Go Fashion (India) Ltd (GOCOLORS) Q4 FY22 Earnings Concall Transcript

Go Fashion (India) Ltd. (NSE: GOCOLORS) Q4 2022 Earnings Concall dated May. 09, 2022

Corporate Participants:

Rajiv Bharati — DAM Capital Advisors — Analyst

Gautam Saraogi — Chief Executive Officer

R. Mohan — Chief Financial Officer

Analysts:

Ankit Kedia — PhillipCapital — Analyst

Devanshu Bansal — Emkay Global Financial Services — Analyst

Vaishnavi Mandhaniya — Anand Rathi — Analyst

Akhil Parekh — Centrum Broking — Analyst

Gautami Desai — Chanakya Capital Services — Analyst

Manish Poddar — Motilal Oswal Asset Management — Analyst

Anirudha Bhandari — Sixteenth Street Capital — Analyst

Rahul Jain — PhillipCapital — Analyst

Resha Mehta — GreenEdge Wealth — Analyst

Manasvi Shah — ICICI Prudential — Analyst

Gautam Rathi — CWC Advisors — Analyst

Deepak Poddar — Sapphire Capital Partners — Analyst

Chirag Lodaya — Valuequest Investment Advisors — Analyst

Vinod Malviya — Union Mutual Fund — Analyst

Binoy Jariwala — Sunidhi Securities and Finance — Analyst

Ankit Babel — Subhkam Ventures — Analyst

Parikshit Shah — Duro Capital — Analyst

Presentation:

Operator

Ladies and gentlemen, good day, and welcome to Go Fashion India Q4 FY ’22 Earnings Conference Call hosted by DAM Capital Advisors Limited. [Operator Instructions]

I now hand the conference over to Mr. Rajiv Bharati from DAM Capital Advisors. Thank you, and over to you, sir.

Rajiv Bharati — DAM Capital Advisors — Analyst

Thank you, Neerav. Good morning, everyone. Representing DAM Capital, it’s our absolute pleasure to host Go Fashion India Ltd. for its Q4 and full year 2022 ending conference call. The company is represented by Mr. Gautam Saraogi, Chief Executive Officer; and Mr. R. Mohan, Chief Financial Officer.

Over to Gautam for your opening remarks, and post which we’ll open it for Q&A. Thank you.

Gautam Saraogi — Chief Executive Officer

Thanks, Rajiv. Good morning, and a warm welcome to everyone present on the call. I hope you all are keeping safe and healthy during these times. I would like to mark a thank you to the entire investor community for the tremendous support during the IPO in November ’21. It was a proud moment for all of us. Along with me I have Mr. R. Mohan, our Chief Financial Officer, and SGA, our Investor Relations Advisors. Hope all of you have received our investor deck by now. For those who haven’t, you can view them on the stock exchange and the company website.

FY ’22 has been a challenging year for this industry, and despite COVID related lockdown, our company has shown great resilience and we have come out stronger than ever before. We are among the few apparel companies in India to have identified the market opportunity in women’s bottom wear and have acted as a category creator for women’s bottom wear. We have strengthened our portfolio by adding new products across all bottom wear category. We have leveraged the advantage to create a direct-to-consumer brand, with a diversified and differentiated product portfolio of premium quality products at competitive prices.

During fiscal year ’22, our volumes grew by 34% and despite the lockdown phase in January, our volumes for the quarter grew by 11% on a YOY basis. We have a strong unit economics with an efficient operating model. We have a standardized and scalable developed model for our EBO base and we have the know-how and experience for the same. Our unit economics has allowed us to expand our EBO network across various regions in India, including new EBOs in tier-1, tier-2, tier-3 and tier-4 cities and towns.

During fiscal year ’22, the company has added 54 EBO stores and we have crossed the 500 store milestone during the last quarter. Keeping in line with the growth strategy to open more doors closer to the consumer, the company is pushing ahead with expansion. We continue to invest expanding our store footprint across geographies by adding 120 to 130 new stores every year. We are looking at omnichannel engagements for a seamless consumer experience, building on a technology-driven growth strategy to reach customers across all cities. Our product being core and essentials to consumers has enabled us to operate on a business model where we offer limited discounts and sale of our products typically at full price, in our experience, results in greater profitability. 97% of our EBO sales for fiscal year ’22 all are on full sales.

In addition, our EBOs average selling price has increased, primarily on the account of value-added products that we’ve introduced as part of our portfolio. Our ASP for fiscal year ’22 is INR661 per unit. We have strategically undertaken brand building initiatives to gain visibility with prudent use of resources, whilst incurring limited branding and marketing expenses. We retail our product under a single brand for improved brand recall and better marketing of a product, which has yielded one of the highest revenues per unit spend in the sector.

We are leveraging technology to bring cost efficiency and enhance consumer experience. We intend to further improve our operating efficiency and ensure efficient supply chain management through global best practices. Among the measures that we intend to undertake, include investing further in the infrastructure to improve productivity and time saving. We will look to upgrade our warehouse to optimize our inventory and supply management. We intend to implement new technologies to further expand and improve customer delivery and enhanced customer buying experiences, with faster dispatches. We also undertake data analytics and that will allow us to better understand customer preferences, improve sales and help scale our operation. We are also in the process to add and identify another small warehousing facility in Bhiwandi in Maharashtra.

We continue to focus on further strengthening our online sales to benefit from evolving customer trends in the market. We propose to make investments in digital channels to improve our omnichannel engagement experience for our customers and have a dedicated team for the e-commerce operation. We also intend to leverage our existing capabilities, to increase our online presence by improving and upgrading our website.

Our focus will be to target customer acquisition to drive sales through our website and online marketplaces. In addition, we intend to invest in content generation, to build engagement with the younger audience. We look forward to continuing to innovate and to have a [Phonetic] creative approach and launch more products, while providing more brand destinations for our consumers, which will help us grow and gain market share in the coming years.

With this, I would like to hand over the call to our CFO, Mr. R. Mohan, for the update on the Q4 and FY ’22 financials. Thank you.

R. Mohan — Chief Financial Officer

Thank you, Gautam, and good morning, everyone. The company has posted strong performance to the quarter ended 31st March ’22 backed by an increased demand across product categories. Our revenues for the quarter stood at INR116 crores as against INR90 crores in Q4 FY ’21, registering a growth of 49% year-on-year, [Indecipherable] volume growth of 11%.

Gross profit increased by 30% to INR72 crores and the GP margin was at 61.8% for the quarter. Our EBITDA for the quarter stood at INR38 crores, registering a growth of 53% Y-on-Y as compared to INR25 crores in Q4 FY ’21. Our EBITDA margins, which stood at 32.4% has seen improvement of 490 basis points on a year-on-year basis. Profit before tax for the quarter stood at INR15 crores at 61% Y-o-Y from Q4 FY ’21. Profit after tax for the quarter stood at INR12 crores, 73% Y-o-Y growth over FY ’21 Q4.

Coming to the same-store sales growth, we have seen a 17% SSSG compared to Q4 FY ’21 that is last year, and an SSSG of 31% for the second half of this year. Coming to the financials FY ’22, our revenue stood at INR401 crores as against INR251 crores in FY ’21 registering a growth of 60% Y-on-Y. Our EBITDA for the year stood at INR119 crores as compared to INR46 crores in FY ’21. Our EBITDA margins which stood at 29.7%. Profit before tax for FY ’22 stood at INR48 crores, whereas profit after tax for FY ’22 stood at INR36 crores. SSSG for FY ’22 is not comparable, due to COVID related lockdowns.

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

Questions and Answers:

Operator

[Operator Instructions] The first question is from the line of Ankit Kedia from PhillipCapital India Private Limited. Please go ahead.

Ankit Kedia — PhillipCapital — Analyst

Hi, sir. I have three questions. First is on your what would be the volume growth in the SSSG of 17% for the quarter, which you have posted given that the ASP increase itself Y-o-Y is around 13%?

Gautam Saraogi — Chief Executive Officer

So Ankit, volume growth would be about 5%.

Ankit Kedia — PhillipCapital — Analyst

Sure. You have also taken a price increase in the month of December and January of INR50 on the leggings. But if I look at your quarter-on-quarter ASP increase it’s virtually flat. So, have we seen downtrading from the consumer side or it’s more of a mix change, wherein the quarter three high festive demand in winter wear, and we will see the benefits of the price increase in quarter one?

Gautam Saraogi — Chief Executive Officer

So Ankit, the way it works is, see, whenever we increase our prices, the price should get increased for the newer pieces, which comes out from our production — from the outsourced production. So till those new pieces gets into the system and we start selling on the new price, it takes time for the transition to happen. So basically the inventory, which is placed at the store level and the other channel level, we are not changing the price for the existing inventory. So the price increase of INR50 what you’re talking about, it will show over a period of two, three quarters. It will not show immediately in quarter one or quarter four.

Ankit Kedia — PhillipCapital — Analyst

Sure. So in that case, our inventory has seen a significant bump-up for the year, where you’ve always guided 90 to 100 days of inventory, it’s more than 150-day inventory today. So what is the reason for the inventory bump-up in the system?

Gautam Saraogi — Chief Executive Officer

Yes. So I’ll explain the logic. I’ll take a few minutes Ankit to explain this, because this is a very important point. So, see, Ankit, there is right now a very big supply chain issue, which is happening because raw materials prices have been fluctuating. Cotton has become a little scarce in availability. So there is a lot of supply chain difficulties in what the apparel industry is facing, as far as cotton and fabrics are concerned. Now, so we have built up inventory. Keeping our growth in mind what we want to do over the next few quarters and few years and immediate future, yes, we have bumped-up inventory so that we don’t get affected by the external factors.

Now, today, we are having about INR165 crores of inventory vis-a-vis, we had INR80 crores of inventory in March ’21. So our inventory has almost doubled. But if I take inventory days as a calculation of what is my current running number, currently, we are doing on average of INR47 crores to INR50 crores of monthly average sales. So if I take my current monthly average sale number and then I compare the inventory what I’m holding, I am having — I am holding about 3.2 months of inventory, which is about 95 to 97 days, which is very much under control and in line with what our inventory planning is to begin with.

So two things here; one is obviously we have bumped up inventory, keeping in mind the supply issues which is happening in the market. Second, most importantly, even if I take my current inventory number coinciding with what sale number I’m currently doing, which is about INR47 crores to INR50 crores on a monthly average, I’m having about 3.2 months of inventory, which is pretty much under control.

Ankit Kedia — PhillipCapital — Analyst

Sir, can you give us a breakup of finished goods inventory and raw material inventory?

Gautam Saraogi — Chief Executive Officer

Yeah, sure. So finished goods inventory — so raw material inventory, in that INR165 crores would be about INR45 crores, if I’m not wrong, around that number.

Ankit Kedia — PhillipCapital — Analyst

Okay. Sir, two more questions from my side. One is on your online sales. In FY ’22, we only saw a 3% growth, while the company growth was 60%. While we have invested a lot about online being the key pillar for growth, why is only 3% growth in online for this system [Phonetic]?

Gautam Saraogi — Chief Executive Officer

See, currently what — so with the online, it’s a very, very important channel, but like I had mentioned last time also, it will grow at a slower speed compared to offline. See, currently what we are doing is, we are building our new website a few months ago, which has — now the new website has already gone live. Now since the new website is live now, we are building the omnichannel strategy. So this push from 3% to probably say double-digit in the coming quarters, in fact, the work in progress is starting to happen now. Since our new site is up now, up and running now, we’re building the omnichannel that we are integrating the new site with our front-end retail. So keeping these things in mind, the online sales will start picking up in the coming quarter.

Operator

Sorry to interrupt you Ankit, I’ll request you to come back in the question queue for a follow-up question. A request to all the participants, please restrict to two questions per participant. If time permits, please come back in the question queue, for a follow-up question. The next question is from the line of Devanshu Bansal from Emkay Global Financial Services. Please go ahead.

Devanshu Bansal — Emkay Global Financial Services — Analyst

Sir, thanks for the opportunity. Just in continuation of earlier question on inventory, just wanted to check, I understood that the current revenue base is also low and given the higher monthly run rate, the inventory levels are higher. But at FY ’23 end, should the inventory levels be at 90, 95 days? Is this a correct understanding?

Gautam Saraogi — Chief Executive Officer

See, I mean we are wanting — we are going to be looking at maintaining similar levels of 90 to 95 days, Devanshu.

Devanshu Bansal — Emkay Global Financial Services — Analyst

Sure. And in terms of channels, you’ve indicated that EBO to contribute about 80% mix. So just wanted to check as in, what is the timeline to achieve this sort of mix?

Gautam Saraogi — Chief Executive Officer

Sorry. Come again. Sorry, Devanshu, I missed your question. Can you please come again?

Devanshu Bansal — Emkay Global Financial Services — Analyst

Sir, in the presentation you have indicated you expect EBO channel to contribute about 80% to your overall revenues. So I just wanted to check the timeline for that.

Gautam Saraogi — Chief Executive Officer

So Devanshu, it’s very hard to specify exact timeline, but we are hopeful that maybe over the next one, 1.5 years or two years, we should get to that number.

Devanshu Bansal — Emkay Global Financial Services — Analyst

Okay. And for the rest 20%, so if we see online channel, you’ve indicated that you have sort of good plans there. So majority of that share shift will happen from LFS, is this a correct understanding?

Gautam Saraogi — Chief Executive Officer

See, I’ll tell you what is our eventual plan. Eventually two, three years down the line, what we are planning to see is that, EBO and online together should calculate — which is a direct-to-consumer, EBO and online together should contribute to 90% of the sales. The LFS shares comes down below 10% and our MBO and other channels would be less than 3%. So this is our eventual mix, what we are planning to achieve in the next two to three years, where 90% of our sales is coming from EBO and online together.

Devanshu Bansal — Emkay Global Financial Services — Analyst

Sure. Got it. Sir, still as a follow-ups, but LFS in this quarter has particularly seen about 150 sort of store addition. So from that perspective, store additions have been sort of particularly strong and so interestingly even tier-2, tier-3, tier-4 towns actually added about 100 stores, of those 150 stores. So just wanted to check, so what are the plans in terms of store addition for LFS format?

Gautam Saraogi — Chief Executive Officer

So Devanshu, what we’re doing in LFS is see, we are very selectively [Indecipherable] with our partners. It’s not that we are going everywhere and are adding stores across the country, it’s not like that. Selectively where our target markets and strategy, we are selectively adding those stores with LFS partners, because LFS is a very, very important channel. It gives us access to newer towns, newer geographies before we can think about opening our EBOs also it gives us a taste and flavor of that new city. So we are going to continue to expand. And this last one year we’ve been to identify good number of LFS stores, and we hope that even in fiscal year ’23, we will be able to add new number of stores.

Devanshu Bansal — Emkay Global Financial Services — Analyst

Okay. Lastly, wanted to check what are the kind of investment in terms of OpEx as well as capex for the online investments that you have indicated for the coming year?

Gautam Saraogi — Chief Executive Officer

Yes. So Devanshu, see as far as online and omni is concerned, it’s not a very cost-heavy or very investment-heavy channel frankly. See our new site, what we wanted to do live we have already got it live. Our new site is ready, our content, new software and our back-end SAP software also is ready. Integrating the three for an omnichannel experience is not going to be very strategical [Phonetic], it’s going to — so the investments in digital are not going to be very material.

Devanshu Bansal — Emkay Global Financial Services — Analyst

Sure. So I wanted to check from team perspective, as you indicated investment in team, warehousing, etc. So anything to watch out there?

Gautam Saraogi — Chief Executive Officer

See on the e-comm front, we have hired a dedicated e-comm team who understands e-comm in and out. See, we are more of an offline business, right, we are more of brick-and-mortar business. So now we have one dedicated team for e-comm and online who just — their entire focus is only online and they are not focused on offline stores. So they — for them, this team what we have formed over the last few months, we are starting to see good results. So we are hopeful that this will add and help us grow our online.

Operator

Thank you, Devanshu. I’ll request to come back in the question queue. Participants are requested to ask two questions per participant. The next question is from the line of Vaishnavi from Anand Rathi. Please go ahead.

Vaishnavi Mandhaniya — Anand Rathi — Analyst

Hi, thanks for taking my question. Sir two things. So, one on the inventory buildup, right, so do we expect sales growth to probably accelerate at a faster rate versus what we have seen in the last one year, if we have so much of inventory buildup?

Gautam Saraogi — Chief Executive Officer

So Vaishnavi, very hard to link the two. I think sales are largely driven by market sentiments on how consumer behavior is happening. Our idea of building inventory was more from the perspective of there should not be any stoppage in supply chain or break in supply chain. But it will be hard to say that because of higher inventory, we will be able to sell a lot better would be a very — would be a hard assumption. But we are quite — noting consumer sentiments are anyways back after third wave, we are very hopeful that the sales over the next couple of quarters will be very strong.

Vaishnavi Mandhaniya — Anand Rathi — Analyst

Okay. And my second question is on the pledge that was done in the last quarter, right, any specific reason for the same?

Gautam Saraogi — Chief Executive Officer

So Vaishnavi, our pledge was for personal reason. Our requirement as a family, as a promoter family, was INR150 crores and we have taken that for — this pledge was specifically taken for personal requirements and commitments. And this is a short-term in nature. We understand the sensitivity around this subject. And this is short-term in nature and we are looking to close the pledge within three to six months.

Vaishnavi Mandhaniya — Anand Rathi — Analyst

Okay. Thank you.

Gautam Saraogi — Chief Executive Officer

Thank you, Vaishnavi.

Operator

Thank you. The next question is from the line of Akhil from Centrum Broking. Please go ahead.

Akhil Parekh — Centrum Broking — Analyst

Hi. Thanks for the opportunity. My first question is on the store closure. So what is the policy or the timeframe we apply given that we see significant store closures, which have happened over last four years, almost 85 stores have closed. So what kind of policies, we look at — on the stores [Phonetic]?

Gautam Saraogi — Chief Executive Officer

Yeah. So see, as far as store closures are concerned, see, if you take most of the store closures, what have happened in the last two years is largely related to COVID because post-COVID, first wave and second wave there were many markets, which didn’t revive. There were many malls which didn’t revive. So we had no choice but to exit. So this — a large number of those closures were pertaining to COVID. In general case scenario, our closures have been limited and we usually at least wait for a year or year and a half, to assess the performance of the store and then decide whether we want to close.

Akhil Parekh — Centrum Broking — Analyst

Got it. And my second question is on expansion in tier-2 and tier-3 towns, as we have significantly added in tier-2, tier-3, and tier-4 towns. So what kind of rent-to-revenue ratio we look at and how does the store dynamics differ in these cities versus the metro and tier-1?

Gautam Saraogi — Chief Executive Officer

Yes, sure. So, if I compare tier-1 versus tier-2 and tier-3, the real disparity between tier-1 versus tier-2, tier-3, tier-4 will be slightly in revenue. See the kind of revenue what we generate for an average store in a tier-1 versus the tier-2, there will be a small delta difference. Obviously, a tier-2, tier-3, tier-4, will be slightly lower than tier-1 cities average store. Having said that, the other economics of the business as far as rent-to-revenue ratio is concerned, salary to revenue ratio is concerned or EBITDA as a percentage of revenue is concerned, that is pretty much same, because in tier-2, tier-3, tier-4, the costs are that much lower. So for us, the rent-to-revenue and the EBITDA percentage does not change. It’s only the numerator, the revenue changes slightly between a tier-1 and the tier-2. Having said that, the kind of rent-to-revenue ratio is what we look at while finalizing our store in a tier-3 city or a tier-1 city, we look at about 15% of rent-to-revenue ratio, [Indecipherable].

Akhil Parekh — Centrum Broking — Analyst

Okay. And just one follow-up on this. Our brand equity tier-2 and tier-3, I am assuming would be a bit lower as compared to tier-1 and metro city, would that interpretation be correct?

Gautam Saraogi — Chief Executive Officer

Well, I would say, our brand recall would be slightly lower in tier-2, tier-3, tier-4, because right now our presence, if you see in terms of EBO network, we are largely in the top eight cities. So yes, it would be that — our brand recall would be lower in tier-2, tier-3, as of now because our presence is low.

Akhil Parekh — Centrum Broking — Analyst

That’s all from my side. Thank you, sir.

Operator

Thank you. The next question is from the line of Gautami Desai from Chanakya Capital Services. Please go ahead.

Gautami Desai — Chanakya Capital Services — Analyst

Yeah. Sir, I just wanted to know your experience on value-added items, experience in the sense that what would be your competitive advantages? And also then — also I would tend to believe that in those items there are established brands and hence your experience will be very different to your leggings, which is your mainstay. Sir, that’s my first question. And another question is, are you able to pass on the cotton prices — the heightened cotton prices completely, or have you done any change in the fabric mix?

Gautam Saraogi — Chief Executive Officer

Okay. Yeah, thanks, Gautami. So first on the value-added products, see, look for us, one of our key strength is product innovation, right. So there have been many products which we have innovated and developed in-house and then we have bought it into the market, like for example, a very important value-added product we had launched three, four years back was the kurti pant. The kurti pant was a product innovated and developed in-house. So our strength is our product innovation, and definitely our value-added products have given us the edge over our competitors. And one of the reasons for our consumers to keep coming back to our Go Colors store, is not only for the variety in colors what we have in leggings and churidars, but for the kind of the range of other products we have, across jeggings, pants, harems, patialas and palazzos. So our value-added product strength is one of our key strengths in terms of our consumer sales.

Now coming to the cotton price increase, see, we have not changed the composition of the fabric. We believe that one of our key selling points are in the quality of our fabrics. So we have not touched the fabric quality at any point. We have — whatever our long-term price increase what we have seen in raw materials, that much increase we have taken at the selling price. See when there are short-term fluctuations in price, we don’t really increase our selling price. We absorb it, because our gross margin gives us the room to absorb it. But whenever there are long-term fluctuations in price, we correspondingly increase the selling price. So we increase the price, without touching the quality of the fabric.

Gautami Desai — Chanakya Capital Services — Analyst

So whatever the price has happened — price hike, that much you feel that with this INR50, it will get covered?

Gautam Saraogi — Chief Executive Officer

Sorry, can you come again. I lost you in between.

Gautami Desai — Chanakya Capital Services — Analyst

Whatever price hike that has happened in your fabric cost, this INR50 price increase, which you have taken, so will that cover that cost?

Gautam Saraogi — Chief Executive Officer

See, we have taken two price increases, Gautami. One we have taken in April 2021, and one we have taken another increase in December 2021. So these two increases what we have taken over the last year and a half, will cover that increase price — in raw material price, without any cost [Phonetic].

Gautami Desai — Chanakya Capital Services — Analyst

Okay. And, sir, your — you say that your LSF is going to come down to 10% and that’s what you reached for. Within that case, would your inventory go down below 90 to 95 days, because then I don’t see that — any reason for your inventory to stay so high.

Gautam Saraogi — Chief Executive Officer

No. See inventory, Gautami, we are maintaining 90 to 95 days consciously. See, we want to maintain inventory under 90, 95 days because we are in a high growth business and in some shops, our inventory does not have any risk, because there no passion element. So at a company level in the short-term future, we want to maintain 90 to 95 days of inventory for faster growth.

Gautami Desai — Chanakya Capital Services — Analyst

Okay. Otherwise, what changes in your working capital you foresee, if you can bring down your LFS to less than 10%.

Gautam Saraogi — Chief Executive Officer

Sure. So Gautami, what will happen is, our receivables, which are at about 50 days, would start coming down to about 25, 30 days. See, I mentioned on the call that our current revenue number is between INR47 crores to INR50 crores. So if I take the INR60 crores of receivables what I have in the balance sheet, and compare it with my current running number, my receivable days is already at 35 days. So my overall receivables as a percentage of revenue comes down, which further decreases my working capital.

Gautami Desai — Chanakya Capital Services — Analyst

Okay. And sir, what we are seeing — not only you, but most companies, is that this continuous rise in the inventory cost, what that has done, is that it has revised the price — the costing — I mean, the overall value of the inventory right. Now you have a high level of inventory and obviously when you value it, it will be at least 25% to 30% higher than what it was. So is there an impact of the same on your margin?

Gautam Saraogi — Chief Executive Officer

No. See, our inventory is calculated on an average cost basis. So because of the raw material price has increased, what is happening, our older inventory value does not increase, because we work on an average cost. Our older inventory will lie in system with the older cost and the newer inventory will be on the newer cost, and then the system calculates the inventory valuation on an average cost basis. So our inventory valuation — overall inventory value in the book does not change with the increase of raw material price.

Gautami Desai — Chanakya Capital Services — Analyst

Okay. Thank you, sir. Thank you so much.

Gautam Saraogi — Chief Executive Officer

Sure, Gautami. Thank you.

Operator

Thank you. The next question is from the line of Manish Poddar from Motilal Oswal Asset Management. Please go ahead.

Manish Poddar — Motilal Oswal Asset Management — Analyst

Yeah, hi, thanks for taking the call. So primarily three questions. First one is, would you be able to help me with the channel mix or sales mix that’s in the base quarter, 4Q ’21?

Gautam Saraogi — Chief Executive Officer

So right now, this quarter, quarter four, we had a channel mix of where EBOs have contributed about 74% of the…

Manish Poddar — Motilal Oswal Asset Management — Analyst

Gautam, the base quarter 4Q ’21, let’s say, I have this quarter mix is there in the PPT. I’m just looking at the base quarter, 4Q ’21?

Gautam Saraogi — Chief Executive Officer

Four?

Manish Poddar — Motilal Oswal Asset Management — Analyst

4Q ’21, the base quarter.

Gautam Saraogi — Chief Executive Officer

I didn’t…

Manish Poddar — Motilal Oswal Asset Management — Analyst

So like you mentioned 74.3% is in this quarter, I’m just trying to understand the base quarter March of ’21, how much was that mix?

Gautam Saraogi — Chief Executive Officer

Oh, at that…

R. Mohan — Chief Financial Officer

75.3%.

Gautam Saraogi — Chief Executive Officer

Yeah. Basically Y-o-Y, you are talking about last year same quarter. Okay. I think at that point of time, it was around 71%, 72%. So the mix was very similar. So EBO has increased from 72% to 74%.

R. Mohan — Chief Financial Officer

Gautam, it is 75.3%, last year.

Gautam Saraogi — Chief Executive Officer

75.3%. So, I stand corrected. So last year same quarter EBO contributed about 75% [Phonetic].

Manish Poddar — Motilal Oswal Asset Management — Analyst

Okay. Then the margin mix stands fine. Okay. Just then probably two more questions. First one is, let’s say, if you look at your Q1 now, the coming quarter, just wanted to understand how would you judge the performance, because last two years, the first quarter has been a whitewash and Q4 had this Jan impact. So when you’re judging your performance in the next quarter, would it be, let’s say, a percentage of what you did in December quarter or how are you internally looking at it or, let’s say, guiding the team for this quarter?

Gautam Saraogi — Chief Executive Officer

Yes, you have very rightly, Manish — so I am — we are going to be looking at month-on-month what growth is going to be doing. Because actually for us to compare, we can’t compare anything with last year first quarter and the year before that, because of COVID. So we would be internally comparing with our previous month number and see how much we’re growing month-on-month, based on previous trends. That’s the way we would be looking at it. Because on quarter to — because if I have to compare it on a Y-o-Y basis, it will be difficult, because last year the entire first quarter was affected by lockdowns and the year before, that also was the same thing.

Manish Poddar — Motilal Oswal Asset Management — Analyst

So just any sense, let’s say, so this quarter Jan, Feb, March, how are the numbers stacking up, would it be, let’s say 20-40-40, is that rough split?

Gautam Saraogi — Chief Executive Officer

Sorry. Jan, Feb, March, I didn’t understand?

Manish Poddar — Motilal Oswal Asset Management — Analyst

This quarter, when I’m looking at, let’s say, a monthly number, would Jan, Feb, March be a split of 20-40-40, let’s say, if you did INR100 sales during this quarter, just a broad ballpark?

Gautam Saraogi — Chief Executive Officer

See broadly, I’ll tell you, like, so in March, we did broadly between INR47 crores to INR48 crores of revenue, in March.

Manish Poddar — Motilal Oswal Asset Management — Analyst

Okay. So I’m just looking at the end number. So that is fine. Just one last one if I can. Just on this warehouse bit, so you’re putting up a warehouse like you mentioned in Bhiwandi in Maharashtra, what is the capex outlay? And I thought earlier, the warehouse in South India was enough for your entire expansion plan. So just why the change in thought, and let’s say, what is the capex outlay here? Thanks.

Gautam Saraogi — Chief Executive Officer

Yeah. So Manish, see It’s very — it’s a nascently, small warehouse. See, it’s not even like a warehouse, warehouse, it’s like a small mini fulfillment center, and I’ll tell you the reason why we are doing this. It contributes to a very large portion of our business and what we noticed that from Bhiwandi, even north can be catered very well. So we said, look, let’s try out with a mini warehouse, like a mini fulfillment centers to see if we are able to improve our efficiencies of sale and dispatch for the stores in west and south — west and north. So it’s a small warehouse and the capex what we are looking at will not be very material in nature. From what we understand, it will be about INR2 crore to INR3 crore and not more. We have still not — we have identified a location, but still the capex plan is yet to be full and free [Phonetic], but it’s not going to be material in nature.

Manish Poddar — Motilal Oswal Asset Management — Analyst

Got it. Just a small feedback. If you can incorporate, let’s say, the base quarter numbers, let’s say, for the channel mix, and let’s say, if you can include the pre-Ind AS margins, let’s say, on a quarterly basis or let’s say at least on an annual basis that will be helpful to understand the performance.

Gautam Saraogi — Chief Executive Officer

Sure.

Manish Poddar — Motilal Oswal Asset Management — Analyst

Thanks so much.

Gautam Saraogi — Chief Executive Officer

Thank you, Manish.

Operator

Thank you. The next question is from the line of Anirudha Bhandari from Sixteenth Street Capital. Please go ahead.

Anirudha Bhandari — Sixteenth Street Capital — Analyst

Yeah. Congratulations on good numbers. My question is on cash flows. Why our cash flow from operations is so low, EBITDA is INR119 crores. What is causing the difference?

Gautam Saraogi — Chief Executive Officer

See, I think, Anirudha, the major reason for our cash flows to be on the lower side, is because of the increase in working capital and largely driven by inventory. So our inventory in March ’21 was INR80 crores, which has gone up to INR165 crores. So one of the reasons for lower cash flows is because of the increase in inventory, which I explained earlier that, because of the supply chain difficulties what we’re seeing in the market right now.

Anirudha Bhandari — Sixteenth Street Capital — Analyst

And what are the receivables pertaining to — I mean, all your EBOs are company-owned, company-operated, right? So most of the receivables are pertaining to LFS sales…?

Gautam Saraogi — Chief Executive Officer

Absolutely.

Anirudha Bhandari — Sixteenth Street Capital — Analyst

And how is the arrangement?

Gautam Saraogi — Chief Executive Officer

Sorry.

Anirudha Bhandari — Sixteenth Street Capital — Analyst

What is that arrangement of receivables, and do you also take the stock back if it doesn’t sell for a few months?

Gautam Saraogi — Chief Executive Officer

Sure, I will explain that Anirudha. So Anirudha, see, very rightly you pointed out, so the receivables what we see in the balance sheet are largely driven by large format stores. So the INR60 crores number you see in the balance sheet is — most of that is LFS. We sell to LFS on a SOR basis which is a principal to principal relationship. So according to accounting standards, we need to show it as debtors account [Phonetic]. Now as far as returns are concerned, ours is a very core and essential wear product, so we have actually not seen goods coming back in large quantities from the large format stores as returns. Our returns percentage has been under 1%.

Anirudha Bhandari — Sixteenth Street Capital — Analyst

Under 1% right?

Gautam Saraogi — Chief Executive Officer

Under 1%.

Anirudha Bhandari — Sixteenth Street Capital — Analyst

Okay. Perfect. And what investments are we doing to improve this ratio, cash flow to EBITDA, it’s very low? And it’s not consistent over the last four years, I guess.

Gautam Saraogi — Chief Executive Officer

No, see, I think, look, as the sales increases and the inventory gets normalized, the requirement of increase of working capital will not be so high, as we have seen in fiscal year ’22. So automatically, the cash flow from operations will automatically increase.

Anirudha Bhandari — Sixteenth Street Capital — Analyst

Okay, got it. Thank you.

Operator

Thank you. The next question is from the line of Rahul Jain from PhillipCapital. Please go ahead.

Rahul Jain — PhillipCapital — Analyst

Hello. Yes, I have a couple of questions. My first question is are you facing any pressure on job work charges, given the increase in cost and throughput?

Gautam Saraogi — Chief Executive Officer

Yeah, hi, Rahul, thanks for the question. So Rahul, we are not seeing any pressure or increase in charges of the job work and the factory charges in total. I think it’s largely been driven by the material cost of fabric. But as far as subcontracting and the factory charges and job working charges are concerned, it has stayed pretty consistent. We don’t see any fluctuations there.

Rahul Jain — PhillipCapital — Analyst

Okay. And my second question is regarding the absolute A&P spend, the cost has declined 20% to INR5 crores as against INR6.4 crores in FY ’21. What is the guidance going forward for A&P spend?

Gautam Saraogi — Chief Executive Officer

See usually, Anirudha [Phonetic], we will be — this year has been lower because this year was a COVID impacted year. So we were really frugal in our advertising spend to be honest with you. In a normalized year, we would be around 2% to 3%. On a long-term average, we would be 2%, 3% there will be some years where we might touch 4%, but on a general, normalized basis, we will be at around 2% to 3% of revenue.

Rahul Jain — PhillipCapital — Analyst

Okay. And could you share the total EBO area and average area per store, if possible?

Gautam Saraogi — Chief Executive Officer

So our average area is, Anirudha, around 400 — about 390 to 400 square feet, average area of our store.

Rahul Jain — PhillipCapital — Analyst

Okay, thank you.

Operator

Thank you. The next question is from the line of Resha Mehta from GreenEdge Wealth. Please go ahead.

Resha Mehta — GreenEdge Wealth — Analyst

Yeah, hi. Thanks for the opportunity. Resha this side. So I have two questions. One, if you could talk about — in terms of the future revenue growth, how much of that will come from volume growth and how much from product mix or premiumization? And also if you could talk about — you alluded to value-added products. So how do you define value-added products, what is their average selling price?

Gautam Saraogi — Chief Executive Officer

Sure. So see, I’ll take the second question first and then I’ll come to the other one. See, from a value-added products perspective, how do we define value-added products? See leggings and churidars are our core generic bottom. Value-added products are anything like pants, jeggings, harems, patialas, palazzos, treggings. they come under the value added mix. Now the value added product for us contribute to almost half of our business. Earlier leggings and churidars used to dominate it, but now the value added products are contributing to almost half of the business.

The average selling price of the value-added products would be around INR800 to INR900 a unit. See, what we are doing as far as pricing our products are concerned, we try and price our product as low as less than INR1,049. So for us, 83% of our entire product portfolio won’t be listed less than INR1,000, because consciously, we want to price our products — with very high quality. So our average selling price for a value-added product would be INR800 to INR900 a unit.

As far as future growth is concerned, see, we are as a company are looking to grow at a CAGR of more than 20% over a long period of time, because our category is very huge. And maybe in the coming years, our growth would be higher, it will be slightly around 30% or higher, 30% or more than 30%, but on a long-term basis, we are looking to grow at a CAGR of around 20%, as far as revenues are concerned.

Resha Mehta — GreenEdge Wealth — Analyst

Got it. And how much of this would be from — be volume growth driven versus product mix or premiumization change?

Gautam Saraogi — Chief Executive Officer

See, for example, suppose I’m looking at a growth of 30% in the immediate couple of years window, probably 15% to 20% should be volume.

Resha Mehta — GreenEdge Wealth — Analyst

Got it. And just to follow-up on this, right, so how much would athleisure be a part of your overall revenue mix? And also in jeggings, track pants, etc, what would be our right to win versus, let’s say, somebody like Page or Enamor, who are operating at broadly similar price points?

Gautam Saraogi — Chief Executive Officer

Yes. See, for us, athleisure right now is a very, very small contributor. See, for example, all these newer products what we have launched in loungewear and athleisure, we are just in the first year. It takes a few quarters, it takes a couple of years for a category or a product to settle down. So if you see right now as a contributor to sales, it will be a very, very small percentage. But one of the reasons why our customer is coming back to Go Colors store, the range of colors and the range of products, what they find under one roof. So today, when a customer is coming to a Go Colors, she is finding the athleisure bottom, she is finding a western wear bottom, she is finding the fusion wear bottoms or ethnic wear bottom under one roof. That is our value-added proposition. Our value-added proposition is basically getting all the products, all the colors of bottom wear under one roof. That is where we have that selling edge.

Operator

Resha, sorry to interrupt, I’ll request you to come back in the question queue for a follow-up question. A request to all the participants, please restrict to one question per participant. If time permits, please come back in the question queue for a follow-up question. The next question is from the line of Manasvi Shah from ICICI Prudential. Please go ahead.

Manasvi Shah — ICICI Prudential — Analyst

Yeah, hi, sir. Thanks for the opportunity. Sir, just two questions pertaining to inventory. One is, what is the aging of your finished goods? If you can answer that. And second, what would be the quantum, because of revaluation this time, because raw mat and NRV has gone up, right, if you can just explain both of these?

Gautam Saraogi — Chief Executive Officer

Yeah, see, our finished goods — most of our finished goods are under one year. See, we have a provisioning policy also Manasvi, so inventory, which is greater than 365 days old, we do — we provide for it, and this year also, we have, as per the policy provided for inventory in our books which is a very relatively smaller number. So the — if I take the inventory aging of our finished goods and raw materials, it’s well within one year.

Manasvi Shah — ICICI Prudential — Analyst

And this provisioning is less than 1%?

Gautam Saraogi — Chief Executive Officer

I’m sorry.

Manasvi Shah — ICICI Prudential — Analyst

And the provisioning less than 1%?

Gautam Saraogi — Chief Executive Officer

Yeah. No, it will be around 1%. I’m not having the exact percentage handy, but it will around the 1%.

Manasvi Shah — ICICI Prudential — Analyst

And on the second question?

Gautam Saraogi — Chief Executive Officer

On the second question, see, like I explained, our inventory valuation does not change with the increase of raw material prices, because in the books, the cost of inventory will be always based on when it was purchased. So the system throws out a weighted average cost of inventory. So the newer inventory will be at the newer raw material pricing and the older inventory will be at the older. So because of the raw materials increase in price, the inventory valuation does not dramatically change.

Manasvi Shah — ICICI Prudential — Analyst

No, but it could change because of the NRV increase, right? The net realized value — I mean, cost realization whichever — okay. So the blended does not change much.

Gautam Saraogi — Chief Executive Officer

Yes, exactly.

R. Mohan — Chief Financial Officer

I’ll just interrupt here. It is cost of realizable value which is lower, not higher. We cannot take [Speech Overlap]

Manasvi Shah — ICICI Prudential — Analyst

Correct. Sure. And secondly, even if I exclude advertising expenses, your other costs have actually fallen or are flat on a Y-o-Y basis, what is the key contributor to this?

R. Mohan — Chief Financial Officer

Which cost?

Manasvi Shah — ICICI Prudential — Analyst

Your other expenses. Your other expenses, ex of employee?

Gautam Saraogi — Chief Executive Officer

See, it’s hard to compare with last year, because last year was a COVID related year and this year also has been a COVID impacted year, so we’ve kept costs low. Even like — if I take the advertising costs, like I was mentioning, we kept it very low, it was 1.2%. So from a bottom line perspective, we have kept costs low, because this has been a COVID impacted year.

Operator

Thank you. The next question is from the line of Gautam Rathi from CWC Advisors. Please go ahead.

Gautam Rathi — CWC Advisors — Analyst

Hi, Gautam, thanks for taking my question. So Gautam I just wanted to understand, one thing, so in the earlier part of the call, you alluded that you have a run rate of about INR47 crore to INR50 crore per month of revenue, right. So if I do a back of the envelope calculation, it says that we should have somewhere around — we might have lost somewhere around INR20 crore, INR25 crore of revenue maybe in Jan, due to Omicron. So is this understanding right? And if it is, so how should we think about then the gross margins at a normalized basis, right? Because this base would not be the right to think about. So can you just help us understand this?

Gautam Saraogi — Chief Executive Officer

Yes, Sure, Gautam. So see yeah, you can assume that we’ve lost around INR20 crores, INR25 crores, because of January Omicron variant, I mean that’s not — that’s a right thing to assume. But from a GM perspective, see like I told you more than 97% of our sales happen on full price, irrespective of the channel, right. So for us, our GM does not really get impacted 00 our GMs pretty much stayed consistent.

Gautam Rathi — CWC Advisors — Analyst

So, Gautam, just wanted to understand, is it right to say that — so your GM last quarter was 66%, this quarter it’s 68%, what is the right level of GM that we should be working with? What is…

Gautam Saraogi — Chief Executive Officer

Last year same quarter, we had a GM of 51% and this quarter we had a GM of 61%. So I think the GM number would — you can assume would be 60% to 61% would be the right number to assume on a long-term basis.

Gautam Rathi — CWC Advisors — Analyst

This is after taking into account, subcontractings cost also?

Gautam Saraogi — Chief Executive Officer

Yes absolutely.

Gautam Rathi — CWC Advisors — Analyst

Okay. So the 68% is slight bit of an aberration, right? So 68% minus the subcontracting, goes up seven right. Okay. So 61%?

Gautam Saraogi — Chief Executive Officer

61% is the right number to assume after subcontracting costs.

Gautam Rathi — CWC Advisors — Analyst

Assume after subcontracting costs, for the full year?

Gautam Saraogi — Chief Executive Officer

Yes, absolutely. So for the full year the GM was 60%. For the quarter four it was 61%.

Gautam Rathi — CWC Advisors — Analyst

Perfect. And just one last question if I may just — just wanted to understand this 50-odd stores that we’ve opened, is it fair to assume that by next year onwards, they should start locking a run rate of anywhere between INR80 lakh to INR1 crore, which is your normal expectation from a store, is that fair ask?

Gautam Saraogi — Chief Executive Officer

Well, difficult to assume like that. But from our past experience, we have seen that any store what we opened, kind of reached some sort of maturity within 12 to 15 or 12 to 18 months. So we would be hopeful the stores that we opened this year, maybe by the end of next year, once it crosses 12 months or 15 months, it should reach some sort of maturity.

Operator

Thank you. The next question is from the line of Deepak Poddar from Sapphire Capital Partners. Please go ahead.

Deepak Poddar — Sapphire Capital Partners — Analyst

Yes. Thank you very much, sir for the opportunity. Sir, I just wanted to understand in terms of EBITDA margin. So what’s the range that we might be looking at, given the raw material inflation that we’ve seen over the near to medium term, in terms of margins?

Gautam Saraogi — Chief Executive Officer

See in terms of — so let me talk about pre-Ind AS EBITDA, because that would give a better kind of idea. See, we would on a steady state basis, look at about 20% to 21% of pre-Ind AS EBITDA as far as annualized — is concerned. As the business keeps increasing, there will be little upside in the EBITDA because of better efficiencies of fixed cost. But 20% to 21% of pre-Ind AS EBITDA is what we are looking at. And if you take post-Ind AS, it would be about — if I’m not wrong, it varies about — on an annualized basis between 35% and 37%.

Deepak Poddar — Sapphire Capital Partners — Analyst

No, 25% to 27%?

Gautam Saraogi — Chief Executive Officer

No, on post Ind As basis, it will be between 35% and 37% and pre-Ind AS basis it will range between 20% and 22%, pre-Ind AS.

Deepak Poddar — Sapphire Capital Partners — Analyst

Okay. And the current quarter, our margins was around 33%. So that was largely because of lower revenue base and — that’s the major reason?

Gautam Saraogi — Chief Executive Officer

No. One of the major reasons is COVID because COVID is definitely — there was a COVID impact in quarter four. There was a COVID impact in quarter one and quarter two, so the EBITDA obviously has been a little lower side because of the COVID impact.

Manish Poddar — Motilal Oswal Asset Management — Analyst

Yes, so that impacted your revenue, right?

Gautam Saraogi — Chief Executive Officer

Yes, absolutely.

Deepak Poddar — Sapphire Capital Partners — Analyst

Okay, that’s it from me. All the very best. Thank you.

Gautam Saraogi — Chief Executive Officer

Thank you.

Operator

Thank you. The next question is from the line of Chirag from Valuequest Investment Advisors. Please go ahead.

Chirag Lodaya — Valuequest Investment Advisors — Analyst

Yes, thank you for the opportunity. Sir, my first question was reason for higher other income in FY ’22 and how we should look at this number going ahead?

Gautam Saraogi — Chief Executive Officer

See, the reason for higher other income in FY ’22 is also because of the larger cash balance what we’ve had. So we’ve had high rate [Phonetic] in fixed deposits and mutual funds. So the reason of higher other income is because of higher cash value.

Chirag Lodaya — Valuequest Investment Advisors — Analyst

Sir, but if I see last two quarters, it is — run rate is about INR3 crores odd, whereas full year is around INR21 crores. So I’m sure in Q1 or Q2, there is some exceptional other income, which would have led to this INR21 crore other income for full year.

R. Mohan — Chief Financial Officer

That’s Ind AS.

Gautam Saraogi — Chief Executive Officer

No, that’s because of Ind AS, Chirag, because in Ind AS, waiver is also shown in other income. Because the waivers what we get from — so that’s more of a Ind AS entry.

Chirag Lodaya — Valuequest Investment Advisors — Analyst

Okay. So going ahead, is it fair to assume the INR3 crores, INR4 crores run rate would continue, right? So it would get normalized.

Gautam Saraogi — Chief Executive Officer

Yeah, it would be fair to assume that. Correct.

Chirag Lodaya — Valuequest Investment Advisors — Analyst

Right. And second was on inventory. So is it fair to assume again H1 FY ’23 will go back to this 95 to 100 days run rate, which is currently 150 plus?

Gautam Saraogi — Chief Executive Officer

So currently our average sale, monthly sale what we’re doing, Chirag, is about — is around INR47 crores to INR50 crores. So based on our current run rate, we are already at about 93 to 94 days of inventory.

Chirag Lodaya — Valuequest Investment Advisors — Analyst

But on a reported basis, in past you used to be at say 90, 95 days. Currently on a reported basis, it is at say 150 plus. So maybe say six months down the line, when things get normalized, is it fair to assume…

Gautam Saraogi — Chief Executive Officer

Yeah, on a six-month basis, we should be able to come back to that number, yeah.

Chirag Lodaya — Valuequest Investment Advisors — Analyst

Right. And just lastly, gross margin guidance, which you gave 60%, 61% is after considering the cotton inflation, which we are seeing and the price increase we have taken. We don’t see any impact on gross margins, right?

Gautam Saraogi — Chief Executive Officer

No, 60%, 61% should continue, we have already factored in that.

Operator

Thank you. Next question is from the line of Vinod from Union Mutual Fund. Please go ahead.

Vinod Malviya — Union Mutual Fund — Analyst

Yeah, thank you for taking my question. I just had one bookkeeping question, can you just tell us what was the rent you paid for full year of FY ’22?

Gautam Saraogi — Chief Executive Officer

Mohan, sir, can you — I think it’s around INR57 crores. I’ll ask Mr. Mohan to confirm.

R. Mohan — Chief Financial Officer

INR57 crores.

Gautam Saraogi — Chief Executive Officer

Okay. INR57 crores of rent we paid.

R. Mohan — Chief Financial Officer

INR57.25 crores of revenue.

Vinod Malviya — Union Mutual Fund — Analyst

Sorry. And how much of it — like how much of it was on a variable basis and how much was fixed?

Gautam Saraogi — Chief Executive Officer

It will be largely — it has been — more than 90% of it will be fixed. Variable would be a very small component.

Vinod Malviya — Union Mutual Fund — Analyst

Okay. Thank you. That’s all from us. Thank you.

Operator

Thank you. The next question is from the line of Binoy Jariwala from Sunidhi Securities and Finance. Please go ahead.

Binoy Jariwala — Sunidhi Securities and Finance — Analyst

Yes, hi, Gautam. Thanks for the opportunity. I just wanted to know what is the Ind AS impact on PBT for FY ’20 and FY ’22?

Gautam Saraogi — Chief Executive Officer

See, the PBT impact would be not very different. It would be a little different. I mean, see, like for example, on — if I take fiscal year ’20 as far as I remember, the difference between PAT on Ind AS and non-Ind AS basis was only INR3 crores, INR4 crores. So the delta difference between non-Ind AS PAT and Ind AS PAT is not too much.

Binoy Jariwala — Sunidhi Securities and Finance — Analyst

And the INR3 crores, INR4 crores means the non-Ind AS PAT was higher and Ind AS PAT was lower, right?

Gautam Saraogi — Chief Executive Officer

No, the Ind AS — the non-Ind AS PAT was higher, you’re right. Ind AS PAT was low. The reported number was lower.

Binoy Jariwala — Sunidhi Securities and Finance — Analyst

This is in FY ’20. And what about FY ’22?

Gautam Saraogi — Chief Executive Officer

FY ’22 also — Mr. Mohan, how much would be the delta?

R. Mohan — Chief Financial Officer

Yeah. No. You have to — stand corrected Gautam, for FY ’20, it was around INR8 crores, with the effect of Ind AS, yeah, 116, particularly the 115 and other…

Binoy Jariwala — Sunidhi Securities and Finance — Analyst

No, 116 Ind AS.

Gautam Saraogi — Chief Executive Officer

Yeah, 116. So FY ’20 was INR8 crores, this is at the PAT level.

Binoy Jariwala — Sunidhi Securities and Finance — Analyst

Okay. And what about FY ’22?

Operator

Participants, please stay connected while we rejoin Mr. Mohan back to the call. Participants, please stay connected while we rejoin Mr. Mohan back to the call.

Gautam Saraogi — Chief Executive Officer

I think he has dropped out.

Operator

Sir, I’m trying to reconnect him. Participants please stay connected. All right. The other line for Mr. Mohan connected.

R. Mohan — Chief Financial Officer

Sorry, I got disconnected in between. I didn’t know that. I was trying to…

Gautam Saraogi — Chief Executive Officer

Mr. Mohan, he is asking what is the impact on PAT in fiscal year ’22 and ’20 because of Ind AS.

R. Mohan — Chief Financial Officer

Yeah. I’ll try to — I’ll explain. In fiscal year ’20, the impact of Ind AS 116 is around INR8 crores, and is now presently around INR7 crores. This goes because — this impact PBT on — Ind AS on PBT would be always there because we are signing up new properties and renewing the old one. So there will be renewal of the old ones and closure of the — engagement of new one. So the impact would be around INR7 crores to INR8 crores on a continuous basis.

Binoy Jariwala — Sunidhi Securities and Finance — Analyst

Understood. And this is the impact, the INR8 crores and INR7 crores respectively that you’ve spoken of, is the PAT impact, right?

Gautam Saraogi — Chief Executive Officer

Yeah, it will be the PAT.

R. Mohan — Chief Financial Officer

Yeah. PAT and PBT both, there won’t be any difference on that.

Gautam Saraogi — Chief Executive Officer

Yeah, it will be the PAT impact.

Binoy Jariwala — Sunidhi Securities and Finance — Analyst

Okay. And likewise…

Gautam Saraogi — Chief Executive Officer

So the reported number would be INR7 crores lower or INR8 crores lower.

Binoy Jariwala — Sunidhi Securities and Finance — Analyst

Understood. Fair enough. Thanks so much. Second and last question is what percentage of our contract manufacturing is where you buy — you provide the raw material to the contract manufacturer?

Gautam Saraogi — Chief Executive Officer

Largely. So for us, the majority of our sourcing happens through that model, where we buy a fabric and then we give it to the subcontractor to convert it. So hard to give a percentage right now, because that will vary from quarter-to-quarter, but majority comes from that model.

Binoy Jariwala — Sunidhi Securities and Finance — Analyst

Is it possible to give on an annualized basis, where you look to maintain this percentage in a particular range or something like that?

Gautam Saraogi — Chief Executive Officer

Sorry I’m not having that number handy. But from what I understand, see, more than 70% of our entire sourcing happens through where we buy the fabric directly and give it to the subcontractor for conversion.

Binoy Jariwala — Sunidhi Securities and Finance — Analyst

Understood. That’s it from my side. Thank you so much.

Gautam Saraogi — Chief Executive Officer

Yeah. No problem. Thank you.

Operator

Thank you. Next question is from the line of Ankit Babel from Subhkam Ventures. Please go ahead.

Ankit Babel — Subhkam Ventures — Analyst

Yeah, sir, two questions from my side. Could you please let us know the seasonality of your company on a quarterly basis, like Q1 pertains to what percentage of your total yearly revenue and what other quarters, I mean contributes? And my second question is sustainable working capital days going ahead, assuming normal environment with a breakup in inventory days, receivable days and payable days.

Gautam Saraogi — Chief Executive Officer

Yeah, sure. See from a seasonality of sales perspective is concerned, we see very little seasonality from a sales perspective, because quarter three, of course, being the highest, quarter three usually contributes to about 33% to 34% of the business. And the balance quarter one, quarter two and quarter four are pretty much almost the same, quarter four being the lowest. Quarter one, quarter two are similar. So quarter three would be about 34%, and quarter four — sorry, quarter three would be about 34% and quarter four would be about 18% to 19% as a contributor. And quarter one and quarter two would be similar. And on the second question — sorry, what was the second — the second question was on working capital?

Ankit Babel — Subhkam Ventures — Analyst

Sustainable working capital and a breakup between inventory, receivables and payable days.

Gautam Saraogi — Chief Executive Officer

Sure. So on a sustainable basis, we look at the working capital days from anywhere between 120 to 130 days. So inventory would be 90 to 95 days, and receivables would be about 30 to 35.

Ankit Babel — Subhkam Ventures — Analyst

Receivables would be 30 to 35?

Gautam Saraogi — Chief Executive Officer

Correct.

Ankit Babel — Subhkam Ventures — Analyst

And payables?

Gautam Saraogi — Chief Executive Officer

Inventory would be 90 to 95 days, payables would be 10 to 11 days.

Ankit Babel — Subhkam Ventures — Analyst

10 to 11, that’s it? Okay. That’s it. Sir. Thank you.

Operator

Thank you. The next question is from the line of Parikshit Shah from Duro Capital. Please go ahead.

Parikshit Shah — Duro Capital — Analyst

Yeah, hi, thanks for the opportunity. My first question was on the gross margin. I think Gautam, in one of the earlier questions you responded, you expect margins to be around 60%, 61%. I just wanted to clarify, this is on a steady state — and I’m guessing that as you improve, the 60%, 61% can actually head higher. And second question was on EBITDA margin, I think you said, you’re targeting 20% to 22% pre-Ind AS. Just wanted to know what the pre-Ind AS margins were for Q4 and fiscal ’22 if you can help with that?

Gautam Saraogi — Chief Executive Officer

Yeah, sure. So see, so, yes, 60% to 61% of the current gross margins, so as the channel mix changes and gets more skewed towards new and online, we see the gross margin definitely improving beyond 60%, 61%. But on the current channel mix, we are estimating the 60%, 61% should continue. As the newer sales increases, this gross margin will further improve. Difficult to quantify how much will it improve, but it will definitely improve.

As far as EBITDA is concerned, we are having an EBITDA of about 21 — about 20% to 21% on a normalized basis. Without the impact of COVID, we are having about 20% to 21% of EBITDA for the year. For quarter four, if I take the pre-Ind AS EBITDA, we were at about 18.9%.

Parikshit Shah — Duro Capital — Analyst

Understood, sir. This was basically the impact of the January wave of Omicron?

Gautam Saraogi — Chief Executive Officer

Absolutely.

Parikshit Shah — Duro Capital — Analyst

Okay, thanks.

Operator

Thank you. Ladies and gentlemen, due to time constraints, that will be the last question for today. I now 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 to the expectations of you all in the future. In case you require any further details, you may contact Mr. Deven from SGA, our Investor Relations partner. Thank you again for joining.

Rajiv Bharati — DAM Capital Advisors — Analyst

Thank you very much. On behalf of DAM Capital Advisors Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.

Gautam Saraogi — Chief Executive Officer

Thank you.