Campus Activewear Ltd (NSE: CAMPUS) Q2 2025 Earnings Call dated Nov. 11, 2024
Corporate Participants:
Nikhil Aggarwal — Whole Time Director and Chief Executive Officer
Sanjay Chhabra — Chief Financial Officer
Analysts:
Priyank Chheda — Analyst
Umang Mehta — Analyst
Gaurav Jogani — Analyst
Videesha Sheth — Analyst
Giriraj Daga — Analyst
Prerna Jhunjhunwala — Analyst
Ankit Kedia — Analyst
Devanshu Bansal — Analyst
Varun Gajaria — Analyst
Aliasgar Shakir — Analyst
Rajiv Bharati — Analyst
Presentation:
Operator
Ladies and gentlemen, good day, and welcome to the Campus Activewear Limited’s Q2 and H1 FY ’25 Earnings Conference Call. [Operator Instructions]
Before we proceed on this call, let me remind you that the discussion may contain forward-looking statements that may involve known or unknown risks, uncertainties and other factors. It may be viewed in conjunction with our business that can cause future results, performance or achievements to differ significantly from what is expressed or implied by such forward-looking statements.
The Campus Activewear’s management team is represented by Mr. Nikhil Aggarwal, Whole Time Director and CEO; and Mr. Sanjay Chhabra, CFO.
I now hand the conference over to Mr. Nikhil Aggarwal, Whole Time Director and CEO, for his opening remarks. Thank you, and over to you, sir.
Nikhil Aggarwal — Whole Time Director and Chief Executive Officer
Thank you. Good evening, everyone. We appreciate your presence at our quarter two and H1 FY ’25 earnings call today. Campus Activewear continues to display exceptional adaptability and notable agility with a 36% volume growth navigating challenging macro environment and subdued demand across geographies. Our revenue surged by 28.8% Y-o-Y during quarter two FY ’24, led by strategic distribution initiatives, including the highest number of annual retailers meet, more than 120, which have been conducted across regions. We had a successful new product statement drive with our top articles being placed in over 80% of our distribution network. We introduced 87 new styles, including our strong sneaker offerings across channels, further strengthening our product portfolio.
During the quarter, we expanded our large format stores presence. We have introduced our products in Lifestyle Stores and scaled up our presence in Reliance Footprint. During the quarter, we have onboarded Vicky Kaushal and Vikrant Massey, renowned Bollywood actors as our new brand ambassadors. We plan to leverage this association for further building our brand through various media channels. Additionally, our recent Move Your Way campaign launched across various platforms is designed to resonate with the youth, encouraging them to celebrate their uniqueness.
Our gross margin for the quarter stands at 52.8%, marginally lower versus quarter one FY ’25, that is 53.3%, driven by planned higher promotions and retailers meet to showcase new products and drive placements ahead of season in distribution channel. Our EBITDA margins were lower at 12.3% versus 15.8% during quarter one, driven by lower gross margin, higher investments in advertisement and sales promotion and higher commission on online business. We believe a part of this dilution has a phasing element as the timing of Big Billion Day offers was more towards week four of September.
We continue to invest judiciously in media spend, including TV campaigns, outdoor coverage and social media engagements for strengthening our brand and widening our consumer engagement. Our new TV ad with Vicky Kaushal is live on air as we speak.
During the quarter, we have added nine new stores across India taking a total EBO count to 288. We would further like to update you that our Board has approved a capacity expansion plan at Ganaur and Haridwar with an investment of approximately INR35 crores. These investments shall help us to cater to the growth in upcoming years.
Here at Campus, our steadfastness and perseverance are anchored by five essential pillars, namely product innovation, design philosophy, omnichannel presence and innovative marketing capabilities and our vertically integrated manufacturing system with a digital transformation that strengthens our core and drive the momentum. These critical elements empower us to navigate challenges, amplifies our business expansion and enforces us to stay ahead of the curve, thereby creating long-term value for our esteemed stakeholders.
Thank you. And now I hand over the call to our CFO, Mr. Sanjay Chhabra, to take you through more details on the quarter two and H1 performance. Over to you, Sanjay.
Sanjay Chhabra — Chief Financial Officer
Thank you, Nikhil. Good evening, everyone, and thank you for joining us in our Q2 and H1 FY ’25 earnings call for Campus Activewear. Our operational revenue grew by 28.8% year-on-year to INR333 crores in Q2 FY ’25, largely benefited by higher distribution, which has shown around 30% growth and online channel, around 36% growth. The Company sold approximately 5.4 million pairs during this quarter, up 36.2% year-on-year.
The average selling price stood at INR622 in quarter two versus INR585 during quarter one, which is largely an open footwear season and INR658 in quarter two last year. The dilution in ASP was largely driven by higher schemes and promotions in distribution channels towards the retailers meet and also a part was attributable to non-BIS inventory liquidation in line with our inventory optimization strategy. We have been able to reduce our non-BIS inventory by 25% during the quarter. Our overall inventory days have reduced from 126 days in Q2 FY ’24 to around 110 days at the end of quarter in FY ’25.
Our gross margins were at 52.8% during quarter two versus 53.3% in quarter one, marginally lower, driven by higher retailer meet led trade spends.
Our EBITDA for quarter two FY ’25 was at INR41.6 crores. The EBITDA margin stood at 12.3% during quarter two, owing to higher advertisement and promotion costs incurred for performance marketing and marginally higher online commission.
PAT stood at INR14.3 crores in quarter two FY ’25 and PAT margin was at 4.2%.
Our balance sheet continues to demonstrate strength and robust return ratios, such as return on capital employed and return on equity of 18.4% and 15.1%, respectively as of 30th of September ’24.
With this summary, I will now conclude my remarks and open the floor to the moderator for the Q&A. Thank you.
Questions and Answers:
Operator
Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Priyank Chheda from Vallum Capital. Please go ahead.
Priyank Chheda
Yeah, hi, team. A great performance. Of course, this has come on a lower base, plus it has come at the cost of margin. So my first question is, if there are some one-offs with respect to retailer meet or higher commissions given to them or higher online sales in the Big Billion Days, if you can quantify to get us a sense of what could be a normalized margins if there is a one-off cost involved, what was the quantum of that cost?
Sanjay Chhabra
Yeah, hi. This is Sanjay. If you look at our gross margin, the dilution in gross margin is only 50 bps. So that’s a reflection to this extent, we had higher trade promotions and schemes for retailers meet. Of course, on the ASP dilution front, apart from the trade spends, the liquidation of non-BIS has also contributed. But as far as gross margin, 50 bps dilution, that’s the quantification.
And secondly, on the A&P part, yes, we did spend around 1% higher in terms of advertisement and promotion. And that’s largely, I would say, phasing we need to look at it from a full year or a longer or six months perspective because there was — there is a bit of seasonality element. We did invest in September and ahead of the season, and we would be getting a return on that during October and November during the Diwali and festival season.
Priyank Chheda
Got it. Wonderful and clear. So there were two particular guidances that were — that we were guided. One on the EBITDA margins for the full year to be 17% to 19% range, as well as strategically with whatever actions on the growth side we are taking, we will maintain the ASP. So anything that we would — that you would like to help us think about how FY ’25 should be on these two guidances that were given?
Nikhil Aggarwal
Yeah, hi, Priyank. So see, we said last time that our endeavor definitely is to deliver in those number ranges in terms of EBITDA margins. But, of course, at the same time, strategically, we have also taken an initiative to basically liquidate all of our non-BIS inventory within this fiscal year. We don’t want to carry any such inventory over to next year. Therefore, keep — and we do not anticipate honestly a large or any kind of material dilution effect, but there could be some, I mean, because it is slightly older stock. So to that extent, we would be looking at slightly lower margins given versus the guidance that we’ve given, slightly lower on that side. But we do expect now that with the balance two quarters, obviously, the base is larger in terms of revenue. So there should be higher operating leverage and margin inflow from the balance two quarters.
Priyank Chheda
Okay. Got it. Yeah. On the traditional channel, sir, we were targeting somewhere around 25,000 touch points by the year-end. Where are we right now? And we also were targeting to increase the billing from that each counter, which we were at around INR3.5 lakhs per shelf by FY ’24, where are we right now on that? And as well as traditionally, we were weak in South and West, you did highlight in the last quarter that there were a few product gaps that you plan to bridge. How has been the progress on these three aspects? One is on the touch points, the increase in the share of the each counter on the billing side and the South and West. Thank you.
Nikhil Aggarwal
So on the touch points, we have grown our total number of touch points from about 22,000, let’s say, or 22,200 at the end of last quarter to about 23,000 at the end of this quarter. So about 800-odd touch points have been increased. At the same time, we have grown our share. There has been a product mix. So with the right product mix in place, we have been able to grow our volume significantly over this entire channel at about approximately 36% — sorry, 44% is the volume growth in the GTM channel, which has led to about a 36% value growth. So there has been definitely an increase in per counter share which has led to this kind of growth. So our main objective for this quarter has been about placement where we have a certain number of focused articles that we call them at — which are priority articles or hero articles. And those are — the endeavor was to maximize the placement of those focused articles across this entire channel. And that has been a very successful drive, which has led to a lot of this volume growth, right, for the channel.
In terms of geographical split, we are very similar to last quarter. We have been able to grow our West share from about — actually about 20.8% last quarter to about 24.4% this quarter for the West. Central is at 10% each in both the quarters. South has slightly degrown in this quarter from 5.1% last quarter to 3.3%. That is primarily due to a bit of a seasonal effect because of the open category being phased out in quarter two. Open category sells the most during quarter one as a seasonal product. So that is the only thing. Otherwise, everything else remains the same in terms of the mix, and this is geographical split.
Priyank Chheda
Amazing. Just a last question on the key few other strategic areas that we were focusing with respect to sneakers, women’s portfolio. How has been the growth in that, if you can highlight? As well as I do see that our NPDs and the number of launches has have seen a step up growth. So what has been the contribution from such NPDs? How do you define the NPDs when you track such a large number of new additions, new articles getting added? So how do you track the NPDs for the full year and their contribution in the revenue?
Nikhil Aggarwal
So NPDs, let me take your second question first. NPDs are tracked basis the placement, right? So, of course, there is a certain number, which strategically I will not be able to talk about on this call, as that’s the strategy for the Company. But there is a certain contribution that we target from NPDs every quarter. And even this quarter, like we’ve launched about 87 new styles. Those have really, really done well, and we have had a very, very good response. So that has, again, also added to this volume growth.
While coming back to sneakers, right, sneakers amongst those 87 styles, a lot of them, I would say, at least 30% are about sneakers, the new sneaker range that has been launched, and it’s also received an overwhelming response. Even in terms of the new expansion plans, that we just mentioned in terms of Haridwar and our Ganaur plant. The expansion is mainly to do with the sneaker range, right? So that will help us expand the capacity to produce even more volume of higher-quality sneakers in the coming quarters. So that’s where we are in terms of the initiatives.
Again, another initiative that focus area is about the demographics in terms of men, women. So very happy to say that we’ve grown our share of women by another percent. So right now, the split is about 78% and 22%, approximately 78% men, about 14% women and balance from kids. So the overall share has gone up from, let’s say, 21% to 22% for women and kids put together.
Priyank Chheda
Perfect. Sorry, if I can just squeeze in one more question. So Chinese imports [Speech Overlap]
Operator
Sorry to interrupt sir. Priyank sir, can you please fall back in the question queue?
Priyank Chheda
No problem. Thank you.
Operator
Thank you. The next question is from the line of Umang Mehta from Kotak Securities. Please go ahead.
Umang Mehta
Hi. Thank you for the opportunity. My question was more on primary and secondary sales. So last year, we had seen that in third quarter, we have seen some restocking in some states where you have taken channel inventory correction. And given that there is an early festive this year and you spoke about the retailer mix as well. Do you see any kind of headwind for primary sales in the December quarter, particularly in the MBO channel?
Nikhil Aggarwal
Hi, Umang, no, not at all. In fact, see quarter two was a lot about primary placement as we did see consumer sentiment being subdued at the tertiary level, but it’s given for quarter three, it’s like — it’s back on track and the markets have opened up. So we don’t see any tertiary issues at the moment. And a lot of the placement that was done during the end of quarter two has basically materialized, and we are now basically looking at replenishment of those orders and repeating the orders for those placements. So, no issues in terms of primary as well.
Umang Mehta
Understood. That’s very encouraging. Second thing was on A&P. So given that you have signed these two ambassadors and you spoke about the TV campaign, on an annual basis, would it be able — would you be able to share any percentage which you are looking at? You spend around INR108 crores last year on A&P. How much growth can we expect from these initiatives?
Nikhil Aggarwal
No, we cannot quantify this. These are actually building blocks for the brand, right? These are — in terms of spend, it will be pretty much the same as last year in terms of the overall A&P spend. But in terms of quantification of the growth in business from these initiatives, that would be, I would say, it’s a longer-term initiative. It takes time to constantly build the brand and grow it over time. So this would not be ideal to quantify it at this stage.
Umang Mehta
Understood. And this is my last question on performance marketing, given that you called out that it was higher this quarter. Now, again, if I go back to the base quarter in 3Q, we had to recoup the sales loss in B2B, we increased in the performance marketing spend, which had weighed on your EBITDA margin in 3Q last year. Given the phasing of Big Billion Day this year, that shouldn’t recur, right, this year? We should see margins normalize in 3Q in that sense. Would that be correct?
Sanjay Chhabra
That’s a right interpretation. I mean, because of the Big Billion Day falling in week four of September, so we couldn’t get the fullest ROI. I mean, most of the improvement in top line would get reflected in the next quarter. However, we had to do the investments upfront.
Umang Mehta
Great. That’s very encouraging to hear. Thank you so much and all the best for the rest of the year.
Nikhil Aggarwal
Thank you.
Operator
Thank you. [Operator Instructions] The next question is from the line of Gaurav Jogani from JM Financial. Please go ahead.
Gaurav Jogani
Thank you for the opportunity and congratulations on the strong revenue growth number. Sir, my first question is with regards to these spends that you mentioned on the trader meet, etc. So one would be giving them discounts on the product price. But would it be the trader meet expense would be accounted in the other expenses rather than the gross margins? Please correct me if I’m not interpreting it in the right way.
Sanjay Chhabra
Gaurav, a typical accounting question. I mean, if I do a spend, it gets accounted in other expense or in sales promotion. But if I support my distributor through a credit note, then it’s a reduction to the sales and hence a lower ASP and lower gross margin.
Gaurav Jogani
Okay. Okay, sir. Got it. Got it. So, sir, related to this, given that there is a focus of clearing the BIS inventory, the non-BIS inventory this quarter — sorry, this year rather FY ’25, would it be prudent to estimate some contraction in the gross margin at least for this year? And maybe once things normalize and restore, the gross margins could restore and hence, we can restore the guidance also of the 17%, 19% that we have given earlier?
Sanjay Chhabra
Yeah. It’s — I mean, it’s nine months down the line, so we are not left with too much of non-BIS inventory. However, in a phased manner, we are trying to sort of liquidate the entire inventory by FY ’25. So which means we are targeting that as of March ’25, we should not be sitting on anything which is produced prior to December ’23.
Gaurav Jogani
Sure. And sir, the last question is, if you can highlight some of the initiatives that you have taken over the last one and a half years just to drive the growth across the various channels and what you have done in terms of restoring growth? And additionally, if you can also help us to quantify or not quantify rather help us out how BIS once the non-BIS inventory is out, how this measure can help the Company as a whole? That could be helpful.
Nikhil Aggarwal
Sure, Gaurav. So, it’s — this growth is definitely not a one quarter phenomena. It has come on the back of several initiatives we’ve taken over the last few quarters. So I’m very proud of the new team that has been put in place now after a lot of restructuring that have happened over the last few quarters. So one is on the back of that. Second is a lot of these initiatives in terms of strategies across the distribution channel, more placement, more focused articles with higher volume throughput for each article, very focused. This is — basically, we are going for very high efficiency execution across GTM, across all the channels rather and then new channels have also been incubated, right, in terms of more stores in terms of LFS, like Lifestyle, Reliance Trends. We’re also focusing on starting of exports, for example, so — or incubating that it’s right in the process. And so, there have been several initiatives which have been taken both at the product level and at the geographical, channel level demographics, we basically cater to all the pillars that would lead to sustainable growth going forward.
And in terms of BIS, we have been very, very positive and very happy with the way the Chinese imports have basically largely been dried up. We also get to know from our channel checks that there have been absolutely no Chinese finished goods import over the last nine to 10 months in the country today, largely due to the non-BIS regulation. So we do anticipate that over the next maybe one or two quarters, this entire non-BIS inventory would sort of dry up and that’s when the domestic brands across the country would benefit from this.
Gaurav Jogani
Sure. Thank you so much for answering my question. All the best. Thank you.
Nikhil Aggarwal
Thank you, Gaurav.
Operator
Thank you. [Operator Instructions] The next question is from the line of Videesha Sheth from Ambit Capital. Please go ahead.
Videesha Sheth
Yes, hi. Thank you for the opportunity. My first question was on the ASP. While for FY ’25, it would be impacted as we trying to liquidate the non-BIS-compliant inventory. But from a long-term basis, how are you looking at the trajectory to shape up?
Sanjay Chhabra
Hi, Videesha. So we may end up — I mean, this year would not be a year wherein we will see a step-up growth in ASP. But from a longer-term perspective, we would continue to go with the trend of perhaps sneakerization or will add the NPDs, which are more trendy and likewise, we can command the premium and the ASP eventually would go up. I mean, it would be a part of strategy that there will be certain core items in the distribution channel to drive volume. At the same time, we will be displaying a wider range of our articles in the other channels, which include the large format stores, the online and our brand.com and our exclusive outlets. So these channels would continue to help us drive the premiumization and hence, a realization of higher ASP. Having said that, I mean, it would start from the product strategy per se, wherein certain percentage of our products would be developed in the premium range to help us continue with the strategy.
Nikhil Aggarwal
Yeah. Just to add to that, Videesha, like we do see an opportunity gap in the market in terms of the premium price points, which is INR1,500 plus to about, let’s say, up to INR2,500, INR3,000. And there is a significant gap there in terms of availability of high-quality shoes at these price points. And we are completely committed to delivering a stunning premium range as well like — and it would be a combination of sneakers, sports shoes, all kinds of categories. There is no category in terms of sports shoes apart from, obviously, leather shoes, we don’t do leather, but every other category would be touched in this — even in these price points.
Videesha Sheth
Got it. And second, on the capacity expansion by when do you expect it to get commercialized?
Nikhil Aggarwal
I think, conservatively by end of quarter four.
Videesha Sheth
Okay. Got it. That’s all from my side. Thank you, Nikhil. Thank you.
Nikhil Aggarwal
Thanks.
Operator
Thank you. The next question is from the line of Giriraj Daga from Visaria Family Trust. Please go ahead.
Giriraj Daga
Yeah. Hello team. Am I audible?
Nikhil Aggarwal
Yes.
Giriraj Daga
Yeah. So my first question is related to non-BIS comment. So if I possess a like-to-like realization, what should be the call out for? Like-to-like how much a decline on growth or what we witness in the realization for quarter two?
Sanjay Chhabra
Okay. If you — it is your question that to what extent the ASP dilution is that [Speech Overlap] the ASP dilution?
Giriraj Daga
Correct, correct.
Sanjay Chhabra
So that would be in the range of INR8 to INR10 per pair.
Giriraj Daga
Okay. Okay. So we had about 3.5 — like 5.4% was our decline, roughly 5.5%. So roughly, you can about 1.5% came from the non-BIS mark?
Sanjay Chhabra
Yeah.
Giriraj Daga
And rest because of the mix, channel mix?
Sanjay Chhabra
Rest because of the higher schemes in the distribution channel is to drive the retailers meet and also remaining portion would be because of the mix.
Giriraj Daga
Okay. My second question will be on your channel expansion. You mentioned about 23,000 touch points. If I look at for a two-, three-year perspective, like what is the total time you are addressing here? Like can this 22,000 go to 40,000, 50,000 or what is the outlook there for the two-, three-year perspective?
Nikhil Aggarwal
So we do — we have a universe of — and I’m talking about close shoes because the overall universe is close to 60,000, 70,000 retailers in the country, but that also includes very low-value clippers, which is a starting point. If we talk about close shoes, there is a universe of about 40,000 to 45,000 outlets, of which the top 23,000 are the ones that we’re catering to at the moment. But over time, like over the years, we will continue to add on at least 5% to 10% new outlets every year as we also have a big opportunity to continue to gain market share in each and every outlet. So it’s both the initiatives that we’ll run in tandem hand in hand.
Giriraj Daga
Sure. Thank you from my side.
Nikhil Aggarwal
Thanks.
Operator
Thank you. The next question is from the line of Prerna Jhunjhunwala from Elara Capital. Please go ahead.
Prerna Jhunjhunwala
Thank you for the opportunity. My first question is on how do you see the demand now in the second half, given that the festive demand is robust in the country and other categories? So how do you see the demand going forward?
Nikhil Aggarwal
Demand has definitely opened up compared to quarter two as the festive season, and this was expected as well. So at the moment, I would say that we are happy with and satisfied with the way the demand has shaped up in quarter three.
Prerna Jhunjhunwala
How has been the festive sales for you?
Nikhil Aggarwal
Encouraging. It was good.
Prerna Jhunjhunwala
Okay. And given that there is a mix dilution in Q2, how do we see the mix improvement coming? Do we see this mix improvement coming in the second half? Or it should be a more longer-term thing that will happen?
Sanjay Chhabra
We see some bit of improvement coming in through, I would say that the retailers meet was an event, which was specific to Q2, would not be at this scale in Q3. So to that extent, our ASPs and margins would improve. Likewise, non-BIS liquidation, of course, that’s an event that may not be to the extent of INR10, INR12 in Q3 and Q4, difficult to quantify. But yeah, retailers meet is an event which from a controllable factor, yes. And otherwise, organically from a business perspective, when we move to Q3, it is more of closed footwear, higher sale of shoes and as the ASPs improve by virtue of seasonality.
Prerna Jhunjhunwala
So will it be possible for you to quantify the non-BIS inventory quantum liquidation for us to just have an understanding on how much will be the effect and how long?
Sanjay Chhabra
A bit difficult to quantify at this point in time. However, it’s not a sizable chunk. I mean, we have moved past nine months since the BIS implementation at our factory line or, I would say, rather 10 months because first of December or mid of December, we implemented BIS. And so, difficult to give you exact numbers, but we are left with a very small portion.
Prerna Jhunjhunwala
Okay. And what will be the revenue growth and margin guidance for FY ’25 and beyond?
Nikhil Aggarwal
Sorry, no, I would refrain from giving any guidance. We have shared quite candidly in terms of the building blocks for the rest of the year and what we expect in terms of non-BIS as well. So we do expect — I can just tell you that we certainly expect much superior margins to last year overall at the end of the year.
Prerna Jhunjhunwala
Okay, understood. Thank you and all the best.
Nikhil Aggarwal
Thank you.
Sanjay Chhabra
Thank you.
Operator
Thank you. The next question is from the line of Ankit Kedia from PhillipCapital. Please go ahead.
Ankit Kedia
Sir, government is talking about Indian footwear sizing. Do you think that’s going to have a positive impact given that more and more manufacturing is happening in-house for you now?
Nikhil Aggarwal
Absolutely. It is something that can have a materially positive impact, but it would take time. We believe that something like this does not happen overnight in terms of a transition and the effect of it. But yes, overall, on a long-term basis, it should have a positive impact. As the consumers — there would be one size and the consumers would have more, let’s say, visibility and more comfort in terms of the sizing when they are selecting any product.
Ankit Kedia
And do you think unorganized market back then, given that government has been a leeway to a lot of unorganized players in terms of revenue threshold and that is where some of the brand players like yourself can really disrupt the market at a lower price point and at the premium level?
Nikhil Aggarwal
Well, we don’t necessarily compete with the unorganized segment because there’s — their product offerings and the quality and the strategies are vastly different from organized players like ourselves. So we would like to just continue to focus on the initiatives that have been working well for the brand and just keep building on that. That is the long-term objective. So I don’t see any — honestly, any kind of threats or issues from any unorganized players in the market.
Ankit Kedia
And sir, my last question is on the EBO channel. If I look at B2C off-line, the growth has tapered a bit in the last couple of quarters. Is it because the numbers of EBO growth is a bit moderate? Or is it to do with the general demand environment being slow?
Nikhil Aggarwal
Yeah, it is largely due to the subdued demand in the market. We have tapered the growth and the opening of new stores accordingly. As we believe that the demand is picking up, we will certainly expand the store opening more — accelerate the store opening from now on.
Ankit Kedia
And sir, what is the target EBO we are targeting for FY ’25?
Nikhil Aggarwal
It would be difficult to comment at this point as it is largely dependent on the availability of the right location. It’s very important to not go just after a certain number when you’re opening EBOs, but you need to be in the right place and the right PG, the right geographical site. So that is more important at this point. And — but we do endeavor to open about 70 to 80 stores every year.
Ankit Kedia
Sure. That’s helpful, sir. Thank you so much.
Nikhil Aggarwal
Thank you.
Operator
The next question is from the line of Devanshu Bansal from Emkay Global. Please go ahead.
Devanshu Bansal
Hi, thanks for the opportunity and congratulations on a good pick up in Q2. Sir, sorry for persisting on this, but this non-BIS inventory must have been declared by you to the government, right? So any specific reason for not calling this out because this must be ready with you, right?
Sanjay Chhabra
Yeah. Any specific reason, meaning we would have these inventories both some at our warehouses and some at — in the distribution channels. So it depends, like to what extent we need to — first is, we need to push it out from our warehouses and then if at all required, we need to see that in the distributors place such inventory is not stuck up and they are not sitting on inventory days beyond certain defined norms, which we monitor through the DMS.
Devanshu Bansal
Okay. But out of this INR475-odd crore of inventory that is there on your books, can you sort of call out as in how much is the left over non-BIS inventory?
Sanjay Chhabra
Of course, we can call out our inventory, but we cannot quantify what is sitting in our distributors’ network or distributors’ channels, which are non-DMS partners, right? So, at an overall level, I mean, it becomes difficult to give a number. However, since — I mean, as we are — with every passing month, such inventory is getting reduced. And as I said that the ASP dilution was to the extent of INR10 to INR12, which is just 2%. So it’s not a very big number to concern us. Yes, it is a bit dilutive on ASP, and it will be there for, let’s say, two more quarters max.
Devanshu Bansal
Okay, sir. Understood. Thanks for taking my questions.
Operator
The next question is from the line of Varun Gajaria from Omkara Capital. Please go ahead.
Varun Gajaria
Hi, sir, and thanks for the opportunity. So just wanted to understand what is the commission component in our other expenses? I’m sorry if I’ve missed that earlier.
Sanjay Chhabra
Yeah, sorry, can you please come again?
Varun Gajaria
What is the commission component in our — the other expenses ahead? And how does it stack up Y-on-Y?
Sanjay Chhabra
Okay. Online commission is ranging between 6% to 10% depending on the portals. And again, it becomes very difficult to put a specific number if you are looking at it is 6% to 10% of our online sales, online marketplace sales.
Varun Gajaria
Okay. So what has largely been in the other expenses? It seems they’re up 11% Y-on-Y. So…
Sanjay Chhabra
Okay. In other expenses, we have the freight and warehousing piece, the online commission piece and all other SG&A admin expenses, which includes travel, CSR and provisions for receivables, inventories and all that stuff. If you are referring to, of course, this quarter, this quarter, we have shown a 9% growth in marketplace. So correspondingly, online commission will also grow because of the volume impact. And there is an element wherein the mix will play, I mean, which total we are selling higher. So versus last quarter, the online commission is higher by around INR2 crores, INR2.5 crores.
Varun Gajaria
Okay. Got it. Okay. And sir, how is the demand now looking?
Nikhil Aggarwal
We already answered that question that demand has opened up compared to quarter two.
Varun Gajaria
Okay. Okay. Thank you.
Nikhil Aggarwal
Thank you.
Operator
Thank you. [Operator Instructions] The next question is a follow-up question. It’s from the line of Priyank Chheda from Vallum Capital. Please go ahead.
Priyank Chheda
Yeah, hi, sir. So, sir, December quarter seems to be contributing almost one-third of our total sales for the annual revenue that we target. And in the past, two years ago, we did touch upon 7 million pairs in a quarter of December ’22. How do you see this panning out as far as December ’24 goes? What is — what are the internal targets that you’re thinking of to beat the previous peak?
Nikhil Aggarwal
Yeah, Priyank, that will go into the guidance. So, I would refrain from giving any guidance for the quarter. But like I’ve mentioned a couple of times on this call that we have certainly seen demand opening up at the tertiary level, and given the initiatives and that we started early in terms of the retailers meet and the placement drive, we certainly see a good, let’s say, replenishment and repeat orders coming from those initiatives. So we don’t see any issues in terms of both primary and tertiary sales for quarter three going forward. That should contribute to a decent quarter three, as I said.
Priyank Chheda
Perfect. Sir, in D2C online, how has been the growth for marketplace, as well as for O2O? And as far as O2O goes, which is into a D2C online O2O, there was a destocking, which we called out, which has bottomed out in Q1. So have we started seeing sales picking up? Now have you reached to around INR30 crores, INR35 crores of sales per quarter in that channel also?
Sanjay Chhabra
Yeah. I mean, overall, we have seen the sales, both value and volume to grow in two of our biggest channels, online and distribution. So online also, in the earlier call, I mentioned that our Q1 was the last quarter wherein we had the impact of higher base and that stands corrected. So now from this quarter onwards, we are showing a growth in B2B and O2O. O2O, by and large, I would say that now is sort of non-existent, very small portion. It is largely B2B wherein we do outright sales to some of the portals. And versus last year, we have shown growth in that as well. So we have grown in marketplace by around 9%. But in the outright, we have grown at a much higher rate.
Priyank Chheda
Okay. So when we say about phasing of performance marketing spend, what we really mean, sir, in that way?
Sanjay Chhabra
It’s like in marketplace, I do invest for a particular month. But whatever sales happens in the last few days of the month, there is an element of GIT and that does not get recognized as a sales, whereas I have done the marketing spend, right? So it’s a normal course, but when those last four, five days is a Big Billion Day period, then a big number goes and sits as a GIT, right? From an accounting perspective, I tend to recognize that sales in the subsequent month and in this case, subsequent quarter.
Priyank Chheda
Got it. Got it, clear. And just last question on non-BIS inventory. It can be the case for the industry as well where the inventory would be higher. And at least MCA data suggests that Chinese imports are on the rise, at least in September quarter they have risen in terms of absolute — in terms of total import rupees — rupees imports that we do, just before the deadline was ended and then the non-BIS inventory deadline was also extended till June ’26. So if it’s the case for industry, would it also impact the non-BIS inventory ASP for you for — till the time industry also liquidates the non-BIS inventory?
Nikhil Aggarwal
So just a small correction there. The MCA has given time for the non-BIS liquidation until July 2026 to the entire industry, but the imports were banned from China for finished goods, starting November, I believe, November or October last year. So since then, no finished goods have been imported in the country. Only SFG, to some extent, like upper or sole or some raw materials is basically being imported from China. Having said that, we do not anticipate like the ASP dilution, like what Sanjay just mentioned in terms of 1% to 1.5%, or let’s say, maximum 2% ASP dilution on account of non-BIS goods. We don’t anticipate any dilution further than that on account of that.
Priyank Chheda
Got it, sir. Got it. Thank you.
Nikhil Aggarwal
Thanks.
Operator
The next question is from the line of Aliasgar Shakir from Motilal Oswal. Please go ahead.
Aliasgar Shakir
Yeah. Thanks for the opportunity and thank you and congratulations on a pretty decent set of revenue growth. Nikhil, my question is on the margin. So if I understood correctly, you mentioned that FY ’25 margin should be higher than FY ’24 margin. Now 1H, I observed that we had about 140 bps down. So does that imply you should probably then in that case, do a nearly about high-teens margin in the H2, which obviously also gives you operating leverage because of the higher revenue base?
Nikhil Aggarwal
That’s right. Without commenting on specific margin percentage, your interpretation is correct. The second half definitely contributes to much higher margins than first half.
Aliasgar Shakir
Got it. And a quick clarification on the revenue side. Now I know you don’t want to give guidance. But this quarter, we did excellent growth, thanks to also a low base of last year. So in that context, now, I mean, 3Q while the base will be obviously good given that it’s a seasonally strong quarter. But should we expect kind of similar trends to continue or probably this quarter was benefiting because of the lower base and therefore, we should not extrapolate that?
Sanjay Chhabra
Yeah. Certainly, I mean, this quarter two had a benefit of lower base, which got corrected. And, of course, there was an element of strong execution as far as distribution is concerned to both having organizing retailers meet and driving product placement. So to that extent, I would say that we have, by and large, tried to cover the gaps in our execution and got our fair share in the market. And going forward, we would continue to sort of build on this, whatever good work we have done on the ground. However, I would just like to say that 30% growth is a number which would — I mean, you can’t have that quarter-on-quarter, right?
Aliasgar Shakir
Yeah, that’s true. But in the past, we’ve been talking about double-digit growth. So in this particular quarter did double-digit growth after probably seven quarters. So does that trend of double-digit growth now trajectory that we have seen in Q2 that at least should continue?
Nikhil Aggarwal
It’s the guidance again, but see, all the building blocks will certainly help us a lot. So the endeavor is that only. I would just want to give you some comfort that is the endeavor. The rest, we, of course, need the market to support, which certainly, the macros have improved in the country in quarter three.
Aliasgar Shakir
Got it. Excellent. Very useful. Thank you so much and best of luck.
Nikhil Aggarwal
Thank you.
Operator
The next question is from the line of Rajiv Bharati from Nuvama. Please go ahead.
Rajiv Bharati
Yeah. Good afternoon, sir. Thanks for the opportunity. Sir, just we are hearing that there have been collection issues from the trade side in the business. We don’t see that in your numbers. But are you hearing something of similar order in the competition, sir?
Nikhil Aggarwal
Can you elaborate the correction in what sense?
Rajiv Bharati
Collection in the sense.
Nikhil Aggarwal
Yeah. Our collections, in fact, our DSO days have come down from, I believe, 35 to 30 days in quarter two end. So, Sanjay, do you want to elaborate?
Sanjay Chhabra
I would just put that we do have a strong system in place to monitor our receivables, our overdue receivables and, I mean, to restrict our exposure. The later part of your question that are you hearing this from competition, we would refrain to comment on that. But as far as we are concerned, we do have systems in place how to deal with the customers with overdue outstanding. I mean, we don’t overexpose unduly just to pump in the inventory.
Nikhil Aggarwal
Yeah. So just to add to Sanjay’s point, like the sales has not come on the back of pump and dump. We can just say that.
Rajiv Bharati
Sure. And on the online, what is the credit you extend? Because you said the growth is higher there.
Sanjay Chhabra
Online marketplace, they pay immediately after the replacement or no question ask return period is over, so which is largely — I mean, the agreed credit day is 21 days, and we do collect within 30 days.
Rajiv Bharati
That’s all from my side. All the best. Thanks a lot.
Operator
Thank you. The next question is from the line of Prerna Jhunjhunwala from Elara Capital. Please go ahead.
Prerna Jhunjhunwala
Thank you for the opportunity. Just wanted some details on the capex that you mentioned in the beginning of the commentary that you were undergoing a capex of INR35 crores. Could you please highlight what will be the capacity expansion or backward integration initiatives that you’re taking over here?
Sanjay Chhabra
This would be a combination. I would say that the capacity expansion would be to the extent of 10- to 12-odd percent as far as our backward integration is concerned.
Prerna Jhunjhunwala
So it will be net capacity addition or it will be just backward integration? I’m just trying [Speech Overlap]
Sanjay Chhabra
It will be a backward integration, it’s more the component capacity addition.
Rajiv Bharati
Okay. And net capacity 35 million continues to remain there?
Sanjay Chhabra
That continues to remain there. And in the event of season, we can look at a small investment to debottleneck, wherever — whichever, I mean, units Dehradun and Baddi, wherever we need to unlock some of the capacity. To that extent, we have the flexibility.
Prerna Jhunjhunwala
Okay. And this 10% to 12% capacity is similar for upper and sole both or is it different?
Nikhil Aggarwal
Yeah. It’s at the moment. So there are both the projects in the pipeline for both upper and sole. There would be capacity expansion in both these areas. On the upper side, specifically more for sneakers to make high-quality sneakers. And sole is a regular expansion of the entire sole project, the sole plant that we have in Ganaur. So, addition of [Indecipherable] basically.
Prerna Jhunjhunwala
Thank you so much. Thank you very much.
Operator
Thank you. The next participant is from the line of Umang Mehta from Kotak Securities. Please go ahead.
Umang Mehta
Yeah. Hi. Thanks for the follow-up opportunity. Nikhil, I heard that marketplaces grew by 9%, which means that B2B outright more than doubled on a Y-o-Y basis. Our understanding was that you all were deprioritizing the B2B channels or greater control on pricing. I just wanted to understand what has changed here. Thank you.
Sanjay Chhabra
Hi, Umang. So nothing much has changed except for the Big Billion Day as explained earlier. So the lower growth in marketplace is only a reflection of timing of Big Billion Day had it been during September, mid of September, we would have been able to recognize the entire sales. But as I said that it was in the last week of September, so large — or large part of the Big Billion Day sales was sitting in GIT in our books.
Umang Mehta
No, no. The entire Big Billion Day is on outright basis, is it?
Sanjay Chhabra
Sorry?
Umang Mehta
The Big Billion Day model is on an outright basis for you completely.
Sanjay Chhabra
Yes.
Nikhil Aggarwal
No, no, no. Big Billion Days both…
Sanjay Chhabra
Umang, I’m just helping you understand that it’s not that outright has grown and marketplace has shown a slower growth. Marketplace would have shown a growth — a decent growth had the Big Billion Day timing would have been different.
Umang Mehta
Understood. Sure. And just one thing if you can help me with. So this quarter has several one-offs and different aspects kind of impacting margins. Would you be able to share any clean EBITDA margin print? I mean, just so that we anchor ourselves to a cleaner number.
Sanjay Chhabra
Again, I already explained that the one-off was the retailers meet. And if you see the gross margin dilution, that is only to the extent of 0.5% on INR33 crores is roughly INR1.5 crores to INR2 crores. So to that extent, and — to the extent of non-BIS liquidation, it would be, again, in the similar range, I would say, around INR80 lakhs to INR1 crores. So to that extent, it’s one-offs. So 1% is to the one-off, rest whatever you see in the EBITDA margin, a lower EBITDA margin is driven by phasing of A&P spend, phasing of CSR and all. So all these things, I mean, on a quarter-on-quarter basis, these are moving pieces. I would suggest that a full year view would be a more relevant view.
Umang Mehta
Okay. Sure. Thank you so much.
Sanjay Chhabra
Thank you.
Operator
Thank you. The next question is from the line of Ankit Kedia from PhillipCapital. Please go ahead.
Ankit Kedia
Sir, just one question on — for BIS compliant inventory, we are doing more Type 1 inventory in the market. Is the retailer educated enough to train the consumer that our product is more superior versus unorganized or versus competition? How are we educating that or charging a premium to a consumer for Type 1 inventory?
Nikhil Aggarwal
So it’s about the brand and the legacy of the brand. It’s not — Campus has been there in the market for the last almost 25 years now. So it’s about the comfort and the trust and experience of the distributors and retailer partners. They trust the brand, they know us very well, they know the quality, the designs of the shoes. They know that Campus stands for excellence in quality along with the latest in design, quality material, trends across the — bringing them first to the country across — from across the world in very reasonable price points. So it’s nothing that is out of books for them. And it’s very easy for them to sell this to the end consumer.
Ankit Kedia
And do you think you can manufacture Type 2 inventory also at a lower price point to compete with the unorganized market and grow volumes?
Nikhil Aggarwal
Just come again, sorry, your voice is muffling.
Ankit Kedia
I said that do you think you want to manufacture Type 2 inventory at the lower price point to compete with unorganized market to gain market share and buy volumes?
Nikhil Aggarwal
We can, but it would just dilute the ASP, and we do have the starting price points of INR899. That’s where we start selling the shoes from. I’m talking about men closed shoes, sports shoes. And going anywhere less than that would further unnecessarily dilute the ASP. So we take a very calculated call in terms of the number of pairs that we need to sell for each and every price point. So the overall ASP can be maintained. We don’t want to also further dilute the brand because any — going anything lower than that also unnecessarily dilutes the brand.
Ankit Kedia
Sure. That’s helpful. Thank you so much.
Operator
Thank you. Ladies and gentlemen, that was the last question for today’s conference call.
On behalf of Campus Activewear Limited, that concludes this conference. Thank you for joining us. And in case of any further queries, please reach out to Campus Activewear’s Investor Relations team at ird@campusshoes.com.
You may now disconnect your lines. Thank you.