh from Nuvama.
I just had 1 question to Rahul, that if I compare the gross margins also versus last year, there has been a contraction. So is this because of the mix of maybe, as you highlighted, higher share of the non-groom segment? Does that explain this reduction in gross margins versus last year?
Yes. So on a Q3 of Q3 if we compare, then the gross margin is 67.8%, which is similar to Q3 of FY '23. However, on a 9-month period, yes, last year, it was 67.8% and now it is 67.2%, on a periodic basis, Nihal, it can always vary from 1 period to another because of various reasons, like product mix also is 1 of the reasons, I would say. Like in FY '23, also, it was at 67.4%. So as a management, we feel that anything 65% above, we are comfortable with that. But on a periodic basis, it can always vary.
Just 1 final question was that you did allude to, bifurcating the business with the non-groom segment growing faster. Was it that the festive business has seen a much weaker performance versus the overall business? You did partially allude to it, but just to clarify the same.
So if I talk about Diwali, particularly, Diwali did pretty well for us in this particular financial year as well. When we look at our overall kurta sales preceding 10, 15 days before Diwali, it was at an all-time high. So I think overall festive led by Diwali in the last quarter was pretty good for us.
The next question is from the line of Manish Poddar from Invesco Asset Management.
So just trying to understand 2 things. One is when you talk that this quarter is still running soft, are you looking at absolute sales done in this quarter and wanting to clock a similar number or are you looking at growth Y-o-Y that lets you with INR 475 crores sales this quarter? And given pent-up 9 months have been soft, a lot of shifts happening in marriages and stuff like that, do you look at absolute number as INR 475-plus crores or you're looking at growth, let's say, this 7.5%, that number is still running at, let's say, 4%, 5%, 6%?
Manish, overall, what I would like to say here is that as a company, we don't give guidance per se. What we are trying to do is qualitative commentary at this current point in time. We would ideally like to see the overall 3 months before giving out the results properly, approximately same time 1 quarter later.
No, sir. Vedant, I'm not asking for a guidance. What I'm trying to understand is when you look at performance in quarter 4, would you look at absolute sales done this quarter versus next quarter to look at whether it is a good number of bad number? Or is it you look at growth, which you did 7.5% this quarter versus the growth next quarter? So, let's say, if you did 12% growth next quarter. Is that a good number in your view? Or do you look at, let's say, season was spread out this quarter, is heavier than the last quarter in terms of wedding days, then the absolute sales should be at least more than INR 475 crores, is what I'm trying to understand?
Okay. Typically, Manish...
I'm not looking for a specific number as such to be very honest.
Yes. So Manish typically, when we talk about growth or when we compare numbers, we compare like in case of Q4, we'll compare Q4 of FY '24 with Q4 of FY '23 because Q3 and Q4 are never comparable historically. However, this year, we'll have to see how the trends emerge. Because we also expected H2 to be slightly other than normal of what we have seen in earlier historical years. So -- and as far as growth is concerned, again, growth for quarter will look and compare with Q4 of FY '23.
Okay. And just one last one, sir, in terms of, let's say, inquiries of franchises, what is the sense on ground? And are we still looking through this 14% to 16% odd space expansion for FY '25? Or that number we want to calibrate it given what the demand environment looks like?
Commenting on overall business development and retail footprint expansion, I would say, for now, our FY '25 estimates would be still at around 15%, 16%, and that is how we are looking at overall store openings. And yes, from a franchisee inquiry perspective, it's, again, never an issue, and we have a great number of franchisees already in the queue across multiple locations.
The next question is from the line of Ankit Kedia from PhillipCapital.
Sure. Vedant, just a question, a follow-up on the store opening. If I look at this quarter itself, shop-in-shop, we opened around 5 stores, but the net EBO expansion was only 4 stores. So, definitely, the store closures have been high this quarter, while the overall area expansion is 50-odd thousand square feet. So, yes, opening of bigger stores. Can you just tell us in last 9 months, why the store closures, whatever the number has happened? And going forward, what would be the average size because we have multiple store sizes from 20,000 to 8,000 to 2,000 as well?
So overall, when we kind of look at our business development strategy, what has happened over the last, I would say, almost 2 years, as we have continuously churned out very small stores. Typically, these stores are under 1,000 square feet and not representative of the new Manyavar anymore, and at the same time, continue to open larger stores.
Typically, I would say the average of new EBOs which are being opened is between 3,000 to 3,200 square feet. That's the broad average. And you are correct in saying that the net opening was only 4. But broadly, we have opened almost 74-odd stores this overall 9 months, while we churned 50, but all very small stores. From an area perspective, these 50 stores would not even add up to 1%, 1.5% of our total area.
Just a follow-up. So how many more of these smaller stores are yet to be churned in the system so that we focus more on the area and not on the store addition, which you always ask us not to look at stores, but given that it's a data point, we need to monitor?
So it's a continuous dynamic process. I would say the large chunk of what had to be done is already being done. Maybe there's about 20-odd such very small stores left. But again, it -- the dynamics also depend on the market. So a market where there is great potential, even a 2,000 square feet store can become relatively small and demand a larger store. So when that eventually opens up, we will end up closing the smaller store. So it's a dynamic process. But I would say from the larger exercise, about 15, 20 very small stores are still left to be churned out.
Sure. My second question is on South versus North. Given that we have a proper South campaign with a brand ambassador now, how big is the South market for us today if I have to look on revenue terms or number of store terms, however, we call it. And from a Mohey perspective, do you think having a separate inventory for South would make more sense also now, given that their women are more wearing sarees and more -- instead of more lehengas? So how is that market also moving in South today?
So overall, South is now our largest market when it comes -- when we are looking at it at a company level, which is including Mebaz. And overall, that is why there is an increased focus on South and also a focus on merchandising specifically for South India. So there is a lot of investment that has been happening from all fronts of design, marketing and retail in that particular region. On the front of Mohey, we're already actually taking this up. There are multiple saree ranges, which are only currently being delivered in South India. And this is a continuous design process for us, where we look at design levels and what sells in particular regions and according to particular cultures. And as an attempt to be a more diverse brand and a more inclusive brand, we will always try to add more and more categories in our portfolio that is able to justify the cultural heritage of any particular area.
And last question is on Twamev. How is the performance of the first couple of stores of Twamev in the festive and the wedding season gone by? Are you happy with that, it's work in progress? And from a next year perspective, what is the store opening guidance for Twamev?
Overall, we are very happy with how Twamev has been performing. In fact, we've recently done the marketing launch of our Twamev South Ex store, where we had a celebrity ambassador launch the store. And things have been looking very well for all the EBOs that we already have opened. From a guidance perspective, now it's a continuous business development task where we are trying to find the best properties and the best markets of the top 10, 15 cities of India. And that is the focus, at least for the next 2 financial years, where we want to cover all these markets with the best-in-class stores that we can find there. Broadly, we have 2, 3 stores signed and in the pipeline on top of the 4 stores we've already opened. And in addition to that, like I mentioned, 10, 15 best cities and best markets of India is what we are looking at from a short-term perspective to grow Twamev in.
And the stores would also be the 4,000 square feet stores or they would be a larger store?
So I would say in the case of Twamev, the minimum would be a 3,500, 4,000, but the average would be slightly higher, more in the lines of 6,000, 6,500.
And the next question is from the line of Nikunj Gala from Sundaram AMC.
My first question is with respect to the sales which we have done in Q3 and the key performance indicators which we track. Have we seen deterioration in those parameters, like the number of articles per bill would be lower or some product mix deterioration, those kind of a key metrics? Have you seen any deviation there?
Thank you for the question. We have actually grown in every single retail metrics that we follow, such as average basket size, average bill value and the overall kind of feedback we are getting from the customers, all of these things have been on a positive front. So overall, from a merchandising and product perspective, also things look very sorted.
And like we've been mentioning, sometimes it's a bumpy road in a long journey. And what we kind of understand is from at least our mid- to long-term perspective, we are doing everything which is right for the business. And as things kind of move forward and improve and there is higher footfalls in our stores, then the business should also increase in the same perspective.
Okay. Because it is slightly counterintuitive, if you see there is a weaker sentiment across when we are seeing one of the region for the lower growth, then the person who have bought the [indiscernible], they must also have a similar kind of [indiscernible]. For example, if [indiscernible] sentiment would have impacted those people who have bought also. So these are 2 disconnects, which we were trying to reconcile, but you are saying that all the metrics are [indiscernible] because their lower growth is over weakness in the consumer sentiment. So how do you see these 2 different commentaries?
Your voice was slightly breaking. But what I understand from the question is -- what you're trying to say is if consumer sentiments were weak, then there would have been no down-trading happening, right?
Yes. Yes.
Yes. The take here is the reason why our ASPs have actually increased is because of higher availability of Twamev in a lot more of our stores. Earlier, we never used to be in slightly higher ASP products. But now, Twamev is available across 70, 80-plus Manyavar stores, else a lot of our business are already being demanded by consumers is now being fulfilled. So that is where the major chunk of ASP improvement has come from. And these were people already who were willing to buy slightly higher-priced items who wanted pure fabrics, but we were not able to serve them in earlier times, not from the perspective of down trading at all. And that's 1 take on ASP's improvement. The other perspective also is from a consumer's perception, overall shopping is also 1 area where they don't at all...
Yes. So Twamev would be contributing, I think, very lower still in overall scheme of things. I was trying to understand from Manyavar to Manyavar perspective the stores, which are purely Manyavar stores. Have you seen some deterioration? But anyway, I'll take it later. The second question would be, say, in FY '25, again, correct me if I'm wrong.
Nikunj, sorry to interrupt, there is a lot of disturbance from your end.
Yes, is it better now?
Yes, it's better.
Yes. So second question would be from FY '25 perspective, correct me if I'm wrong, whether wedding dates are still lower than FY '24 days going into next year? Is that a scenario you are also looking at?
The overall wedding dates, when we look at next year, overall, what we kind of understand is H1 is slightly soft and H2 is very strong. So that's the overall qualitative understanding of next financial year when it comes to wedding dates. However, as these things are based on astronomy, as we get closer to dates, the things will get finalized.
Sir, I was just referring on an annual basis, not H1, H2, but still, I think they are lower, right, as compared to FY '24 also?
No, it's broadly the same or I think 2 to 3 dates are higher compared to this year.
The next question is from the line of Tejash Shah from Avendus Spark.
A couple of questions. Vedant, when we started this quarter, and this is for the whole sector, there was a strong popular narrative that we had some 3.8 million weddings packed in this 30 days. And hence, a lot of expectations by media and by my investor community was built around this quarter turning out to be very good. So 2 questions on this point alone. First, is there an authentic way to kind of get this data? Or is it just garbage in, garbage out data so that we don't do such mistakes in future, a? And b, is there any forecasting value of we keep on asking number of wedding days and dates every time? Is there any forecasting value to this or it is just a kind of hiding point that we should keep in mind?
So, Tejash, our learning over the last decade or so since we've been trying to track the number of weddings that happened in the country is there is no true source of this data, which is the actual number of weddings that are happening. Majority of the comments made that we have seen in the press are also not backed by a large research but rather a qualitative understanding of people, which is what we understand.
The second take here is what we internally are now trying to do is we try to talk to a lot of people in the industry who have bookings 6 to 9 months in advance. So this includes hotels, banquet hall owners, et cetera. But again, the tricky part here is that the wedding dates are actually different in India based on where you are based. So Hindi belt follows 1 set of wedding dates; Telegu market follows 1 set of different wedding dates; again, different for Tamil.
So, now, as our company is growing and we operate in almost every single part of the country, it's slightly difficult to track what is happening across the different parts of the nation, but we are starting to track the Hindi belt numbers a little more carefully and closely.
Very clear. This was very helpful. And second and last question. I just wanted to understand. So you called out that the consumer sentiments are relatively tepid. So just wanted to understand more the character of this slowdown or the tepidness. Is it uniform across geographies? And within your vintage of stores, are you seeing some divergence in demand sentiment within your own network as well?
I would say the pattern which we see is it is very similar across geographies, but Tier 1 is still a lot better off compared to Tier 2 and Tier 3. So there, we feel the pressure is slightly higher on our business, while Tier 1 overall continues to perform better relatively. But from a geographic perspective, it's pretty much similar.
And anything more -- any more read on this Tier 2 pressure? Are you relatively kind of -- competitively, are you placed well or you see unorganized? Because we are seeing the trend in many other categories in consumer basket that unorganized is actually bouncing back very strongly in the recent past. So any observation there?
See, our personal understanding is that from a merchandising perspective, we are extremely data-focused. So all the price points that were working well for us last year and the year before, we continue to be strong on those particular price points. Even though we might have evolved slightly higher price points, that doesn't mean that we've left our smaller price points. And there's also a continuous effort from a marketing front from the perspective of also improving our overall design mix, be it a Tier 2 or a Tier 3 store. So from an input perspective, we see no challenge. And another factor which I would like to add is 1 business internally, which gives us a sense of how unorganized is doing is our MBO business. So even when we look at a 9-month perspective, our MBO business is 1 of the most majorly hit channels for us. So that, and also discussing business with our MBO partners, gives us an understanding that MBO overall as a channel has been a lot more hit compared to our EBO business. So I don't see a narrative where we feel that unorganized is bouncing back. It's mostly a road bump of multiple other factors as per our understanding.
And the next question is from the line of Sameer Gupta from India Infoline.
Just a small follow-up. Employee cost is down 10% Y-o-Y. Is there any one-off here? Are we downsizing? Is it an effort to say margins -- payroll shifting to franchises, anything on that line item would be helpful?
It is mainly because of decrease in the director remuneration. So in July this year -- in June, July this year, we had revised the director remuneration. So as a result of which, we can see overall employee benefit expense going down. But other than that, our employee expense has actually increased by more than 20%. But because of decrease in director remuneration, the impact is coming with that.
Isn't it something that we also did last year same time around?
No, last year, we did revisit in April sometime. So -- and there was a further revisit this time in July. So that is why we see a difference in director remuneration. But, otherwise, the normal employee costs have increased actually.
Okay. So this is more towards variability of director remuneration, is that what you have done?
Yes, absolutely. You're right.
The next question is from the line of [ Lakshya Jain ] from [ Flyer Investment ].
First of all, sir, we are new shareholders in the company, and we feel proud as shareholders of Vedant Fashions Limited. Hats off to your business model, sir.
As my first question, sir, taking into consideration the huge amount of cash find in our balance sheet, where are the spending limits comes to inorganic growth? Do we plan to stay with our same product line or you are open to anything related to wedding?
See our overall 5- to 10-year strategy is more around apparels, and that is what we are currently focused on. However, from a very long-term perspective, I would say business is dynamic and never say never sort of a piece here where while we have never explored non-apparel side of weddings, it is something which we would only look at in a very long-term perspective. The other piece is, like you mentioned, the cash pile is large. The way we kind of look at disbursement is in the form of dividends. And for the last 2 financial years, we've been doing almost 50% of PAT in the form of dividends. And we continue to invest in our newer segments of growth, such as Twamev, such as Mohey, and this will be followed by Project Manthan in the course of 1 to 2 financial years.
And the very good part about our business model is we don't require significant capital investments to launch any new brand. It is actually a model which can enable us to make profitable brands from the very first financial year itself.
Yes. Got it. Are we expanding in sarees as well, sir, apart from Mebaz under the brand Mohey?
Yes. Actually, there is a very high focus on our saree category. It enables us to capture both the gifting category in a wedding and also capture the family members of the groom who might be accompanying him for the shopping. And it also acts as a great bridge for people to start interacting with Mohey as a brand, and it has been one of the best performing categories for us this financial year.
Was competition also one of the main reasons for lower growth apart from Shraddh in Q3? Do you see this competition as a speed breaker in our short-term growth, sir?
See, we very carefully monitor competition across the country. And what we will acknowledge is that the number of stores from competition has definitely increased over the last 2 financial years, and there's a lot more stores now. However, given the kind of moats our business enjoys, what we have seen is while majority of these stores have opened in Tier 1, the major impact has actually been in Tier 2 and Tier 3 for our business.
Sorry to interrupt. Sorry, Lakshya sir, can you come back in the question queue for the follow-up question?
I just have 1 last question, sir.
Sorry, sir, there is time constraint.
Vedant, you can complete.
Let me just complete the answer. And the last part to that answer is also that Tier 1 is where we've seen still relatively less impact over Tier 2 and 3. And majority of stores that have opened up is actually in Tier 1. So we feel the other factors are in higher play versus competition as of now.
Okay. So Tier 2 -- Tier 1, we are much better compared to the competition. Like we are not facing that much of impact issue in Tier 1?
So majority of the competition stores have actually opened in Tier 1. So just the fact that Tier 2 and Tier 3 is more hit, we are able to comment saying that the other factors are actually in higher player versus actually instead of competition.
And the next question is from the line of Prerna Jhunjhunwala from Elara Capital.
Just wanted to understand what is making Tier 2, Tier 3 cities more impacted when we see that e-commerce channels all, Flipkart, Myntra, are not due to this category per se because the consumer's expenditure is slowed down across the categories, then Tier 2, Tier 3 are more hit against e-commerce players who are talking where they are witnessing higher growth in Tire 2, Tier 3. So just wanted to get some color on category slowdown per se in geography dynamics.
Yes, I would say, Prerna, that this particular comparison is very difficult to do in our case because e-commerce from an India perspective is still a very young industry. And as there are more number of smartphones available, more people accessing the Internet, that industry will continue to grow. And hence, I don't see particularly a big correlation here. And what we understand is from the overall consumer business communities that the Tier 2, Tier 3 pressure felt. And even in cities where we have good presence across retail and overall from an operations perspective, we have still felt that the overall number of consumers walking in was slightly lower, primarily led by lower consumer sentiments. And the good part about our business, you could say, in some senses, that still people prefer to feel the product before they buy one because Indian wear is not something that men especially buy on a very regular basis. Hence, the penetration of e-commerce is still extremely small in the overall scale of the industry.
Okay. And if we want to see this business differently than other apparel categories because people prefer to purchase for their wedding and they would not like to compromise over here and stuff. Do you think rental business could pose a risk to this business going forward on a longer-term basis?
We continuously evaluate newer forms of -- and dynamic forms of business opportunities that may be there. But overall, our consumer research says that wedding clothes is of cultural significance. And at least for the groom and the immediate family, culturally buying a new product and wearing that and actually storing it as a treasure in their wardrobe throughout the lives is a big part of the overall consumer journey than we refer to clothes being worn during the wedding. So at least from a short to midterm perspective, we don't see this trend being large.
One more question, if I can continue. We visited few Tier 2, Tier 3 cities during the quarter to understand this slowdown. But what we understand is a lot of new stores per se have opened up in Tier 2, Tier 3 cities also in competition to Manyavar. Any color on that would be helpful because people are saying that footfalls are not -- I mean the market is not so big as the number of stores are opening up. So some color on maybe market opportunity for us in Tier 2, Tier 3 cities where we see opportunities. And what could change, and maybe some lead indicators for us to understand, because number of wedding dates and all these parameters, which we were looking for is actually not making much -- giving more color to the sales growth?
No, point well taken. So overall, our understanding is that even in Tier 2 cities, where there might have been newer players that have opened up stores, our overall impact has not been any higher than in a city where stores have not opened up in comparison. And that is why overall, our understanding is the effect of other elements of the business are slightly higher this year compared to any other factor per se.
Okay. Understood. Any lead indicators that you could highlight?
Apologies, I couldn't hear this part.
Any lead indicators that you could highlight apart from wedding dates and number of weddings that we can follow?
Yes. So 1 was number of weddings and the other overall consumer sentiments across the board. So these are the 2 main points that we understand. A bit of pent up was there last year overall from a 9-month perspective.
[Operator Instructions] The next question is from the line of Akhil Parekh from B&K Securities.
Just to harp more on the demand side, right? And we are seeing -- clearly seeing the dichotomy in the sales of likes of Titan versus Manyavar, right, given that we both target similar customer segment and the demand is a function of wedding and festive season. But on one side, we are seeing that Titan's jewelry sales is growing very well while we are kind of relatively underperforming. So if you can please help understand the dichotomy, if the competitive intensity also has not increased, then what could be the possible reason for the difference in the performance?
Our overall understanding here is that the 2 categories are very different. One is also the purchase cycle. What is evident to us is apparel is bought much closer to the weddings while jewelry is actually purchased maybe even 1 year before the wedding in a lot of cases. And thus, this is quite a different business for us to kind of evaluate or compare to. And the other also piece is that majority of the jewelry businesses that we've kind of seen and heard about, only 20%, 25% of their total business is weddings related and the other is more related to daily consumption or investments.
Sure. This is helpful. And if I can squeeze 1 more question, if I missed -- if you have given the reasons for delay in the opening of Mohey's flagship stores, I don't know if I've missed that part. And how does the pipeline of new store opening for Mohey looks like?
Overall, the reason for the flagship being delayed was more of a construction element and more of a handover element from our real estate partners, which led us to have a delay, which is slightly out of our control, and that was the primary reason. And the second piece also from a store opening element is we are looking at trying out multiple different models by mid- to late next financial year. We want to experiment with newer forms of Mohey and try open different kinds of stores and pilot different business development strategies.
Thank you. Ladies and gentlemen, due to time constraints, that was the last question. I would now like to hand the conference over to management for closing comments.
Thank you very much for all the analysts for joining our call. It's always a pleasure interacting with all of you and always a good learning for us. Thank you very much. Hoping to interact soon again in the financial year ending earnings call.
Thank you.
On behalf of Axis Capital Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.