Aditya Vision Ltd (540205) Q4 FY23 Earnings Concall Transcript

Aditya Vision Ltd (BSE:540205) Q4 FY23 Earnings Concall dated May. 19, 2023.

Corporate Participants:

Yashovardhan Sinha — Chairman and Managing Director

Yosham Vardhan — Director, Strategy & Corporate Planning

Analysts:

Nikhil Shetty — Nuvama Group — Analyst

Pritesh Chheda — Lucky Investment Managers — Analyst

Akshat Mehta — Sameeksha Capital Private Limited — Analyst

Praveen Ranjan Sahay — Prabhudas Lilladher — Analyst

Devang Patel — Sameeksha Capital — Analyst

Agastya Dave — CAO Capital — Analyst

Varship Shah — Envision Capital — Analyst

Vishal Prasad — VP Capital — Analyst

Ankush Agarwal — — Analyst

Krisha Kansara — Molecule Ventures — Analyst

Chirag Fialoke — Shree RatnaTraya Capital Partners — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to the Q4 FY ’23 Earnings Conference Call for Aditya Vision Limited. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. Nikhil Shetty from Nuvama Group. Thank you and over to you, sir.

Nikhil Shetty — Nuvama Group — Analyst

Thank you. Good day, everyone. On behalf of Nuvama Professional Clients Group, I welcome you all to Q4 and full year FY ’23 earnings conference call of Aditya Vision Limited. So we take this opportunity to thank management of Aditya Vision for giving us the opportunity host this post earning conference call. From the management we have with us today Mr. Yashovardhan Sinha, Chairman and Managing Director; Ms. Yosham Vardhan, Director and Strategy, Corporate Planning.

I now hand over the call to the management to share a brief introduction about the company and highlights of the results, post which we will open the floor for the question-and-answer session. Thank you and over to you, Sinha, sir.

Yashovardhan Sinha — Chairman and Managing Director

Thank you, NIkhil. Good evening, ladies and gentlemen. I welcome all the participants to this inaugural earnings call of Aditya Vision. As this is our May due call, I would like to discuss the journey of Aditya Vision, followed by the strategic updates for FY ’23. Our investor presentation has been uploaded on the exchange and we hope you have had the opportunity to review it also.

Our company Aditya Vision Limited was conceptualized in 1999 with a vision to provide the people of Bihar with high quality electronic products at competitive prices and exceptional customer service. For us, every customer is our guest and we believe in building a relationship of trust with them as our tagline symbolizes, ” Sambandh Bharose Ka”. I’m a first generation to entrepreneur myself and I have worked with PHU Bank for almost 20 years. Aditya Vision rarely began in 1999 with the establishment of a single showroom in Patna, Bihar based on a simple yet unique business model.

We started spending in Patna from 2006 to 2013. Thereafter, with improvement in power situation and rest part of Bihar. In 2014, we started expanding out of Bihar, Patna district in other district headquarters of Bihar. In 2016, when we had 16 showrooms, we came out with an IPO and raised INR5.8 crores and got listed on BSE. Since this issue, we have not raised any fund till date. After IPO, we have experienced remarkable growth and we’ve scaled up to 43 stores till FY 2020 and in COVID period of FY ’21 and FY ’22 when the work was in — the world was in shock and distress, we took this — it as an opportunity and added 36 stores to reach 79 stores in FY ’23.

We have expanded our presence to 105 stores across the under-penetrated markets of Hindi heartland, Bihar, Jharkhand and Uttar Pradesh as was this our strategy. We have stayed in Bihar from 1999 to 2021 fortifying and consolidating our presence. And then only in FY ’22, we entered Jharkhand where we currently have 17 stores. Then in FY ’23, we now have entered Eastern UP with four stores taking our total count to 110 stores as on date. In Bihar, specifically as per people report, we have achieved a significant market share of over 50%.

Jharkhand and Eastern UP are continuous markets with cultural similarities where Aditya Vision is a familiar name. It offers a large and under-penetrated consumer market and absence of organized competition. Over time, we anticipate that these areas have the potential to be as large as our core Bihar market. Our success stand we have repay to our unwavering commitment to a customer-centric approach by prioritizing the need and preferences of our customers. We have been able to understand the requirements better and build a relationship with them. This customer-centric focus has resulted in enhanced customer loyalty and retention.

We consistently strive to cater our customer services to meet their specific needs further solidifying the royalty interest in us. This approach not only fosters customer stickiness, but also provides us with the confidence to continue expanding and growing in the future. We take pride in our dedicated customer service call center called Aditya Seva with a team of over 30 skilled employees addressing the grievances of our customers in the shortest possible time across three states. Our business model focuses solely on pure retailing of products. We purchase from original equipment manufacturer OEMs and we do not engage in private label.

We have cultivated long-term reputed OEMs allowing us to offer a diverse range of products to our customers. These OEMs not only support us in meeting the needs of our customers, but also offer full support to our state expansion plan. In 2016, the year of our IPO, our revenue was INR140 crores and PAT was just a mere INR1 crore. Since then, we have grown revenues to reach INR1,322 and PAT of INR64 crores representing seven year compounded growth rate of 28% in revenue and 77% in PAT. There were certain queries raised by few investors owning an article circulated on social media. In our opinion, it is unfortunate that they publish it without checking with us because many of the points raised there could have easily been clarified.

Our company has been very diligent in paying tax and dues. Our company has already clarified in a letter dated July 3, 2021 which was uploaded to the exchange that there was just a delay in filing ESG return for the period April 2018 to July 2018 which as you would appreciate was the initial phase of GST implementation. The matter was resolved with the filing of return utilizing our input credits alone. We are proud to state that though we are 23 years old company, there is no pending litigation with any statutory government department, not even in any tribunal or any court.

We take immense pride in the fact that company has had zero store closure since its inception, including the years of COVID-19 pandemic. On the contrary, we put the pandemic as an opportunity to not only expand, but also undertake a comprehensive revamp of all our existing stores, including addition of new flows and upgrading of air conditioners and other electronic equipment. We also added new flows and revamped our head office. We also migrated to newer ERP with latest capabilities of capturing serial numbers for our SKUs at several purchase and sell point, which led to requirement of additional computers, printers, barcode scanners for each store and in warehouses and goods store.

New laptops are given at various points of need to staff in head office and branches working from home during the pandemic, which resulted in higher gross. In FY ’22, we made inroads in the states of Jharkhand where we undertook a store opening and hospitality activities on a very large scale aiming to create a lasting impression on our customers, which makes us irreplaceable by upcoming peers and competition with rising geographical reach company outlet. It’s very important for new-store openings and celebrations of new achievements with the staff as well as the customers together.

We also celebrate at a brand stage our annual reward and loyalty program buy and win and widespread its reach at each of our outlet where we invite and serve all our existing customers which led rise in hospitality expenses and we continue — and we expect to continue to do so. To support our employees during the pandemic when the stores were closed or operational for a limited number of days, we gave them advances which are now being adjusted against. their salary. We also have adjustable advances to landlords for customization of premises, several premises which were under constructions during those times in order to maintain our store growth momentum.

We migrated to Ind AS 116 from FY ’21 and for our company operating in geography to adapted to new accounting standard took sometime. While we adopted Ind AS 116, the principles are new and ever evolving and accounting treatment under it are still being clarified with passage of time. To ensure the accuracy of our financial statements and especially impact of Ind AS 116, I’m happy to inform you that Grant Thornton have been engaged by us for computation and implementation of Ind AS 116 as well as for our additional work of review of our overall financial statement of FY ’23. Same year the nature of classification and grouping has been incorporated under their review.

The company has reclassified certain amounts presented at March 31, 22. These reclassifications were made to align with the presentation used in the financial statements as of March 31, ’23 in accordance with the Ind AS 7, the statement of cash flows and the requirements specified under [Indecipherable] dividend 2 of the Companies Act 2013. These changes in classification do not impact the total cash flow of the company, but rather effect the allocation of cash flows among operating, investing and financing activities. We remain deeply committed towards upholding highest standards of corporate governance.

In our experience, one of the key reasons for downfall of retail companies has been excessive growth and deteriorating unit economics. Hence, we believe in calibrated expansion along with extreme focus on the store level economics. We ensure we achieve store breakeven within six months with a payback period of three years. Our stated goal is 150 stores by financial year 2025. We have already opened five more stores in FY ’24 and have already entered into lease agreements for another 20 more stores. We are confident of achieving our target, if not bettering it.

Lastly, we believe one of our key pillars of our success is our employees. Our company’s culture determines this testimony. I personally spend time to ensure we are fostering the right principles and culture in our organization with the objective of sharing our success and aligning long-term incentives to our employees. We have granted ESOPs to over 300 employees widely distributed to include not just senior level executives, but also store managers, cashiers, warehouse and service executives.

I’m glad to welcome our two directors appointed on our Board today, Mr. Ravindra Zutshi appointed as Non-Executive Independent Director, has an illustrious experience of sale, marketing and operations of over 45 years in the Indian consumer electronics and consumer durable industry. He’s a respected consumer durable veteran who has worked with Samsung India for 19 years as Deputy Managing Director where he played a vital role in setting up the brand in India. He has also worked with LG Electronics India Private Limited as Senior Director, India Head for Business Enterprises till 2020. And his last assignment was with Havells India Limited as President, Business Development and Corporate Affairs from ’21 to ’23. It is our pleasure to have him on our Board and we look forward for his guidance and strategic insight in future.

Along with Mr. Zutshi, I welcome Yosham Vardhan on the Board as Whole-Time Director. Yosham joined Aditya Vision in early 2021 as Director, Strategy and Corporate Planning and has played an important role in growth and expansion of our company. Prior to joining Aditya Vision, she was a partner in a leading law firm in Mumbai with over nine years experience where she was advising corporates on cross border mergers and acquisitions and private equity transactions. It is great pleasure that I announce that our company has a exceeded its expectation by achieving an impressive — coming to this financial, it is with great pleasure that I announce that our company has exceeded its expectations by achieving an impressive revenue growth of 47% and a PAT growth of 82% in full year FY ’23.

With regard to Q4, the revenue generated in the months of January and February was strong with more than 35% growth Y-o-Y. However, sales in March were affected by unseasonal rain impacting our quarterly performance to that extent. With our set strong sales, we have seen the remarkable same-store sales growth of over 38% for financial year. In Q4, FY ’23 Y-o-Y, our PBT went up by more than 128% from INR6.20 crores to INR14.15 crores all, but PAT was lesser Y-o-Y due to adjustments in income tax as there was a reversal of PAT in Q4 FY ’22 owing to restatement of quarterly numbers on implementation of Ind AS 116. So the impact was only due to income tax.

Our net profit, our business has an element of seasonality, with Q1 being traditionally very strong due to vertical growth in demand of ACs, refrigerators, room coolers and other refrigeration products. As said as part of our business strategy, we adopt an aggressive entry acquisition approach to award stock out situations. We start stocking inventory especially compressor products from the beginning of Q4 itself to be well prepared for the sudden summer season demand of next year Q1. Also at the financial year end, we get a very good deals from OEMs, which we are confident to easily liquidate in Q1.

Consequently, our inventory remains at highest level at March end. Our inventory grew by 39% in FY ’23, which aligns with our revenue growth of 47% and opening of 26 new stores in this period as we had to stock additional seasonal products for new stores as well. Overall, the company had an exceptional year delivering a stellar performance and we remain confident that our performance in the years to come will continue in the same manner as we have been delivering in the past years.

Now I will hand over to Yosham Vardhan to discuss the financial highlights of the year. Yosham?

Yosham Vardhan — Director, Strategy & Corporate Planning

Thank you, sir. Good afternoon, ladies and gentlemen. We are thrilled to present the strong financial performance of FY ’23. Here is an overview of our financial results. In FY ’23, our revenue experienced a year-over-year increase of 47% resulting from increase in scale of operations. We successfully maintained gross margin at 15.96% driven by an optimal product mix. The profit after tax for the year increased by 82% and reached INR64 crores, primarily driven by a robust Y-o-Y growth in EBITDA of 60%. As previously mentioned, our store count reached 105 in FY ’23. We commenced this financial year by opening five new stores in Bihar, Jharkhand and Uttar Pradesh taking the overall count to 110 stores as on date.

Our gross debt is INR270 crores, while our net debt is INR185 crores. Therefore, our net debt to EBITDA stood at 1.39 times, while net debt to equity is at 1.4 times. We have always been focused on generating superior ROE. The ROCE and ROE for the year were 28% and 60%, respectively.

We can now open the floor for questions.

Questions and Answers:

Operator

[Operator Instructions] The first question is from the line of Pritesh Chheda from Lucky Investment Managers. Please go ahead.

Pritesh Chheda — Lucky Investment Managers — Analyst

Yeah, ma’am, for the fourth quarter what will be the SSG? Is it fair to assume that because of the store expansion, there’s no SSG in the first — fourth quarter?

Yashovardhan Sinha — Chairman and Managing Director

The SSG has been calculated the entire year and not on fourth quarter.

Pritesh Chheda — Lucky Investment Managers — Analyst

So what will be for the fourth quarter, sir?

Yashovardhan Sinha — Chairman and Managing Director

We will get back to you for fourth quarter. Our IR will get back to you.

Pritesh Chheda — Lucky Investment Managers — Analyst

Okay. Sir, just my other question, I’m just looking at your cash flow from the inventory addition of about INR84 crores versus the store expansion, if you could help us understand that? Because your PPT talks about certain inventory number per store and I’m just trying to correlate with that INR84 crores number.

Yashovardhan Sinha — Chairman and Managing Director

What I already have spoken earlier, we have opened 26 new stores during this period and there are several stores in pipeline also, which are going to be just opened. And primarily this is what I said that for summer season, we have to stock air conditioners, refrigerators, air coolers and other refrigeration products. So we are quite high on inventory end of the financial year where we get good discounts also from the OEMs. So this has led to the rise of inventory and impact from new stores also we had to keep extra inventory of the compressor products.

Pritesh Chheda — Lucky Investment Managers — Analyst

So usually, your inventory turn year end and mid-year, how will it differ, sir?

Yashovardhan Sinha — Chairman and Managing Director

We are very high at the year end, no doubt about it, because we have already spoken about this that it actually coincides with the financial year end also and it coincides with the beginning of summer season also. So for all OEMs, it is — their financial year ends at this March. So what happens is that they are also very keen to give us a very good bargain. And we are entering into very, very busy days. So we are high on inventory so that we can make the most of the margins on our profits.

Pritesh Chheda — Lucky Investment Managers — Analyst

So your inventory turn will be what less than two times if I have to look at the year end number?

Yashovardhan Sinha — Chairman and Managing Director

You are talking about the entire year?

Pritesh Chheda — Lucky Investment Managers — Analyst

Yeah.

Yashovardhan Sinha — Chairman and Managing Director

No, inventory days are around…

Pritesh Chheda — Lucky Investment Managers — Analyst

No, not sir, not inventory days. I’m looking at sales upon inventory, sir.

Yashovardhan Sinha — Chairman and Managing Director

Since upon inventory if you have said, it is 80 days.

Pritesh Chheda — Lucky Investment Managers — Analyst

Okay. I’ll take this offline. And my last question is, sir, how do you see the season panning out, sir?

Yashovardhan Sinha — Chairman and Managing Director

Season is good. There is — of course, the unseasonal rains are there, but we are confident of achieving our goals.

Pritesh Chheda — Lucky Investment Managers — Analyst

And what kind of top line growth you look at in FY ’24?

Yashovardhan Sinha — Chairman and Managing Director

Definitely, we will be looking towards more than 20%.

Pritesh Chheda — Lucky Investment Managers — Analyst

Okay, sir. Okay.

Operator

Thank you. The next question is from the line of Akshat Mehta from Sameeksha Capital Private Limited. Please go ahead.

Akshat Mehta — Sameeksha Capital Private Limited — Analyst

Hello.

Yashovardhan Sinha — Chairman and Managing Director

Yes, Akhsat.

Akshat Mehta — Sameeksha Capital Private Limited — Analyst

Yeah. Thank you for the opportunity. [Indecipherable] question only, sir, if you can answer them. So going forward, you are saying that you are going to have around 22% revenue growth going forward that the store additions that — 25 store additions for the year that is around 30%. So I mean, can you explain why your overall revenue growth was lower than the store additions [Indecipherable].

Yashovardhan Sinha — Chairman and Managing Director

No, no, what I said that we easily won’t — will grow by 20%. It’s not limited to 20%. Akshat, we are target, in fact, we have been historically, we have been growing at a pace of around 27%, 28%. So in my opinion, there is no reason why we should not achieve that what we have done in past 10 years. So what we are — our aim will be to achieve — to stick to that. And I said that when I meant that with minimum 20% growth has to come looking — going ahead.

Akshat Mehta — Sameeksha Capital Private Limited — Analyst

Okay. My second question is on the new stores that you’ve opened up in UP and Jharkhand, can give you some color on those stores are performing and whether those are similar to Bihar? You know the market a lot. And additionally, what will be the inventory is required store order inventory turns in those stores? If you can give some from color on that?

Yashovardhan Sinha — Chairman and Managing Director

What I could hear, Akshat, is that you want to know how our stores are doing in Jharkhand and UP. And…

Akshat Mehta — Sameeksha Capital Private Limited — Analyst

And the inventory to be required there, inventory per store required in those stores? And how is it doing compared to Bihar?

Yashovardhan Sinha — Chairman and Managing Director

No, no, I’d say it’s very similar to what we are having in Bihar. And since this is another state and — but our billings are all centralized from OEMs also. So inventory because as I’ve told you always that very big stores like 4,000 to 6,000 square feet stores, we are having inventory of around INR3 crores. So — and these stores in Jharkhand, they are doing very well let me tell you and we have we started with a very big bang in Uttar Pradesh also. And right now, we have so far opened 17 stores in 14 districts of Jharkhand and four stores are under construction there in four districts. And similarly, we have opened — already opened four stores in Eastern Uttar Pradesh which is Varanasi and one in Jaunpur and 10 stores are under construction. And inventory level is almost same as what it is Bihar because what I have been talking about is that traditionally, culturally, seasonally also, all these states are similar in nature.

Akshat Mehta — Sameeksha Capital Private Limited — Analyst

Okay. I think one more question if I can add in. We have been looking at actually gross margins over the last two years of around 16%. Going forward in your PPT, you said that the stores will account 12% to 15% margin. So is there structure given that going forward your guidance rolls and [Indecipherable] in gross margins or [Indecipherable].

Yashovardhan Sinha — Chairman and Managing Director

We always give a guidance of a range. We cannot give you exact guidance of what margin we are going to…

Akshat Mehta — Sameeksha Capital Private Limited — Analyst

No. The range is 12% to 15% whereas you are making 16% since last two years. That is why even the upper end of the range is lower than what you are making currently. So that’s why I was…

Yashovardhan Sinha — Chairman and Managing Director

Also that is good for the company and investors. So we are at the — right now, we are on the upper range of the — upper band range. But our guidance will always remain between 14% and — to 16% of gross margin. And if we achieve 16%, we are — our company is doing really, really well. Well. And whatever guidance we give, so guidance has been given from historical data also.

Akshat Mehta — Sameeksha Capital Private Limited — Analyst

Okay. I will come back in the queue, sir. Thank you.

Operator

[Operator Instructions] The next question is from the line of Praveen Ranjan Sahay from Prabhudas Lilladher. Please go ahead.

Praveen Ranjan Sahay — Prabhudas Lilladher — Analyst

Yeah, hi, sir. Many congratulations on good set of numbers. The first question is related to your average selling price, which is continuously increasing on a Y-o-Y basis, if I look at. So can you give some color on that? Is it because of high value product you are continuously adding or some product differentiation in new stores you are expanding? Is it because of that? What’s exactly the reason?

Yashovardhan Sinha — Chairman and Managing Director

Praveen, the reason is that in fact, I’ve already spoken also that actually people are shifting towards the premium products. And a contrary to what people think that in this part people will prefer cheaper range of or model of vapor, that’s not the reason. In this part of the — in the geography in fact, people want to buy something value buying is there. So they always aim to buy the best model, the more — the premium products like we are having because it is very surprising that we are selling highest numbers of five star rated air conditioners. Our share of our rating in entire sale of air conditioners. So the numbers are going, average selling price is going up just because [Indecipherable]. Otherwise, as you know, very easy financing has also come in and all financials are there. Retail finances are there. So that becomes easy for them to upgrade their product, so our customers can easily upgrade their product. So average selling price and this is what we expect that will keep on increasing average selling price going by the trend.

Praveen Ranjan Sahay — Prabhudas Lilladher — Analyst

So is it because of the product this average selling price is improving largely?

Yashovardhan Sinha — Chairman and Managing Director

No. What I said that — two things and people are preferring premium products to lower models and also upgrading their purchases because of very easy financing.

Praveen Ranjan Sahay — Prabhudas Lilladher — Analyst

Got it, sir. Got it. Second question is related to the EBITDA per store. I can see that you are aggressively adding stores year-on-year. So if I look at from 43 stores in ’20, now it’s 105 stores. Even addition of the stores is quite strong. Your EBITDA per store is also continuously increasing. So like even in the newer stores, you are commanding the similar kind of EBITDA on the existing what we come early. Is it like that or…

Yashovardhan Sinha — Chairman and Managing Director

I would say that it becomes more like a basket I would say because EBITDA of course [Indecipherable] store. And as you know, we are only operating in the under-penetrated markets. We are not — and we are present in such markets which are very, very under-penetrated. So therefore EBITDA margin and you take — be clear that our EBITDA margin is maintained. But again, it becomes a basket of year because at many places our EBITDA can be lower. It can be higher at places. So it’s on — in aggregate, EBITDA is quite satisfying.

Praveen Ranjan Sahay — Prabhudas Lilladher — Analyst

Okay. Thank you, sir. I’ll come in the queue.

Operator

Thank you. The next question is from the line of Devang Patel from Sameeksha Capital. Please go ahead.

Devang Patel — Sameeksha Capital — Analyst

Sir, firstly, wanted to compliment you for much better disclosures in the PBT this time. Sir, my question was you mentioned on a basket basis, our margins are very satisfactory. I just wanted a sense if we ever look at only our core market of Bihar, do you see our profitability here rising further from here on?

Yashovardhan Sinha — Chairman and Managing Director

I don’t think so that our margin will expand any further. We will be striving to maintain it at the same rate.

Devang Patel — Sameeksha Capital — Analyst

Okay. Sir, and just wanted a clarification on the cash and bank balance, there is some restatement in the accounts. So what is our total cash and FDs put together?

Yashovardhan Sinha — Chairman and Managing Director

Our total cash is around INR82 crores.

Devang Patel — Sameeksha Capital — Analyst

Okay. And some broad color on the INR30 crores capex that is done on just having spend on what we plan spend next year?

Yashovardhan Sinha — Chairman and Managing Director

Can you repeat it? I could not hear it clearly.

Devang Patel — Sameeksha Capital — Analyst

Sir, broadly on what have we done capex in FY ’23 and what spending do we plan to do in FY ’24?

Yashovardhan Sinha — Chairman and Managing Director

Okay. In FY ’23, our capex has been around INR22 crores and we are expecting — actually it will depend on how many stores we are able to add because we have been adding stores quite quickly. So looking at what is left and very — in fact, we are in beginning of the year. So it will be very difficult for me to give you a guidance, but it cannot be less than INR12 crores, INR15 crores maybe. It will all depend on how many number of stores we can add.

Devang Patel — Sameeksha Capital — Analyst

Okay. Sir, you mentioned earlier that broadly our margins will remain same. Are we seeing new competition enter in our core market? Are you seeing bigger players come here? What do you expect — how do you expect competition to play out?

Yashovardhan Sinha — Chairman and Managing Director

We are not that much bothered about competition because we are confident of ourselves. We have been — as I told you, we know the core market of this entire geography like Bihar and even since Jharkhand is also very similar. And so UP is also very similar where everywhere people are aware of Aditya Vision. And in fact, it was not that competition is not there and was not there. Competition was always there in all these markets. In fact, very big modern trade retailers are also present in most of the states of [Indecipherable]. But despite that, this result we could come up with. So I am not that much worried about competition and we believe that our business model is totally different from others.

Devang Patel — Sameeksha Capital — Analyst

Okay, sir. I’ll come back in queue and thank you so much and wish you all the best.

Yashovardhan Sinha — Chairman and Managing Director

Thank you.

Operator

Thank you. We have the next question from the line of Agastya Dave from CAO Capital. Please go ahead.

Agastya Dave — CAO Capital — Analyst

Am I audible?

Yashovardhan Sinha — Chairman and Managing Director

Yes, you are audible, Aditya.

Agastya Dave — CAO Capital — Analyst

Agastya, sir, yes, sir. Thank you very much, Sinha, sir, for your opening remarks. The clarifications that you have given on the accounting side, those are appreciated. Sir, [Foreign Speech] physical stores everyone has asked you. My question is on the e-commerce that you were doing, the e-com sales. Those were — I’m assuming those must have gone up during the corona phase. How are they behaving and are they falling versus where they were earlier? Can you disclose some numbers there?

Yashovardhan Sinha — Chairman and Managing Director

That numbers I’ll not be disclosing, but I can tell you one thing that as you said yourself rightly said that it was quite high during the pandemic. But it has come down drastically after that because in this part everybody without that can feel nobody is prepared to buy. And in fact — and since we are present in most of the locations, so people prefer to come to us and then buy. So I used to put it like this that at the same time, we are doing our e-commerce. But at the same time, our brick-and-mortar is closely attached to the heart of the people.

Agastya Dave — CAO Capital — Analyst

Right, sir. Sir, in the coming season, how do you see the same-store growth — same-store sales growth in Bihar, especially the old stores in Patna? Do you expect like double-digit growth to happen in your like the first 10 stores that you had? [Foreign Speech].

Yashovardhan Sinha — Chairman and Managing Director

[Foreign Speech] They will be in single-digit. They will not show us double-digit of course in Patna because already they are very, very mature stores, as old as 24 years So these are the stores who are giving us — still delivering a single-digit store growth and we do not expect them to give us the double-digit.

Agastya Dave — CAO Capital — Analyst

[Foreign Speech] for a store to reach that maturity level that same-store growth falls below 10%? Does it take like five, six years.

Yashovardhan Sinha — Chairman and Managing Director

No, it’s not about 10% share. In fact, my explanation is like that in three years — typically in the three — full three years, each and every stores matures. So my clarity is that at least now they are at a level where really it can become comparable same-store sales growth. Otherwise because they are — in fact, growth was very, very quick and fast during this period in first three years. So again the all stores, whatever stores we are, let us say, happening since last I’ll put it till ’23 last nine years, they are still delivering us a growth of double-digits.

Agastya Dave — CAO Capital — Analyst

Sir, last question [Foreign Speech]. You said that Jan-Feb was pretty March slowed down for you, but April or May [Foreign Speech]. Can you give some idea [Foreign Speech]?

Yashovardhan Sinha — Chairman and Managing Director

It has been a dampener no doubt about it this unseasonal rain which have impact really been a bit — very disturbing. But despite that, I mean, we are doing well.

Agastya Dave — CAO Capital — Analyst

Okay. [Foreign Speech] is holding up right? The demand adjusted for this unseasonal rain is still strong?

Yashovardhan Sinha — Chairman and Managing Director

Yes. Since now we are — in fact, our geography is very vast and huge. And so let us say, if there is rain in let us say Eastern Uttar Pradesh, but still our Jharkhand is going to do well. Bihar will still keep doing well. There is a dampener Bihar, Jharkhand does well. So we have reached out level 3 state. Our store distribution is quite even now and same is divided into regions.

Agastya Dave — CAO Capital — Analyst

Great, sir. Thank you very much for the opportunity. Sir, one last thing [Foreign Speech] I have seen a lot of promoters selling in the stock. There have been like multiple rounds. Can you assure us that no further selling will happen? If there is going to be selling, I would request you since you mentioned that you aim to be one of the best in corporate governance also. My suggestion would be can you please if there is a requirement for the promoter family, if you can disclose in like well in advance [Foreign Speech], there will be selling because we need funds for our own use. That is perfectly okay, but suddenly out of the blue, if selling happens that is [Foreign Speech] especially when an article also appears questioning the accounting policies and all that. So that is my only suggestion, sir. If you can like throw some light if there are further plans to sell down your stake or are you done for the time being?

Yashovardhan Sinha — Chairman and Managing Director

And then I can give you my insight. Whatever selling was — that has been done, it was all strategic in nature. It was not done anything to raise money for any type buy because then our shareholding was very in fact not — we wanted to have good investors on board as well. So it was on a strategic basis and there is no requirement of any funds for any promoter as well.

Agastya Dave — CAO Capital — Analyst

So no further selling there?

Yashovardhan Sinha — Chairman and Managing Director

No, what I said that it can be only a strategic fail, not disturbing any market. We don’t suppose anything right now. Nothing is on hand right now, but I’m trying to tell you that strategic sale to good investors can always be there.

Agastya Dave — CAO Capital — Analyst

Great, sir. Thank you for the opportunity, sir. Good investors can always buy from the market because everyone else is doing that. But thank you very much and I appreciate your answer, sir and clarity. Thank you, sir,

Yashovardhan Sinha — Chairman and Managing Director

One thing actually, stock is not that liquid. So of course if they buy to a market, they will never approach us.

Agastya Dave — CAO Capital — Analyst

Right. Great, sir. Thank you very much, sir. I really appreciate it. All the best, sir.

Yashovardhan Sinha — Chairman and Managing Director

Thank you.

Operator

Thank you. The next question is from the line of Varship Shah from Envision Capital. Please go ahead.

Varship Shah — Envision Capital — Analyst

Thank you for taking my questions. Our debt has constantly been increasing, so at OCF is negative. So is there any sustainable level of debt that we target? Because in the future [Indecipherable] slowdown in sales. We might have — our leverage might shoot up significantly maybe a couple of years later, especially as we are expanding stores everywhere.

Yashovardhan Sinha — Chairman and Managing Director

So I’ll say most of the debt — almost 90% of debt is in form of short-term working capital. So as you know, working capital usage is dependent on your inventory for the purpose of inventory. So I don’t foresee anything as such because long-term debt is very, very small limited in nature in our balance sheet and working capital needs, whenever it is — when we are opening stores, we’re not raising capital. But then we’ll have to take the reports to working capital loan from bank and these are very temporary and very impact to short-term loans. It all depends on — actually when you see it on the balance sheet, you may be finding it that we have utilized that much. But maybe most of the time the utilization is very less because these are all cash credit limit.

Varship Shah — Envision Capital — Analyst

All right. And so this phenomenal growth we see, I mean, we have a unique model, but what stops competitor let’s say Croma or Reliance Digital to launch a similar model? So point being is our growth coming more from gain in the mom and pop stores or because the market is growing that strongly in Bihar and UP and Jharkhand?

Yashovardhan Sinha — Chairman and Managing Director

Yeah, I’ll say it’s not on cost of mom and pop because mom and pop was — in this sector, there are very few mom and pop stores. And that will be located in very, very small block levels and very, very small asset [Indecipherable] and towns and all that. So in fact, our growth model is definitely driven by the demand, surge in demand. When I always say that these markets are very, very under-penetrated, if you see in our investor presentation, you will find it that it’s one of the lowest penetration is there in Bihar or even Jharkhand or Eastern UP. When you compare from entire UP, you will find that Eastern UP we have similar penetration level as of Bihar and population is huge. Bihar is the third most populous state of entire India. Similarly Eastern UP is as big as Bihar in population. So these are driving the demand and the big modern retailers, they were present from since many years in Patna or let us say nearby towns and nearby district headquarters, but then we are very strong. We have some of the — we believe in the concept of some of the — our way of handling our customers are different. Our model is different. So we don’t think that it is a cost [Indecipherable] because market is expanding, no doubt about it.

Varship Shah — Envision Capital — Analyst

All right, sir. Thank you for taking my questions.

Yashovardhan Sinha — Chairman and Managing Director

Thank you.

Operator

Thank you. The next question is from the line of Vishal Prasad from VP Capital. Please go ahead. Mr. Vishal Prasad, the line for you has been unmuted. You may proceed with your question.

Vishal Prasad — VP Capital — Analyst

Hello. Am I audible, sir?

Yashovardhan Sinha — Chairman and Managing Director

Yes, go ahead.

Vishal Prasad — VP Capital — Analyst

Okay. There was some problems. So Yashovardhan ji, it’s really nice to see a company from Patna doing so well. How much is the revenue from our top five stores?

Yashovardhan Sinha — Chairman and Managing Director

Top five, our — we can get back to you after some time. Generally, we do not disclose our store-wise sale for obvious reasons.

Vishal Prasad — VP Capital — Analyst

Right. I’ll try to get it offline, sir. Thank you. And sir, second question, so I visited few of our stores and I saw televisions costings INR5 lakhs to INR10 lakhs. India is a cash driven market and Bihar more so. So if someone comes and wants to buy a INR12 lakh television by paying cash, do we entertain these customers?

Yashovardhan Sinha — Chairman and Managing Director

No, how can we entertain. When it is mandatory for us, above INR2 lakhs we cannot get in anything in cash. So they get it financed. They get it through sending money in the bank through RTGS and other things.

Vishal Prasad — VP Capital — Analyst

Okay.

Yashovardhan Sinha — Chairman and Managing Director

Above INR2 lakhs, we cannot — our billing system is logged. We cannot in fact bill for more INR2 lakhs in cash.

Vishal Prasad — VP Capital — Analyst

Okay. So sir, I understand that we have never closed a store. This is quite unusual for our industry. Would it be possible for you to talk about what has helped us achieve 100% success rates with our stores?

Yashovardhan Sinha — Chairman and Managing Director

I’ll put it like this there are two things. One is that we have been fortifying our place also what I’ve already told in my opening remarks. We have been fortifying our place in the markets where we find that the business is there and we do not give any space to any competitor in that. So — hello, hello.

Operator

Sir, we can hear you. You can go ahead.

Yashovardhan Sinha — Chairman and Managing Director

So we — in fact, we have never closed any store because of our locations were selected very, very diligently. And as I told earlier also, the demand is very high and demand is very high here. Demand is growing also in that rapid way. So maybe our selection of places, territories there we remain very good and plus these are under-penetrated markets. So in fact, it is really very satisfying and a wonderful in fact feeling that we have not closed a single store since inception.

Vishal Prasad — VP Capital — Analyst

Sir, I’ll take an example, I visited Kulharia House [Phonetic] store. I think probably it was 2015, ’16. And at that time, Kankarbagh used to do pretty good and Kulharia was not doing so good. So my question to you would be you must have come across a scenario where certain store doesn’t work as per our expectation. Since we have not closed any of our stores, we must have taken some corrective measures which helps us increase our sales from that particular store. Could you talk about our approach of turning around a store and maybe with the specific example?

Yashovardhan Sinha — Chairman and Managing Director

I can tell you it is very simple that way yes all stores cannot perform equally. But we also know that, that store has to be profitable. Then only there is — viability is also very much needed. So what we do if suppose some store has not really coming up well, then we focus more on those stores and we’re focusing on a main thing will be human resources, the biggest thing I’ll say. So we understand that human resources is most important thing. We give them training, what is going wrong, we’ve taken experienced people there. Sometimes we put an very experienced manager there to see why they are not performing that well and it has always paid off. Like right now, Kulharia is doing very well. What you said that ’15, ’16, you said that — you thought that Kulharia was not doing as well as Kankarbagh. It will never do as well as Kankarbagh. But Kulharia in itself, they have improved a lot where we have given a very good growth in sales.

Vishal Prasad — VP Capital — Analyst

Right, sir. And sir, last question till now most of the senior management recruitment has been done within the promoter group and letters of promoters. So we are growing very aggressively and we are doing pretty well. So could you share your thoughts on building our senior level leadership by inducting professionals?

Yashovardhan Sinha — Chairman and Managing Director

When we feel that requirement is there, then we are going to see, look into that and we will not rule out. But when it will be really needed, we are going to do that.

Vishal Prasad — VP Capital — Analyst

So sir, what’s the roles distribution between you and your directors, both of them are on Board and working kind of pretty closely with you.

Yashovardhan Sinha — Chairman and Managing Director

You are aware that I’m the Chairman, I take the overall, even making an policy making and everything. And there is chance that Prabhakar also who looks after operations, he is the Director — Whole-Time Director. And now Yosham has also joined the Board to further this company.

Vishal Prasad — VP Capital — Analyst

Right, sir. Thank you.

Yashovardhan Sinha — Chairman and Managing Director

Thank you.

Operator

[Operator Instructions] The next question comes from the line of [Indecipherable] from Rajmahal investments. Please go ahead. [Indecipherable] the line for you, has been unmuted. Please proceed with your question. As there is no response from the current participant in the queue. We will proceed with the next question, which will be from the line of Ankush Agarwal from [Indecipherable] Capital. Please go ahead.

Ankush Agarwal — — Analyst

Yeah, hi. Am I audible?

Operator

Yes, you are audible sir.

Ankush Agarwal — — Analyst

Yeah. Sir, just one clarification on the accounting. So all the suggestions provided by Grant Thornton, have they been implemented or we should expect some more reclassification in the coming quarters?

Yashovardhan Sinha — Chairman and Managing Director

No, no, all have been implemented in financial year ’23.

Ankush Agarwal — — Analyst

Okay. So sir, any thoughts on upgrading our accounting and auditing firms more like something like a big four or big five because now we are growing and we have now become a multi-state company as well. Any thoughts on that?

Yashovardhan Sinha — Chairman and Managing Director

Yes. We are — these are things that are always in our mind and we’ll take appropriate decisions as and when it is required.

Ankush Agarwal — — Analyst

Okay. But nothing at moment to your point.

Yashovardhan Sinha — Chairman and Managing Director

I said that we are looking at all options and we’ll take an appropriate decision at right time.

Ankush Agarwal — — Analyst

Okay. That was all thank. Thank you.

Operator

Thank you. The next question is from the line of Krisha Kansara from Molecule Ventures. Please go ahead.

Krisha Kansara — Molecule Ventures — Analyst

Hello.

Yashovardhan Sinha — Chairman and Managing Director

Yes.

Krisha Kansara — Molecule Ventures — Analyst

Yeah. Sir, my first question is regarding demand. So recently there has been say regarding sustaining demand [Indecipherable]. S how are you filling the demand when you see [Indecipherable] from ground level? What kind of [Indecipherable] have been taken currently?

Yashovardhan Sinha — Chairman and Managing Director

You mean to say that demand is coming down of AC is what you said. Can you speak clearly? You were not very much audible.

Krisha Kansara — Molecule Ventures — Analyst

Yes, sir. I was asking about the softening demand in the AC segment. I just wanted to know your views on that.

Yashovardhan Sinha — Chairman and Managing Director

There is — I won’t say that there is any softening of demand in AC. What I’ll say that yes, unseasonal rains were — in fact, peak summer is there and seasonal rain comes and it definitely dampens the spirit for buying compressor. But even when it is we believe that it will be — if rates have come in March, we are going to get extended summer in this beyond June this year. So we are very — quite confident of achieving our targets set for AC. And for that, we are doing — we take into account every aspect in that regard that. We in fact — we have got demand in others. We have schemes also like we give cashbacks or like there is a very good exchange policy. We go free installation. So we keep on coming with very easily finance terms and all that. So these are our [Indecipherable] and which is going to give us result.

Krisha Kansara — Molecule Ventures — Analyst

Okay. Sir, got it.

Yashovardhan Sinha — Chairman and Managing Director

Actually, what I mean to say demand for AC has not come down, maybe some unseasonal rains or some seasonal reason can be there, but we try to cope with this unseasonal rains or let us say weather also to schemes like finances, cashbacks free installation, comprehensive warranty, very good exchanges. So these are – -and in fact all OEMs also they support us.

Krisha Kansara — Molecule Ventures — Analyst

Okay, sir. Sir, my next question is on the entertainment part because we are entering new geographies currently, how much was our advertisement cost in this quarter and also sir for the full year FY ’23?

Yashovardhan Sinha — Chairman and Managing Director

FY ’23, our cost of advertisement it is around 0.8% of our sales.

Krisha Kansara — Molecule Ventures — Analyst

Okay, sir. 0.8% of your sales. Hello?

Yashovardhan Sinha — Chairman and Managing Director

0.8% will be — in fact 0.8 to 1% of the sales we are aiming to have it in future also.

Krisha Kansara — Molecule Ventures — Analyst

Okay. 0.8%, right, sir?

Yashovardhan Sinha — Chairman and Managing Director

In fact, 0.8 to 1%.

Krisha Kansara — Molecule Ventures — Analyst

Okay.

Operator

Sorry to interrupt ma’am, we request you to please return to the queue for follow-up questions. The next question is from the line of Chirag Fialoke from Shree RatnaTraya Capital Partners. Please go ahead.

Chirag Fialoke — Shree RatnaTraya Capital Partners — Analyst

Hi. Good evening, Mr. Sinha, Yosham. Thank you for the opportunity. Congratulations on the continued execution. Very happy to see how things are shaping up. Heartly congratulations from my side, sir. Just one question, I wanted to know a little bit more about the new stores that we are opening. And can I say it will be very helpful if you can compare some of the new stores with our existing old Bihar stores on four counts. One, average store size. Two, what kind of revenue potential do you generally see? Are they similar? Three, on gross margins because sort of difference in mix or difference in pricing strategies in the new geography? And four, on rental costs. So just to compare new and old stores on these four.

Yashovardhan Sinha — Chairman and Managing Director

Size is definitely we are now going into a bigger size of stores compared to what we were having when you compare from the past. Secondly, revenue of course we are getting very good response as I have already told you. And since it is a new store, so revenue is rising month-over-month or even quarter-over-quarter or year-over-year. So we are getting very good response like this one thing.

So — and what gross margins, I will say that we are — in fact, getting margins are something which is a as a basket I’ll say. So margins depends on where you are exactly operating and what the competitive environment you are operating that store in. So that depends on that. And it is a very much very carefully kept secret by the management to how they operate as far as margins are concerned.

Lastly, you asked for rental. So rentals are definitely going high and wherever we are going, we are good getting experiencing high rentals compared to what we had before in Bihar. But then over that much of period of time, our rentals are almost comparable because the rents have gone up everywhere. And — but still I would say that is part of India is having low rentals.

Chirag Fialoke — Shree RatnaTraya Capital Partners — Analyst

Perfect. Thank you so much. Great. Thank you so much. Always a pleasure.

Yashovardhan Sinha — Chairman and Managing Director

Thank you.

Operator

Thank you. Ladies and gentlemen, due to positive of time, that was our last question for today. I would now like to hand the conference over to the management for closing comments. Over to you, sir.

Yashovardhan Sinha — Chairman and Managing Director

Thank you. Yosham, can you please close the forum.

Yosham Vardhan — Director, Strategy & Corporate Planning

It shows that we have addressed all your inquiries to your satisfaction. If you have any remaining unanswered questions, please don’t hesitate to contact our IR agency, Go Advisors. They will be more than happy to assist you further. Thanks a lot.

Operator

[Operator Closing Remarks]