Aditya Birla Fashion and Retail Ltd (NSE: ABFRL) Q3 2025 Earnings Call dated Feb. 17, 2025
Corporate Participants:
Jagdish Bajaj — Chief Financial Officer
Vishak Kumar — Whole-Time Director and Chief Executive Officer of Madura Fashion and Lifestyle
Sangeeta Tanwani — Whole-Time Director and Chief Executive Officer of Pantaloons
Ashish Dikshit — Managing Director
Analysts:
Tejas Shah — Analyst
Devanshu Bansal — Analyst
Sheela Rathi — Analyst
Sameer Gupta — Analyst
Tanuj Pandia — Analyst
Jignanshu Gor — Analyst
Ashish Kanodia — Analyst
Videesha Sheth — Analyst
Presentation:
Operator
And gentlemen, good day and welcome to the Third Quarter Earnings Conference Call of Aditya Birla Fashion and Retail Limited. The call will begin with a brief discussion by the company’s management on the Q3 FY ’25 performance followed by a question-and-answer session. We have with us today Mr Ashish Dixit, Managing Director; Mr, CFO; Mr Vishal Kumar, Director and CEO of Lifestyle Business; Mr Sangita Tanwani, Director and CEO of Pantaloons. I want to thank the management team on behalf of all the participants for taking valuable time to be with us. I must remind you that today’s discussion may include certain forward-looking statements and must be viewed, therefore in conjunction with the risk that the company faces. Please restrict your questions to the quarter performance and to strategic questions only. Housekeeping questions can be dealt separately with the IR team. With this, I would now like to hand the conference over to Mr Jagdesh Prajaj. Thank you, and over to you, sir.
Jagdish Bajaj — Chief Financial Officer
Thank you. Good afternoon, and welcome to the Q3 FY ’25 earnings call of our company. Let me start with an overview of the macro-environment. The overall consumption remained subdued this quarter as well with periods of high to moderate consumption. While the festive and wedding season witnessed robust demand, other period experienced inconsistent footfalls. In the context of the weak operating environment for the past many quarters, our strategy has been focused on driving better efficiencies in operations, leveraging our existing asset-base and deploying capital strategically. We have been executing this agenda by rationalizing our distribution to prune less product new channels, tightening inventory management, extending high-value partnerships, reducing operating costs and strategically aligning the product portfolio in-line with consumer relevance. Through these measures, we have consistently delivered profitable growth over past few quarters. This quarter as well, we have delivered EBITDA margin expansion with all our businesses demonstrating improved profitability. Update on key corporate actions. First, the demerger of Westernwear Brands business into a separate entity that is Aditya Birla Lifestyle Brands Limited or ABLBL is progressing well and set for completion within the next two, three months. The NCLT hearing is scheduled in third week of March 2025. Number two, the company has successfully secured USD490 million equity capital through a mix of QIP and preferential issue. The fundraise within demerge will strengthen its balance sheet by making it debt-free and leaving enough cash-in the books to take care of the growth needs of its businesses till they become self-sustainable. This fundraise affected strong participate — attracted a strong participation from leading global and domestic investors, along with our promoters who paid a significant premium to the prevailing share price, underscoring their confidence in the long-term potential of the business. Coming to the financial performance for this quarter, the company delivered consolidated revenue of INR4,305 crores, a growth of 3% over same quarter last year. Consolidated EBITDA stood at INR683 crores, growing 13% Y-o-Y in absolute terms with 15.9% margin edge against 14.5% margin in Q3 last year. Our established businesses continue to deliver strong margins, while high-growth segments like ethnic and tomorrow have achieved significant revenue growth coupled with profitable margin expansion. Consolidated PAT stood at loss of INR42 crore for the quarter against loss of INR108 crores in same quarter last year. At YTD level, company recorded a revenue of INR11,376 crore, which is growth of 7% Y-o-Y. EBITDA stood at INR1,499 crore, margin of 13.2% against 12.5% margin in YTD December last year. As on 31st December 2024, our store network stands at 4,492 stores, spanning across a total retail area of 11.9 million square feet. The total net-debt of consolidated ABFRL at the end of January 2025 stood at approximately INR1,800 crore after receiving INR1,860 crore of QIP money. This will further come down post receipt of preferential issue of INR2,379 crores. We expect ABL BL to start the next year with opening debt of INR700 crore, whereas demerge ABFRL will have a likely cash balance of approximately INR1,300 crores. Let us now discuss business-wide performance. Starting with proposed Aditya Birla Lifestyle Brands Limited, ABLBL posted revenue of INR2,151 crore with EBITDA of INR355 crores in Q3 FY ’25 and an EBITDA margin of 16.5%, 90 basis-point expansion versus last year. Lati style brands, the brands have seen a retail L2L growth of 12% across brands on a network of more than 2,500 stores. This industry-leading L2L growth reflects the strength and quality of franchisee that these brands have with Indian consumers. The total revenue remained flat on account of de-growth in wholesale and e-com channel. Brands posted revenue of INR1,817 crores with EBITDA of INR357 crores in Q3 FY ’25 with an EBITDA margin of 19.6%. Over the past few quarters, in context of the market situation, brands have taken the opportunity to strategically optimize their network and channels to enhance overall quality of its distribution. This involved existing underperforming markets and formats and restructuring business, exiting underperforming markets and formats and restructuring business arrangements with wholesale and e-commerce partners to drive profitability. Despite these changes, the brands have consistently driven premiumization, casualization and elevated in-store experiences, aligning with evolving consumer preferences. This transformation further fueled by a strong festive and wedding season reinforced their market literacy. The emerging growth businesses in ABLBL, which include youth Western Wear, innerwear, airth leisure and segment posted 5% growth at an overall level with the segment posting another quarter of EBITDA margin improvement. As you may be already aware, the company is in the process of out its F ’21 offline operations, which has had a moderate impact on the growth of the emerging segment and also impacted its overall profitability. Post the demerger, ABLBL is set to embark on its independent value-creation journey, well-supported by access to its own cash flows to drive growth. Over the next 12 months, the brands are poised for an aggressive expansion with a significant rollout of 300 plus Navy stores across the portfolio. Additionally, other sales channels are expected to regain momentum, further accelerating the overall growth. Let us now discuss performance of demerge ABFRL segments. The proposed demerge ABFRL reported a 3% Y-o-Y revenue growth, reaching INR2,218 crore. EBITDA stood at INR320 crore with an EBITDA margin of 14.4%, marked marking an increase of 250 basis-points from 11% and 9% in the same quarter last year. Let me first cover pantaloons. Pental loans has been a driving premiumization strategy where it has consciously moved away from the overcrowded value retailing space. This is visible in the quality of overall offerings to our customers through a revamped product portfolio and enhanced merchandise. As an outcome of this deliberate choice, has exited over 40 stores in the past 12 months, mostly in Tier-2 and smaller market. This has helped improve its customer proposition as well as consistently improving its profitability. The reported revenue of INR1,305 crores this quarter was impacted primarily by the shift of Pujo to Q2 this year and the closure of a store on Y-o-Y basis. Excluding the East John, recorded a positive LTOL growth of 2.5%. At an overall level, the L2L was negative 2.5%. On profitability front, the segment reported an EBITDA margin of 19.3%, reflecting an improvement of our 170 basis-point Y-o-Y. Style up continues to expand its retail footprint and now operates across 39 stores. The brand has also diversified its product portfolio by introducing newer categories to constantly improve its customer consumer proposition. Post the fundraise, as the financial viability of the formats get established over an expanding retail network, we are poised to accelerate the growth of this format going-forward. Ethnic business, our ethnic strategy continues to deliver for us. As we stand today, the portfolio of ethnic plants is the largest and most comprehensive portfolio in the industry and has consistently driven growth for FBFRL by maintaining double-digit growth over the past few quarters. As the portfolio is gaining scale, it’s starting to contribute to our overall profitability as well. In a quarter that has both the benefits of festive and wedding season, the performance of this portfolio showcased the intensive strength of our brands and their relevance for consumers across multiple occasions. The overall portfolio posted a revenue of INR588 crore, a growth of 7% Y-o-Y. While TCNS is still going through a distribution rationalization to focus on profitable channels, which led to its de-growth for rest of the portfolio, excluding TCNS, the growth has been 39%, highlighting strong momentum across the brands. Profitability for the overall portfolio also improved sharply with EBITDA margins reaching 19.2%, a remarkable 1,160 basis-point Y-o-Y expansion. This was led by improvement in margin across the entire brand portfolio. Portfolio of brands, which include, Tarun Talyani, House of Masawa and Santru and Nikhil grew by 41% on Y-o-Y basis. This also has the addition of business, which got added in Q2 of this year as we increased our stake in the company to 51%. Within premium ethnic brands, the men’s ethnic brand able to is a festive and wedding season this quarter with sales growing by more than 50% versus last year. Delivered an 18% L2L growth and strengthened its footprint in key wedding markets. The brand for the first time delivered a positive EBITDA this quarter, forecasing increasing potential of its business model. Meanwhile, TCNS recorded its second consecutive quarter of positive EBITDA. Despite a revenue decline of about 20% due to ongoing distribution optimization app — aimed at establishing profitable distribution. By strategically selecting profitable channels and stores along with cost-control initiatives, the business has successfully been able to streamline operations and drive leverage. Our merchandise has also seen improvement and the consumer feedback on recent ranges has been more than encouraging, backed by four consecutive quarter of positive. We feel these efforts by our operating teams have led a strong foundation for sustained viable growth in the medium to long-term for the brand. Post the fundraise, the balance sheet of demerged ABFRL is well-placed to support the accelerated expansion of our ethnic portfolio. Luxury retail, the collective air mono-brands grew by 13% in Q3 FY ’25, led by a strong L2L of 10% and robust e-commerce performance. Similarly, our digital brand portfolios under Tomorrow posted a growth of 26% in sales year-on-year with an improvement in margin. This validates our belief in the longer-term potential of digitally active brands focused on Young India. To conclude, despite a challenging consumption environment, especially for discretionary category, our focus on driving productivity, efficiency, profitability, coupled with continuous improvement in products and services has been able to guide us through this tough environment. One of the key strategic task of adequate fundraise has been successfully completed. Another important strategic initiative of demerger is on-track. The completion of these steps in next two, three months will enable us to unlock value through two independent entities, both with attractive growth potential and a strong balance sheet through a resilient growth-oriented business model sharpened over-time. We are open to questions now. Thank you.
Questions and Answers:
Operator
Thank you, Mr Bajaj. We will now begin with the question-and-answer session. Anyone who wishes to ask questions may press R&1 on the touchstone phone. If you wish to withdraw yourself from the question queue, you may press R&2. Participants are requested to use only answers while asking your question. Ladies and gentlemen, we will visit for a moment while the question queue assembles. The first question is from the line of Tejas Shah from Avendus Spark. Please go-ahead.
Tejas Shah
Hi, thanks for the opportunity. First question is on lifestyle. So very strong like-to-like performance, especially in the tight demand environment that we picked-up from other retailers. So wanted to know what worked for us and interestingly, margin expansion in the presentation, we credited channel mix tighter control, cost-control and inventory management as key drivers for margin expansion, which are independent of LTL. So how should we think about margins also when, let’s say, if we continue this LTL performance, how should we think about margins in coming period? So those two questions on lifestyle brands?
Vishak Kumar
Sure. Hi, Tejas. Vishak here. Yeah, I think it was a decent quarter for us from a retail like-for-like point-of-view, largely driven by a very strong festive and wedding performance. We had prepared for this. We also knew that the calendar was in that sense more a Q3 calendar for wedding. So we are prepared for this with the kind of assortments that we had. In fact, frankly, if winter had been stronger this time, we would have had even better growth, but this was a tepid winter this time, otherwise, we would have had that gain as well. So I think it was just preparing for a strong festive and winter season that enabled us to do this. Of course, your second question is around how do we maintain this kind of margin expansion. I think the biggest brain our business on margins is the discounting. And as we keep getting better and better at tightening discounting, getting into more-and-more of channel mix play, et-cetera, which drives for reduced discounting, I think the stronger our business keeps getting. So that business would be lever number-one. The drivers of that full-price sell-through drivers of that superior retail experience, all of that is how we would look at keeping that driving a quarter-on-quarter. And looking at where we are in this calendar year or where we have started, do you think that this performance will continue for this calendar year as well? Thank you. Yeah, I think fundamentally, Tejas, all the fundamentals are very strong and in-place. You remember that we had a very tough first-quarter where the calendar was pretty bad. So that was there. But after that, it’s been a steady improvement phase. So we should expect the momentum to continue. In fact, what you did — I don’t know if you saw it in the data was, we also you know in some sense, consolidated our retail network. So some of our margin draining retail stores have been taken off. So that also augurs well for the overall network. And to that extent, we also are cranking up the expansion machinery once again. So that will give us another wave of growth as we go along. So I think, yeah, the quarters ahead fundamentally look strong.
Tejas Shah
Sure. Thanks. Second question is pertaining to Pantaloon. So with 40 store closures in last 12 months, is the consolidation phase over? And does the metro Tier-1 focus means that we will service the demand beyond Tier-1 through styler because interestingly, is now 39 stores. So versus 40 stores. We have opened 39 stores. Obviously, this can be a coincidence. But just wanted to know your thoughts on how to think about both Pantaloon’s expansion from here on and style up sir expansion also in Tier-2, Tier-3?
Sangeeta Tanwani
Yeah. Hi, Tejas is Sanita. So as far as-is concerned, like we’ve talked before, this is — our distribution strategy is in-line with our overall brand strategy, which is about premiumization. And therefore, of course, every retailer reviews its store and performance from time-to-time. But for us more so, this is a bit of a reset to make sure that as a brand, we come together and we come through as a consistent brand across the. So we’ve closed, as the commentary has told you about 40 stores in the last one year. We’ll have a few more in this quarter. And for next year, of course, we’ll review based on performance and the market conditions, how things progress. As far as your second question is concerned, we — here in retail, we are very clear, it’s a two-pronged strategy because we are addressing two very different consumer sets. Style up clearly playing in the value segment category. And again, we have close to 40 stores, which we will continue to expand to address the needs of that consumer. The mid-market segment, which is where Pantalones operates, we will continue to expand in the relevant markets. You will see increasingly our expansion of largely in metros, mini metros and Tier-1 towns, whereas the style-up audience is there in a metro and continues to exist across the POP straight out. So two-pronged strategy, two brands addressing two different consumer sets with their own separate distribution agenda. I hope I’ve answered your question.
Tejas Shah
Yes, you have. If I may squeeze or squeeze in one more. So, what are the initial stage markers we are monitoring to track the product market fit for Style up and if you can share any of the KPIs that you’re monitoring there?
Sangeeta Tanwani
So we are monitoring it like we would monitor any other retail business. Of course, very specific focus on-store economics to ensure that we — even today at a store network level, the stores are positive. Our focus is to continuously ensure that our inputs, which is in terms of our merchandise strategy, we continue to improve that. We’ve launched new categories. We’ve launched beauty, which has started-off really well for Style Up. We’ve relaunched laundry, which is also doing well. So to complete the proposition, it is still almost the first full-year of style-up and therefore, we are learning very, very quickly as we are going along to make sure that our proposition is both relevant to the customer and differentiated versus competition. So all the metrics in terms of customer metrics are being monitored and commercial metrics from a business model standpoint are being monitored. And our eyes are on sharpening the axon proposition and expanding our distribution.
Tejas Shah
Got it. That’s all from my side and all the best for coming quarters. Yeah.
Operator
The next question is from the line of Devanshu Bansal from Emkay Global. Please go-ahead.
Devanshu Bansal
You say, hi, thanks for taking my questions. Congratulations on good LTL in lifestyle business and margin improvement across segments for the company. I sir, first question is on-network optimization and restructuring with partners both in lifestyle. I just wanted to check, do you foresee any losses related to inventory liquidation at these stores, any kind of asset write-offs which may happen or that has already been taken care of.
Vishak Kumar
I’ll come in here. I think the results that you see here are inclusive of any inventory domincy or any potential we have a very conservative but a consistent policy on that. So there’ll be no surprises on that account.
Devanshu Bansal
Understood. And sir, we have sort of closed stores, right? And now we are sort of again going aggressive on the expansion. So I just wanted to check on the key learnings with the stores that we have closed, which we are now sort of building upon to open new stores aggressively again.
Ashish Dikshit
So I think three different parts of businesses where foreclosures have happened. Lifestyle brands, I’ll let to comment, but primarily we felt that there were operating conditions where many parts of the market, particularly our expansion to smaller towns was taking time to fully fractify. Most of our store closure were consistent with this sort of phenomena, which is smaller towns taking longer to recover and that’s where a lot of rationalization has happened. Spantaloons is a different thing as Sunita just responded in previous question, it was a strategic call on shift in premium positioning and therefore, we felt that lot of smaller towns as well as smaller size stores, which didn’t do justice to overall pant loans proposition needed to be pruned. We have done a significant part of it. There’s still some part which is left there. The third large rationalization came in TCNS where post evaluation once we came into the business over next six to nine months, we looked at the network profitability, took a onetime deep correction. So we think most of these are strategic onetime correction in a large manner. And as the consumption improves, both the businesses, all the three businesses will be able to grow. Lifestyle brands particularly also will have access to their own cash. So their ability to grow even in downtimes when franchisees sometimes are not in a position to invest during the low time, the business will be able to sort of short circuit that and invest deeper. Pantaloons are primary investment in the Pantaloon segment is going to be in style-up, although we’ll continue to gradually increase pantaloons. And TCNS is an early-stage for us to start growing. Right now, the focus is on profitability.
Devanshu Bansal
Understood, sir. Sir, last question
Vishak Kumar
To what Ashish said, which is in terms of forever ’21, we had an accelerated closure of stores. So — and that will be there in Q4 also in that sense. And so like Jadesh mentioned in his speech, we are getting out-of-the offline for our ’21 business. So that also added to the total list of closures. There is of course also the routine lease expiry locations becoming irrelevant, et-cetera, which is there. But usually the new additions would be significantly higher than that. This time there were this set of one-offs also, which had to be pruned. So those — I think there are fairly robust criteria of stop-loss and a robust criteria around evaluation of stores, et-cetera. I think we get it 95% right and that’s the accuracy level at which we’d like to work because you do need to grow aggressively a network
Devanshu Bansal
Hi,, sir, last question from my end. The debt level is currently sort of INR1,800 crore after receiving the QIP proceeds, I guess after the potential issue, it should be largely to said that ABLBL will be having INR700 crore of debt and ABFL will have INR1,300 crore of cash, yeah. So I just want to check on the leeway for ABFRL’s growth, right? So with this INR1,300 crores capital we suffice for them to sort of move on to the next decade of growth or there is certain period of that this capital can sort of suffice growth for this segment?
Ashish Dikshit
So two-parts. One that while your — your analysis is perfect, I think we expect the ABLBL business to start with a debt of INR700 crores and ABSRL to start with a cash of between INR1,300 crores INR1,500 crores. The only other point I would add to that is that we are also looking to separately raise capital in tomorrow for its own growth. Right now, you’re looking at numbers at a consolidated level. Once you take that out, it will free-up a lot more capital for ABFRL’s remaining businesses. And then if you look at within the ABFRL businesses, Pantaloons is capable of generating its own free-cash flow. Sile up is where capital will be required. Large part of ethnic is self-funded, perhaps one where meaningfully a reasonably large-size of capital will be required. And there is small investment that will go into the first store in Fire. So we feel over next three years, we have enough cash cover left for growing these businesses. Of course, the internal accruals from the profitable business will continue to further add to that. And tomorrow’s fundraise will take-away one of the sort of responsibility for for this current cash-flow.
Devanshu Bansal
Just small follow-up here. So within say three years, you expect these smaller sort of new ventures tiled up, to gain scale and then post that they’ll be able to sustain on their own or we may have to sort of raise more capital rather than and
Ashish Dikshit
So current analysis and that’s why this level of capital was raised is that with the capital that we have raised, over next three years, we should be able to accelerate the growth of these new businesses to a point that at the end of that cycle, the company as a whole, which is a demerged JBF will be free-cash flow generating company.
Devanshu Bansal
Fair enough, sir. Thanks for taking my questions.
Operator
Thank you. We’ll take the next question from the line of Sheila Rathi from Morgan Stanley. Please go-ahead.
Sheela Rathi
Thanks for taking my question. My questions again are on pantaloon. So I hear you saying that we are going to be focusing more on in the metro cities, Tier-1 markets, mini metros, focusing more on the premium category. I just want to understand that today, when we look at our current portfolio of pant loans, what would be the positioning or say couple of years ago, what was the positioning? And how much time will it take us to get to the premium level which we are aspiring to get to.
Sangeeta Tanwani
Yeah. So hi, Sheila. We — if you — if you look-back at the history of pant loans, we — few years back, about three to four years back is when we defined our strategy to move-up just before COVID in fact, from a value player to being a mid-market player. And we commenced our journey then, of course, COVID came and disrupted business for almost everybody. I think we have got all our elements. The foundation is absolutely strong. The distribution correction that you see is, as I said earlier, is to make sure that the brand experience is consistent. Today, with all the consumer work that we have done and we’ve done some very extensive consumer work-in the last six to eight months, the consumer clearly sees us as a player in the mid-market segment. I think it’s a question of now ensuring that the brand imagery, the brand experience is consistent across each of our stores and that’s our journey to ensure that our merchandising continues to get better to ensure that our stores continue to look good and therefore, we are investing in a retail — again, a new retail identity, which is completely in sync with where the market has moved and equally to make sure that our customer experience is superior to most other players. So to answer your question, I think we have already made the shift, not just as defined in our strategy, but as the consumer has played it played back to us. It’s now a question of just fine-tuning our strategy and making sure that our execution is consistent, I would expect that it’s a journey of another 12 to 18 months for us to look more come — more shall I say coherent across each of our stores.
Sheela Rathi
Got it. Understood. Just a follow-up here, Sangita. Will this be led by own brand strategy only or do we plan to change the portfolio?
Sangeeta Tanwani
So our emphasis on private-label has been there over the last few years, our share of private-label has — has improved a little bit. I think the lens that we are using is to make sure that our brand and label assortment is relevant for that city and for that store. Our emphasis will be to make sure our private-label is very competitive and relevant that we offer great value through our private-label. In those stores in those markets where the external brands play a complementing role and therefore offer a greater variety to our customer, we will continue to have those brands. But the choice making today, I think is far more deliberate and it is far more data enabled. And therefore, as we are looking at the layouts and assortment of labels in each of our stores, it’s far more specific, keeping in-line the understanding or in-line with the understanding of the customers in each of those cities. So we’ll continue our play with both, but private-label will be our top priority and we will continue to improve that merchandise and therefore, the share of private-label over a period of time.
Sheela Rathi
Understood. My second question again is on the store expansion strategy. You talked about we had store closures and there may be some more going ahead. Having said that, when we are opening style-up stores, are we having a strategy where it is closer to a pandalone store or we are pursuing a very independent strategy of driving expansion of Style up. I mean, just want to understand how are we leveraging our existing brands to scale-up Style up faster?
Sangeeta Tanwani
So the strategy for the two brands and two businesses is absolutely independent simply for the reason that the consumer sets are completely different. We’ve had examples where we have a pantoons and a style-up store sitting right next to each other because we believe in that catchment, there is potential for both of those stores. And I think the fact that we have a sharp understanding of who the — these consumer sets are or which these consumer sets are, we assess the potential of each of these businesses independently. And if it turns out that the stores need to sit next to each other, so be the case or if there’s no potential for style up in that catchment, style-up will find its own location in that city.
Sheela Rathi
Understood. My second and final question was on tomorrow. How should we think about the growth going ahead? I did hear you say that we will require to do some capital raise, but how should we think about the growth trajectory and you know the profitability journey for — tomorrow, say, for the next two years?
Ashish Dikshit
Sheila, hi, this is Ashish Shell. As you can see over the last couple of quarters since tomorrow’s numbers are also getting represented here, that business is growing organically at about 25% to 30% and that’s really the kind of growth rate we think we’ll continue to maintain. Over a period of time, a part of capital raise will also go towards an inorganic opportunity. I think the whole space of digitally first focused in Gen Z and millennium young millennial customers is a very large opportunity. Our current portfolio of about five or six brands is focused largely on the young casual men’s wear space. There will be opportunities later. And post fundraise, we will obviously look at entering some of the new categories as well. But at this point of time, therefore, 25% to 30% organic growth rate is what we are experiencing and that will continue to remain. Overall picture may change post the fundraise, but that’s something that we can talk about when that actually happens. On profitability, yeah, on profitability, the intrinsic profitability of each of these brands is on a continuously improving path. Barring one out of six brands, I think most others are close to being profitable and some of them already are profitable. There is a corporate overhead below that, which is sort of pulling down the overall profitability. We think over a period of time as intrinsic profitability of the constuent brands if tomorrow improves, that will be able to leverage the overhead that currently exist.
Sheela Rathi
Understood. Thank you, Ashish.
Operator
Thank you. We’ll take the next question from the line of Sameer Gupta from India Infoline. Please go-ahead.
Sameer Gupta
Hi, good evening and thanks for taking my question. Firstly, sir, on lifestyle brands. Now I understand this is a more penetrated category versus others. And if I remember few years back, the growth lever here, which was identified was expansion into smaller cities with concepts like Peter England Dread. Now the focus is back on larger cities. So how should we look at the growth outlook? Is it like calibrated down now to a more mid to-high single-digit, which is more realistic? Your thoughts on this?
Ashish Dikshit
Thanks, Amit. So you know, so we still have a very robust Peter England bread network. Likewise, we have a network of about — totally altogether in Tier-4 towns itself, we would have about 700 odd stores. So it’s a very robust network and that grows. It’s the reality that the headwinds in those markets have been a little more than the overall conditions in other markets. But those are short-term ups and downs that we have deal with. In the medium-term, these are as important for us as markets as are the Tier-3, Tier-2, Tier-1 and the metro cities. So in that sense, all I can say is that at this point of time, maybe the number of new stores which will come up in bigger cities might be more and also we’re looking at larger store formats as our merchandise assortment has expanded, but it doesn’t mean that the other towns are any less important. Those will also continue to be. Short-term, yeah, the aggression in growth in smaller towns would be a little muted as compared to what we would do in the bigger cities.
Sameer Gupta
Yeah. So short-term mid to-high single-digit growth rate considering demand comes back-in a more a consumer-friendly environment, that’s a realistic assumption.
Ashish Dikshit
In small towns, you’re saying?
Sameer Gupta
No, as an overall lifestyle brands?
Ashish Dikshit
I think so. I mean, you know, look, please recognize this, there are costs escalate 5% to 6% year-on-year. Okay. So as a network, you’ve got to constantly keep growing faster than your cost to be better and better network, okay. So that will be a continuous drive-to keep improving like-for-like sales as we do. So like — so I can only say this that there might be some ups and downs across quarters, but in general, that’s the kind of direction going-forward in our business?
Sameer Gupta
Got it. Second question is on the net-debt. Now I heard also point this out that INR700 crores of net-debt in ABLBL from FY ’26 onwards. Now I remember last year, this number was around INR1,000 crores. So if my understanding correct that with the whole year, the more cash-generating business has only accrued INR300 crore and this is despite low working capital and capex requirements in this set of business?
Jagdish Bajaj
Hi, Tamish. So this is like we have to monitor the account separately. Firstly, whatever working capital charge plus working capital consumption plus capital expenditure all needs to be meet by the business itself. Therefore, the opening date of INR1,000 crore, we are saying that year-end will be around INR700 crores. So the cash generation of the business has gone into fund the capex and working capital and interest.
Sameer Gupta
I’ll probably take this offline. Lastly, sir, if I may squeeze in. Outlook on Taswa, you’ve added 10 stores this year so-far and this year was a very healthy wedding oriented, you know, 3rd-quarter was very wedding heavy. So what is the outlook or plan in terms of store rollout going-forward?
Ashish Dikshit
Yeah. So your first-half of the year was very, very poor and it was one of the lowest wedding period for Taswa for the market itself. I think as the weddings are coming back, obviously, the expansion is increasing the second-half of this year is seeing more expansion than previous half. But overall, post fundraise and the balance sheet of ABFRL, you will see a far more accelerated expansion. I think what was important also was to establish and prove to ourselves a very strong store model, which is now increasingly visible, invest behind the brand, getting the store economics, supply-chain, et-cetera. I think so the foundation has been done post the balance sheets and post this fundraise and a stronger balance sheet, that’s why we’ll be able to expand much faster.
Sameer Gupta
Any number you can give FY ’26?
Ashish Dikshit
Yeah. I think it would be in the range of 40 to 50 stores from the current level of about — we end this year at about 70-odd stores and we should be able to probably add closer to 50 stores next year.
Sameer Gupta
Got it, sir. This is very helpful. We’ll come back-in the queue for follow-ups. Thanks.
Operator
Thank you. The next question is from the line of Tanuj from JM Financial. Please go-ahead.
Tanuj Pandia
Thanks for the opportunity, sir. Sir, my first question is on lifestyle. So how are we planning to revive the growth in wholesale and our e-commerce channel? And how is this impacting the profitability of the entire lifestyle format considering that these channels are lower-margin and require higher working capital?
Ashish Dikshit
Hi, Tanuj. So three things. There is a part of wholesale which is very attractive from a profitability point-of-view, there are parts of retail which are less so. And we have a portfolio, each of them having their own role to play in the — in each of our brand plays. There are some one-offs in the quarter, which we have to recognize and one of our biggest trading partners in the department store format has been going through and I’ve said this in the last quarter also has been going through a strategic shift and I think it will be probably another quarter or two before they can strongly bounce-back. So that is there impacted in our base. There — so there are a couple of one-offs like that, which do impact the wholesale and those will in that sense, go away in coming quarters for our business. On the e-com side, actually, exactly what you’re saying, Tanuj, which is to say how do we make our e-com more profitable. You know, in the past, there was also a lot of inventory from a liquidation of old season merchandise point-of-view. So as we made our inventory sharper, we have had less of that. And for — hence, the kind of business that we want to grow within e-com is a lesser discount, more profitable growth path. So we’re building models towards that. I think that is the way we’ll be able to create something which is strengthening brands addresses the kind of consumers who go to the e-commerce business and yet also is a more profitable mix for us. So that’s the thinking on the wholesale side,.
Tanuj Pandia
Yeah. Sure, sir. Sir, my second question is on pantaloons format, like what kind of store opening are we targeting in FY ’25 and ’26 net store opening in pantaloons? And if you can provide the breakup of like what will drive growth in pantaloon between SSG and store openings, like how much will be from the SSG side and how much from the new-store openings
Ashish Dikshit
So I think at this point of time, we don’t want to give a number on growth broken up with this degree of detail. But as said, we continue to sort of fine-tune our network at this point of time. I’ll let Sanita come in and talk about the growth, which is the number of new stores added, but there will be a sort of marginal refinement of the network even in next six to 12 months.
Sangeeta Tanwani
Yeah. So specifically for this year, I think by the end-of-the financial year, we would have opened about 13 to 15 stores. We have a few more to go in the next few weeks before the end-of-the financial year. And just this year alone, we would have shut about 20 odd stores. We have shut few and few are about to be shut-in the next five to six months. Next year we are looking at again opening about 15 to 20 stores.
Tanuj Pandia
On this 15 to 20 stores is the net opening am I right?
Sangeeta Tanwani
Next year
Tanuj Pandia
For the next year.
Sangeeta Tanwani
We will review 15 to 20 will be the new stores. We will review how many stores if at all they need to be shut, which is a normal-course like Vishak was also explaining to you, if a market shifts or if we believe a store is not doing extremely well, well that I think call we take on an ongoing basis.
Tanuj Pandia
Okay. And my last question is on the innovative segment, like what scale is the company trying to achieve and like at what scale we’ll be able to achieve the single-digit EBITDA margin in our segment.
Ashish Dikshit
So we are closing right now to about INR500 crores. I think we’ll have to grow by another 40% to 50% from this level to get to that kind of margin structure?
Tanuj Pandia
Yeah. Sure, sir. Thank you. That’s all from my side. Thank you, sir.
Operator
Thank you. Thank you. The next question is from the line of from Bernstein. Please go-ahead.
Jignanshu Gor
Hi, thank you for the opportunity and taking my question. I wanted to check regarding the margin profile for three of our largest businesses, which is lifestyle, pant loans and ethnic, the margins are all close to 20% for this quarter. So how should we think about these going-forward? Do we expect them at — is there any expansion possible or do you think we are broadly near the peak and we should maintain that?
Ashish Dikshit
I think you should look at margins not on a quarterly basis because fashion is very seasonal and festivals and especially quarters like this area very profitable in that sense. Look at YTD numbers and then if you think about the large businesses, lifestyle brands over a consistent period of time has operated with the revenues with EBITDA margins between 18% to 20%. And therefore, that’s the kind of margin that, I mean last couple of years, it’s been closer to, 19% 19.5%. Is where there is a significant shift in margins because margins last year at the same time for nine months was about 13-odd percent, which has moved closer to about 17.5%. So that’s where the big improvement has taken place. On Ethnic Wear, I would say it’s too early for us to say where the margins will eventually settle because consists of two kinds of businesses, some very profitable, well settled business though they may be small and some businesses where we are investing deeply are turning around. So that’s why is where we are investing deeply. This quarter, it’s shown profit just positive EBITDA for the first time and TCNS is also at the low profitability base. Similarly, designers on the other side are very profitable, but quarter three margins are, I would say, exaggerated in the wedding and ethnic markets simply because of amount of weddings and the festival period that falls in this period. And therefore, I don’t think this is truly reflective for long-term thing, but it’s probably more reflective of the potential these businesses have. At this point, many of the businesses are too small to operate at this level of profitability on an annual basis?
Jignanshu Gor
Okay. That’s extremely helpful. Thank you. Thank you very much. I think the second thing I wanted to check and apologies if this has been covered earlier, is where do we see our strongest sort of growth if we were to aim for a double-digit growth in the lifestyle, the ABLBL part of the business? Or how is the management thinking about that? Because it has been a little bit tepid in the last few years now.
Ashish Dikshit
Yeah. Vishat will come in?
Vishak Kumar
Yeah. Hi, can add. Yeah. I think one of our biggest levers for growth, which didn’t happen this year is net retail expansion. So we took in that sense, a consolidation year of getting the mix right of the kind of stores. Also, like I was explaining earlier, small towns, there were a lot of headwinds that we have to go through. To a fair extent that’s behind us and we are back to aggressive expansion. Of course, it takes a little time to crank up that engine and you will see that over the coming quarters in terms of the kind of expansion that we see. So the — the way we see it as three big pillars within retail. So there is of course, like-for-like retail. And like I was saying earlier, that will be a continuous journey to constantly keep getting stronger like-for-likes within our business. We have a fairly large network, which applies from a like-to-like definition. The second is new spaces, new spaces in new markets, also new spaces in existing markets. We also have a multiple portfolio of brands. So there are some brands in some places, which also tells us proven spaces for other brands in those markets, et-cetera. And that’s the second wave of growth and we’ve identified white spaces for that in the kind of network we want to expand. The third is also what we call project stretch, which is to say in-markets where our stores do very well, but we don’t have stores of the size that we would ideally want. So how do we make — in those same markets, how do we create larger stores for ourselves? Sometimes a higher floor in the same building might be available, but sometimes we might have to relocate to a larger store to be able to do that. So all of these would be drive us towards making for a stronger retail — and already if you look at our overall retail, it’s two-third of our business. So when our retail grows very strongly, our overall business has to keep growing stronger. So not to say that the other parts of our business, other channels are any less important, those we will continue to drive. We have very strong department store and trade business. We have a strong e-com business. All of those also will drive. But if you want to know significantly what changes in quarters ahead, it will be a very aggressive retail expansion.
Jignanshu Gor
Okay. Well, that’s helpful. I have a follow-up, but maybe I’ll come back-in the queue. Thank you. Is there time? Yeah. Thank you.
Operator
Thank you. The next question is from the line of Ashish Kanodia from Citigroup. Please go-ahead.
Ashish Kanodia
Yeah. Thank you for the opportunity. So the first question was on the fundraise. So given that this fundraise has happened at the — at a consolidated entity level before the demerger happening. So just wanted to understand what was the thought process of leaving ABLBL with INR700 crores of debt? And related question on this was by when do you expect that entity to become debt-free
Ashish Dikshit
Demerger plan in the fundraiser at that stage, our expectation was demerger will happen faster. But because we were simultaneously doing the acquisition and therefore the corresponding merger of TCNS, we realized the whole demerger exercise will probably take 12 to 15 months. And that’s when we decided to do the fundraise in the combined entity because that is the fastest way of raising capital at that point of time. On the question of the rationale for leading leasing 700, I think Jadesh in his previous quarter’s responses explained that the demerger is effective from 1st April 2024. So the books of accounts of the two companies are separated with the relevant debts lying in both the companies and the — therefore, the company started with close to INR1,000 crores of debt at that point of time, which they brought it down in these nine months-to INR700 crores. Over next two, 2.5 years, we expect this to become a debt-free company.
Ashish Kanodia
Sure. That’s helpful. And second thing, now when I look at your store expansion plan and looking at your presentation, I think there are two key categories which you are calling out in terms of accelerated growth. One is on the value fashion segment, which would be style up. And the second thing is on the ethnic business side. So on ethnic business, I think you guided for maybe 50 stores addition in FY ’26. But if you can also give some sense in terms of what to expect in style-up and also within ethnic beyond, what kind of a stone expansion can we expect?
Ashish Dikshit
So in terms of expansion, Ashish, there are not two, but three large ships that we are looking at and primarily driven by the fact that I think organic performance is improving. We have completed our acquisition journey. Now the focus is sort of improving the strength of those business and creating larger leverage. The first that Vishak talked about, which is lifestyle brands accelerating much faster than network expansion. We think that’s a large opportunity, which is sort of under-leveraged in the combined entity. And one of the strategic rational for demerger was to leave that cash for allowing that business to source. So that’s point number-one. As far as value retail is concerned, you’re absolutely right. I think style-up is the opportunity. We expect this year-to-end with a network between 45 to 50 stores, 48 to 50 stores. Next year, we’ll definitely at the minimum level, double it. As we go along during the course of the year, we’ll see if we can expand faster than that. But at this point, I think the number that I would play-out is about 50 more stores next year. Taswa has already gone — got the momentum with 70 stores now in the network and a good model, which is working well. So that’s wise about 50 odd stores., of course, more concentrated network. Potential for style-up in subsequent years is much larger, but we obviously want to take bite-size as we keep improving the economics of the business before we expand rapidly.
Ashish Kanodia
Sure, and just last bit is on tomorrow. So just you touched upon that and I think this has been a strategy for quite some time that tomorrow will its own path of fundraising. So just two questions here. One, how much total investment has been made in tomorrow till-date? And secondly, what kind of a fundraise and what timeline are we looking for tomorrow?
Ashish Dikshit
So I think, Ashish, we’ve been pretty consistent with the strategy of tomorrow. We knew it’s a longer-term because it’s a very, very, very large opportunity of a market which is emerging quite rapidly. We had initially invested close to $100 million, which is between INR750 crore to INR800 crores in equity. There is a little bit of debt, which tomorrow is taken on-balance sheet. So let’s say about INR1,000 odd crores is really what they have — we have invested in that business. In terms of timeline, we’ll look at when markets are right in next nine to 12 months-to raise this capital and the exact amount, I think closer to the time we’ll decide. I don’t want to give a number at this stage. Sure,. That’s helpful. Thank you and all the best. Yeah, the only other thing I would say is we will fund tomorrow its growth with that capital. So in a sense, the current rates will be largely kept for the ethnic and the value retail apart from a small luxury play?
Ashish Kanodia
Sure. That’s helpful. Thank you.
Operator
Thank you. Thank you. The next question is from the line of Vidisha from Ambit Capital. Please go-ahead.
Videesha Sheth
Yes, hi. Thank you for the opportunity. Most of my questions have been answered, but just a follow-up in case of pant loans and style up. So in the pursuit of having a different proposition for pant loans as well as, if you can elaborate on the initiatives either in terms of demarcation of price points or the new launch momentum or store layouts. If you can go a little granular in terms of how different is the proposition and offering in case of versus signed-up?
Sangeeta Tanwani
Yeah. Hi,. So as I mentioned before, these are two separate businesses targeting two different consumer segments. They play in different spaces from a price point as a as a part of the proposition. So let me just go one-by-one. They are both multi-category stores operating across women’s Western, ethnic and men’s bear and accessories. The formats are very different. The focus on merchandise is very different. Style-up is a completely private-label space with everything that is sold-in the store is designed by us in-house. Pantoons, as you know, has external brands. The pricing is different between the two. In case of style-up, our exit price points are about INR1,200 to INR1,300 with bulk of our merchandise being below INR1,000. In case of Pantroons, the exit price point is much higher would be probably twice of that because the consumer segments are different. So while we operate with the same set of categories, the merchandise is different because the price points are different and our store formats are different. On an average style-up size is about 6,000 to 8,000 square feet. In case of pant loans, in fact, given our strategy to play with a little bit of premiumization in the mid-market segment, we are opening larger stores and our average store size is anywhere between 15,000 to 20,000. We have examples of stores that we are opening, which are 30,000, 40,000 square feet. So they are — they look completely different. The teams that work on these propositions are completely different. And as I said, the opportunity exists for both of these propositions because both the consumer sets exist in large numbers and we are continuing to strengthen our proposition in both.
Videesha Sheth
This is very helpful. Thank you.
Operator
Thank you. Thank you. Ladies and gentlemen, in the interest of time, we’ll be taking the last question, which is from the line of Sameer Gupta from India Infoline. Please go-ahead.
Sameer Gupta
Hi, thanks again for taking my question. One clarification. So the other segment within ABFRL, I assume that it’s largely the super-premium and luxury retail and a margin of 13% this quarter. Now I understand this business used to be very healthy with 20% plus margins. So — and that’s been a seasonally strongest quarter, just. Just wondering if I’m reading it correctly?
Ashish Dikshit
No, your two-parts. One, you’re reading it correctly in a large extent, but to give you comfort, the existing operating business, which is the collective and the international brand, continues to remain same healthy margin that you talked about. There is currently an investment going on in the Galleries La store and the — that’s really what has brought down the overall margins.
Sameer Gupta
Got it. Got it. That’s helpful. Secondly, forever ’21, I missed the details. So you mentioned phasing out-of-the offline business. Just some details around what is the size of this business currently and what is the kind of impact or if there is any positive impact we can expect on the EBITDA, it will be very helpful if you can share that.
Ashish Dikshit
Okay. So it will be positive because we were not making money in that business, but obviously, we don’t reveal details at the brand level. It would be right to give me — give you the exact number. There will be a positive impact on there.
Sameer Gupta
And is online big in this is like you will continue to do online, right?
Ashish Dikshit
Yeah. In a very small subscale level. So it’s not material in that sense. Most of the business was offered.
Sameer Gupta
Got it, sir. That’s very helpful. Thank you.
Operator
Thank you. Ladies and gentlemen, as that was the last question for today, we will conclude the Q&A session. On behalf of the management team, we thank all the participants for joining us. In case of any further queries, you may please get-in touch with Mr Amit. You may now disconnect your lines. Thank you.