Brand Concepts Ltd (NSE: BCONCEPTS) Q3 2025 Earnings Call dated Feb. 12, 2025
Corporate Participants:
Abhinav Kumar — Chief Financial Officer
Unidentified Speaker
Analysts:
Unidentified Participant
Naysar Parikh — Analyst
Kashish Gandotra — Analyst
Risha Mehta — Analyst
Presentation:
Operator
Ladies and gentlemen, I welcome you all to the Q3 and nine months FY ’25 post-earnings conference call of Brand Concepts Limited. Today on the call from the management team we have with us, Mr Avinav Kumar, CEO. As a disclaimer, I would like to inform all of you that this call may contain forward-looking statements, which may involve risks and uncertainties. Also, a reminder that this call is being recorded. I would now request the management to detail us about the business and performance highlights for the quarter, the growth plan vision for the coming year, post which we will open the floor for Q&A. Over to you.
Abhinav Kumar — Chief Financial Officer
Hi, everyone. Very, very good evening. So just reflecting on the on the current quarter, we continue to see pricing pressures, discounting pressures from across-the-board, whether it is incumbent brands, new brands coming on-board or whether it is the old classic brands, we continue to see all those pricing pressures and all happening. However, as I had mentioned earlier as well, we have — we’ve still chosen not to get into this pricing war and hence wait this period out. In-spite of that, I think overall, from retail perspective, if I comment, so we are at a — I wouldn’t say a very, very-high growth, but I think a decent growth. If I take-off the institutional sales, which last year we had done to shop or stop a billbuster program that is a strategic sales that we had done.
But I had mentioned it then also that it is — it’s not going to be continuing its one-time sort of an activity. So if we take-off that and then we compare the results, so this quarter also we’ve grown by 15% overall. And for the period ending nine months, we’ve registered a growth of 21%. So which considering the current market situations, I feel that we still doing a decent job. This growth primarily comes more from business development and new brands, whereas our largest house, Tommy, we see a muted growth over there. So they are the — in fact, for the quarter, I think it’s a — it’s a minus 2%, but we’ve taken a jump-in our pricing, while everybody else is continuing to discount and everything.
We’ve actually gone the opposite way of trying to run against the — against the tide of the river. But I feel like in the long-run, this is going to help us. A couple of quarters here and there should not deter us from a long — from our long-term vision. So we continue on the same path with certain brand strategies in our portfolio overall I think it’s fine or because of by the virtue of a growth being muted and your costs being going up, bottom-line is under pressure. However, I think it is pretty much in-line with what we’ve been thinking. So I’ve been mentioning that would be — we would be in the region of 10% to 12% EBITDA and I think we still being able to maintain that.
Giving an update on certain projects. So our hard luggage plant underway and hopefully, as I had promised earlier that by March, we should — we should start our trials and it seems we are on-track with that. So March will begin our trials and next year should see a production coming out of that plant and helping us not only in our supply-chain, managing our inventories, supply-chain, but also lowering down our costs, which will help us to fight better in the market. Apart from that, I’ve been mentioning that new brands are — so in quite in advanced stages with a few brands.
And we hope that I still see a lot of white spaces or those strategic gaps in our overall portfolio. So looking at fulfilling all those portfolios and all those gaps through different brand portfolios. And hopefully, this year, we might be able to come up with a few good brands, which are strategically filling in those gaps for us. The new brand that we had acquired, which is Juicy Couture, and I’m very, very happy to announce that we are now gearing for the launch of it. The team has worked tirelessly, something that we generally say that a new brand will take about 9 months to 10 months for the rollout.
We’ve been able to turn this around. And hopefully, March itself, we should be able to start our rollout as we speak. Our first consignments have left the factories. And March is when we look at starting to launch Juicy Couture. Very, very positive on that brand as of now. Let’s see how the consumers like it.
Yes. So that’s it from my side. We always take longer time in Q&A. So I’d like to dedicate more time to that.
Questions and Answers:
Operator
Sure. Thanks. [Operator Instructions] We’ll take the first question from Risha Mehta. Rishay can go-ahead.
Unidentified Participant
Yeah, thanks. So the first one is on the discounting part that you spoke about. So would you say that considering Tommy, like you said, has degrown by 2% in nine months and that we’ve stayed away from discounting. Do you think that we’ve lost market-share? And how are we really thinking about balancing between growth discounting and market-share if this kind of discounting continues? So that’s the first question.
Abhinav Kumar
See, first and foremost see I don’t think this kind of discounting can continue for very long here. So right now whatever the fight is for whatever reasons, I don’t think the discounting is going to continue forever, right? So today or tomorrow rationalization will sort of come back. Now when it comes to you know, when we were deciding internally on the strategies also, Risha, the question is whether are we Tommy Hilfiger Concepts Limited or are we brand concepts limited, right? So we are brand concepts limited. And hence every brand will have to play a different role or different part, right.
So Tommy for us is a premium brand and that’s how the brand also wants — wants it to be perceived and that’s how their pricing goes. And hence, for us to sort of lower pricing and go on a higher discounting and in the fear of losing market-share, I don’t think that is a strategy that we would like to take. We would like to maintain the of the brand. Today, yes, in certain price points where we need business, probably we need another brand in those price points and to capture those business. So I hope I’ve been able to answer your question.
Unidentified Participant
On the market-share part and also if you could contextualize that with the kind of price hikes, what kind of price hikes have you taken and how much of this 21% you know growth in nine months has actually come from price hikes. And would you say that since Tommy has degrown by 2%, have you lost market-share because of the price hikes that we’ve taken while the industry is discounting? And with this kind of whatever price hike we’ve taken, how much of a gap are you know we add versus our peers? Because that gap would have widened, I would imagine.
Abhinav Kumar
Yes, yes. So for example, if I give you a figure, our average ASP of Tommy luggage, is now close to INR9,000, 8,700 something. That’s our average ASP, which brings a — if you look at a set value, it brings the set value to almost 25,000, 25,000 rupees here whereas today the competition is coming across at right from 4, 4.500 kind of a set price you know people have started selling luggages for 1,100 rupees 1,400 rupees you know you get a t-shirt in that and you selling a full luggage. That market was never us. Let’s put it that way, right? We were never targeting that market. So overall, you could say that, yes, as a percentage, as it is minuscule. So how much will — how much of a market-share will we lose? But if you segment the market and if you look at the premium segment, I don’t think we’ve lost any market over there.
Unidentified Participant
And how much price hikes have we taken? So 21% growth driven by what kind of price hikes for nine months?
Abhinav Kumar
Our pricing in travel gear specifically, if I talk about would have gone up by almost 9%, 8% to 9%.
Unidentified Participant
Understood. And last one, if I may, on the manufacturing side. If you could just comment on our existing setup, so until we get this new hard luggage plant going, was everything completely outsourced both hard luggage and soft luggage? So what was the now? And second, with the hard luggage plant in-house, then what kind of in-house versus outsourced for hard soft luggage are we expecting? And you know, what are the benefits essentially that we are seeing in terms of, let’s say, gross margin improvement or working capital? If some kind of quantification and numbers if you can give that would be helpful.
Abhinav Kumar
Yeah. Thank you. The current scenario is, yes, everything is outsourced. And I would say the bulk of it would still — we are still heavily dependent on China, right? We have a few Indian manufacturers with whom we’ve started working and styles which have slightly higher volumes so probably not in width but at least styles which have higher depth we’ve sort of started manufacturing them in India but I would still say that at best, the split would be about 35% India and 65% would still be sort of China or at least 60% would still be China, 35% 40% would be India. So once the plant kicks-in, we expect that — and the plant will take some time to sort of come to a certain level. But yes, fully operational, running well, say, two quarters down the line, we can definitely expect that we will start shifting more-and-more in-house. And I would expect that you know, anywhere between in the first year-by the time we exit the next year, anywhere between 35% to 40%, 35% of our requirement would be coming from our own plant, 30% 35% would be coming from the other plants in India. And China will try and restrict it to about a 30%.
Unidentified Participant
That’s a gross margin and the working capital improvement, if any quantification or numbers there?
Abhinav Kumar
I think you know any which ways if we move to our own manufacturing facility, in the — in the ideal scenario it should add at least 12% kind of a EBITDA margin from there, which if you consider a 30% kind of a sourcing over there, it should lead to a 4% on the travel gear business. Now you have to understand it will not reflect on the overall because again, it will depend on the on the percentage of business which is coming from hard luggage, which today would be, I don’t think would be more than, 22% 23% so you can do the maths and you’ll come to this thing that what is it that it should be adding to the bottom-line.
Unidentified Participant
All right, thank you. I’ll come back-in the queue.
Operator
Thank you. We’ll take the next question from the line of Parik., you can go-ahead.
Naysar Parikh
Hi, hi,. Thank you. So a couple of questions. First is that are we doing anything to complete obviously not through Tommy, but with any other brand or private brand in the lower-end of the segment.
Abhinav Kumar
Yes, we’re gearing up for that. We’re gearing up for that and hopefully, you know in the next two quarters, I think we’ll start seeing results of those as well. So you know, we’ve sort of gone controlled even in our e-commerce business when it comes to the new brands because we were first trying to establish them in the offline market, and you know while we started-off well in the offline market with these new brands, and then this entire price disruption and everything started happening.
So we’ve now taken a strategic call that we shall now open up e-commerce also for — for our luggage and travel gear and all these categories under the new brands as well. So we’ve started the entire product development, we started giving them and even in my listing, I mentioned that there were some slow-moving items where we’ve sort of given a little higher discount and we’ve started pushing them in the e-commerce channels, giving a much better price proposition for the end-consumer. So I am hoping that we’ll be looking at some traction happening from those quarters. So we have.
Naysar Parikh
This is private brands or these are the other new brands.
Abhinav Kumar
Aeropostale and Benetton to be precise.
Naysar Parikh
Okay. Okay. Understood. What — and on private brands today, what percentage that is? Is there any movement there?
Abhinav Kumar
Yes. So in fact, if you look at from a — from a brand-wise perspective or whatever our private brands, we’ve actually — in the nine-month period, we’ve grown by more than 200%, but the base itself was very small, you know. In Q3, we’ve, for example, we’ve grown by more than 90%. But again, the base was small, right? So we are — but to play this private brand, a price point story,, we have to understand that, you know, this is being played by all the — all the top players, so namely Safari, VIP and Samsung and all of them are sitting with their own manufacturing setup, right.
The moment you outsource your manufacturing, obviously, the margins are getting shared with the manufacturer. The manufacturers being — so China as it is becoming expensive. So hence importing and playing this game is not possible. So you come down to Indian manufacturers. Now if you come to Indian manufacturers, obviously, there is a monopolistic kind of a situation today, right. Whoever has a hard luggage plant is flush with orders.
So that price competitiveness even in terms of manufacturing, you’re not getting. So you don’t know whether the manufacturer is making a 15% margin or 20% margin, it’s very hard to say that. So playing this price game by being a trader by sourcing it from somebody else and selling it to the end-consumer, it’s never going to work-out, right? So the game will really start once we have our own manufacturing.
Naysar Parikh
Correct. Understood. And once our manufacturing setup starts, will we be able to produce even Tommy, etc over there.
Abhinav Kumar
Yes, we’ve set-up a — we’re setting up a plant which is we’ll be able to produce 100% PC, the highest-quality product. We are also you know from day-one, we are, for example taking on the all the environmental those carbon credit or carbon footprint whatever you call we’re taking all those steps where we getting that environmental-friendly certifications and all of that, which today, for example, if you have to — tomorrow you get a contract manufacturing opportunity from European countries or US countries, we’ll already be compliant with all of that. So we’re taking all the necessary steps where it’s a world-class manufacturing facility, which can compete with any manufacturing facility in China or anywhere else.
Naysar Parikh
Okay. And the capacity and you said it will go-live when.
Abhinav Kumar
March is the trial, so I hope that we should be live with production somewhere in April.
Naysar Parikh
And what is the capacity?
Abhinav Kumar
The total capacity installed right now would be around 25,000 to 30,000 pieces a month with these lines functioning. However, it will take us a few months-to reach that optimum capacity. Once you start, you don’t reach that capacity on day-one, right? So it takes be some trial and errors, lines getting set and all of that. So it will take about two, three, four months. So looking at the end of Q1, beginning of Q2 is when we should be in a position to start hitting 20,000, 25,000 pieces per month at least.
Naysar Parikh
Okay. And last question on merger. On the soft luggage also, what is the capacity? And does that — when — how should we think about that? And does that also help margins when we shift to the manufacturers.
Abhinav Kumar
Yes, that should also help our margins. And our NCLT meeting was set on 4th of Feb. So I really hope that I’ll have some good news, but that meeting got pushed from NCLT. Now our hearing is on 24. So let’s hope the hearing happens. And if there is no — this thing, we should get the order and then whatever another 30 days to 45 days it takes to sort of complete all the formalities.
Naysar Parikh
And what’s their capacity?
Abhinav Kumar
Their capacity is — actually, it depends on the size of the bank. So the thermal — the primary product over there is a backpack, right? And whether it is a two compartment, three compartment or a single compartment, the quantities vary accordingly. But we have a capacity of on an average about 75,000 to 80,000 pieces per month. So about 1 million pieces a year.
Naysar Parikh
Okay. Got it. Thank you.
Abhinav Kumar
Welcome.
Operator
Yeah. Thank you. We’ll take the next question from the line of Abhishek. Abhishek, you can unmute and ask.
Unidentified Participant
Am I audible?
Abhinav Kumar
Yeah. Hi, Abhishek.
Unidentified Participant
Yeah. Just wanted to know what do you think — how long do you think this discount practice will continue? Do you think the peak is over or it is yet to come? The worst is yet?
Abhinav Kumar
I think the peak is over. So for example, if I have to share Jan, right? Now January, you know, for example, January is — has been a good month for us, right. January, we have overall growth and everything has been very, very good for us. So slowly and steadily, the traction is coming back, things are coming back. I started hearing a even in the traditional trade that certain special offers or special discounts and all that have been withdrawn by a few players. So hopefully, you know, the peak is over is what I would say. Now let’s see how long the tail is, but the peak is over.
Unidentified Participant
Do you think we can expect like better numbers in Q4?
Abhinav Kumar
And Q4 as it is, we are — as I said we’ve taken other measures as well, not only sitting back and waiting that the discounting war gets over and only then we start improving. Having said that, know, institutional single order whose quarter as we have achieve growth, growth in these markets is not a bad growth. I think that growth is still good. However, even after that, we’ve put in — put a few things in motion. So nine months period, if you’ll see, we are at a 7% kind of overall growth, right, including institutional and everything. So Nine-Month period we are at a 7% growth and we hope that I want to exit the year in a double-digit. So we’ve already pushed the pedal and hopefully the markets are also supporting it. So Q4 should be — should be better.
Unidentified Participant
We think we can cross INR300 crores?
Abhinav Kumar
Yeah. No, not INR300 crores, but we’re looking at Q4 standalone, if you talk about, we’re looking at sort of 15% to 20% growth overall, which should take us to — it helps us cross a 10% growth overall for the year.
Unidentified Participant
Okay. Thank you. Thank you. Thanks. Got it.
Operator
Yeah, thank you. We’ll take the next question from the line of Kashish. Kashish, you can unmute and ask.
Kashish Gandotra
And thanks for the opportunity. Couple of questions from my side. One question is, if I see the revenue proportion, the modern trade channel has come down from 26% last year to 24% this year. What I was thinking is this despite the number of stores has gone up from 37% to 46. So I just wanted to get a sense, are the stores making money right now? Because I think that will be very important factor if we want to scale it up for model. There should be sufficient incentive for them to make money so that only we can expand rapidly. So just wanted your thoughts on this.
Abhinav Kumar
See, modern trade for us includes EBOs as well as a large-format stores and key retail accounts, right? So it’s not only the EBOs. So for example, EBOs, yes, we’ve been growing. Overall also we’ve been growing and we were at a heavy — we were sort of like-to-like was minus, quarters me, Bolatha. So till Q2, we were, you know, close to minus 10% like-to-like. By the end of Q3, for the year ended, we’ve come down to a minus 4%. So we’ve gained, right? So we’ve started gaining back. And there again ASP corrections have worked better in our EBOs, so — which is leading to a better margin structure as well. So I would say that, yes, the stores are profitable. We are not running loss-making stores. But while you see a modern trade overall coming down, it is it’s also got an impact of — so we were present across Reliance Centro and all those channels as well. And Reliance has sort of decided to scale-down the operations of Centro. And overall for us also it was not making sense. So we’ve started to pull out of Land Central. So hence, you know modern trade numbers look a little compromised.
Kashish Gandotra
Got it. So basically for model, they are making money. We are trying to improve the revenue and once it improve their profitability. And are we seeing sufficient traction because what is our target to increase the number of stores say next year or next couple of years?
Abhinav Kumar
Actually, you know when it comes to the stores, are trying to redefine our physical stores, okay. So while we had taken an aggressive target this year to expand on the stores and we did that also we added some eight, nine stores in the first four, five months itself, four months itself. But then we sort of slowed down and we’re trying to reimagine the entire physical retail space because you know with the onslaught of earlier it was only e-commerce and now it is your quick commerce and all of them, right one needs to have a a really good unique selling proposition in physical retail for able to attract the end-consumer right so we are — as we speak, we are almost finalizing on our — on our new identity, new this thing.
So I think in the next couple of months, we want to do an experiment, we want to do a pilot with a sort of a larger store. And we also have, as I said, we also have a few more brands in the pipeline and Touch would we’ve gone after also brands which are good brands, which are top brands. And all the brands are such that you know, I can’t say no to any one of them, right? They are such brands. So we’re also waiting that if you’re able to convert a few brands and then plan the stores accordingly so that tomorrow once we — once we have these brands, we are able to showcase all those brands in our store. So hence, for the time-being going a little slow on the expansion. But when I say slow, it doesn’t mean that we are not going to be opening stores. We are opening stores, but it’s not that I’m going to be opening another 20 stores in the next six, eight months.
Kashish Gandotra
Sure. Makes a lot of sense. One last question, if I may squeeze in.
Abhinav Kumar
Yeah.
Kashish Gandotra
Another question was now since we have that backward integration with us once the manufacturing comes in, are we planning to enter into a different set of customers with Tommy majority of our revenue come, which is a premium segment. Once we have our production capability with us, are we targeting to target mass segment? And if, yes, are we going to do it with the vertical brand or we are in conversations with acquiring a new brand, something like that?
Abhinav Kumar
See, for us would sort of you know and would help us in definitely acquiring that mass and mass premium consumer. Today we are we are sort of handicapped where we have the brand, but you know, pricing from — as a manufacturer’s pricing advantage, we don’t have that, right? And hence vertical will still be a play. I’m not saying that we will not be playing on vertical, but I will see the initial thrust will go towards and and, again to answer your question, yes, we are in talks with one more brand, which is — which is going to be in that price bracket. So the idea would be that it will be Aero, then, then one more and then it is.
Kashish Gandotra
Okay. Sure. Thanks a lot,. All the best for the future and thanks a lot for giving all the answers so much. Thank you.
Abhinav Kumar
Thanks, Kish.
Operator
Thank you. We’ll take the next question from the line of., you can unmute that also.
Unidentified Participant
Yeah, hi, sir. Good evening. How are you?
Abhinav Kumar
Hi,. All good. All good, sir.
Unidentified Participant
Okay. So just had a few questions. So few on the industry and few company-specific. So from the industry perspective, if I may look at the results of the big players currently, sir, they have achieved good volume growth, but they are not unable to achieve that much profitability. So which clearly suggests that currently they are playing on the pricing gain. Correct. So sir, my question is that since on the demand-side, mainly, if the volumes growth is so strong, let’s say a quarter or two when they will increase their prices, so won’t that impact the demand? And is it possible that the customers are currently preponing their — the purchases because they are seeing that the value at which they are getting the product are so good. So instead of let’s say, three or six months buying later, they are buying it currently. So what’s your take on that?
Abhinav Kumar
See, it’s a very broad sort of a question. My take on that would be a, at that price, you’re not getting a value-added product right? You’re getting a very, very basic product you know if you look at the whole, you know the famous that pyramid structure, which we all make, right, where your the bottom of the pricing grid has the heaviest chunk, right, that’s the belly. But as you keep growing, people will migrate from that sort of bottom of the pyramid moving inching towards the mid of the pyramid and the mid ones would start inching towards the upper-end of the pyramid.
So that’s a life-cycle, that’s a journey which happens, right? And hence, I don’t see — from a long-term view, I don’t see that as a challenge per se. Today in fact you know a lot of unbranded people have been actually converted to a branded because of the pricing that you’re getting a branded product, it’s virtually cheaper than the — you know what you were getting those unbranded products, right? So obviously, a lot of people are coming into the brand fold, which is actually good news for us because eventually today or tomorrow in their — in that consumer’s journey, that consumer is going to go up, right, and everybody will have their own segments to play upon. So I don’t think what major impact on. No, I don’t see it that way. That pricing if they are correcting the pricing. Yes, the volumes might correct little bit here and there, but overall, this segment is still very, very bullish.
Unidentified Participant
Okay. So the demand that you are seeing currently, you feel that even if the crisis increases, so the demand will hold-up, right? Yeah, heart segment.
Abhinav Kumar
Yeah. Yeah, to a large extent, it should hold-up because see what happens in every year, if you look at we are the hottest aviation sector in the whole country, right, in the whole world, right. The amount of traveling, which is increasing today, travel for various multivarious reasons, it’s crazy, right? And you would keep on needing bags, right? Though the life-cycle of a bag, it’s not a — it’s not like a short or a T-shirt where the lifecycle is probably three months, six months or eight months. Here the lifecycle of a bag is a good 2.5 years, three years, right? But you know, every 2.5 years, three years, there are so many people coming in, changing their bags, buying new bags. So long-term, I don’t see that as a major challenge.
Unidentified Participant
Got it. So very helpful. Sir, my next question is that for the health figures, some of the laggages that I have seen on the website, so the discount that has been shown is around 45%, 55% and 60% for some of the products right at even on the. So just wanted to know that is the conscious decision to show this kind of discounts? Because earlier I remember that we were discussing that we don’t want to show it as a very heavily discounted brand.
Abhinav Kumar
So correct. So you will always have certain lines which will — and see, just rather than today, the reality is that an up to 50% is a given. It’s you know, now consumers brand perception also doesn’t go away, up to 50% to give an, right? And ours up to 50% is not flat 50%. Our up to 50% is still actually up to 50%. We are in fact one of the least discounted brands. So if you if you actually look at the least discounted brands, list way, we’ll be — it will be in us right as a brand. So certain lines, if it is an old season merchandise, if we’re getting if it is a liquidation or if it is a specific e-commerce model, certain lines will — are carrying that sort of a discounting, but that’s about it. 70% of our entire line is less than 30% of discount.
Unidentified Participant
Got it. So that means we are not taking a hit on the margins, right? It is the inflationary price that we are showing and the discount. But overall, in terms of realization, there has not been much change. Correct.
Abhinav Kumar
Yes.
Unidentified Participant
Got it, sir. And sir, my other question is that in the opening remarks, you said that currently we are in advanced stages — advanced-stage of the talks with some of the brands to sign. So sir, just wanted to know that currently, if we see UC, we are scaling it up. We have just signed JC. So sir, currently signing a new brand will also little to more inventory in terms of developing it. So in this time, do you find that decision to be correct because that may lead us to some kind of working capital pressure. So what’s your take on that?
Abhinav Kumar
Yeah, see, it will not only lead to working capital pressure, it will also lead to pressures on your manpower on a lot of other things, right, right but strategically if you need so there are two approaches one is we have these resources and this much is what we can do. Or the other approach is we have to do this now whatever resources that we need, we’ll provide that. So we’ve taken the second approach. We need to strengthen our brand portfolio. This is the time when we prepare ourselves for the long-haul, right? And hence we initiated dialogues with these brands. And I feel that these brands will be a great, great addition into our portfolio. So — and then whatever we have to do to support or figure out the working capital, we continue to invest into our manpower, strengthening our resources. We continue to do that. But the vision is very, very, very clear that we want a six to eight brand portfolio. We are — we want to become a house of brands and hence, till the time we reach that critical level, we’re going to be adding brands.
Unidentified Participant
Got it, sir. Very helpful. If I may just ask a couple of more questions.
Abhinav Kumar
Yes. I don’t know.
Unidentified Participant
Is that fair enough? Should I come back-in queue?
Operator
Can you please write the queue again?
Unidentified Participant
Sure, sure, sure. Thank you.
Operator
We’ll take the next question from the line of Risha. Risha, you can unmute and ask.
Risha Mehta
Yeah. Thank you for the follow-up. So one thing on the — so with our own manufacturing, would we be seeing any benefits to our inventory days because right now a majority of it is imported from China and if that becomes half, then how would it benefit our inventory days?
Abhinav Kumar
It should, but see you know the nature of one of the you know there are advantages and disadvantages boast of being a listed company right so the advantages is you know the correct pressure which all of you guys put on us, that’s a healthy pressure. The disadvantage is that you have to live quarter-on-quarter, right? So if you’re talking from a quarter-to-quarter perspective, probably in the next couple of quarters, I don’t know whether the inventory will go up, down because you’ll have a lot of raw-material stocking, you’ll have all of that. But technically speaking, from a long-term perspective, yes, manufacturing should bring the inventory levels down because your lead times would shorten up, you know there is zero transit of the finished goods. However, raw-material stocking will go up. So — but net-net, I still feel that our supply-chain will get strengthened to a quite large extent. But the result of it will come in Q1 of next year or Q2 or Q3, it’s very difficult for me to comment on that right now,
Risha Mehta
Fair, fair. The other thing was on the margins front, right? So while, yes, 11% 12% margins which we’ve maintained despite the challenging environment is a great feat. But when I look at it from a PAT margin perspective, our aspiration has been in that 5% to 6% range. And with the new plant coming in and with higher depreciation, I would imagine higher employee costs and some fixed-cost kind of coming in. How do we see the PAT margin shaping up in the next one to two years?
Abhinav Kumar
See, two years down the line, I’m hoping that it will be back to the levels that our aspiration is, we’ll come back to the level. But if I have to give a comment of — for example, this calendar year, if I have to give a comment on that, I feel that, yes, because we’ve opened a lot of stores, we’ve opened some cocos as well. Then there is you know depreciation in terms of we’ve done a lot of capex or we’re continuing to do capex, whether it is our warehouse, whether it is linear manufacturing and hence the depreciation and all this will also start to go up. So currently, yes, if we remain at a 10%, 11% kind of EBITDA, about 11% kind of an EBITDA, we would be seeing a 3%, 4%, 3%, 3.5% kind of a PAT.
We are working towards it where not at the PAT level, but at the EBITDA level itself, can we sort of start climbing back to that 12%, 13% because to be honest, yes, I myself am not very happy with the fact that I don’t look at it more from that perspective or percentages or whatever my earlier benchmarking percentages. But I look at from the perspective that what is the cash residual in my hand, which I’m able to say, which I’m able to put back into the business. And. And that you know, not very happy with the current this thing. So hopefully, you know, once we start sort of building on a few drivers, which start delivering, we’ll start seeing better EBITDA margin itself. So we’ll start crossing 12% again, which will — which will start reflecting even in the PAT margins.
Risha Mehta
Right. And just to complete this point, so this quarterly run-rate of INR7 crores for employee costs and depreciation INR3 crores, does that include the new plant expenses and the depreciation or not yet? That has not yet started coming in?
Abhinav Kumar
No, that has not yet started coming. New plant — there are a few people whom we’ve hired, but majorly that whole thing is not coming in a way.
Risha Mehta
Right. So — and you would be able to guide for a quarterly run-rate on employee and depreciation costs right now or maybe we’ve got to wait for another one or two quarters.
Abhinav Kumar
Sorry, I didn’t catch you on that.
Risha Mehta
So in terms of your estimates for quarterly run-rate for employee costs and depreciation costs once the new plant comes in, so will you be able to guide on that away or would we have to wait for one or two quarters for that.
Abhinav Kumar
Yeah, you’ll have to wait for at least 1/4 then we’ll be able to — so probably towards the end of Q1 is when I’ll be able to sort of give a much better concrete answer on that.
Risha Mehta
And on the channels so first is on this institutional channel right so FY ’24 it seems was a very good year for the institutional channel sales, but this year has been subdued. So any specific reasons why this channel has been subdued and you know, how can we kind of reduce the lumpiness of the revenues that we — the sales that we do to this channel? And what was the contribution in last year versus nine months this year?
Abhinav Kumar
So I actually mentioned this right at the beginning that institutional — there was one strategic institutional sales which we did last year, which was not of a sort of a recurring nature here. And hence that whole data probably today looks skewed and that sale-in itself was to the tune of almost INR26 crore INR27 crores, right? So if you knock-off that and then if you study the data, you will see that institutional in its own has also started growing. Now we have a proper institutional team. We have institution head who is heading that business. So we’ve sort of strengthened that department also and looking at sort of building on to that.
Risha Mehta
Right, right. And on the CSD channel, so I think we had entered this channel in Q4 of FY ’24. So in nine months, how has this shaped up? What kind of revenues have we done in nine months.
Abhinav Kumar
Very well. So in fact, overall, our bulk of the growth which has been fueled has come from the CSD channel. So whatever some channel corrections or for example, your Reliance closing and all that and deparate market conditions, but here in-spite of all of that, if we’ve been able to post strong numbers, one strong reason for that is the CSD channel. We’ve been doing well over there, Resha. And hopefully you know once our — so what we also intend to do is once we have our own plant completely fully functional and running lot of these models which we are servicing to the canteen source department are gonna move in-house and hence you know whatever there is a margin compromise today happening because of the certain pricing that you’ve given to stores department, those things should also get corrected. And — but yes, to net-net answer, we’ve been doing pretty well over there. We are getting a good traction over there and we plan to expand it even further.
Risha Mehta
Right. And what would be your revenue mix across brands, across categories and between hard luggage, soft luggish? Would it be possible to quantify that or maybe I can write for this data? Maybe I can.
Abhinav Kumar
I’ll prefer that and we’ll give you all the data.
Risha Mehta
Sure, sure. Thanks so much for the detailed answers and best wishes. Thanks.
Abhinav Kumar
Thanks. Thanks,.
Operator
Thank you. We’ll take the next question from the line of Abhi Jain. Abhi, you can unmute and ask.
Unidentified Participant
Hi, good evening, Mr Kumar. Hope you’re doing well. Good evening again. MR., just first question is simply looking at one of your listed competitors and they are talking about improving EBITDA margins in Q4. And obviously, they have also given a guidance that they are seeing tailwinds and they’re seeing turning things around and you are also mentioning that Q4 seems to be a, 15% 20% growth kind of a quarter. But just on the EBITDA margin, then I know it’s very short-term, but given that uncertain environment we are in, do you think that you’ll be able to maintain or slightly better this EBITDA margin in Q4 or are you seeing any headwinds to that?
Abhinav Kumar
See if we the first point is that the 15% 20% growth if we sort of do that, I think the EBITDA margin should be sort of better.
Unidentified Participant
And just a second question. I know, I mean we were on a trajectory and till last year, I mean you were expecting that there will be a 25% growth rate. And obviously, you were growing much faster than your peers and you were looking like that you have some industry-leading edge. But we had to recalibrate this year because industry went into a headwind. And you must-have also reflected and looked back upon this year and must-have — I don’t know, you must-have realized that there are certain competitive advantages that brand concepts have, which will put you in a better state in the coming two years.
So I just wanted to understand, I mean, what has this year sort of taught you and help you understand about the company, how you are positioned or in front of your competitors and what makes you feel confident that in the next one or two years or maybe even three years, you know, you will be the industry-leading player, if I may say so or if I’m the liberty to say so or you know you have those committed — I’m not able to frame it properly, but I just want to understand.
Abhinav Kumar
Yeah, I got your question. I think it’s a very, very good question, because yes, you’re absolutely right. We’ve been doing a lot of introspection we’ve been doing a lot of thinking on what is our competitive advantage and trust me the more that we think about it, the more we reflect on it. And the more we feel, yes, there we made mistakes. We’ve made mistakes when it comes to getting the right product you know better on today, UCB, for example, in the first year of its operations, this is the first complete full-year of operations of Beneton and we should be sort of ending at a INR50 crore-plus retail, which, you know in wholesale translates to about INR25 odd crores. So we should be able to translate around INR50 crores of retail.
Now I would say it’s not a bad fee for a new brand but none of us internally possibly are very happy about it for the simple fact that we could have done much better and hence today so for example better on handbags, very minuscule, we could have done wonders over there but you know the product didn’t fire it was not well-accepted by the consumers. Now while I understand that it’s a learning curve and all of that, but I think we should have done better. We are not a new player where we can afford to have so many learning curves, right? And this brings me to the point somebody else also, I think gentlemen had asked that you’re signing more brands. So whatever we’ve been able to do with and been able to do and not been able to do has given us enough room, enough food for thought that are we prepared to sort of sign other brands, you know.
Today, for example, and I’ve always mentioned that our brands are — it’s a constant process where you are in the process of in discussions with those brands. And we are in discussions with almost four to five brands, some of them will materialize, some of them will not. But if I were to ask a question that tomorrow, if all those four or five brands say yes on the same date, the brands are so good that I’ll not be able to say no to any one of them, right. Are we prepared to sort of do justice to those brands? Understanding of where the customer and the brand fitment with the product is happening or not? Because today’s consumers become smart. So one game is simple the pricing in.
You make a bare shell product and just put a particular pricing. I never wanted to take that route and I will never take that route, right? So we do that whole product, brand fitment, consumer fitment, price fitment and all of that. So I think lot of lot of areas where we can improve. Women hand eyes, for example, is a complete white space for us. Right. Our total contribution of women handbags would not be more than 5%, 7%, correct. So we have a lot of headwind over there.
A lot of headroom over there. Similarly, you know, for example, backpacks. Backpacks still I don’t think we’ve reached that right potential where, you know, so lot of headroom in backpacks. So lot of different product categories, a lot of strengthening is required which we are doing internally bagline as I said can we be a sort of disruptor over there with our stores, or is it just another run-of-the mill physical retail store? So today physical retail is nothing but it’s going to be an experience. Are we able to give that experience to the consumer? We are not to be very honest, not very happy with — with the kind of experience that we have been able to deliver. So we need to do a lot of — there’s a lot of work, which needs to be done.
This year, we’ve taken more as a year of consolidation. So we’ve done a lot of internal this thing. Our warehousing, we’ve been running on that old warehousing for a very long-time. So we moved to a new facility in this year. Our deliveries got impacted. Our e-commerce deliveries got impacted in the beginning. But now it’s all settling down. We’re building a world-class warehouse. We’ve taken a consultant in order to sort of optimize the inventory management and the flow of it. So lot of lot of efforts we’ve done this year and hopefully we should be able to see the results in the coming years. So yes, this year that way has been extremely good for us.
Unidentified Participant
Thank you. Thank you for candidate. No one has clear always. And that’s great. And just finally, I wanted to understand what do you understand about the consumer behavior in India, particularly in travel and luggage, what has been your — I mean, you have been doing this for almost 15 20 years now. I mean can you in a way summarize this consumer — this Indian consumer, what happens to this Indian consumer that it is so jubilant and vibrant and ready to go out, shop for brands a few years, then suddenly it — it sort of isolates and then suddenly it just goes into these — that it delay the shopping decision, we see price wall happening. So what have you made out-of-the consumer behavior of Indian consumer than have you been able to understand the consumer better? That’s what I wanted to understand.
Abhinav Kumar
Yes. I think what has happened and specifically if I talk about the travel gear space. See, having said that, we also have to understand that in the past four quarters, right, the overall retail has been slow. So it’s not that it’s only travel gear, which has been slow. You look at everybody’s results, right. So overall retail, overall consumerism has gone down, right. Whether it was inflation, whether it was less money in the pocket or whether it was all the money going into SIP.
Now these are reasons to just sort of post bottom, right? But whatever it was, the reality was that there was less walk-in, the offtake from the end retail point or e-commerce or whatever has been muted. So overall, retail sentiment had been muted. Now if we come to Travel gear for specific, what happened was suddenly two large players went into a price war, one for the other reason, one for some other reason, right? I would not want to comment on why moving into it. But now for us, you have to understand what was happening is earlier the entry price point was about INR3,500, INR4,000 rupees for a branded product in the market for a cable, right.
Then the next player was selling it for about 4,500. Then the next brand came at, say, 5,000, 5,500. And then it was us somewhere around the 7,000 kind of a mark. So, 7,000, 7,5000. Now what happens is suddenly one of them go rock-bottom right they just suddenly slash the pricing. The other guys follow suit. So now the difference is you buy something for 1,500 or you buy something for 8.5 thousand right. So I don’t blame the consumer today. That no matter how discerning a consumer is, if you’re making a shift of buying behavior of 20%, 30%, it is understandable, 40% understandable, 50% understandable.,, Chal, Milk or Tommy, so 50% jump.
But you know, I’m getting a Tommy is a brand, I’m getting fashion and all that. But we — the decision-making is though Azar and now you know. So then suddenly you can’t say that the consumer has suddenly gone up, it’s what we ourselves have done to the industry. You know what I’m saying, but this is what we’ve — it’s our own making. It seems as if it’s the race to the — not to the finish line, but to the bottom-line. I don’t know. But hopefully this will not continue. It’s going to change and things are going to start to come back you know.
Unidentified Participant
No, no, thank you. Thank you again. Thank you for your honesty and thank you for your detailed answers. It’s always good to understand the consumer and the market better from you. Coming from straight from the and is always the truth to picture. So thank you and wish you all the best for the coming quarters. Thank you.
Abhinav Kumar
Thanks.
Operator
Thanks, thanks,. Thank you. We’ll take the last question from the line of., you can unmute.
Unidentified Participant
Thanks for the opportunity again to — sir, in my experience to some of the retailers that I have talked about, sir, they are saying that the online sales has hampered their growth. And on the — so wanted to know, sir, what is our traction that we are receiving from our stores because the guidance that we have given is also the growth in retail sector from retail stores taking the store count 200. So if the existing players are seeing that the online stores — online sales are impacting the retail — retailers from consumption behavior. So just wanted to know that how you feeling about it and what are the things that dealers must be telling you, right? That what is their experience?
Operator
Let’s see, I believe that all these, whether it is e-commerce or whether it is offline, this is going to parallelly exist. But having said that, you know, things are changing — excuse me, things are changing so fast, it’s become such a dynamic world that you cannot be held onto with one thought, right? So if today I decide that or probably I would have given an that you know what we’ll open 100 stores or we’ll take the store count to 100. But I think we need to be nimble on our feet to understand the boss their if disruption is happening and we need to slow that down and we need to be a little more aggressive on digital or on e-commerce side, why not?
At the end-of-the day, you are still servicing the end-consumer, right? Somebody with some product, somebody with some product. So today, I think one big disruptor which is coming in the market is the quick commerce. If you understand e-commerce and physical retail, one big advantage the physical retail carried was instant gratification, right. So you pay and you get the product in-hand and you move-out, correct? E-commerce media, that are the key at best take delivery OTT right otherwise though then then charge in depending on Kah I product RI average team charge then passed in so but now with quick commerce it’s eight minutes.
So they solve the instant gratification also correct? Earlier it was only you know your essentials or grocery items. But today these guys have become aggressive even in the getting into the fashion categories also right and looking at them, Mintra is preparing for its own sort of quick commerce. Amazon is preparing for their own commerce. Everybody is preparing for their quick commerce. So how would retail pan-out in this is why as I said that we want to we are in the process of taking a step-back and understanding that actually what are you delivering from the store, that instant gratification also is being met by that platform, whether it is Mintra now or whether it is a blink it you know and it’s become a phenomenon.
So should we open stores or should we be just partnering with them and open dark stores rather be present in with them then so these are fundamental questions that needs to be answered. I still believe that experience in retail is going to be the key. Now what kind of an experience are we able to deliver? Decide whether your particular offline model will survive or will.
Unidentified Participant
Got it, sir. And sir, one last question. So that is pertain to sir, what is the strategy pertaining to opening the new-store in terms of be it of or Tommy Hilfiger? And let’s say, last-time you also guided that we have signed GCs. So it is possible that we may open the store of a particular dedicated brand.
Abhinav Kumar
Yeah. So we are opening — we’ve signed our first store of JC. So hopefully somewhere around in April, we should launch our first store in JC as well. But as I — as I said, as I’ve mentioned earlier also, our primary focus would remain on opening bag line, but if a brand has the strength and merit of sustaining the store and also from a perspective of presenting the brand experience to the end-consumer so that there are some stores where they can come and experience the brand in its entirety, we’ll open those stores. So today also if you look at out-of-the 46 stores that we have, there are only four travel gear stores, right? So the focus is for sure on opening more-and-more of bagline stores where we are able to sort of showcase all our brands under one proof.
Unidentified Participant
Got it, sir. That’s all from me. And thank you and good luck. Thanks.
Abhinav Kumar
Thanks.
Operator
Thank you. Since that was the last question, I will now hand over the call to, sir. Over to you, sir.
Unidentified Speaker
Thanks, Savina, would you like to give any closing comments before we end this call?
Abhinav Kumar
No, I think I’m exhausted in my comments.
Unidentified Speaker
Sure, sure. Right. So thank you to all the participants for joining on the call and thank you to the management for giving us their time. This brings us to the end of today’s call. You may all disconnect. Thank you.
Operator
[Operator Closing Remarks]