Cantabil Retail India Ltd (CANTABIL) Q4 FY23 Earnings Concall Transcript

Cantabil Retail India Ltd (NSE:CANTABIL) Q4 FY23 Earnings Concall dated May. 16, 2023.

Corporate Participants:

Smit Shah — Investor Relations

Vijay Bansal — Chairman and Managing Director

Deepak Bansal — Whole Time Director

Basant Goyal — Whole Time Director

Shivendra Nigam — Chief Financial Officer

Analysts:

Kapil Jagasia — Nuvama Wealth Research — Analyst

Himanshu Nayyar — Systematix — Analyst

Kunal — Dalal & Broacha Stock Broking Limited — Analyst

Rusmik Oza — Nine Rays Equity Research — Analyst

Bharat Gianani — Moneycontrol — Analyst

Hiten Boricha — Sequent Investments — Analyst

Kalpesh Parekh — JSN Advisory — Analyst

Ashish Kumar — Investor — Analyst

Praveen Sharma — Sharma Investment — Analyst

Presentation:

Operator

Ladies and gentlemen, good day, and welcome to the Cantabil Retail India Limited Q4 FY ’23 Maiden [Phonetic] Earnings Conference Call. [Operator Instructions]

I now hand the conference over to Mr. Smit Shah from Adfactors. Thank you and over to you, sir.

Smit Shah — Investor Relations

Thank you, Vikram. Good evening, everyone. This is Smit Shah from Adfactors PR. We present, Investor Relations for Cantabil Retail India Limited. On behalf of Cantabil Retail India, I welcome you all to our maiden earning conference call for Q4 and FY ’23. We will have a brief opening remarks from the management followed by a question-and-answer session.

Please note that certain statements made during this call may be forward-looking in nature. Such forward-looking statements are subject to certain risks and uncertainties that could cause our actual results or projections could differ materially from those statements. The company will not be in a way responsible for any actions taken based on such statements and undertakes no obligation to publicly update these forward-looking statements.

I would now like to hand over the call to Mr. Vijay Bansal, Chairman and Managing Director for his opening remarks. Over to you, sir.

Vijay Bansal — Chairman and Managing Director

We will [Phonetic] start to everyone. On behalf of Cantabil Retail India Limited, I welcome, and thank you all to the earning conference call of quarter four and FY ’22-’23 of the company. Joining me on this call, Mr. Deepak Bansal, Whole Time Director; Mr. Basant Goyal, Whole Time Director; Mr. Shivendra Nigam, Chief Financial Officer; Mrs. Poonam Chahal, Company Secretary.

We have uploaded the results, release and our investor presentation on investor relations and our company website. And I hope that everyone had the opportunity to look at our results. Our company has achieved a milestone revenue [Phonetic], and we have grown about INR500 crore mark for the first time and [indecipherable] impressive EBITDA in fact in FY ’23.

[Foreign Speech]

Now, I am handing over the call to Mr. Deepak Bansal.

Deepak Bansal — Whole Time Director

Thank you, Vijay sir. Good evening, and a warm welcome to everyone present on the call. It’s my pleasure to share with you that in March-April growth we have experienced over the past few years. Our store count on 31st March 2022 was 378. We opened 69 new stores in the last financial year. Now, our store count stands at 457. Out of these, 70% are Company stores and 30% are Franchisee stores. We plan to open six to seven new stores every month.

As purchasing power has evolved tremendously in this Tier II and III towns in last few years, so majority of our new stores will be coming in these towns. All new expansion, will be done through internal accruals. Currently, we have 20% was working Tier I towns, 40% in Tier II towns, and 40% in Tier III towns. Total retail area under operation is around 5,25,000. Our average size per store is 1,200 square feet approximately. Our e-commerce business is also growing well.

Now, I will hand over it to Mr. Basant Goyal, who throw some light on e-commerce business.

Basant Goyal — Whole Time Director

Thank you, Deepakji, and good evening, everyone. We started our e-commerce operations in the year ’22-’23, and our net sales costs INR13.5 [Phonetic] crores, which is around 2.5% of the total turnover. We see e-commerce as a great business and we target exponential growth this year. So we will target an overall turnover to reach around 6% to 7% of the total turnover in the financial year ’23-’24, and further to 8% to 10% in the FY ’24-’25.

We are currently listed in all the leading markets, which is from Myntra, Ajio, Tata Cliq, Flipkart, Amazon and Nykaa. We have recently launched our own website, and we are trying to attract more customers on our platform. We have also successfully implemented omni-channel [Phonetic] systems for faster deliveries and a seamless shopping experience for the customers.

I would now like to pass the call to Mr. Shivendra Nigam, who will take you through the key financials of the company. Thank you.

Shivendra Nigam — Chief Financial Officer

Thank you, Basantji. Good evening and warm welcome to everyone. It gives me immense pleasure to overview the company’s financial number for the quarter and financial year ended 2023.

Let’s start with quarter four numbers and then I’ll come back on FY ’23 as a whole. For quarter four, we have been able to register INR173 crore of sales as compared to INR133 crore of sales for last year, that is 29.93% of the growth. EBITDA, INR41.73 crore for quarter four FY ’23, against Y-o-Y of INR33.82 crores for FY ’22, that registered a growth of 23.39%. PAT, INR16.88 crores as compared to INR8.12 crores, that has been 9.77% this year, with a growth of 107.88% in PAT. Our EPS has got for the quarter INR10.34, that is 107.63% growth Y-o-Y for Q4 FY ’22.

Now coming to the whole financial year ’23 numbers. We have been able to register cemented sales of INR552 crores, against INR383 crores for last financial year, that is 43.96% of the growth. Now coming to EBITDA, INR163.65 crores EBITDA for the financial year ’23, as compared to FY ’22 INR110.1 crores, that is seeing a growth of 48.61% in EBITDA. Our PAT has grown to INR67.24 crores as compared to INR38.06 crores for FY ’22, that is 12.19% PAT this year with a growth of 76.67% as compared to last year. Our EPS has grown INR41.18, that is 76.66% growth as compared to last year.

Now coming to ROE and ROCE. Our ROE for the financial year ’23 have got 30%, that is coming, 30.38%, and ROCE, 47.22%.

With this, end of numbers, I’ll request moderator to open the floor for question-and-answer session. Thank you.

Questions and Answers:

Operator

Thank you very much, sir. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] Take our first question from the line of Kapil Jagasia from Nuvama [Phonetic] Wealth Research. Please go ahead.

Kapil Jagasia — Nuvama Wealth Research — Analyst

Thank you. And congratulations for great set of numbers. Sir, my first question is regarding your 20% revenue growth. Can you just break it out for us. Regarding, what would be the same-store sales growth for you this quarter, and also any price improvement in that?

Shivendra Nigam — Chief Financial Officer

So, as far as sales is concerned for the quarter, as I mentioned, we have registered a INR173 crore of revenue. So overall same-store sales growth is exception here [Phonetic]. And we have been able to register 13-plus percent in the same-store growth, as far as total value is concerned, as well as volume has also been grown some 3.50% to 3.75%, but that’s a specific same-store growth and contribution in Q4 for the financial year revenue.

Kapil Jagasia — Nuvama Wealth Research — Analyst

Okay. So what would be the volume number for us?

Shivendra Nigam — Chief Financial Officer

Volume sales for the whole year is around INR50 lakhs, INR50 lakhs have been sold.

Kapil Jagasia — Nuvama Wealth Research — Analyst

Okay. And for this particular quarter, it would be?

Shivendra Nigam — Chief Financial Officer

Sorry?

Kapil Jagasia — Nuvama Wealth Research — Analyst

For this quarter, Q4?

Shivendra Nigam — Chief Financial Officer

Financial year, this is the number, it’s for financial year.

Deepak Bansal — Whole Time Director

Around 45,000 pieces have been sold in this last quarter.

Kapil Jagasia — Nuvama Wealth Research — Analyst

Okay, okay, okay. And sir, in terms of your revenue per store for the entire year, it has come to around 1.4 cr, and for this particular quarter, it is upwards of around 1.6 cr. So, like, what would be the potential going forward, like would it be peak or we can see further upward movement from here, like what would be your thought process on this?

Shivendra Nigam — Chief Financial Officer

Yeah, like I mentioned, the 1.40 is the average revenue per store, and we are targeting 5% to 6% same-store sales growth in the next financial year as well. So definitely, there has been — the revenue per store is going to increase by the same percentage.

Kapil Jagasia — Nuvama Wealth Research — Analyst

Okay. And like if we see from the three-year to five-year perspective, like what would be the potential year. Can we see around 1.8 cr to 2 cr revenue per store? Is that a possibility?

Shivendra Nigam — Chief Financial Officer

Yeah, if we are targeting 5% to 6% same-store sales growth for every year, so it will account for the three years, and it was 15% growth. So the 15%, means yeah, by around 1.70, 1.80 crores it can test it up for three years per store.

Kapil Jagasia — Nuvama Wealth Research — Analyst

Okay. And sir, my final question would be on the operating margins. We already have seen 30% [Phonetic] post Ind-AS EBITDA margins, but now, like in this year, we opened 70 stores, going forward, we are looking to open 80 stores. So you know what would be the impact on margins for the coming FY ’24, and also beyond what would be the margin levels that we can foresee?

Shivendra Nigam — Chief Financial Officer

So post Ind-AS margin, whatever the growth would concern, so what we have been expecting in this EBITDA margin. So chances are being taken from the 1% or 2% because mostly the cost is fixed in nature. The moment my top line will increase, I’ll be able to generate more margin to safer side, pre Ind-AS, we are targeting for 20%, post Ind-AS 30%, and there is a potential to increase it to 1% or 2% year-on year basis.

Kapil Jagasia — Nuvama Wealth Research — Analyst

Okay. And would be we warranting any further price hikes going forward?

Shivendra Nigam — Chief Financial Officer

Sorry, didn’t get your question, please.

Kapil Jagasia — Nuvama Wealth Research — Analyst

Are we looking for some price hikes in this coming year?

Shivendra Nigam — Chief Financial Officer

Price hikes you were asking, right?

Kapil Jagasia — Nuvama Wealth Research — Analyst

Yes.

Shivendra Nigam — Chief Financial Officer

No, we are not looking for any price hikes, means price will almost remain the same.

Kapil Jagasia — Nuvama Wealth Research — Analyst

Okay, great. All the best. Thank you for answering all of my questions. Thank you.

Shivendra Nigam — Chief Financial Officer

Thank you.

Operator

Thank you. [Operator Instructions] We take our next question from the line of Himanshu Nayyar from Systematix. Please go ahead.

Himanshu Nayyar — Systematix — Analyst

Yeah. Good afternoon, sir and congratulations on a great set of numbers. Firstly, can you talk a bit, I mean, we are doing quite well on our inventory. So can you give us some more granularity there. As to how much potential do we see, if any, for further improvement. And how do we account for the inventory. Basically, if you can give some more details on the freshness of our inventory, which is data looks currently.

Shivendra Nigam — Chief Financial Officer

So as far as inventory is concerned, to the half [Phonetic] inventory of this, and around 140 days, right. And net working capital is coming across 113 days. So, yes, for last year, there is a some — because of the new initiative has been taken in the business launching of new products as well as slightly higher expectation from the sales some inventories being there. However, the overall inventory to control in terms of investing in between 130 days to 135 days and taking the working capital in between 95 days to 100 days. So it will take two quarters, three more quarters to come up, but this is the target we have been taking to manage the inventory.

As far as freshness is concerned, Deepakji, will let you know about the store inventory volume.

Deepak Bansal — Whole Time Director

Yeah. The freshness is about we have two collection in a season, like spring-summer and the cold winter. So the spring-summer collection is in these stores. So the system is — we use to send a fresh inventory to stores around 2.5 times to 3 times in a month. So every store is receiving in the same ratio, two times to three times. And we are adding ladies and kids wear also in the new stores. So right now we have around 46% in men’s store, 22% [Phonetic] in men’s and ladies store, 18% on the family stores, and 1% on the ladies and the kids exclusive stores. Total inventory is, adding all the stores in the same manner. And by the end of season — in the end of season sale we also used to add inventory in that time also. So in the end of season sale also we had the good collection and the fresh collection available in these stores.

Himanshu Nayyar — Systematix — Analyst

Understood, understood. And the second one, if you can talk a bit on our given that we are generating a good amount of cash, so any capital allocation plans that you can share as to next two years, have we decided [Speech Overlap] or there is —

Deepak Bansal — Whole Time Director

Hello?

Himanshu Nayyar — Systematix — Analyst

Am I audible, sir?

Smit Shah — Investor Relations

Yes, you are, sir.

Himanshu Nayyar — Systematix — Analyst

Yeah. So, yeah, so I was talking about the capex plan, if you can give us some color. Our capital allocation, I mean, apart from the store expansion that we are looking at any other areas are we looking at in terms of capex for the next two years in terms of strengthening our supply-chain warehousing or any of the other major areas?

Vijay Bansal — Chairman and Managing Director

[Foreign Speech]

Himanshu Nayyar — Systematix — Analyst

So including the store capex, how much of total capex should we budget, sir, for the next two years?

Shivendra Nigam — Chief Financial Officer

So that equation is very simple for our capital expenditure. If we had been making a store, the capex cost is coming in INR2,000 per square feet. So the average store size as of now coming is at 1,200 square feet, which we have benefit is a INR2,000 per square feet is going to be invest in the capex for that store, which we can expect 18 stores, we are being opening for the year, out of which 70:30 ratio has been there in terms of franchisee stores as well as company-owned stores, then you can multiply very simply 50 to 55 stores have been opened for the company. And since the opening the bigger stores now, so INR25 lakhs to INR30 lakhs per store you can take it for the capex for that store and as [indecipherable]. Therefore, the future planning when we are going to double and triple the business that’s the capex for the pattern we had in inventory. So that’s the total capex investment for this year’s plan, for next two years for the company.

Himanshu Nayyar — Systematix — Analyst

Got it, sir. Great. That’s all from me. Thank you and all the best to the team.

Shivendra Nigam — Chief Financial Officer

Thank you, Himanshu.

Operator

Thank you. We take the next question from the line of Kunal from Dalal & Broacha Stock Broking Limited. Please go ahead.

Kunal — Dalal & Broacha Stock Broking Limited — Analyst

Yeah, sir. Thanks for the opportunity. Sir —

Operator

Kunal, I’m sorry to interrupt, please use the handset. We are not able to hear you.

Kunal — Dalal & Broacha Stock Broking Limited — Analyst

Yeah, can you hear me now?

Operator

Yeah, please go ahead.

Kunal — Dalal & Broacha Stock Broking Limited — Analyst

Yeah. Sir, I just wanted to ask in terms — in terms of capex, so you mentioned the total capex for this coming year would be INR25 crores and another INR25 crores for FY ’25, if I’m not wrong.

Shivendra Nigam — Chief Financial Officer

Correct.

Kunal — Dalal & Broacha Stock Broking Limited — Analyst

Okay. And sir, that would be purely for stores or there is any other capex which we are looking for?

Shivendra Nigam — Chief Financial Officer

So there are two things being there, three things in fact, as we told. Number one, capex is going for the expansion plan, which we are doing continuously. Then this warehousing plan at your facility, just bundles [Phonetic] that what has been excellent, plus also we are enhancing the capacity in our production setback was of some part would also be there. So broadly these are the three capex plan for the company for coming two years to three years.

Kunal — Dalal & Broacha Stock Broking Limited — Analyst

Okay, okay. And sir, in terms of the amount of units sold this quarter, you mentioned it’s approximately 4,50,000, if I’m not wrong.

Deepak Bansal — Whole Time Director

Yeah, 45,000 [Phonetic] I mentioned.

Kunal — Dalal & Broacha Stock Broking Limited — Analyst

Sorry, sir 45 — Hello, sir, could you repeat that. Hello, am I audible — sir, can you repeat that number, sir.

Shivendra Nigam — Chief Financial Officer

Hello?

Kunal — Dalal & Broacha Stock Broking Limited — Analyst

Hello sir, am I audible?

Shivendra Nigam — Chief Financial Officer

Yeah, yeah.

Kunal — Dalal & Broacha Stock Broking Limited — Analyst

Yeah. Sir, I just wanted your number of products sold in the last quarter, number of units.

Shivendra Nigam — Chief Financial Officer

Yeah, it’s around 1.5 lakhs [Phonetic] in the last quarter.

Kunal — Dalal & Broacha Stock Broking Limited — Analyst

Okay. And sir, what would be the percentage of units during the year sold on USS [Phonetic]? And now season sale?

Shivendra Nigam — Chief Financial Officer

Yeah, it’s around 65% are sold in the end-of-the season sale and rest is sold in the fresh period.

Kunal — Dalal & Broacha Stock Broking Limited — Analyst

Okay, sir, 65% end of season sale and 35% is on full-price.

Shivendra Nigam — Chief Financial Officer

Yeah.

Kunal — Dalal & Broacha Stock Broking Limited — Analyst

And sir, how long is generally our end of season sale for FY ’23 in terms of base.

Shivendra Nigam — Chief Financial Officer

Yeah, we have — like we have two formats. We start with the 20% discount in the fresh period and as we offer a buy two get one. Then we gradually move to the 50% discount and later in the offer of buy two get five. So in buy two get one free as a period we count as a fresh period. And then 50% and buy two get five, we count as the end-of-the season sale. So for the four months — in a year the offer is running only buy two get one free, then the two months, we have 50% of and for the rest of the period, we have buy two get five. So it’s four plus two plus six, means four period is we are — on the four months, we are only buy two get one, for two months only 50% and for the six months, we are on buy two get five.

Kunal — Dalal & Broacha Stock Broking Limited — Analyst

Okay, okay, okay. Thank you, sir.

Shivendra Nigam — Chief Financial Officer

Thank you.

Operator

Thank you. We take the next question from the line of Rusmik Oza from Nine Rays Equity Research [Phonetic]. Please go ahead.

Rusmik Oza — Nine Rays Equity Research — Analyst

Yes, thanks for the opportunity. Sir, wanted to understand the per store dynamics of profitability, because a) we have average capex [Phonetic] for INR25 lakhs per store and average revenue of 1.4 cr, and in the presentation, you mentioned the breakeven is around six months to eight months. What kind of profitability per store you get in a fiscal year. If you can just give some mechanics of this, it will be helpful.

Shivendra Nigam — Chief Financial Officer

So the metrics for us is very simple, whether I am taking it at the company-level or whether I am taking at store economics. So the same thing we started, whatever like 1.4 crore of your sale from per store basis or on a 550 crores sale you have taken on a company basis, my sales coming with the margins. So we have a target of keeping the 55% of the gross margin. So when we are hitting the 55% of that gross margin, then I’ll be able to manage that store in terms of EBITDA. Vijay, himself mentioned on a 20% level, because my store cost is mainly having renters and salaries, which is coming in the range of 30% of my retail cost.

So, first we have is sales, then you need deduct new GST, out of that, but whatever the field is being booked in the balance sheet, out of which 55% to 56% of the gross margin we have been earning. Then it’s the 30% of the retail cost would go and whatever then we left at a store level EBITDA basis, then at low-cost, including depreciation and finance cost coming in the range of 8% [Phonetic] to 9% and when you report that, company-level EBITDA has coming into the 20% and then I am moving by depreciation and other things. So leave the tax, tax percentage will be getting index above 30% [Phonetic], that’s the simple metrics for this one.

Rusmik Oza — Nine Rays Equity Research — Analyst

Okay. So the second question is, you know both FY ’22 and FY ’23, the share of menswear has remained static at around 86% to 87%. Would there be any change in this metrics going forward? Or is that the profitability here is better-off then getting too heavy in two other segments. Your thoughts and views on this.

Shivendra Nigam — Chief Financial Officer

So this is the number, sir, percentage basis, you see like today, we are having say 85% of the menswear [Phonetic] and the balance is coming 9% to 10%, I’m giving a range of the ladies wear, and then it is coming to kids wear and my [indecipherable] giving 3%. So now that scenario is this, see, we have been opening because successfully model has been — we are opening exclusive stores for ladies and kids wear as well. We are having 25 stores for ladies and kids wear. So overall, absolute term, my sale is increasing for ladies wear as well as kids wear. But when you get into the overall on a percentage basis because menswear will also grow. So, 85% would come down to say, 84%, but overall the scenario in terms of total number. When I see 35,000 [Phonetic] crores, it would be on the same parameters like 85% unmet would be at 83% to 84%, ladies share would be increased by 1% of kids share. But overall scenario in terms of percentage would be approximately this one.

Rusmik Oza — Nine Rays Equity Research — Analyst

Okay. And my last question, sir, you want to increase the share of e-commerce in order to around 6%, 7% or 8% going forward. Is the profitability on the e-commerce, how is it compared with your EBO structure in terms of margins and absolute profitability?

Shivendra Nigam — Chief Financial Officer

Yeah, basically, this was our first year in the e-commerce business base. And basically we we’re trying to develop a team and we’re trying to get entry into all the major marketplaces. But we are very clear about the fact that we want to maintain profitability in the e-commerce space as well. So this year, we were not able to achieve very good margins even though we didn’t make any loss, but in the future we are very clear that we want at least 10% PAT from the e-commerce space as well.

Rusmik Oza — Nine Rays Equity Research — Analyst

Okay. Thank you, sir. And best of luck.

Shivendra Nigam — Chief Financial Officer

Thank you.

Operator

Thank you. We take our next question from the line of Bharat Gianani from Moneycontrol. Please go ahead.

Bharat Gianani — Moneycontrol — Analyst

Yes, sir. Congratulations for a very good set of numbers. Sir, just two questions from my side. One is, what steps are we’re taking to increase the same-store sales growth. So earlier in the call, you said that you are targeting 5% to 6%, same-store growth every year. And the second point related to the same, same-store sales growth is that now we are targeting a slightly bigger store, as you earlier pointed out that now compared to the average — company average of about 1,200 square feet store. Now, we are targeting to open about 2,000 square feet store. So I just wanted to understand like, first is, what those steps in general you are taking to boost the same-store sales? Second, given the higher store size, what steps are you taking to kind of so the HSV [Phonetic] same-store sales growth remains constant, despite having a much bigger store size. So just wanted to ask on it.

Shivendra Nigam — Chief Financial Officer

So we have firstly, same-store sales, what we took a number of major, first and foremost is about our KPI, that is the ticket size. We continuously focus on the average fee value that our average fee value should be rising in the early store planning, plus [indecipherable] planning should be the right, means, if we are coming actually five product A, B, C, D, E, then in what quantity each category has to be placed and we are always fine-tuning DSO augment planning.

Turning to training and development, we have the training and development team also. They provided training and development to the front-end stuff would be better numbers. And incentives, incentivizing the stock is always a part of the system. So this is what work of the same-store sales growth. And about the new stores, the bigger stores which we are doing, bigger stores we are doing of 2,000 schedule [Phonetic] almost every family stores. And we have recently increased [indecipherable] also like we are adding in the section.

Then we are adding the perfumes. So number of things have been added in the HSV segment. So HSV segment is also keeping a good space. And we have to be — the bigger space will be set than the previous time. So bigger stores are somewhat a new experience, but right now 18% family stores, we have a good revenue from them. So we are increasing this 18% share of family stores. So — and the same-store sales growth, so the family stores also we are targeting the same numbers.

Bharat Gianani — Moneycontrol — Analyst

Okay, okay, okay. Okay. So, thanks and all the best. That’s all from me.

Shivendra Nigam — Chief Financial Officer

Thank you.

Operator

Thank you. We’ll take our next question from the line of Hiten Boricha from Sequent Investments. Please go ahead.

Hiten Boricha — Sequent Investments — Analyst

Good evening, sir. Sir, firstly you mentioned, we had sold 5 lakh pieces in FY ’23, what was the number in FY ’22?

Shivendra Nigam — Chief Financial Officer

Sorry, I can’t hear your question.

Hiten Boricha — Sequent Investments — Analyst

Hello. Is that audible now?

Shivendra Nigam — Chief Financial Officer

Yeah.

Hiten Boricha — Sequent Investments — Analyst

Yeah, sir my question is, you have mentioned, we have sold 5 lakh pieces in FY ’23, what was the number in FY ’22?

Shivendra Nigam — Chief Financial Officer

We sold 50 lakhs pieces, it is not 5 lakhs pieces, we sold 50 lakh pieces.

Hiten Boricha — Sequent Investments — Analyst

50 lakh pieces.

Shivendra Nigam — Chief Financial Officer

Yeah. And we sold for some 40 lakh pieces in the FY ’22.

Hiten Boricha — Sequent Investments — Analyst

40 lakh pieces. Okay. When you say 15, one-five 15, right, sir.

Shivendra Nigam — Chief Financial Officer

5-0, fifty lakhs.

Hiten Boricha — Sequent Investments — Analyst

5-0, fifty.

Shivendra Nigam — Chief Financial Officer

There to 40 lakhs, last financial year.

Hiten Boricha — Sequent Investments — Analyst

Okay, okay. Okay, understood, understood. Sir, my second question is on the capex side. So when you say we are going to add eight stores, nine stores per month, which is around roughly around 90 stores a year, so do we have a breakup of how many stores will be company-owned and how many will be franchised-owned? And just want to understand our franchisee model, so if we are take and going through a franchise model, so who is spending on the capex and how is the arrangement between us and the franchisees. Just some color on that.

Shivendra Nigam — Chief Financial Officer

Yeah. Right now we have 70% company-owned stores and 30% are the franchisee stores. And we will be going forward with the same ratio. And for the franchisee investment, there are two types of investment for the franchisee. One is the security deposit against new store, which is for refundable [Phonetic]; and other is the capex investment on the furniture and the fixtures. So total investment of a franchisee dependent upon the size of these stores generally, branches from the INR35 lakhs even INR50 lakh. And there is a fixed margin for the franchisee out of which he had two incurring operating course that is majorly the rent and the salary and miscellaneous. So our franchisees are mostly earning well and they’re happy with the company.

Deepak Bansal — Whole Time Director

So basically what we do is, maintaining and expensing everything is done by the franchisee. We only take the percentage of sales or anything like that, or we also do operation things for them. Hello? Hello?

Hiten Boricha — Sequent Investments — Analyst

Hello? Yeah. Should I repeat my question, sir.

Shivendra Nigam — Chief Financial Officer

Understand it. The first question in terms of franchisee has been answered. Any other question, because we were not been able to listen.

Hiten Boricha — Sequent Investments — Analyst

Yeah. Sir, actually I have a follow-up question on that. So just wanted to understand when you say a franchisee, so do we have arrangement to take certain amount of sales, the percentage of sales or we also do operating thing for that particular store?

Shivendra Nigam — Chief Financial Officer

No, no, no. I want to know, what is the guidance or in terms of the revenue that we will [Speech Overlap]

Hiten Boricha — Sequent Investments — Analyst

[indecipherable] on your side.

Shivendra Nigam — Chief Financial Officer

[Technical Issues]

Hiten Boricha — Sequent Investments — Analyst

Am I audible now?

Shivendra Nigam — Chief Financial Officer

Yeah, you are audible, but from the — noise from the backside. So what I got your question, see, whether what we are selling to the franchisee, is there any [indecipherable] being there, right. Am I right?

Hiten Boricha — Sequent Investments — Analyst

Yes, sir.

Shivendra Nigam — Chief Financial Officer

Okay. So what is that? What we are selling to the franchisees, all the franchisees. So if you see the inventory is on all our books for all the franchisees, right. So we are not selling any of the franchisee outrightly. So that has got that the sale is more booked and that hasn’t been there. It is the balance sheet sale, whatever you are being looking. It was for what the counter sale that is the sale to the end-User. So that is why we have not been booking and whatever the real sales happened to the end user, it is being there and all the sales is being there in our GST number. And all that talk show in the books of account, including all the franchisees stores.

Hiten Boricha — Sequent Investments — Analyst

Okay, sir.

Basant Goyal — Whole Time Director

[Technical Issues] water spread that you have got, however, dependent EBITDA amounting profile or it is similar to what is the right –?

Shivendra Nigam — Chief Financial Officer

Invoicing of that [Speech Overlap]

Hiten Boricha — Sequent Investments — Analyst

Hello, I’m done with my questions, sir. Thank you.

Shivendra Nigam — Chief Financial Officer

Okay, thank you.

Operator

Thank you. [Operator Instructions] We take the next question from the line of Kalpesh from JSN Advisory. Please go ahead.

Kalpesh Parekh — JSN Advisory — Analyst

Yeah, good evening and heartiest congratulations to Cantabil team for a very strong set of numbers.

Shivendra Nigam — Chief Financial Officer

Thank you.

Kalpesh Parekh — JSN Advisory — Analyst

But certainly, I just had a question that probably the way we have grown in last couple of years, do you think 650 stores to 700 stores in next three years is an understatement, probably we can achieve it faster than whatever we have been visualizing yet?

Shivendra Nigam — Chief Financial Officer

We have already mentioned that we’ll be opening around 70 stores to 80 stores in the year. So, we don’t plan to go by bigger — much faster pace. So by the year end, by the next year end, we will be having around 530 stores. So again in the next year we will be adding around 80 stores, it will be coming around 610. So, yeah, so we will be adding around 80 stores in a year only. This is our plan.

Kalpesh Parekh — JSN Advisory — Analyst

Okay. So by far your — probably we should be able to cross 700 type of levels, right, three years down the line. Three years down the line, we should be able to cross 700, right?

Basant Goyal — Whole Time Director

Hello, Kalpeshji, your voice is cracking. Yeah, Kalpeshji.

Kalpesh Parekh — JSN Advisory — Analyst

[Foreign Speech]

Basant Goyal — Whole Time Director

No, we are targeting [Foreign Speech] it is difficult to do 700 stores before three years.

Kalpesh Parekh — JSN Advisory — Analyst

And, sir, on the gross margin front, the way performance has been shown, do you think we have some upside possibility on the gross margin front?

Shivendra Nigam — Chief Financial Officer

Kalpeshji, [Foreign Speech] To safer side, we are targeting 55% of the margins, but we have potential in there. And we will be able to do more than that. But as of now, [Foreign Speech]

Kalpesh Parekh — JSN Advisory — Analyst

Right. And my last question sir will be on your cash flow front, particularly. The way we are catching up on the cash flow. And with the capex restricted to 25 cr, 30 cr. So there will be lot of surplus cash available in that scenario. [Foreign Speech] like would you kind of higher dividend because you are already at 74%, 75% holding. Do you think that that possibility looks more likely in the coming years when the capex will be limited to 25 crores, 30 crores. And cash flow will be strong.

Basant Goyal — Whole Time Director

[Foreign Speech]

Kalpesh Parekh — JSN Advisory — Analyst

Definitely, definitely. Thank you very much and heartiest congratulations once again.

Basant Goyal — Whole Time Director

Thank you.

Operator

Thank you. [Operator Instructions] We’ll take our next question from the line of Ashish Kumar, an Investor. Please go ahead.

Ashish Kumar — Investor — Analyst

Yes, good evening, sir. [Foreign Speech]

Basant Goyal — Whole Time Director

[Foreign Speech] to comply with Ind AS 116, we are debt-free and we are keeping the intent of everything to keep the company debt free. This is adjustment for Ind AS 116.

Ashish Kumar — Investor — Analyst

Okay sir, thank you sir. Thank you so much. There’s only one question my side, sir. Okay, thank you.

Smit Shah — Investor Relations

Thank you.

Operator

Thank you. We’ll take our next question from the line of Praveen Sharma from Sharma investment [Phonetic]. Please go ahead.

Praveen Sharma — Sharma Investment — Analyst

Am I audible?

Operator

Yes, you are. Please go ahead.

Praveen Sharma — Sharma Investment — Analyst

Yeah, yeah. Thank you for taking my question. First of all —

Operator

I’m sorry to interrupt, sir, your voice is not clear enough, please speak closer to mic.

Praveen Sharma — Sharma Investment — Analyst

Okay, can you hear me now.

Operator

Yes, much better. Please go ahead.

Praveen Sharma — Sharma Investment — Analyst

Okay, so first of all, congratulations for a great set of numbers. [Technical Issues]

Operator

Sir, your voice is not very clear. It comes a little louder little early and now it’s gone. So you can please speak a little closer to mic and keep it stable. Thank you.

Praveen Sharma — Sharma Investment — Analyst

I have shifted to the normal, is that fine?

Operator

Much more clear. Please go ahead.

Praveen Sharma — Sharma Investment — Analyst

Yeah. So I just had a couple of questions. I missed out on the first-half of the call due to some technical issues. So I may have missed out on some of the questions asked. So please, apologize, if I repeat it. Just the first question is, we see that Cantabil’s gross margins are among the best in the industry. Just wanted to understand how do you maintain it? And is it sustainable at this high level? That’s one.

The second one your presentation states that there is an aspiration to achieve approx 1,000 crores of turnover. So request if you could explain that in terms of time, that is how the margins would look at that time. And how many stores would be needed to reach those?

And last, in terms of models [Phonetic], which segments would be we actually present them. For example your GBOs, NBOs [Phonetic], online you have the trade that is an e-commerce, any particular mix. This is all, I have to ask. Thank you.

Shivendra Nigam — Chief Financial Officer

Okay. So three questions you ask. I’ll just answer two questions first. Number one in terms of gross margin. So gross margin, we are having. So if you are taking it straight away from the front page of the balance sheet you are finding in both, because my factory labor costs due to compliances has been included in the part of salaries and wages and slightly other manufacturing costs. So I’ll give you the exact gross margin. We are having a gross margin of 56% for this financial year as compared to 50% of the last financial year. This is what the gross margin, we have been achieving and having a target to maintain the gross margin. Number one.

Number two, question [indecipherable] about little stores in three years. So we will — we are targeting that by the end of three years in March ’26, we will be having 7,000 [Phonetic], approximately 1,000 crores sales. And I will be doing it is about [indecipherable]. So Cantabil right now into the exclusive brand outlets. We are not going into the multi-brand outlets. And we will be carrying out the same phenomenon. We will be going through the exclusive brand outlets. We will be going through the online e-commerce business and through the same-store sales growth. So these are three formats [Phonetic].

And very slightly difference that somewhat stores are the men’s stores, some are the ladies stores, and some are the family stores. And recently we experimented with the ladies and kids exclusive stores. So, when stores are very few in number like 25 stores only. So we will be taking all the formats we’ve had. But the issue can change a little bit like we right now, we have only 18% family stores and 1% of the ladies and kid stores. So these two categories can increase. So by the mix of only the EBOs only we will be growing in the future.

Praveen Sharma — Sharma Investment — Analyst

Okay, thank you. Thank you. I got it. Thank you so much for answering the questions.

Operator

Thank you. Ladies and gentlemen, we have reached the end of the question-and-answer session. And I would now like to hand the conference back over to Mr. Vijay Bansal for closing comments. Over to you, sir.

Vijay Bansal — Chairman and Managing Director

Thank you, everyone for your [indecipherable]

Operator

[Operator Closing Remarks]