Cantabil Retail India Ltd (NSE: CANTABIL) Q2 2025 Earnings Call dated Nov. 13, 2024
Corporate Participants:
Vijay Bansal — Chairman & Managing Director
Shivendra Nigam — Chief Financial Officer
Analysts:
Renuka Sivsankar — Analyst
Shrinjana Mittal — Analyst
Unidentified Participant
Giriraj Daga — Analyst
Aman Vishwakarma — Analyst
Dhiral Shah — Analyst
Meet Raj — Analyst
Presentation:
Operator
Ladies and gentlemen, good day, and welcome to Q2 FY25 and H1 FY25 Earnings Conference Call of Cantabil Retail India Limited, hosted by Philip Capital, PCG desk.
Before we begin, a brief disclaimer. The presentation which Cantabil Retail India Limited has uploaded on the stock exchange and our website, including the discussion during the call contains or may contain certain forward-looking statements concerning Cantabil Retail India Limited business prospects and profitability, which are subject to several risks and uncertainties and actual results could materially differ from those in such forward-looking statements. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Ms. Renuka from PhillipCapital India Private Limited. Thank you, and over to you, ma’am.
Renuka Sivsankar — Analyst
Thank you. Good afternoon, everyone. On behalf of PhilipCapital Private Client Group, I welcome all of you to the Q2 and H1 FY25 Earnings Conference Call of Cantabil Retail India. From the management today, we have Mr. Vijay Bansal, Chairman and MD; Mr. Deepak Bansal, Whole-Time Director; Mr. Basant Goyal, Whole Time Director; Mr. Shivendra Nigam, CFO; and Mrs. Poonam Chahal, CS.
Now I hand over the conference to Mr. Vijay Bansal for his opening remarks, and then we will open the floor for Q&A. Over to you, sir.
Vijay Bansal — Chairman & Managing Director
Good evening, everyone. On behalf of Cantabil Retail India Limited. I welcome everyone to the Q2 and H1 FY25 earnings conference call of the company. Joining me on this call is Mr. Deepak Bansal, Whole-Time Director; Mr. Basant Goyal, Whole-Time Director; Mr. Shivendra Nigam, CFO; Ms. Poonam Chahal, CS and Marathon Capital, our Investor Relations advisers.
I hope everyone had an opportunity to look at our results. The presentation and result release have been uploaded on the stock exchange and our company website.
We are pleased to report a good beginning to FY25 with our company achieving an impressive 15.5% volume growth in H1 FY25. This success was accomplished despite challenging market conditions. Our strategic agenda is focused on enhancing customer experience, reinforcing our brand promise, and driving growth through expanded reach into newer markets and diversification across categories.
Let me conclude by reiterating our key focus areas; increasing retail presence, enhancing manufacturing capacities, improving efficiencies. We are committed to solidify our position in the fashion apparel sector.
I now hand over the call to Mr. Shivendra Nigam for giving update on the financial and operational performance for the quarter. Thank you.
Shivendra Nigam — Chief Financial Officer
Thank you, sir. Good evening, and a very warm welcome to everyone. Coming to the financials. Performance highlights for Q2 FY25. Revenue from operations for Q2 FY25 grew by 12% to INR151.2 crore as compared to INR135.1 crore in Q2 FY24. EBITDA for Q2 FY25 stood at INR34.6 crore as compared to INR29.6 crore in Q2 FY24. EBITDA margin for Q2 FY25 stood at 22.8% as compared to 21.9% in Q2 FY24. PAT for Q2 FY25 stood at INR6.6 crores as compared to INR7.5 crore in Q2 FY24. PAT margin for Q2 FY25, stood at 4.3%.
Performance highlights for H1 FY25. We have achieved revenue from operations for H1 FY25, which has grown by 13% to INR279.1 crore as compared to INR246.9 crore in H1 FY24. EBITDA for H1 FY25 stood at INR73.9 crore as compared to INR64 crore in H1 FY25. Our EBITDA margin for half year FY25 stood at INR26.5 crore as compared to INR25.9 crore in H1 FY24. PAT for H1 ’25 stood at INR18 crore as compared to INR19.8 crore in H1 FY24.
On the expansion front, the company accelerated its store expansion strategy by opening 23 stores net during H1 FY24. The company operates to 556 retail stores, out of which, 425 are the company-owned stores at 135 by franchisee operated. The retail area, we are now serving at 7 lakhs plus square feet, which is stand on September 30, 2024.
We will now begin the question-and-answer session. Thank you.
Questions and Answers:
Operator
Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] The first question is from the line of Shrinjana Mittal from RatnaTraya. Please go ahead.
Shrinjana Mittal
Hi. Thank you for the opportunity. So I have a couple of questions. So, one is on the same-store sales growth. For this quarter, our same-store — reported same-store sales growth is around 3.48%, right, as per the presentation.
Vijay Bansal
Correct.
Shrinjana Mittal
Yeah. So firstly, can you help me understand the calculation for that like how do we calculate? Actually, like it’s not very clear. I think I asked in the last call also, but it’s not very clear because we have added about 15% to the store growth and our sales growth is around 12%. But the newer stores, I’m assuming it would take time for the new stores to become mature, right? So how is the calculation done for the same-store sales growth?
Vijay Bansal
The same-store sales growth, we first completely removed the new stores. Then there are two kinds of stores. One which has completely run for the 12 months last year also and same period this year also. But the store which has come in between last year and this year, they are running for the full-time. So this year, we are reducing that period for which we operated extra in the previous year. So that’s how we’re making completely like-to-like growth. So there is no error in it — means, there is no error we’re making.
Shivendra Nigam
And also, the same-store sales growth what you are telling, that is 3.4% negative side, minus 3% for this quarter.
Shrinjana Mittal
Correct. Correct. That’s why. So [Speech Overlap]
Shivendra Nigam
It’s an apple-to-apple comparison. Whatever the store say, in the month of June was operating fully, they have been considered, same in the July and August kind of thing. That’s like July, September.
Shrinjana Mittal
Right. So Shivendra ji, what I’m asking is like why it is surprising to me is because if it’s negative 3%. So that means our old stores have not grown, old stores as in stores which were opened last year as well. So, the growth which has come, which is in total sales, which we see about 12%, that is entirely from the store addition, right, from the new stores?
Shivendra Nigam
Correct. You’re right. Whatever the expansion is being done because considering the market scenario specifically on North, first quarter if you have seen, we were being plus 1.3% in value, and the volume was actually 4%. In this quarter, also, the volume is good. We are just minus 0.8% in terms of volume. So that is considered in this. So new — whatever the growth has come from new stores at minus 3% for the quarter. Overall, six months, minus 1.2%. That’s it.
Shrinjana Mittal
Okay. Yeah. And like just one more clarity on this. Sir, same-store sales growth, like if we — if I just look at the formula for that and like so for this year, this quarter, September ’24, when we are calculating in the denominator, we’ll take the stores which were opened in September ’23, or September ’22? Or like which one would that be? Like are we taking [Speech Overlap]
Shivendra Nigam
Same-stores which have been opened in the last year. As explained, opened in the last year, that has been considered this month also.
Shrinjana Mittal
Okay.
Vijay Bansal
So, like, I explained by an example, if some store has been opened in the July — August last year. So if we remove the four-month period of this year also, then we will consider the sale of this year from August only and compare apple-to-apple.
Shrinjana Mittal
Understood. Okay, okay. So but that’s an one year old store. Okay, got it. And like when we were initially in the start of the year, we were targeting 4% to 5% in same-store sales growth, right? So now that like this half, we have been short on that. So how do we see the year closing? Like do we see some improvement in the same-store sales growth in the second half? Or would it be in the similar range?
Shivendra Nigam
So considering the market scenario, as well as peers, if we are — so we take the period for the festivity everyone is hoping and we are also one. So the post-Shradh period. Shradh to exactly the Diwali day, 28 days, we have seen a very decent growth in terms of sale in same-store sales growth in these 28 days, apple-to-apple, like-to-like comparison. And going forward, the season is also going good.
So we are hoping, yes, there is a 1.34% negative side, but still, we are not revising our any estimate. 4% to 5% what we are on a totality basis for the year should come. Yes, we understand for this achieving 4%, 5% number, we need to have it 7% to 8% growth for the remaining six months and which are very hopeful that should come. Maybe the plus/minus 4% is a different thing, but positive, the year should be ended with a very positive note.
Shrinjana Mittal
Understood. Understood. Thank you. Thank you. I just have one other bookkeeping question. So, are you –sorry.
Shivendra Nigam
Yeah. We’re answering. Yeah, right.
Shrinjana Mittal
Yeah. One other bookkeeping question. So one — the job — we used to report job work charges in the PPT. For this quarter, can you share that number, Shivendra ji, please?
Shivendra Nigam
Separately, I’ll share it with you — I’ll share with you. Offline I’ll share with you.
Shrinjana Mittal
Okay, okay. Got it. Thank you.
Operator
Thank you. The next question is from the line of Pratik Kothari, an Individual Investor. Please go ahead.
Unidentified Participant
Sir, good evening. First and foremost, just wanted to check with you in terms of the market scenario right now. We’ve been hearing that there is some sort of kind of sluggishness in the market of consumer demand. Did you see that as well in the past quarter? And do you see that currently as well? And do you see it improving in the forthcoming quarter? Just wanted to take a sense from you on that.
Vijay Bansal
No. The sluggish demand, yes, we saw in quarter one and two. Quarter two, it was more and quarter one, it was less. But in quarter three in the running
Period, we are not seeing the sluggish demand, there is upbound in the demand. And in quarter two, also the demand was sluggish because there was a preponement of the Shradh period in which the people used to refrain from the shopping activity. And there was a pre-ponement in the Raksha Bandhan festival also, last year, it was on 30th August and this year, it came on 20th August. So, 10 days period was sluggish in August also. So now currently, the market is upbound.
Unidentified Participant
And sir, obviously, congratulations on good volumes that you’ve shown the growth on. But any particular reason if I do a comparative year-on-year, any particular reason for the fall in margins, both on EBITDA and PAT levels? If you could highlight any particular reason which you’ve seen where margins have seen contraction?
Shivendra Nigam
So in our earlier commentary as well, we are continuously saying, we have been focused company in terms of managing our gross margin, right? So gross margin has also been improved this side. Yes, once the same-store sales growth is only slightly under pressure, so cost is same. So that is why EBITDA margin is on a percentage basis is slightly on a lower side. So that is the main reason. Plus, we are opening the new stores. So that will also will take time to get mature. So that is what the scenario mainly is. Expenses are there, but same-store sales growth would come that would be recovered.
Unidentified Participant
But sir, we — over the last some back-to-back quarters, we’ve seen that the SSG growth has kind of been in the single-digit kind of thing. Obviously, there has been good volume growth, but that is primarily on account of new stores opening is what we believe. Is that the right reason? Or you believe that the SSG growth is robust enough for to contribute to the higher EBITDA margin?
Vijay Bansal
No, the quantity in like-to-like also for the first six months, there has been increase in the 1% in the quantity in the like-to-like sales. And there has been — value wise, we have decreased by 1.25%. So purely, the quantity is not attributed to the new store opening. The old stores have quantity-wise and volume-wise, they have grown from the last year in the H1 specifically. So for the next few — next two quarters, we are really hopeful.
Unidentified Participant
Okay. And sir, last question is generally on the inventory means. Do you think that the inventory levels will continue at the levels of currently or because of the festivities in Q3, the inventory levels would be different on account of — means, obviously, this is relating to the sales itself of Q3? How do you see the inventory panning out over the next six months?
Shivendra Nigam
Correct. You rightly pointed out. Whenever you have seen our balance sheet for the 30th September, you have seen inventory on a higher side, right?
Unidentified Participant
Right.
Shivendra Nigam
Because my all the winter inventories has been piled up now. So out of this increased inventory, my cash flow for the first half is majorly goes towards the inventory as on 30th September, right? Because my obviously, winter inventory has been piled up. So, the bifurcation for this is approximately whatever the cash flow was, new stores inventory, as well as majority in the winter inventory, plus existing basis store on you can say, 2% has been increased. So this will be rectified and this will be corrected at the end of the year. But overall, inventory days, what we have been communicated earlier as well, approximately 120 days would remain same.
Unidentified Participant
Okay. Sir, last question, basically, in terms of the festivities right now in basis your preliminary analysis you’ve seeing the growth coming in from Tier 2, Tier 3 kind of towns or more of rural demand, which is kind of built up. Can you throw some light around that? Is just helping us to do the analysis in terms of where the growth is coming in from as well?
Vijay Bansal
The growth is coming from both urban and the rural areas. So there is no dearth of demand in the rural areas now. So demand is equally upbound in both the urban and the rural areas.
Unidentified Participant
Okay. Okay. Okay. Okay. Got it, sir. Probably I’ll come back in the queue in case of additional questions.
Vijay Bansal
Thanks.
Unidentified Participant
Thank you so much.
Operator
Thank you. [Operator Instructions] The next question is from the line of Giriraj Daga from Visaria Family Trust. Please go ahead.
Giriraj Daga
Yeah. Hello, Team. So, my first question is, did you mention the number of SSG before like — Diwali like-to-like period, what was there in October? I’m not taking October because festive — actually, there was a 10-day delay or ahead of last year Diwali was 10 days later. So on the like-for-like, let’s say, from Navratri till Diwali, what was the SSG?
Shivendra Nigam
Like I just said its exactly 28 days post-Shradh period till Diwali day. So we have noted a decent amount of SSG. It’s a good amount of SSG. We have been noted.
Giriraj Daga
Positive?
Shivendra Nigam
Yeah.
Giriraj Daga
Positive SSG, right?
Shivendra Nigam
Yeah, it’s a positive SSG and a decent number of SSG.
Giriraj Daga
Okay, okay. I understood. Thanks. Second, when I look at the numbers like this quarter, we had about 200 basis points, 300 basis points of gross margin expansion. And first half also, we had about 240 point of gross margin expansion. So first question on, when I look at the realization, as per your volume has grown up, so realization has gone down actually. So what is driving this gross margin expansion?
Shivendra Nigam
So gross margin expansion means against increased mainly on there was some correction in prices, ight? Earlier, it was not done. So we have taken the correction in the prices. So mainly gross margin has been expanded, as well as volume is also on a positive side in Q1 and very slightly minus on a second side. So mainly the gross margin has increased on the pricing side.
Giriraj Daga
No, sorry, sir. When you say your total revenue was down, volume was a small minus, right?
Shivendra Nigam
Right, percentage. So obviously, the volume isn’t on the positive side, if you say my overall sales for the six months has been down minus 1.3%. However, my volume is plus 1.03%, 1%, you can say.
Giriraj Daga
So, the realization should be down, right?
Shivendra Nigam
Sorry?
Giriraj Daga
Realization should be down.
Vijay Bansal
Realization is [Speech Overlap] the realization is down here. Average sale price has gone down. We have passed on the benefit to the customer of the raw material store correction. Our gross margins have increased because we have — markup we have increased. So we have done a revision in the markup of the products we are making.
Giriraj Daga
And this markup will sustain, right? It’s not — we are not going to go back to the earlier gross margin.
Vijay Bansal
This markup is sustainable.
Giriraj Daga
Okay, okay. And you are going to — I just missed the number. You’re continuing with the earlier thought process of about store expansions, somewhere about 80 or 200 store addition, right?
Vijay Bansal
Yeah, we have the same target of 80 to 85 new stores in this year. Though there is some lesser number of stores have been opened in the Q1, Q2. But in Q3, October, we have only opened 10 stores and the same kind of number we are opening in the November and December. So the shortfall, which we had gone into Q1 and Q2 will be covered up in Q3.
Giriraj Daga
Okay. And what is the overall capex, like what was the second — full-year capex we are looking now?
Shivendra Nigam
So same capex is there. Approximately INR1,700 to INR1,800 per square feet capex is there in Q1 as well. But however, the biggest store been opening by Q — H1, store size about INR1,650 average size. So, accordingly, we — 70 to 80 stores, we have been opening. So approximately on this basis, we can take INR20 crores approximately in INR20 crores to INR25 crores in terms of capex for store expansion, plus existing facility, what we have been making for our warehousing, that is required in capex as well.
Giriraj Daga
You mentioned around INR20 crore to INR25 crore capex?
Vijay Bansal
Yes, yes.
Giriraj Daga
But like first half only, we had done about INR21 crores of capex, right?
Shivendra Nigam
That includes, ideally the INR20 crore to INR25 crore is for two expansions. One is for store expansion. And one, the warehousing facility, has become office facility we had that will be probably closed by this financial year. So that majority capex is going there as well, which will be finished by this financial year. Approximately that requires INR15 crore to INR20 crore more by the end of the financial year or first quarter of next financial year.
Giriraj Daga
Okay. So this year capex probably will be about INR40 crores.
Shivendra Nigam
INR40 crore to INR50 crores even this year.
Giriraj Daga
Okay. And we will not need any additional equity for this now?
Shivendra Nigam
No, no, no. Everything from the internal accruals only.
Giriraj Daga
Okay, okay. Sure. Thank you.
Shivendra Nigam
Thank you.
Operator
The next question is from the line of Pratik Kothari an Individual Investor. Please go ahead.
Unidentified Participant
Thanks once again sir. Sir, just some follow-up questions. Basically, we’ve seen a volume growth of almost 14% plus in the quarter, whereas the overall value growth was only 12%. I just wanted to kind of correlate in terms of was there any category change which saw better demand, which was lower in value? Or was it that you’ve reduced the prices? What is it that has led to the value downfall compared to the corresponding quarter of last year?
Vijay Bansal
So, quantity if we consider L2L, it’s minus 0.75%, but overall quantity has been increased to 15%. So a major contribution has been done by the new stores. So our accessories contribution is around 5% so — and rest of the garments are 95%. So it says — means, the same ratio, which we have been earlier. So it’s not due to the addition of the accessories. It’s the same manner due to which the quantity has increased.
Unidentified Participant
So is it fair to assume that accessory hasn’t grown to the extent of what you are expecting accessory demand to come in from the stores, means, still we continue to believe that apparel will constitute to have a major pie in terms of our sales going forward as well.
Vijay Bansal
Earlier also, like we are expecting accessories to be in this range only around 6%, maybe 7% only, and it’s coming in that range only. So we never overestimated the accessories contribution in the total sales. So, our contribution will be something like this only in future.
Unidentified Participant
Okay. And a related point to revenues was just wanted to reconfirm the guidance for the year. Do we stand to the revenue target and profitability what we had earlier quoted?
Shivendra Nigam
Yes, we haven’t revised any of the target and very confident to achieve those numbers. So this year, approximately 15%, 17%, 18% revenue growth would have been there.
Unidentified Participant
And in terms of profitability?
Vijay Bansal
Margins — EBITDA margin should be in the line of 26% to 27%. That is in December and 10% approximately PAT number should have been here, maintaining the gross margin 55% plus.
Unidentified Participant
Okay. And coming to the store size in terms of growth, obviously, we heard that basically you’re going into large pocket stores in terms of size and all, how are they performing in terms of what is the response which you’re getting from those kind of stores? Is it becoming value accretive for you in any manner? Is it more still in the experimental stage? What are you seeing on that front?
Vijay Bansal
No, the experience we have got by opening the new store, we think it’s a good idea, and we are really successful where we have opened the new — bigger stores, I mean, and even the retail cost of the bigger stores is lesser than the smaller stores, if they have a better EBITDA margin, the bigger stores have. So we will be going with the bigger stores only in the future.
Unidentified Participant
So, your indications in terms of PSF on these larger stores is much better compared to your traditional size stores is what you– what we have to estimate?
Vijay Bansal
So, bigger stores tend to have a lower PSF, but that’s the norm of the industry because when you increase the stores, the PSF tend to go down, but your EBITDA margins shouldn’t go down. Your realization shouldn’t go down. So those things are maintained and even better — the profitability is better in the bigger stores.
Unidentified Participant
Okay, okay. So on the EBITDA front, you will probably see an uptick is what you’re saying on account of increase in large stores?
Shivendra Nigam
Yeah, on company level. [Speech Overlap] store.
Unidentified Participant
And in terms of what would be that number of bigger stores today means, and if I have to put that number into perspective?
Vijay Bansal
So we are [Speech Overlap]
Unidentified Participant
How many bigger stores would have been already operational?
Vijay Bansal
So we have 20% family stores. So these are the bigger stores. We have the 30% as the men’s and the ladies, and our 50 — 45% stores are only men’s wear store and 5% stores, we are doing ladies and kids. So, you can say 20% are the bigger stores.
Unidentified Participant
Okay. Understood, understood. And last quick question was on the split between online and offline. Obviously, in the previous calls, you’ve highlighted about digital penetration and all. Are you seeing an uptick there as well in terms of online penetration? What would be the split?
Shivendra Nigam
So the split as of now, overall guidance is same for the year. But from the Y-o-Y basis, quarter-on-quarter, also the growth is there. Last year, out of this, we have been in Q2, approximately INR6.5 crores, out of total revenue of INR135 crores. And this year, out of INR152 crores, approximately INR10 crores has already been achieved.
Unidentified Participant
In the online space, from the online?
Shivendra Nigam
E-commerce space, yes, correct. E-commerce space. So overall, numbers are coming as per our expectation and annual guidance is same.
Unidentified Participant
Thank you, sir. Thank you so much. That’s all from my end. Thank you, sir.
Shivendra Nigam
Thank you.
Operator
Thank you. [Operator Instructions] The next question is from the line of Aman, an Individual Investor. Please go ahead.
Unidentified Participant
Yeah. Hi, sir. Am I audible?
Operator
Yes sir.
Vijay Bansal
Yes, Aman. Yeah.
Unidentified Participant
Okay, okay. So sir, my question is, if we look at the organized retail sector, like fast fashion, is the growth engine for many of the peers. Is there any component of fast fashion kind of products in our current product portfolio? Or are we looking for such kind of addition in future in our stores?
Vijay Bansal
Yeah. We have planning to add the fast fashion kind of products in our collection. So we are planning to go with the like 25% of the collection should be in the category of fast fashion, but a majority of the brand is about the basic fashion, minimalistic fashion. So we can’t change the DNA of the brand completely. But yes, we are inculcating the fast fashion element and components in the collection.
Unidentified Participant
Okay, okay. So basically, the — my idea was of — my idea of question was basically, the fast fashion is growing about 30%, 35% kind of CAGR, so that was the logic.
Vijay Bansal
No, your logic is right. So, there is no denial in there. So we are changing ourselves a little.
Unidentified Participant
Okay. Okay. Thank you. Thank you, sir. Thanks, sir.
Vijay Bansal
Thank you.
Operator
The next question is from the line of Aman Vishwakarma from PhillipCapital. Please go ahead.
Aman Vishwakarma
Hello. So I had a question on your — to begin with the store addition. So you set a target of 80, 90 stores every year for the next couple of years, right? So this expansion — so what are the reasons that we are planning to expand in T3 or T4 or T1, T2?
Vijay Bansal
So we have presence on all the three categories, Tier 1, 2 and the 3. So 20% of the stores are in the Tier 1 town, 40% in Tier 2, and 40% in T3 towns. So — and the retail cost is lesser in the Tier 2 and 3 towns. So that’s why we have going in the Tier 2 and 3 towns and the company has a good traction in the Tier 2, 3 towns and good brand awareness in these towns. And the company’s ASP is very suitable for the smaller towns. So that’s why we are going in these towns.
Aman Vishwakarma
Okay. And second question would be on your fast fashion thing that you mentioned earlier. So I mean, sir, do we have the design capability for it and maybe the logistics that we need to go with it?
Vijay Bansal
Yeah, we have a design capability. We have a team of designers who are working on the fast fashion kind of stuff also. So we will be soon introducing the fast fashion — little fast fashion categories in the collection and logistic capability is there.
Aman Vishwakarma
Okay. And just lastly, so I see your stores being very skewed towards men’s fashion, right? So do you not think to some extent that limits our ability to charge a premium to the customers? So would it not make more sense to have more occasional wear for women that would enable us to go up the value chain and what is your thought process?
Vijay Bansal
We are not planning the occasional wear for the ladies’ stuff. But yes, because Cantabil is predominantly men’s and the customers sometimes don’t know that Cantabil is offering ladies collection also. So we are opening ladies and kids exclusive stores also. So that stores are highlighting the Cantabil ladies collection, and they are providing good response to us.
Aman Vishwakarma
Okay. So what would be the revenue share like between the two, that the ladies wear and the men’s wear? Maybe a couple of years down the line, how do you see that panning out?
Vijay Bansal
So right now, we have like 83% menswear, 10% ladies wear and 5% accessories and rest is the kidswear. But in the future, we see that ladies wear component should go up like 12%, 13%, it should come.
Aman Vishwakarma
Okay, got it. I’ll come back in the queue.
Vijay Bansal
Okay, thank you.
Operator
Thank you. [Operator Instructions] The next question is from the line of Dhiral Shah from PhillipCapital. Please go ahead.
Dhiral Shah
Yeah. Good afternoon sir. Thanks for the opportunity. Sir, just wanted to know what is the reason for the higher depreciation in the P&L side since we have not opened much store in H1? And what will be the run rate going ahead?
Shivendra Nigam
So depreciation is there. Since if you see for the last 1.5 years, we have opened approximately 90-plus stores, approximately 100 stores, and out of which 90 plus are the company-owned stores. And now since the size is bigger in terms of the store 1,600 square feet. Obviously, capex is moe. The more capex is there, the more depreciation is there. Now considering this, Ind AS 116, the higher depreciation is accelerated because of Ind AS 116 working. All the lease rental has been converted. The more we are opening the bigger stores, as well as company-owned stores, depreciation and finance cost would increase.
Dhiral Shah
So will this not impact our profitability in terms of our profit after tax?
Shivendra Nigam
So yes, that is why we are giving separate slide in terms of Ind AS, pre-Ind AS, post-Ind AS. Whatever the number is being shown that has been lesser INR1.25 per quarter in terms of profitability. Actual profitability before Ind AS is INR2 crores. And then on a purely non-Ind AS side also, there’s a bigger — stores would be there and capex would be there. So slightly depreciation would be on the higher side.
Dhiral Shah
Okay. And sir, in terms of demand outlook or on the volume side, so are we seeing more interest coming from the Tier 2, Tier 3 cities? Or it is also from metro and urban cities?
Vijay Bansal
We are expecting the same upbound in the market in both Tier 1 and Tier 2, 3 towns. So there is no difference between the demand in between.
Dhiral Shah
So this 13% volume growth that we have seen in Q2, so is it equally from the metro and the Tier 2 and Tier 3 cities?
Vijay Bansal
Yeah, it’s equally between these, yeah
Dhiral Shah
Okay. And sir, what was the growth on the online channel side in this quarter, particularly since in H1, we have seen 32% growth, but particularly for this quarter in Q2, what was the growth and what is the outlook on the online sales channel going ahead?
Shivendra Nigam
As I just replied, there is an online growth as well. So last year, 6.5% as compared to this quarter, it’s 10.5%. So definitely, growth is good in terms of online. And overall guidance, as we said earlier, last year, we did approximately INR5.5 crores. This year, we have a target of approximately 7% of total revenue that is going to be achieved, yeah.
Dhiral Shah
Okay. And sir, in the coming years, let’s say, over the next two years, are we planning to take it to double digit?
Shivendra Nigam
So yes, when we have been always said, we are targeting to make the company the INR1,000 crore revenue company by FY27. And that time, we have seen a contribution for e-commerce approximately 8% to 10%. So from here onwards, we will take it to the double-digit.
Dhiral Shah
Okay. And sir, lastly, if we had INR1,000 crores kind of a revenue that we are aspiring to. So what will be the product category mix between menswear, womenswear, or maybe on kids wear and accessories? What are we targeting, sir?
Vijay Bansal
So when we’ll be doing like INR1,000 crores, so ladies and kids category contribution will increase. So ladies category should be between 15% to 20%. And the kids category, we’re expecting something like 6%, 7% maximum.
Dhiral Shah
And sir, what will be our strategy to increase the share, particularly on the women’s category side? Are we planning some new product launches over there to improve the pie or maybe to increase their contribution in the stores that we manage?
Vijay Bansal
So we are adding new ladies and kids exclusive stores, through which we are planning to take the contribution of ladies and kids up in the total sales.
Shivendra Nigam
So existing share, if you see the bigger stores will contribute. If you see last year to last year, it’s growing 8%, 9%, we are expecting 12%. So that is why bigger stores is there, which includes contribution in terms of ladies more, as well as exclusive stores, which is approximately 40-plus stores.
Dhiral Shah
Okay. And sir, when it comes to the average selling price, what would be the difference between the categories, let’s say, menswear, kidswear or even women’s wear?
Vijay Bansal
So, ESP is more or less the same in the men’s and the ladies, but yes, it’s slightly lesser in the kidswear.
Dhiral Shah
Okay, okay. Even the accessories would remain at the same range?
Shivendra Nigam
That is lower. That is obviously lower.
Dhiral Shah
Okay, okay. And sir, just last one question. In terms of our EBITDA margin over the next two years to three years, is there any room for further improvement that we may see from the current range or maybe it will remain the same even going ahead?
Shivendra Nigam
So, we have set a higher benchmark. So whatever the numbers we have achieved in FY23, when we are talking about to reach INR1,000 crores, we are trying to come back on those numbers, 26% to 27% EBITDA margin now, it has — it can go up to 28% to 30% in coming years.
Dhiral Shah
Okay. And sir, if may I ask what will be the margin driver going ahead to take it to 28% to 30%?
Shivendra Nigam
So same — 4% to 5% of the same-store sales growth we are expecting, which was obviously not there last year. And this year, we are doing more — because the contribution is fixed, we are robusting our gross margin. So this EBITDA margin uptick would be 2% to 3% would have been there.
Dhiral Shah
Okay. Okay, sure. Thank you so much. That’s it from my side.
Shivendra Nigam
Thank you, sir.
Operator
Thank you. The next question is from the line of Meet Raj from Equirus PMS. Please go ahead.
Meet Raj
Yeah, thanks for the opportunity. Two questions from my side. First is, again, related to fast fashion. So basically, what is the launch timeline for this category? Related question is across how many stores we are planning to introduce fast fashion. Will it be only in the family stores or other stores as well?
Vijay Bansal
So like we will be moderating our current collection, so it will be going to the every store. And so, we will not be adding the like new SKU, but we’ll be like modifying the old collection into — a portion of it into a fast fashion collection. So it will be available in all these stores.
Unidentified Participant
Okay, okay. And would it — will it be a material margin difference of fast fashion clothing versus your normal clothing?
Shivendra Nigam
Not exactly. The overall, we are targeting — see plus/minus 1%, 1.5%, 2% in any category is different and depends on the product on product, right? But overall gross margin, what we are maintaining, that would be there, 55% to 56%. That’s the overall target.
Unidentified Participant
Okay, okay, okay. Second question is in terms of your FY27 revenue. When you say INR1,000 crores of revenue and with higher EBITDA margin of close to 29%, 30%. So do we still maintain our earlier guidance of INR120 crores to INR125 crores of net profit in FY27?
Shivendra Nigam
Percentage would be there, what I mentioned. We are trying to reach that 10% as of now. So there is always shown in terms of PAT margin, 10% to 11%, 12% and 26, 27 this — we are delivering now. the moment going forward, 1% to 2% uptake would have been there.
Unidentified Participant
Okay, okay. And last question, in terms of accessories category. So can you tell the exact margin of accessories? Is it materially lower than your clothing category?
Shivendra Nigam
As I just mentioned, all the margins we are operating on plus 50%, 52% 53%. Approximately 1% or 2% margin on category-wise is different, but overall margin is lying in all the categories above 50% and somewhere 55% to 56%.
Meet Raj
Okay, okay. Got it. Got it. Thank you so much.
Shivendra Nigam
Thanks, sir.
Operator
Thank you. As there are no further questions from the participants, I would like to hand the conference over to the management for their closing comments.
Vijay Bansal
I would like to, once again, thank you all for joining us on this call today. We hope we have been able to answer your queries. Please feel free to reach out to our CFO or IR team for any clarification or feedback. Thank you, all.
Shivendra Nigam
Thank you, sir.
Operator
[Operator Closing Remarks]