Go Fashion (India) Ltd (GOCOLORS) Q3 FY23 Earnings Concall Transcript

Go Fashion (India) Ltd (NSE:GOCOLORS) Q3 FY23 Earnings Concall dated Jan. 25, 2023.

Corporate Participants:

Gautam Saraogi — Chief Executive Officer

R. Mohan — Chief Financial Officer

Analysts:

Ankit Kedia — Phillip Capital — Analyst

Devanshu Bansal — Emkay Global Financial Services — Analyst

Varun Pratap Singh — ICICI Securities — Analyst

Nihal Mahesh Jham — Nuvama — Analyst

Manish Poddar — Motilal Oswal AMC — Analyst

Mythili Balakrishnan — Alchemy Capital Management — Analyst

Vikas Jain — Equirus Capital — Analyst

Akhil Parekh — Centrum Broking — Analyst

Himanshu Nayyar — Systematix — Analyst

Saptarshee Chatterjee — Centrum PMS — Analyst

Prerna Jhunjhunwala — Elara Capital — Analyst

Aditya Sharma — Aditya Birla AMC — Analyst

Rajiv Bharati — DAM Capital — Analyst

Gautam Rathi — CWC Advisors — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to Q3 FY ’23 Earnings Conference Call of Go Fashion (India) Limited. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectation of the company as on date of this call. These statements are not the guarantees of future performance and involves risks and uncertainties that are difficult to predict. [Operator Instructions]

I now hand the conference over to Mr. Gautam Saraogi. Thank you, and over to you, sir.

Gautam Saraogi — Chief Executive Officer

Thank you. Good evening, and a warm welcome to everyone present on the call. Along with me, I have R. Mohan, our Chief Financial Officer; and SGA, our Investor Relations Advisor. I hope you are all received our investor deck by now. For those who have not, you can view them on the stock exchange and the company website.

The company has shown strong performance in Q3 FY ’23. Our revenue grew by 24% to INR177 crores, highest ever quarterly revenues at Go Fashion. EBITDA and PAT grew by 14% and 3% respectively to INR59 crores and INR24 crores respectively. This has been on the back of high volume growth and improved product portfolio. Our revenues compared to Q3 FY ’20, which is pre-COVID levels has increased by 51% for Q3 FY ’23, essentially for EBOs stood at 18% for Q3 FY ’23 compared to pre-COVID levels, which is Q3 FY ’20. SSSG for EBO is at 10% compared to last year quarter three.

For the quarter, our volume growth — our overall volume growth has grown by 17% compared to last year. Compared to pre-COVID levels, our overall volumes has grown by 28%. Our product being core and essential to customers has enabled to operate us on a business model, where we offer limited discounts and the sale of our product is typically at full price, which is in our experience results in greater profitability. 96% of our sales in the nine month FY ’23 are at fuller sales.

In addition, our EBO average selling price has increased continuously, primarily on account of value-added products than we’ve introduced as part of our product portfolio. Our ASP for the nine months stood at INR724. As mentioned in our last couple of calls, the company’s investing in brand-building initiatives, which will help us and gain visibility and help us focus to grow our online sales channels to benefit the evolving customer trends in the market.

During the last quarter, the company has — had a brand campaign, Good To Go. This activated 53 mega and macro influencers across eight cities and brings 36 flats, a unique audience via influencer marketing. The approach was to reach out to audience which have affinity to the brand, also the audience who are currently in the concentration table of purchase. We reached 82 million audience and [Indecipherable] list at 23% after 60 days.

During Q3, FY ’23, the company added 35 new EBO stores and the total of 101 stores in the nine months FY ’23. This takes a EBO store count to 604 as of 31st December 2022. As guided earlier, we will continue to add 120 to 130 stores in FY ’23, which is in line with our growth expansion plan. We are looking at omnichannel engagements for a seamless customer experience, building on a technology-driven strategy to the consumer across all cities.

We are leveraging technology to bring cost-efficiency and enhance customer experience. We intend to further improve our operating efficiency and ensure efficient supply chain management to [Indecipherable]. We will need to upgrade our warehouse to optimize our inventory and supply chain management. Coming to the working capital front, we have reduced our working capital days to 151 days as on 31st December, 2022 compared to 178 days as on 31st December 2021. We are further working to reduce it, mainly on the inventory front.

On the cash flow front, we have delivered positive operating cash flow of INR60 crores for the nine month FY ’23. We look forward to continuing our innovative and creative approach and launch more designs, while providing more brand destination for consumers, which will help us grow and gain market share in the coming years. Our focus will be to target customer acquisitions to drive sales to our website and online marketplaces. In addition, we intend to invest in content generation to build engagement with the younger audience.

With this, I would like to hand over the call to our CFO, Mr. R. Mohan, for the update on the Q3 and nine month FY ’23 financials. Thank you.

R. Mohan — Chief Financial Officer

Thank you, Gautam and good evening, everyone. The company has posted strong performance for the quarter and nine months ended 31st December 2022, backed by the increased demand across product categories. Our revenue for the quarter stood at INR177 crores, as against INR142 crores in Q3 FY ’22, a growth of 24% Y-o-Y.

Gross profit stood at INR104 crores, a growth of 21% Y-o-Y with the GP margin of 59% for the quarter. Our EBITDA for the quarter stood at INR59 crores as compared to INR52 crores in Q3 FY ’22, a growth of 14% Y-o-Y, our EBITDA margins stood at 33.5%. Profit after-tax for the quarter stood at 24% — INR24 crores, a 3% Y-o-Y growth from Q3 FY ’22. PAT margins stood at 13.8%.

Coming to the nine month FY ’23 performance, revenues stood at INR508 crores, as against INR285 crores in nine month FY ’22, a growth of 78% Y-o-Y. Gross profit stood at INR303 crores, a growth of 79% Y-o-Y with a GP margin of 59.7% for the nine months. Our EBITDA for the half year stood at INR162 crores as compared to INR81 crores in nine month FY ’22, a growth of 99% Y-o-Y, our EBITDA margin stood at 31.8%.

Profit after-tax for the nine months stood at INR68 crores as compared to INR23 crores in nine month FY ’22, a growth of 192% Y-o-Y, profit margin stood at 8.2%. The ROCE and ROE on an annualized basis stands at 19.8% and 17.8% respectively.

With this, we will now open the floor for the question and answers.

Questions and Answers:

Operator

Thank you very much. [Operator Instructions] We’ll take our first question from the line of Ankit Kedia from Phillip Capital. Please go ahead, sir.

Ankit Kedia — Phillip Capital — Analyst

Sir, I wanted to understand your volume growth for the quarter, given that you have posted 17% Y-o-Y growth, but you also had a 25% in your store addition and ASP growth is also around 10%, 11%. So what is the volume growth in SSG and how has been the new store impact on profitability on volumes?

Gautam Saraogi — Chief Executive Officer

Yeah, thanks, Ankit. So from an SSG perspective, see, this year we’ve had a 10% value growth over last year Q3 FY ’22. So the value growth is at 10%, the volume we have seen a degrowth of minus 2%. But, see, our business like I had also mentioned earlier is becoming more of a cluster-based business. So this quarter we have seen there are SSG has stood at 10% and minus 2% on a volume level. Our FCFG [Phonetic] which is same cluster sales growth has stood at 24% on a value level and 11% at a volume level.

Ankit Kedia — Phillip Capital — Analyst

And this in Y-o-Y?

Gautam Saraogi — Chief Executive Officer

This is all Y-o-Y, which I’m telling you as a comparison between Q3 FY ’23 versus Q3 FY ’22.

Ankit Kedia — Phillip Capital — Analyst

Sure. And sir from a cluster-based approach, how many clusters do you think or how many stores do you add in that cluster or how many kilometers is that cluster and how many stores out of your 600 odd stores out in this cluster-based strategy?

Gautam Saraogi — Chief Executive Officer

See, I would say about 50% to 70% of the stores — about 50%, 60% of the stores are little more than that are in clusters, but how many stores we can have in a cluster is very subjective to that particular location. So every area, every locality is different. There are some localities where in the entire cluster one store is enough. And in some localities where the area is very — the area of the cluster is very small, but multiple stores is required. So it may be like — I’ll give you an example now. Let’s take Mumbai, right? So linking road is one cluster, the Bandra cluster, linking road — if you have one store for the entire road is enough. But whereas, if I take the Dadar market, Dadar stores in that small West — Dadar West area where the shopping is there, there we can have a potential of three to four stores. So it really depends from market-to-market.

Ankit Kedia — Phillip Capital — Analyst

Sure. So going forward, is it fair to assume a volume growth on SSG basis? Would it be low-single digit or flattish? While on the cluster-based, it could be a higher on grade?

Gautam Saraogi — Chief Executive Officer

See, though we are going to be your cluster-based model, but on a — at an SSG level, we are going to continue aiming to have a volume growth of 4% to 5% on a SSG level. See, this quarter, the overall retail market was an — the overall [Indecipherable] low. That is why we’ve seen a degrowth of minus 2%. On a generalized basis, we are aiming to maintain the volume growth of 4% to 5% on SSG basis — on a Y-o-Y basis.

Ankit Kedia — Phillip Capital — Analyst

Sure. Sir, my second question is regarding your working capital if an —

Gautam Saraogi — Chief Executive Officer

On an overall basis, we are more of a cluster-based growth model than an SSG model.

Ankit Kedia — Phillip Capital — Analyst

Understood. Sir, my second question is regarding your working capital. If I missed it on a quarter-on-quarter basis, the cash on books are actually reduced. While we’re seeing your operating cash flow, which because I believe that it’s post in that operating cash flow. So if you can just help us with the absolute inventory number for the December ending numbers? So that will help us understand the actual working capital.

Gautam Saraogi — Chief Executive Officer

Yeah. So our absolute inventory is around INR223 crores to INR225 crores in the book, which is including finished goods and raw material. Now very rightly you pointed out, this cash flow from operations which you see at INR60 crores, which is post Ind As basis. If I take three Ind As basis, this INR60 crores will actually be zero, because we have a raised outflow of about INR60 crores to INR61 crores. So, if we met of that range from the INR60 crores, the INR60 crores becomes zero. So from a cash flow from operations perspective, it stands at nil, on a pre-Ind As basis.

Ankit Kedia — Phillip Capital — Analyst

Understood. That helpful, sir. I’ll come —

Gautam Saraogi — Chief Executive Officer

But what happens is the working capital also includes the inventory for the newer stores what we’ve opened. So this zero cash flow from operations what we have, it is both the inventory what we’ve added for the new store.

Ankit Kedia — Phillip Capital — Analyst

Sure. Sir, but if I look at your September inventory was INR215 crores. So approximately INR8 crores, INR9 crores inventory has been added, but that is when if you’re also slightly on the higher side, because as cotton prices are falling, you would using the high-cost inventory of [Indecipherable] low-cost inventory, shouldn’t the inventory absolute amount decline?

Gautam Saraogi — Chief Executive Officer

See, currently, Ankit, we are at four months of inventory and we are looking to optimize our inventory and we have been moving it over quarter. And we are looking to bring it down to three months. So this optimization of four months to three months will take a few quarters that we are aiming to bring it down to three months. And that is how we are going to be reducing our overall working capital.

Ankit Kedia — Phillip Capital — Analyst

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

Gautam Saraogi — Chief Executive Officer

Sure. Thank you, Ankit.

Operator

Thank you. We’ll take the next question from the line of Mr. Devanshu Bansal from Emkay Global Financial Services. Please go ahead, sir.

Devanshu Bansal — Emkay Global Financial Services — Analyst

Yes, sir. Thanks for the opportunity. Sir, I wanted to understand the gross margin decline versus last year. So the EBO mix and factors improved, but our gross margins have actually — by about 160 basis points. So what explains that?

Gautam Saraogi — Chief Executive Officer

See, in this quarter we’ve had some marketing offers netted from our large-format store partners. And that is why, because it’s come all in one quarter, that is the — and we usually net off this against revenue, because of Ind AS 115 accounting standards. And because of that, in fact, of those marketing debit, our revenue has fallen to that extent and this has led to be decline in the — slight decline in our gross margin.

Devanshu Bansal — Emkay Global Financial Services — Analyst

So compare — comparable gross margins you’re saying — so net it, if you would like to call out the impact of this thing?

Gautam Saraogi — Chief Executive Officer

See, usually on a [Indecipherable] basis, we want to even maintain 60% to 60.5% gross margin consistently.

Devanshu Bansal — Emkay Global Financial Services — Analyst

Sure.

Gautam Saraogi — Chief Executive Officer

But [Indecipherable] is the same channel mix. If the channel mix tomorrow as the EBO sales increases, the rate will increase. But taking the same channel mix, we will maintain 60% to 60.5% of gross margin.

Devanshu Bansal — Emkay Global Financial Services — Analyst

Got it, sir. Got it. And, sir, with cotton prices sort of being it reduced level sustaining at the current level, how is the competition sort of taking it? Are they going for certain prices or — so what’s your plan on those fronts?

Gautam Saraogi — Chief Executive Officer

See, we have not — we don’t have any plans to reduce prices. And even what we have studied from competition, competition has also not reduced prices. Currently, these reduced prices — these reduced cotton prices will have to see the sustainability for two, three quarters. And then we’ll have to see. Because cotton prices in the last 18 months has fluctuated a lot. So one have to take a judgment on whether the prices will continue to be low, we don’t know. We’ll have to study this for two, three quarters. But having said that, we have not reduced prices and we have also not seen anyone else in the industry reducing the price.

Devanshu Bansal — Emkay Global Financial Services — Analyst

Got it. And sir you indicated that this was a challenging quarter. And I should sort of — would compliments on maintaining a decent inventory levels. So what sort of held us in maintaining the inventory level despite short fall in sales during the quarter?

Gautam Saraogi — Chief Executive Officer

No. See, I think, look, our inventory planning is very accurate, Devanshu, so for us all our inventory planning is through our ERP calculations and EI what we’ve built internally. And everything is based on sales and sales production. So we’ve kind of very accurately planned our inventory, thinking of how the quarter will move. Now how — so we have done about INR177 crores of revenue. Ideally as management, we thought that we could have done about INR184 crores to INR185 crores of revenue. So we have fallen short by INR6 crores, INR7 crores to what we thought would not in a good number to achieve.

Devanshu Bansal — Emkay Global Financial Services — Analyst

Got it. And this INR6 crore, INR7 crore, so this is a general trend that January, we’re seeing relatively better performance versus what historically than we have been. So is that same trend visible in your — at your stores as well?

Gautam Saraogi — Chief Executive Officer

Yes. I mean, a week on January has been pretty decent. I mean, usually how January perform, we are seeing similar trends in January this year. It’s too early to comment, because January is not concluded way. But from what I understand, I see in the industry, it has been pretty decent and it’s been in similar to past.

Devanshu Bansal — Emkay Global Financial Services — Analyst

Got it. And one last question from my side. Generally, on an annual basis, we have seen about 10 to 15 store closures. And this year, there has not been any store closure. So do you expect store closures to happen in Q4 or not?

Gautam Saraogi — Chief Executive Officer

It’s hard to say right now, but maybe one or two stores, nothing material.

Devanshu Bansal — Emkay Global Financial Services — Analyst

Got it, sir.

Gautam Saraogi — Chief Executive Officer

There are one or two airport stores which we’re considering to shut. But we have not finalized that yet, but maybe one or two stores maximum in the last quarter. Nothing material.

Devanshu Bansal — Emkay Global Financial Services — Analyst

Got it, sir. Thanks a lot.

Operator

Thank you. [Operator Instructions] We take the next question from the line of Mr. Varun Pratap Singh from ICICI Securities. Please go ahead, sir.

Varun Pratap Singh — ICICI Securities — Analyst

Yeah, thank you. So, sir as you highlighted that depending on channel mix, the trajectory of gross margin would be taking shape. So just wanted to understand that in our current presentation, revenue contribution from online channels are close to 21%. Yeah. And if we look at your last quarter presentation, the revenue contribution is around 3%. So from 3% to 20% it is quite a big jump.

Gautam Saraogi — Chief Executive Officer

No, no. Varun, there is a small correction there. I think you’ve read it wrong. The online has this quarter been 2.5%. That 21 [Technical Issues] —

Varun Pratap Singh — ICICI Securities — Analyst

Okay. So I think there is some error in the presentation. Right, understood.

Gautam Saraogi — Chief Executive Officer

Okay. Maybe I’ll have to check the presentation. Maybe the color coding was wrong. I’ll have to check that. But the online sales, which was earlier at 3% is currently at about 2.5%, 3%. So it’s been maintaining a similar trend.

Varun Pratap Singh — ICICI Securities — Analyst

Got it. Got it. Understood, sir. Okay. And so how do you look at the revenue contribution from the channel going forward? For example, two, three years, especially from online channel.

Gautam Saraogi — Chief Executive Officer

See, we are looking over the next two, three years, we want to ideally scale the EBO business and online business to get a — currently we are at about 76%, both EBO and online together. You would ideally want it to be around 90% over the next three years of — a little more than that. We’re aiming to get to the 90% number. And in that 90%, online would be above 8%, 9%. So currently, online is about 3%. We would like to take it to 8%, 9% of the overall numbers.

Varun Pratap Singh — ICICI Securities — Analyst

Right, right. And that should not be gross margin dilutive —

Gautam Saraogi — Chief Executive Officer

No, it doesn’t further improve the gross margin. We currently are — based on the current channel mix, we have a steady state gross margin of about 60% or 60.5%. As the view on online sales contributions increases, because that is direct-to-consumer. That will have a positive upside on our gross margin.

Varun Pratap Singh — ICICI Securities — Analyst

I’m saying only for online channel, gross margins should ideally be dilutive, sir given the commission that we have to pay [Speech Overlap]

Gautam Saraogi — Chief Executive Officer

No, see what happens is the online — the commissions are booked below gross margin. So the gross margin and online and view are similar.

Varun Pratap Singh — ICICI Securities — Analyst

Understood. Okay. And, sir second question is on marketing spend. So given the renewed thrust on improving visibility and brand perception, so how should we look at the overall expense as a percentage of revenues?

Gautam Saraogi — Chief Executive Officer

See, on a [Indecipherable] basis, Varun, you can estimate it to be between 3% and 4%. Usually H1 didn’t have higher spend than H2, see because we plan our advertising spend prior to such thing. So this year we had about 4.5% in H1, which has now come down to 3.5% by — for nine month, because our spends in quarter three are less. So on an annualized basis, on a steady-state basis, we will see about between 3% to 4% will be our [Indecipherable].

Varun Pratap Singh — ICICI Securities — Analyst

Okay. Okay, understood, sir. Yeah, that’s it from my side, sir. Thank you very much. All the best.

Gautam Saraogi — Chief Executive Officer

Thank you, Varun.

Operator

Thank you, sir. We take the next question from the line of Mr. Nihal Mahesh Jham from Nuvama. Please go ahead, sir.

Nihal Mahesh Jham — Nuvama — Analyst

Yes, thank you so much and good evening to the management. So three questions. First, the clarification on the cluster approach that you mentioned. Just to understand that right, you were basically highlighting that opening stores in the same cluster ends up impacting the SSG value and volume growth in a way. Is that the right understanding? Because the store openings to each other.

Gautam Saraogi — Chief Executive Officer

Correct. Correct. Sometimes it does. Yeah, correct.

Nihal Mahesh Jham — Nuvama — Analyst

That’s helpful. The second question was that, if I look at your city expansion over the last five years, you have consistently opened around 20 cities and I think for this year also it is at 16. Maybe I think, by ’23, you will end-up reaching a similar number. So is there a thought of accelerating that or that is the template we want to follow in terms of the number of cities we keep expanding into?

Gautam Saraogi — Chief Executive Officer

See, it’s very difficult to estimate how many cities we are going to add every year, because it’s all based on availability of store. But what I can tell you is that, whatever 120 to 134 we are adding, 50% would be from the top eight cities. See, our percentage of top eight cities on a cluster-based model is about 56% to 57%. That ratio will maintain. Now, how many new cities we’ll add every year, it’s very hard to estimate, sometimes 20 cities, sometimes 25 cities, it’s all based on availability. But the mix of metro versus non-metro, which is currently at 57% by metro, that we’ll maintain.

Nihal Mahesh Jham — Nuvama — Analyst

Got that point. Just one last thing on the inventory side. Currently, we are at around 120 days of inventory and that’s a number that is stayed similar for the last couple of quarters. It is [Indecipherable] but I’m guessing that is because of what has happened due to COVID last year. What is the roadmap from the 120 to 90 that we keep highlighting? What are the parts of the value chain that you’ve been reducing monthly [Phonetic] and that will help you reach the 90%.

Gautam Saraogi — Chief Executive Officer

So, now let me clarify why 120 days and why we’re at 120 days. See, in our business, our sourcing model is as such where we buy battery, we buy a raw material and then we can convert it into a garment. So there is a — there is an element of raw material inventory in our business. If I take the 120 days, my garment inventory days is around 90 days. It’s because of my fabric what I maintaining of 30 days and having 120 days of inventory. So if I take in terms of real sense of finished goods inventory and full as three months of inventory is does that the fabric is making it look at four months.

Now, of course, our sourcing model has been consistent right from the beginning. So pre-COVID, we had 90 days of inventory, including fabric. So the little bit fine tuning what will end-up doing it to bring it down to three months, if we are going to be fine tuning the inventory at the warehouse. Here at the store level, currently, we are having about 35 to 40 days of inventory on the overall sale. That will remain the same. The warehouse inventory in finished goods, we will fine tune that a little bit and we’ll fine tune the fabric inventory. So automatically this 120 days will come down to 90 days.

Nihal Mahesh Jham — Nuvama — Analyst

Including the fabric also?

Gautam Saraogi — Chief Executive Officer

Yes, absolutely. But it will take some time because the fine-tuning happens over a period of time, maybe it will take two, three quarters already more, but we’ll bring that down to 90 days, which was the number prior to COVID.

Nihal Mahesh Jham — Nuvama — Analyst

That is helpful. Thank you so much for sharing with us.

Gautam Saraogi — Chief Executive Officer

Yeah, thank you.

Operator

Thank you, sir. We take the next question from the line of Mr. Manish Poddar from Motilal Oswal AMC. Please go ahead, sir.

Manish Poddar — Motilal Oswal AMC — Analyst

Hi, Gautam. So I have three questions. One is, will it be right that this quarter had the entire raw material impact? And let’s say, incrementally raw material let’s say sort of competition you will depend on?

Gautam Saraogi — Chief Executive Officer

Sorry. Manish, can you come back with your question again? I lost you in between.

Manish Poddar — Motilal Oswal AMC — Analyst

So, I’m just trying to understand, let’s say, the gross margin, which you achieved during this quarter, does this making the entire all these inflationary impact, which is there, let’s say, in the inventory in the system, is that how you want to [Indecipherable] gross one?

Gautam Saraogi — Chief Executive Officer

See, Manish, the inventory — the cotton prices, which has reduced, has actually not given the upside yet in the gross margin, because our inventory works on a weighted-average methodology. So right now the newer fabric what we are foreseeing is on the lower cotton prices. So that is really not affected. The reduced prices have actually not bought that positive upside on the gross margin yet. That will take some time for it to kick in.

Manish Poddar — Motilal Oswal AMC — Analyst

So you feel like quarter one is [Speech Overlap] —

Gautam Saraogi — Chief Executive Officer

It’s very hard to estimate, Manish.

Manish Poddar — Motilal Oswal AMC — Analyst

What I’m trying to understand is a, EBIT prices, which you got in the December, that would be at least 5% to 10% lower than what the quarter average would be, right? Or that is still on the case?

Gautam Saraogi — Chief Executive Officer

No. See, the price increase what we have taken in December ’22 — 2022, it’s more or less —

Manish Poddar — Motilal Oswal AMC — Analyst

No, I’m talking about RM prices not product price. I’m just talking about, let’s say, the cotton raw material which you get lead either end product or work in progress? Has that started reflecting in lower prices, because of the price correction which has happened in the commodity.

Gautam Saraogi — Chief Executive Officer

Yeah. I think that — the price hike what had happened in December ’22 at the RM front, that has already impacted the gross margin. So your question is right. So, that increase what had happened at that point of time has already started showing in the gross margin, but it’s not so much because we had taken a price hike also at the same time.

Manish Poddar — Motilal Oswal AMC — Analyst

Right. Okay. And this second one is ad spend, now you’re calling out let’s say 2% to 4% for this year. If I believe with the beginning of the quarter one, I think in July, August, we had mentioned about 4% to 5%. So is there a change in —

Gautam Saraogi — Chief Executive Officer

No, no. I stand corrected in that. The 4% to 5% was moved from a guidance of quarter one and quarter two. For a year through, we are looking at 3% to 4%, not 4% to 5%. 4% to 5% is more from an H1 perspective.

Manish Poddar — Motilal Oswal AMC — Analyst

Okay. Just one last one, so let’s say, this year this 130 odd store guidance in a ballpark stage. In early are you planning to open higher number of stores in FY ’24 and ’25?

Gautam Saraogi — Chief Executive Officer

We are yet to make — we are yet to make that plan, Manish. So probably we’ll have better clarity maybe in the next couple of months. But it will be in the line of — more or less it will be in the line 120 to 130 stores.

Manish Poddar — Motilal Oswal AMC — Analyst

Okay. Fair enough. Thanks.

Gautam Saraogi — Chief Executive Officer

Thank you, Manish.

Operator

Thank you, sir. We take the next question from the line of Mythili Balakrishnan from Alchemy Capital Management. Please go ahead.

Mythili Balakrishnan — Alchemy Capital Management — Analyst

Hi. Just a couple of questions. One is on this U.S. [Phonetic] sales. Given that we have indicated that 96% plus sales was [Indecipherable]. Could you sort of just help us a little bit in terms of was that U.S. sales during the quarter? Is it currently on? And what is the kind of response we’re seeing?

Gautam Saraogi — Chief Executive Officer

See, so we have two [Indecipherable] periods effectively. We have one we run it during quarter one and one we run during quarter four. So currently, we have a [Indecipherable] running. On certain articles, we are providing certain offers. But the impact of such articles are very less because the total inventory, which will be under this offers will be less than 15% or less than 10% of the total inventory. So the 96% of full price sale still continues to be.

Mythili Balakrishnan — Alchemy Capital Management — Analyst

Got it.

Gautam Saraogi — Chief Executive Officer

So because the offers are there at the store, but it is on very, very limited inventory. Because in our business, most colors and products continue to the next season without getting discontinued. So we don’t have too much of such inventory where we want to liquid it on discounts.

Mythili Balakrishnan — Alchemy Capital Management — Analyst

Got it. And when did the USA start for us?

Gautam Saraogi — Chief Executive Officer

We just started now in January end. It will go on till Feb end.

Mythili Balakrishnan — Alchemy Capital Management — Analyst

Okay. Also just wanted to check on this ASP increase that we’ve seen on this nine month basis. How much of it is mix and how much of it is pricing increases per se on a like-to-like basis?

Gautam Saraogi — Chief Executive Officer

This ASP what we have seen increase from INR709 to INR724 is based on used products. Because the last price hike what we’ve taken was in December 2022. And —

R. Mohan — Chief Financial Officer

’21 Gautam.

Gautam Saraogi — Chief Executive Officer

No ’22 visit know? Sorry, ’21 — December 21, yeah. So the last price hike we’ve taken was in December ’21. And mostly, after that, we have not taken a price hike, so this slight increase in average selling price on INR709 to INR724 would be on the basis of new product, largely driven by new products.

Mythili Balakrishnan — Alchemy Capital Management — Analyst

Correct. Just wanted to also get a sense from you on the outlook, which you had spoken about that. There was a certain part of the sales which you expected the sales to be higher by INR6 crores to INR7 crores which didn’t finally occur. What is the consumer sentiment in or could you just sort of elaborate a little bit on what you’re seeing in the demand then and what are you seeing currently?

Gautam Saraogi — Chief Executive Officer

See, I think, look, overall the sentiment has been pretty decent. I mean, look, I wouldn’t call it a some bad quarter, the sales are pretty good. But look, we had a management expectation of above INR184 crores, INR185 crores, we ended up with INR177 crores. So the consumer sentiment has been pretty okay. We thought it could have been a little better. But otherwise, November was quite a fall, was quite a sharp fall. October and December were pretty good.

Mythili Balakrishnan — Alchemy Capital Management — Analyst

Got it. Also wanted to check with you on two other points. One is on your EBITDA margins [Technical Issues]

Gautam Saraogi — Chief Executive Officer

Hello.

Mythili Balakrishnan — Alchemy Capital Management — Analyst

Hello. While you have indicated your gross margins will be in that 60% to 60.5% range. Would you have a similar range which you’re seeking for the EBITDA margins?

Gautam Saraogi — Chief Executive Officer

See, on a year through basis, we are looking to maintain EBITDA margins of about 32% to 33%, post Ind As.

Mythili Balakrishnan — Alchemy Capital Management — Analyst

Of course, Ind As. Got it.

Gautam Saraogi — Chief Executive Officer

On a year through basis.

Mythili Balakrishnan — Alchemy Capital Management — Analyst

On a full-year basis. Some quarters will be higher, some quarters lower.

Gautam Saraogi — Chief Executive Officer

Correct.

Mythili Balakrishnan — Alchemy Capital Management — Analyst

Got it. And in terms of the loyalty program, is there any further action which happened along that side?

Gautam Saraogi — Chief Executive Officer

See, we have already made the loyalty program. We are investing in the final round of testing. Hopefully, we should be taking it live starting first quarter.

Mythili Balakrishnan — Alchemy Capital Management — Analyst

Okay. And my last question is on the pledge. Just wanted to get a sense from you that you had mentioned earlier that it would take six months to sort of get it out. Does that still stand in terms of —

Gautam Saraogi — Chief Executive Officer

See, our original plan was to close it by September 30. It was — and it continues to be short-term in nature, the pledge. As family, as promoters, that is on our top of our priority list and we’re looking to close it soon, as soon as possible.

Mythili Balakrishnan — Alchemy Capital Management — Analyst

But there is no timeline that you had given for it?

Gautam Saraogi — Chief Executive Officer

As of now, we are not giving a timeline, but we continue to maintain, saying that it is short-term in nature and on top of our priority list quickly. But hard to be timeline right now on it.

Mythili Balakrishnan — Alchemy Capital Management — Analyst

Okay. I just wanted to get a sense from you of the rental to sales ratio that you are seeing currently for the nine months of this year?

Gautam Saraogi — Chief Executive Officer

See, at a company level, we’ve had about 14% to 15% as rent to revenue ratio.

Mythili Balakrishnan — Alchemy Capital Management — Analyst

Okay.

Gautam Saraogi — Chief Executive Officer

On a — but that’s on an overall sales basis. If I look at an EBO level, EBO channel, EBO level, it’ll be about 17%, 18%.

Mythili Balakrishnan — Alchemy Capital Management — Analyst

17%, 18%.

Gautam Saraogi — Chief Executive Officer

But at a company level, because at an overall company sales, it’ll be about 14% to 15%.

Mythili Balakrishnan — Alchemy Capital Management — Analyst

Got it. But coming to this opening more stores, especially in a cluster basis, we are now seeing some amount of this cannibalization happening on the volume side. You know that which earlier was not the case and clearly, the market is a little more saturated than we might have expected. Just wanted to get your thoughts on this, especially given that you are indicating that you want to be at that 4% to 5% SSG level at the store. So how are you sort of thinking about it and like on incremental stores, are there any metrics that you will keep a close track on that if things don’t work out appropriately, then you might look to even close some of these stores?

Gautam Saraogi — Chief Executive Officer

See, for us, closing of stores won’t happen a lot, because, see we are a [Indecipherable] in any market because you open up stores. We typically wait for the larger retailers to open first, we see, we judge their performance and then after that we decide to open up stores. So closures in RTS is very limited because we have the [Indecipherable] in many market. But considering how we are growing in clusters, the right metric to be used in our — evaluating our sales is obviously SCSG, which is same cluster sales growth. But as management, we continue to aim that at an SSG level, we will want to maintain about 4% to 5% volume growth, we would want to at least aim and try maintaining that.

Mythili Balakrishnan — Alchemy Capital Management — Analyst

Got it.

Gautam Saraogi — Chief Executive Officer

But our experience has been that even in the cluster, though in a cluster multiple stores, sometimes cannibalizes the first of the second store on the same cluster. It does not really reflect in a — decline in margin because the incremental increase in revenue to the incremental increase in the rent and other expenses is far greater in revenue then the expenses. So the margin, what I had noticed at a cluster level, pretty much maintained, it’s not get better.

Mythili Balakrishnan — Alchemy Capital Management — Analyst

Got it. But you are closely tracking this margins at a cluster level including trend —

Gautam Saraogi — Chief Executive Officer

Absolutely. So because we look at cluster as one location, right. So we take out EBITDA, we take out gross margins at a cluster level and then see whether there has been a decline after adding more stores, and that trend, we have not seen any decline.

Mythili Balakrishnan — Alchemy Capital Management — Analyst

Okay. Thanks a lot. That’s all from me.

Gautam Saraogi — Chief Executive Officer

Thank you.

Operator

Thank you. We take the next question from the line of Mr. Vikash [Phonetic] from Equirus. Please go ahead, sir.

Vikas Jain — Equirus Capital — Analyst

Yes. Thank you so much for the opportunity. Sir, just a couple of quick questions. So can you break this 10% SSG that we’ve got into a pricing or a volume-led breakup in —

Gautam Saraogi — Chief Executive Officer

Yeah. So the 10% when it converted into volume it is minus 2%.

Vikas Jain — Equirus Capital — Analyst

Volume is minus 2%, all right. And sir, I missed the mark when you said that you ascribed a reason for the decline in the gross margin for this particular quarter. Can you please repeat that? What was the detail?

Gautam Saraogi — Chief Executive Officer

Yeah. I think this quarter we had some marketing and offer debit from some of our large-format store partners and such that is our knocked off in the revenue. And because it is adjusted in the revenue line item, that we have seen a slight decrease in the gross margin.

Vikas Jain — Equirus Capital — Analyst

Sure. Sure. So this is more to do with what the nature of this item is that usually happens every third quarter or what is the —

Gautam Saraogi — Chief Executive Officer

It differs — it differs. It happens every alternate quarter, but different amount was a little more than normally. See what these offers are basically many of the large format stores, run many schemes in their tool, like on a bill basket, they’ll get a particular offer. They drums a marketing campaigns in their store. So such initiatives are basically owned by the brand [Indecipherable] brands and also own by their private label. So proportionately, we have owned our contribution.

Vikas Jain — Equirus Capital — Analyst

Correct. Correct. But this is a normal business that incur every quarter right?

Gautam Saraogi — Chief Executive Officer

It is always in the normal course of business, it’s not an outliner.

Vikas Jain — Equirus Capital — Analyst

Understood. Sir, and with respect to the stores opening, you did reaffirm that around [Technical Issues] in a particular year.

Gautam Saraogi — Chief Executive Officer

I just want to confirm one more thing. This comes every quarter, but this time because of it being a little more than normal, that’s why we’ve seen a decline in the —

Vikas Jain — Equirus Capital — Analyst

Sure, sure. I understood. I got that. Yeah. Sir, last question, with respect to — you did mention that whatever store opening that would have on an annual basis, either 120 or 130 — around 57% or 58% would control to be open in the top eight cities. Is that understanding correct?

R. Mohan — Chief Financial Officer

Yeah. Above 50% to 55%, see in our existing fees, also we are seeing a lot of scope of growth. So I think that 50% of are coming from our top eight cities or top 10 cities will continue.

Vikas Jain — Equirus Capital — Analyst

Understood. Sir, in that case, can I ask you a broad question is to like, we do mention in our presentation that our revenue from a particular matured store will be around INR85 lakh to INR90 lakh, right? So out of this 600 odd stores that we have, around how much percentage of our stores will be clocking such revenue throughput?

Gautam Saraogi — Chief Executive Officer

See, the INR85 lakhs to INR90 lakhs is for mature sir, that’s a blended number. Mainly, it is also including the stores which have opened in the current financial year, the last is a blended number, the INR85 lakhs to INR90 lakhs, it’s not for the mature stores only.

Vikas Jain — Equirus Capital — Analyst

All right. So, our mature stores would be even clocking higher run rates?

Gautam Saraogi — Chief Executive Officer

Ideally should be clocking a little higher. I don’t have that number handy, but it will be clocking higher.

Vikas Jain — Equirus Capital — Analyst

Sure, sure.

Gautam Saraogi — Chief Executive Officer

Measure maturity? Any store which is greater than 18 months, we take that as a mature store. So we measure maturity by time and not by revenues.

Vikas Jain — Equirus Capital — Analyst

Understood. Understood. Understood. Thank you so much, sir.

Gautam Saraogi — Chief Executive Officer

Right.

Operator

Thank you, sir. We take the next question is from the line of Mr. Akhil Parekh from Centrum Broking. Please go ahead, sir.

Akhil Parekh — Centrum Broking — Analyst

Hi. Thanks for the opportunity. Sir, my first question is on the demand trend, right. You’ve highlighted October and December was good. Would you be able to bifurcate how different or similar they are in, say, Tier 1 versus Tier 2, Tier 3, Tier 4?

Gautam Saraogi — Chief Executive Officer

See, I think Tier — I think the real difference happened that is at state level and not at the tier level. I’ll give you an example. Now, Delhi — for example let us take the Delhi region, right. And some of the Delhi, October, November are usually good month. December starts to decline because of being down. Now in South, the trend is very different. October does very well, because of Diwali and then December around Christmas, New Year, the sales again picks up. So the trend really differs between individual space and not at a tier level.

Akhil Parekh — Centrum Broking — Analyst

Okay. I mean, you answer from a seasonality perspective similarly. But I’m just saying in general, how the demand trend is there?

Gautam Saraogi — Chief Executive Officer

Again in general, what happens in usually festivals fall in October and even this year, it was in October. So October, usually sales spike. November again after festival the sales slightly takes a dip in November. And then in December, because of New Year and Christmas and the holiday season, December again the sales spike. So, individually, November is slightly lower than October and December picks a better and it becomes — December usually becomes on par with the sales. This is the usual trend. It depends when the individual festival fall.

Akhil Parekh — Centrum Broking — Analyst

No, but my question, whoever coming from okay, we are seeing, right the impact of inflation hurting the consumer segment, more so people who are in Tier 2, Tier 3 towns, which is evident from the numbers reported by some of the FMCG companies. Are we seeing such kind of a discrepancy between the Tier 1 versus a Tier 2, Tier 3, Tier 4 in terms of a demand front?

Gautam Saraogi — Chief Executive Officer

See, in our case, we have not seen any such disparity as of now. For us our Tier 2, it’s continuing to do as well as our Tier 1. So we are not really seeing too much of disparity between Tier 1, Tier 2. But having said that, we are more currently looking at our network. If you see 50% of our stores are in top eight cities. So currently, we are more Tier 1 from a network perspective. But whatever we have in Tier 2, Tier 3, Tier 4, we have not seen any as such fall. I mean, no greater fall than what is happened in Tier 1, let me put it that way.

Akhil Parekh — Centrum Broking — Analyst

Okay. So SSG volume of minus 2% would be broadly similar across the tiers you’re saying —

Gautam Saraogi — Chief Executive Officer

Yeah. It would be similar.

Akhil Parekh — Centrum Broking — Analyst

Okay. Second question was on the ASP front, you said that you’ve seen a kind of plus 10%, 11% of ASP increase on a Y-o-Y basis. Are we seeing any trends where premium products are getting sold way more than what they used to be and probably marked products or the entry-level products are getting so less currently as compared to say in last one, two years?

Gautam Saraogi — Chief Executive Officer

I wouldn’t — we have not seen any dramatic shift on that front. I think it’s been fairly similar and consistent to what it was before. So we’ve not seen really any big change on the premiumization front, look the customer is upgrading and that’s why our ASP is increasing but there’s no dramatic shift.

Akhil Parekh — Centrum Broking — Analyst

Okay. Okay. Fair enough. And last question sir —

Gautam Saraogi — Chief Executive Officer

But to your question, there is a shift, that’s why you have seen our ASPs increase, because of the new product portfolio. There is a shift, but it’s a very slow and gradual shift.

Akhil Parekh — Centrum Broking — Analyst

Okay. Fair enough. And lastly on the ramping up of newer stores, right. I mean, I’m sure the newer stores would be clocking to only 30%, 40% from your sales as subside to the very mature stores. So how is it — how does the timeline looks like? So say for example, if I open a new store today, how many months or year this takes for that store to reach to the sales level of our very mature stores?

Gautam Saraogi — Chief Executive Officer

See, Akhil, mentioning on the call, maturity for us be measured not by revenue, but we measure it by time. See we have some older stores also, which is well below the average of INR85 lakhs. And we had some newer stores also which are well above that INR85 lakhs, INR90 lakhs numbers. So for us the — for a store to be matured it by time and not by revenue. So usually between 18 to 24 months is when a store gets matured.

Akhil Parekh — Centrum Broking — Analyst

Okay. Okay. That’s all from my side and best wishes for coming quarters.

Gautam Saraogi — Chief Executive Officer

Thank you.

Operator

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

Himanshu Nayyar — Systematix — Analyst

Yeah. Hi, good evening, Gautam and Mr. Mohan. So first question, I mean, given that you said the demand trends are very simpler for you in the both the metro — larger and the smaller markets. So just wanted to understand, is there any notable or a significant difference in the store economics or you told that you opened in the top eight cities versus your other stores. And given if you open a significant proportion in your non top eight cities, so that impacts our overall store economics or not much?

Gautam Saraogi — Chief Executive Officer

See, from a margins perspective, margins are very similar between Tier 1 and Tier 3 and I’ll tell you why. So there will be a difference in revenue. So the top eight cities, average store revenue versus our Tier 3 cities, revenue would be different. In Tier 3, the revenue levels first would be lower. In our case, it is not significantly lower, but it is lower. But what happens is, even when these revenues are lower in Tier 3, our other costs price, rentals, staff costs and other expense is also that much lower. So the kind of EBITDA what we generate at as to average store level EBITDA of 31% to 32%, whether it is a Tier 3 or whether it is a Tier 1, we end up delivering the same 31% to 32% EBITDA. So there’s no change in the margins as such, but the revenues would be different for a Tier 1 versus Tier 2.

Himanshu Nayyar — Systematix — Analyst

Okay. And return ratios in [Indecipherable] that would again broadly be similar, is it?

Gautam Saraogi — Chief Executive Officer

No no. There’ll be a changes, so to the return ratios in a Tier 3 would slightly longer, because the investments will be to put up a store, as far as capex and inventory whether it is a Tier 3 or the Tier 1 is the same. So your payback period is likely going to be longer in Tier 2 versus Tier 1.

Himanshu Nayyar — Systematix — Analyst

Got it. And secondly, it was on the omnichannel [Indecipherable] so can you share some details as to where we are in that journey? And if we have already started late in a significant number of stores, any initial data on how much is that adding to our store throughput or revenue per store which you’re billing?

Gautam Saraogi — Chief Executive Officer

See, we have started omnichannel in a small way. I mean, we started seeing some success. It is still early days. So we have started doing localized deliveries on certain stores and it is scaling up. We’ve also now making a omnichannel program there, any customer who walks into a local store, and if she is not able to find a color and size, we convert that customer into an omnichannel customer. So we start initiated and right now we have done it in a few stores. So it’s very early on to say how the result is, but it has gone live in a peripheral number of things.

Himanshu Nayyar — Systematix — Analyst

So any idea, I mean, how much you think such as [Technical Issues] impact on our store throughput?

Gautam Saraogi — Chief Executive Officer

Exactly. So that was the idea. I mean, we are quite optimistic that this should improve the store economics and the store throughput, but since we have piloted in a few stores, even the staff are getting trained how to use that omnichannel modules. So it will take some time for us to really know how much is the output increases. So we have done a small pilots in four to five store.

Himanshu Nayyar — Systematix — Analyst

Okay, so It’s still a long time away that we actually start seeing a material —

Gautam Saraogi — Chief Executive Officer

Because there are so many integrations we need to do at a software level. So we have piloted it in four to five stores and see how it goes.

Himanshu Nayyar — Systematix — Analyst

Got it. All right. That’s all from me. All the best.

Gautam Saraogi — Chief Executive Officer

No problem. Thank you.

Operator

Thank you, sir. We take the next question from the line of Saptarshee Chatterjee from Centrum PMS. Please go ahead, sir.

Saptarshee Chatterjee — Centrum PMS — Analyst

Yeah. Good evening and thank you for the opportunity. Sir, my question is, sometime back you have talked about your repeat customers around close to 30% to 35% of the total customers. If you can talk about how that has moved and if your product per customer has also grown Q-o-Q or Y-o-Y?

Gautam Saraogi — Chief Executive Officer

Our repeat purchase was about at 40% to 45%. And that has more or less maintained. From the other — probably other point data what we mentioned whether the same customer is buying a lot more or not, that data we have still not tracked in this quarter. And probably when we have little more information in that, we will circulate it. But our repeat purchase at 40% to 45% are maintained.

Saptarshee Chatterjee — Centrum PMS — Analyst

Understood, sir. But also like do you track whether a same customer with vintage with someone who is buying two year, three years back with us is buying more. Is there any evidence or data for that?

Gautam Saraogi — Chief Executive Officer

That’s something, again we’ve not tracked data in the last couple of quarters. But what data we track I’ll tell you, which we have done very well in Q3. So we track how many customers have lapsed. So some data around the lapsed customer, we send out SMS and we have been able to recall many customer back to the store and converted those lapsed customers into active customers. So we’ve done that estimate. So the customers which are very old and not repeat come back to the store.

Saptarshee Chatterjee — Centrum PMS — Analyst

Understood, sir. Helpful. And secondly, would want to know what are the parameters you track for the brand recall as like Go Colors on all omnichannels and how do you track that?

Gautam Saraogi — Chief Executive Officer

See, in — see offline there is no one way to measure it, but in social media and digital world, there are some third-party agencies through social media and digital, they’re able to tell what is the recall value. There is some metrics and map they use. But there are some third-party agencies doing that. In the social media space and digital space, in the offline space, there’s not really any real way to measure the recall, unless we conducts a customer survey.

Saptarshee Chatterjee — Centrum PMS — Analyst

Okay. And but do you — can you quantify like what has been our brand recall at for the third-party agencies?

Gautam Saraogi — Chief Executive Officer

Yeah. So in fact, we had a recall, we did a recent — we did a small brand campaign also. So in the social media space and the news space, we had a brand recomposed our campaign, we did a study, it was about 23%.

Saptarshee Chatterjee — Centrum PMS — Analyst

Versus like Y-o-Y or something how to compare that?

Gautam Saraogi — Chief Executive Officer

This campaign, we have not done before. This was the first time we have done this.

Saptarshee Chatterjee — Centrum PMS — Analyst

Understood. Understood. And last question from my side is that, you have talked about maybe around 120 kind of store additions every year and we have a visibility of maybe another 500 stores, but in terms of like we are seeing some bit of volume cannibalization within the stores of same regions, how our number of locations are going to grow in next three, four years?

Gautam Saraogi — Chief Executive Officer

See, we are going to continue to grow in clusters. And that’s why for us sale cluster sales growth is a much better metric than same store sales growth. So we are going to be continuing to grow in clusters, because on the cluster based expansion model. So over the next two, three years, we will continue to add 120 crores to 130 stores and a good number. Very hard to say how many will be coming from the existing clusters, but it’s going to be that driven model only.

Saptarshee Chatterjee — Centrum PMS — Analyst

Okay, sir. Thank you so much and all the best.

Gautam Saraogi — Chief Executive Officer

Thank you.

Operator

Thank you. [Operator Instructions] We’ll take the next question from the line of Prerna Jhunjhunwala from Elara Capital. Please go ahead.

Prerna Jhunjhunwala — Elara Capital — Analyst

Thank you, sir. One question from my end is, how much of your sales would be new product sales versus core products? This is say understand the impact of raw material movement as well, because you’ve not taken a price hike since December ’21. And there has been a material improvement — increase in the cost of raw material as well. So just wanted to understand these two factors?

Gautam Saraogi — Chief Executive Officer

See, for us, whether new products or old products, our gross margin structure and multiplier is the same. So even if our newer products are selling — older product portfolios are selling, our gross margin profile, which is we are having at a EBO level, we have about 68% to 69%, that maintain and that will transfer it to even — that is transferred from 60% to 60.5% at a company level. So the margin profile is very similar in all our products and we don’t have that differentiating between a new and a old product.

Prerna Jhunjhunwala — Elara Capital — Analyst

No. It is from the point of raw material actually, because if raw material prices have increased by 30%, 35%, 40%, without price hike beyond December ’21 —

Gautam Saraogi — Chief Executive Officer

I will tell you. In fact, our raw material price — the raw material prices have increased slight and around the same time, we had also increases the — increased the price of the product. So I’ll tell you, for the first increase that happened in April ’21 or March ’21, whether there is a — there was a sharp increase in RM pricing. And we had also immediately simultaneously increased our product prices. The same trend happened in December ’21, which I had also mentioned earlier in the call, the RM prices went up in December ’21 and we took the product price hike also in December ’21. So when we are taking the hike with the increase of the RM hikes, it kind of counterbalances.

Prerna Jhunjhunwala — Elara Capital — Analyst

Okay.

Gautam Saraogi — Chief Executive Officer

So it’s very hard to say that there is an impact coming, because the newer inventory, even though when we are changing our prices, the newer inventory coming in and is going with the new selling terms. The older inventory in the channel has been selling at the old price.

Prerna Jhunjhunwala — Elara Capital — Analyst

Okay, understood. So could you —

Gautam Saraogi — Chief Executive Officer

So the increase in the RM and the increase in the selling side goes hand-in-hand is what I’m trying to tell you. And the last increase of RM and the last increase of selling price happened in December ’21.

Prerna Jhunjhunwala — Elara Capital — Analyst

Okay. And now, if cotton prices come down, then what do you do to your ASP, because just trying to understand on the core product. Would you reduce your ASP?

Gautam Saraogi — Chief Executive Officer

No, no. For us, it is not comfortable for us to reduce the prices. So even if tomorrow the RM prices fall and it’s already fallen, if it comes definitely maintain even in a scenario, in that scenario, we will not be reducing our prices.

Prerna Jhunjhunwala — Elara Capital — Analyst

So your gross margin should increase then?

Gautam Saraogi — Chief Executive Officer

I mean, if these cotton prices — if these reduced cotton prices continue, then our gross margin should increase.

Prerna Jhunjhunwala — Elara Capital — Analyst

Okay, understood. And could you share the number between the core and premium products revenue share? It will help.

Gautam Saraogi — Chief Executive Officer

Currently, it’s the same ratio of 50/50.

Prerna Jhunjhunwala — Elara Capital — Analyst

Okay. And historically, maybe three years back.

Gautam Saraogi — Chief Executive Officer

Three, four years back, it was more 60/40, now it become 50/50.

Prerna Jhunjhunwala — Elara Capital — Analyst

Okay. Thank you so much, sir.

Gautam Saraogi — Chief Executive Officer

Thank you.

Operator

Thank you, ma’am. We take the next question from the line of Mr. Aditya Sharma from Aditya Birla AMC. Please go ahead.

Aditya Sharma — Aditya Birla AMC — Analyst

Hi, sir. Thanks for the opportunity. Just wanted to understand this. So we have completely outsourced in terms of manufacturing, So can’t we use the procurement can be done by the outsourcing companies to whom we are outsourced and actually save around 60 days in working capital. So as you talked about 30 days, our – in terms of inventory occupied by the RM that you’re procuring. So that could actually in turn become payables and the company could actually have a much better cash flow from operations and much better working capital. So just wanted to understand are we prioritizing cash margins over cash flows and can we actually implement this model?

Gautam Saraogi — Chief Executive Officer

See, I’ll tell you, look, because of this model, what we work on margins definitely are better, because we source fabric directly. But having said that, see the reason why they are sourcing our fabric directly and margins because of the quality. See we as a brand with the fabric quality, we play the very, very important role in a garment. And that is why our customers keeps coming back to us. So that quality we want to have it in [Indecipherable]. And that is one of the reasons why we buy our fabrics in FMCG.

And now, coming to our subcontractors, see we work with very small subcontractors. We work at multiple subcontractors, but work very, very small subcontractors. Those subcontractors don’t have that kind of financial strength to buy the fabric directly, also.

Aditya Sharma — Aditya Birla AMC — Analyst

Okay.

Gautam Saraogi — Chief Executive Officer

And because we are working with small subcontractors, we are able to source a better rate on the subcontracting charges. Whereas if we go to a larger export firm or a garment manufacturing firm, their cost of gaining the conversion in CMP versus the smaller sub-contractor would be far higher. So we work with the smaller sub-contractors, which gives us a upside in our CM charges — upside in the gross margin, upside in our sourcing.

Aditya Sharma — Aditya Birla AMC — Analyst

Got it. Got it. So I guess —

Gautam Saraogi — Chief Executive Officer

But the primary reason of doing this model is because we want to control the quality. More than margin with more from the region of controlling the quality on the product.

Aditya Sharma — Aditya Birla AMC — Analyst

But we also can actually have our — from where we are outsourcing, we can ask them to actually —

Gautam Saraogi — Chief Executive Officer

We can nominate the supplier —

Aditya Sharma — Aditya Birla AMC — Analyst

Buy from our supplier list, which —

Gautam Saraogi — Chief Executive Officer

Yeah, yeah, we are doing right. We are doing that, but if we just — but there are many sub-contractors, we won’t be able to do. Now, if I take the entire transaction, there are many places —

Aditya Sharma — Aditya Birla AMC — Analyst

Yeah. Correct. So what has changed in our inventory? So we are having the same model, but before we had 90 days, now it’s kind of consistently around 120 odd days. While we were understanding that the RM prices have short up and there was an even demand and probably backfoot actually result in such kind of high inventory days. So I just wanted to understand this inventory piece like what has resulted in this higher inventory days from previous years?

Gautam Saraogi — Chief Executive Officer

I think, look, during those periods of COVID, I think inventory planning and all became little difficult at that point of time. And it was during — during the period of COVID whereas inventory days went from 90 days and it gone as away 170, 180. So we’ve been able to bring it to 120. I think COVID was that scenario and that situation, but now we are trying to see somewhat brought it down to reasonableness of 120 days, we’re further wanting to optimize it to [Indecipherable]. But it was a COVID — it was a COVID window when this happened.

Aditya Sharma — Aditya Birla AMC — Analyst

So can we achieve this in a couple of quarters or what’s the timeline for it?

Gautam Saraogi — Chief Executive Officer

See, we ideally are looking at two, three quarter, a little more to stabilizes this at 90.

Aditya Sharma — Aditya Birla AMC — Analyst

Got it. Got it. Thank you so much.

Operator

Thank you, sir. We take the next question from the line of Mr. Rajiv Bharati from DAM Capital. Please go ahead, sir.

Rajiv Bharati — DAM Capital — Analyst

Thanks for the opportunity, sir. So can you call out the rent and the FCF number for this quarter?

Gautam Saraogi — Chief Executive Officer

Just one second, I will tell you. Just one second, I don’t have it handy, I’ll tell you.

R. Mohan — Chief Financial Officer

What is the figure is at —

Gautam Saraogi — Chief Executive Officer

The rent I’ll tell him. The rent is, we have paid INR23.5 crores of rent in quarter three FY ’23 [Phonetic].

Rajiv Bharati — DAM Capital — Analyst

Okay. So this is entirely the fixed rent, is it, below EBITDA?

Gautam Saraogi — Chief Executive Officer

Yeah, this is correct.

Rajiv Bharati — DAM Capital — Analyst

Okay. And let’s say, the OCF number or the FCF number for the quarter, because the INR60 crores is for nine month, right?

Gautam Saraogi — Chief Executive Officer

Yeah. So the INR60 crores is for the nine months, so for the nine months, the INR60 crores is on the basis of Ind AS 116. If I look at pre-Ind AS operating cash flow, it is nil. Because we’ve had INR60 crores of rent and we’ve had INR60 crores of cash, so basically it is nil.

Rajiv Bharati — DAM Capital — Analyst

Got it. But for the quarter, I just want to get it from —

Gautam Saraogi — Chief Executive Officer

No, we’ve prepared — no, we’ve prevailed a cash flow for nine months.

Rajiv Bharati — DAM Capital — Analyst

Okay. And one question on loyalty, I think it was asked before. Do you have a metric which you are, let’s say, accumulating right now in terms of tracking the loyalty, the repeat part of the purchase?

Gautam Saraogi — Chief Executive Officer

See, loyalty for us right now, is not gone live, we are testing it, we’re making the program. Hopefully, loyalty should go live from Q1. That is what we are planning. But as far as repeat customer base is concerned, our repeat customer rate is at about 40% to 45%, which has been consistent over last one, one and a half years what we are seeing.

Rajiv Bharati — DAM Capital — Analyst

Yeah. Okay. That’s all from my side. Thanks a lot and all the best.

Gautam Saraogi — Chief Executive Officer

Thank you.

Operator

Thank you, sir. We take the next question from the line of Mr. Gautam Rathi from CWC. Please go ahead, sir.

Gautam Rathi — CWC Advisors — Analyst

Hi, Gautam. Thanks for taking my question. The first one actually I wanted to understand, so you said you took a price hike in December 2021, right? So generally in — when you see our history of last five, seven years, whenever you take a price hike, how much impact does it have on your volumes and how much time does it take for the volumes to come back to a normal level, right. Is there a correlation there?

Gautam Saraogi — Chief Executive Officer

See, usually we have not seen a volume impact because of price hike. Because when we do a price hike, you right said, we took in December 21. Whenever we have taken a price hike, it was taken with the entire industry. So it’s usually for a customer that experience the price hike is across all brands. We have not seen a volume impact because of price hike in our old experience. See, because we increase our prices only if there are long-term fluctuations in raw material prices. In short-term, if there are any fluctuations we absorb it, because we have the gross margin, but any long-term fluctuations that is when we increase and then in such fluctuation, the entire industry takes along with it.

Gautam Rathi — CWC Advisors — Analyst

So, Gautam, next quarter you will — the price hike that you’ve taken in December ’21 will come into the base, right? Then the impact that you were getting because of higher prices will also cushion the base. And the question which you’re trying to understand is, your volume growth being where it is. Is it possible that the growth will start to taper off a bit?

Gautam Saraogi — Chief Executive Officer

No. So, you’re saying — can you come again with the question, I didn’t clearly understand it.

Gautam Rathi — CWC Advisors — Analyst

Basically, there are three elements which are there in your growth. One is the volume growth that you’re getting, especially in your SSG guide, most of the SSG is coming from prices, right? You have around a 10% SSG, wherein volume growth is negative 2%, right? And if the volume growth has not been impacted by the prices that you’ve taken, then next quarter onwards, the prices will be in the base of Q — of the previous quarter last year, right? So in that sense, the quarter will be — the growth will start to normalize, right, unless you take another price hike now.

Gautam Saraogi — Chief Executive Officer

See, I explain the question now — no, no, no, I’ll explain the question. I understood where they are coming from. See, we are the company, we do want to increase our prices every year to drive growth. We will increase the prices only there are changes in raw material pricing. Now as far as how are we going to be growing, the growth is going to be at a — see, at an equity level, we want to grow at 4% to 5%, but having said that, our ASPs will keep increasing because of the new product coming in. So we are looking at a value SSG of about 10%, in which, 4% to 5% will be driven by volume and the balance 4% to 5% will be driven by ASP which is going to be driven by new product portfolio and not change in pricing of the existing products.

Gautam Rathi — CWC Advisors — Analyst

But your historical ASG, SSG was much higher, which now you are saying you’re — you believe that the SSG should grow at 10%. And the second thing is, in this quarter you were at negative 2%. So, it will take some time. The question I’m trying to understand is, it will — the negative 2% to — 4% to 5% will take some time, right?

Gautam Saraogi — Chief Executive Officer

No, no. See, that’s what I’m saying, so the minus 2% happened because obviously this quarter was the little tough. But in our business, the right way to look at it also is through the SCSG mechanism. In the SCSG data, we’ve had 11% volume growth in this quarter on a Y-o-Y basis.

Gautam Rathi — CWC Advisors — Analyst

Which is fair, which is fair, which I understand, which is a fair. Okay. That’s perfect. The second thing which we wanted to just understand is the seasonality bit, right. And I’m just talking from, I think one of us in this conversation, you had mentioned that the way you think about seasonality is broadly 45%, 55% right; 45% in H1 and 55% in H2. Does that remain or is this year an exception to that?

Gautam Saraogi — Chief Executive Officer

I mean, see, these are the patterns via to COVID. But this is the first full-year after COVID. This is the first full-year, so we’ll have to see, but looking at — looking at the current year trends, it is looking at the same trends of 45% and 55%.

Gautam Rathi — CWC Advisors — Analyst

Okay. Even the 45%, 55% which will mean that Q4 will see — we could see further acceleration. That is the only limited point, right?

Gautam Saraogi — Chief Executive Officer

No usually, quarter four is the biggest quarter of the year.

Gautam Rathi — CWC Advisors — Analyst

Exactly.

Gautam Saraogi — Chief Executive Officer

Yeah, but usually 45%, 55% applies for us, because we are adding new stores. So those stores which have opened in the first six months of the year, they normalize to a certain extent to give revenue in H2 and that is why the 45%, 55% rule applies to us. But on a same-store basis, the quarter four is the biggest.

Gautam Rathi — CWC Advisors — Analyst

Understood. Understood. And just one, sir, sorry, one last clarification. So when you say you usually consider 18 months for a store maturity, right? So — and when you call out these SSG numbers, are these also for those 18 months base or is it a different time period?

Gautam Saraogi — Chief Executive Officer

No, it’s a blended number. It’s a blended number right from our oldest store to our newest store. Newest store in, see okay, what qualifies under SSG, any store. So let me clarify. So now we’ve had 10% SSG, right? Q3 FY ’23 versus Q3 FY ’22. Now, what are the source what are going to be considered in SSG. All stores which have opened before October 1, 2021, are going to be coming under SSG valuation. The store has to be live for a full quarter in comparison, for it to be evaluated in SSG.

Gautam Rathi — CWC Advisors — Analyst

Correct. So October 2022, right, before October 2022?

Gautam Saraogi — Chief Executive Officer

No, no. [Speech Overlap] on a Y-o-Y basis.

Gautam Rathi — CWC Advisors — Analyst

Right. So full year, okay. Understood. Okay. Thanks a lot, sir.

Gautam Saraogi — Chief Executive Officer

Yeah, thanks.

Operator

Thank you, sir. Ladies and gentlemen, that was the last question for the day. I would now like to hand the conference over to the management for closing comments.

Gautam Saraogi — Chief Executive Officer

Thank you, everyone for joining us. I hope we’ve been able to answer all your queries. We look forward to such interactions in the future. We hope to live up with the expectations of ARPU in the future. In case if you require any further details, you may contact, Mr. Deven Dhruva from SGA, our Investor Relation partner.

Operator

[Operators Closing Remarks]