METRO BRANDS LTD (METROBRAND) Q2 FY23 Earnings Concall Transcript

METRO BRANDS LTD (NSE:METROBRAND)Q2 FY23 Earnings Concall dated Oct. 21, 2022

Corporate Participants:

Nissan Joseph — Chief Executive Officer

Kaushal Parekh — Chief Financial officer

Farah Malik Bhanji — Managing Director

Analysts:

Aniket Sethi — Analyst

Gaurav Jogani — Axis Capital Ltd. — Analyst

Tejas Shah — Spark Capital Advisors (India) Private Limited — Analyst

Aliasgar Shakir — Motilal Oswal Financial Services Ltd — Analyst

Nikunj Gala — Sundaram Asset Management Company Limited — Analyst

Prerna Amana — — Analyst

Ankit Kedia — Phillip Capital India Pvt. Ltd. — Analyst

Devanshu Bansal — Emkay Global Financial Services — Analyst

Vikas Jain — Equirus Capital Private Limited — Analyst

Sagar Jethwani — Phillip Capital India Pvt. Ltd. — Analyst

Sabyasachi Mukerji — Centrum PMS — Analyst

Akshay Kothari — Envision Capital Services Private Limited — Analyst

Tanmay Gupta — Motilal Oswal Financial Services Ltd — Analyst

Rajiv — DAM Capital — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to the Metro Brands’ 2Q FY23 Results Conference Call, hosted by ICICI Securities Limited. As a reminder, all participant lines will be in the listen-only mode. And, there will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions]. I now hand the conference over to Mr. Aniket Sethi from ICICI Securities. Thank you, and over to you, sir.

Aniket Sethi — Analyst

Thank you, Kathy. Hi, everyone, a very good afternoon. Thank you for joining us. It’s our absolute privilege to host the 2Q FY23 earnings call of Metro Brands Limited. We have with us the senior management from the Company, Mr. Rafique Malik, Chairman; Ms. Farah Malik Bhanji, Managing Director; Mr. Nissan Joseph, Chief Executive Officer and, Mr. Kaushal Parekh, Chief Financial officer. I would request Mr. Nissan to share some perspectives on the quarter gone by, as well as the recent acquisition, post which we can open the floor for questions. Thank you, and over to you Nissan.

Nissan Joseph — Chief Executive Officer

Thank you, Aniket, and good afternoon everyone. And thank you for joining our Q2 FY23 earnings call. We delivered another great quarter for Metro Brands, very much in line with our expectations. It is reassuring that we have now lapped a full year of operation in the post COVID era, and the consumer demand continues to be strong. We had two major festivals in the quarter, as we count Janmashtami in the middle of the quarter and caught most of Dussehra festival at the end of the quarter.

To give you a quick overview of the quarter, Metro Brands has delivered consolidated revenues of INR476 crores for the quarter, an increase of 47% against the corresponding quarter of the previous year with a PAT of 16.4% and EBITDA of 31%. Our consolidated gross margins for this quarter came in at 57.4% which is in the range that we target of typically being between 55% to 57%, and this despite the end of season sales that we typically run in Q2 along with the anticipated inflation for [Phonetic] input costs that we had.

We saw our biggest growth come from the over INR3,000 price range, which continues to reinforce our strength as we cater to the affordable premium segment of the footwear market. On the growth side, Metro Brands continues to see strong growth in terms of volume and value across all formats and tiers. While we are excited about our growth in brick-and-mortar stores, our growth trajectory continued in e-commerce as sales grew by 50% year-on-year for the first six months of the year.

We opened a total of 37 stores. We relocated four and closed five for a net growth of 28 stores for the quarter across all our formats. We are on pace to open the 260 stores over the next three years that we guided to in our RHP. Despite lapping sales that includes pent-up demand from last year, we anticipate demand to remain through the wedding season. Now coming to our recent share purchase agreement that we signed to acquire Cravatex Brands Limited. This is a very exciting and synergistic acquisition, which is aligned with our expertise of footwear retailing in India and serves the athletic and athleisure whitespace in our portfolio of brands.

FILA is an international brand with a rich heritage in the athletic space and ProLine is a well distributed, sports apparel brand, also with a rich heritage in India. In the coming weeks, we will be working on integrating the companies to unlock the potential of this acquisition. With that, I will turn it over to our CFO, Kaushal Parekh to take you through more details of Q2.

Kaushal Parekh — Chief Financial officer

Thank you, Nissan. Good afternoon everyone and welcome to Q2 earnings call of Metro Brands Limited. As, you all know, this quarter marks closure of one year of reopening of Indian economy post COVID-19 restrictions. Metro Brands started FY23 on a strong note, both from operational and financial performance standpoint.

During this quarter also, Metro Brands has continued to demonstrate strong resilience. Before moving on to the financial numbers, I would want to discuss two points, which will help understand this quarter numbers in the right perspective. Although these points have been called out in our earlier discussion, I feel this is relevant to mention and repeat them again here.

The first point is on the seasonality that we see in our business. In our case, Q1 is generally about 25% of the full year revenue. Q2 is the smallest with around 22% to 23% of annual revenue. Q3 is by far the biggest around 27% to 28% of the revenue and Q4 is again around 25% in that range. Q2 generally is the smallest quarter, and hence revenue number needs to be seen considering this point.

Second point is on the gross margins. In our industry, we generally see two end of season sales; one in Q2 and another in Q4. Hence gross margins for Q2 and Q4 gets impacted due to end of season sale. So if you’re seeing absolute performance for Q2 and Q4 on a standalone basis, you will see impact of end of season sale coming in. To summarize in brief, our revenue for this quarter is to be seen considering point number one on seasonality, that is Q2 being the smallest. And gross margins needs to be seen in light of point number two, that is adverse impact that we see on account of end of season sale.

With this, let me start with a quick snapshot of financial performance of MBL starting with revenues. On a year-on-year basis, Q2 FY23 revenue was up by 47%. On a half year basis, our revenue was up by 116%. Because of seasonality as I discussed, on a Q-on-Q basis, quarter-on-quarter basis, revenue was down by around 6%. Now, if you compare it with pre-COVID period, that is, if you compare with H1 FY20, our revenue was up 66% on a standalone basis.

Similarly, if you compare it with Q2 FY20, our revenue was up by around 70% on a standalone basis. So that growth that we saw even in Q1 similar growth percentage continues even when it is compared for Q2 and H1 together.

Also on a revenue front, key highlights for the quarter had to be our performance of e-commerce sales. We achieved highest ever e-commerce sales of INR41 crores, which was up by 21% on a Y-on-Y basis. Moving on to gross margins. This quarter we delivered stable gross margins of 57.4% which is more or less in line with margins that we saw in Q2 of last year. For H1, gross margin reading is strong at 58.6%.

Lastly moving on to bottom line performance for Q2, we delivered EBITDA of 31% and PAT of 16.4%. If you see it for H1, EBITDA — EBITDA is 33.6% and PAT was 18.7% respectively. With this, I’ll close and hand it over back to the — to commence with our Q&A session.

Operator

Sir should we open the floor for Q&A?

Nissan Joseph — Chief Executive Officer

Yeah. Please.

Questions and Answers:

Operator

Thank you. Thank you very much. Ladies and gentlemen we will now begin the question-and-answer session. [Operator Instructions]. Thank you. The first question is from the line of Tejas Shah from Spark Capital. Please go ahead. We request you to please allow a moment, we’re experiencing some disturbance on the line. The current participant has moved out of the queue, we take the next question from the line of Gaurav Jogani from Axis Capital. Please go ahead.

Gaurav Jogani — Axis Capital Ltd. — Analyst

Hello. Hi. [Technical Issues].

Operator

Mr. Jogani, please stay connected. Participants please allow us, while we check the disturbance on the call. Thank you. [Technical Issues]. Ladies and gentlemen, thank you for being on hold. We will proceed with the call now. And we have the participant from Axis Capital, Gaurav Jogani on the call who would like to ask a question. Mr. Jogani, you can proceed with your question.

Gaurav Jogani — Axis Capital Ltd. — Analyst

Yeah. Sure. Thank you for the opportunity, sir. My first question is, with regards to the store openings, so if you see specifically in terms of Crocs, the store addition there have been just two or three stores in the past two quarters that we see. So anything on that front?

Kaushal Parekh — Chief Financial officer

Okay. I’ll take that first question. So we typically tried to open as many Crocs stores as we can before the monsoon season, because the monsoon season is one of the largest for Crocs. And, at the end of it, we don’t want to be disruptive to our stores. We continue to want to expand and see opportunity for all our five concepts to grow as part of that 260 stores that we guided to.

Gaurav Jogani — Axis Capital Ltd. — Analyst

Okay, okay. Sure sir, thanks. And sir my next question is with regards to, if you can help us out how the demand conditions are panning out in Q3. The reason why I asked this question is, because unlike a normal year, this year some of the festivities have fallen in Q2. So, in that light, how do you see the Q3 panning out? And does your yearly percentage that Kaushal has mentioned earlier, does that changes in that light?

Nissan Joseph — Chief Executive Officer

So we did have a shift of a couple of festivals into Q2. But actually we did — we only caught the starting of Dussehra, and with the tail-end of Dussehra fell into Q3. So, there was not much of a significant shift. When we look at the shift in the total business, it’s not going to be significant. We believe that the numbers, the contribution of each quarter is going to remain about the same year-on-year. And, we continue to monitor our business. This is not the first time we’ve gone through a shift in demand caused by shifting festivals or wedding seasons. And we are aware of how to measure through it. We believe that consumer sentiment is strong.

However, you have to remember last year this was the first time we came out of COVID and, there was some pent-up demand. That demand is fungible from the standpoint that you’re not going to buy 3x the number of shoes, just because you haven’t bought shoes in three 3x — three years. So we do understand that we are going to be looking at some very steep numbers. So we are able to read through that, and we continue to feel that, that demand in the consumers in our segments as I indicated in my opening remarks, the section over INR3,000 saw the biggest increase. That premium consumer is still out there shopping, and wants to shop and hasn’t finished the pent-up partying yet from COVID.

Gaurav Jogani — Axis Capital Ltd. — Analyst

Sure. And sir, just last question from my end is with regards to the other expenses and the employee cost line-items. So if you see, quarter-on-quarter, they have kind of increased around 8%-odd. This against the revenues have not actually commensurately increased. As you mentioned that Q2 is generally a lean quarter. So anything to read in that front?

Kaushal Parekh — Chief Financial officer

So Gaurav, you know, we’ve seen some increase in salary costs both at the back-end and the front-end. There are specific reasons for the same. At the back-end obviously this is also preparing for having talent right on time for all the growth initiatives that we have. FILA — we’ve already announced one acquisition in this quarter. At the front-end, we have seen some increase. This is predominantly on account of opening of new stores again based on that opening numbers, the staff comes in a bit early. So these are one-offs — these are basically two reasons why we’ve seen some slight increase in costs.

Obviously, revenue would start flowing from new stores, say that’s opened up in the second — in later half of this quarter, we’ll have full revenue coming in from next quarter, and salary cuts would start getting absorbed from the next quarter onwards for all the new stores.

Gaurav Jogani — Axis Capital Ltd. — Analyst

Sure. And so, likewise, that could be also used for the other expenses, I’m guessing, and maybe a higher marketing cost in Q2?

Nissan Joseph — Chief Executive Officer

Yeah, during COVID we — I think we were very conservative in our marketing spend, in our travel spend, those aren’t sustainable, right? You have to do marketing, you have to travel when you have a geographically disbursed fleet of stores. So, we have started instituting that back into our system. And we have been doing it for a little bit, but, it has picked up considerably in the last few months. And we think that’s important for whether it’s scoping out real-estate in different geographies or if it’s just ongoing supervision of our 672 stores.

Kaushal Parekh — Chief Financial officer

Also Gaurav, we opened 28 stores in current year. So obviously, when you open the store, the marketing cost goes on day one. Also in current year you would have seen that Diwali is slightly preponed, so obviously all the marketing activities just goes in time, so that we hit the customer segment right on time before the festivities sort of starts.

Gaurav Jogani — Axis Capital Ltd. — Analyst

Sure. Thank you, and that’s all from me.

Nissan Joseph — Chief Executive Officer

Thanks, Gaurav.

Operator

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

Tejas Shah — Spark Capital Advisors (India) Private Limited — Analyst

Sir, first question pertains to since — since we have COCO network across. And then you spoke about pent-up element of demand also visible in the last part of — last year, mainly. The number that we are generating now, what percent and this is a slightly vague question, but what would you attribute to pent-up demand or do you believe that there is a real demand buoyancy that you are seeing in the market and pent-up is behind this?

Nissan Joseph — Chief Executive Officer

As I mentioned earlier, the pent-up demand was there, but it was really when COVID finished. If you hadn’t bought shoes for three years, and if you buy one shoe every year, you’re not going to turnaround and buy three shoes to make up for it. You’re going to buy that shoe. It just all happened to be, I would say it was more a concentration of buying, more than it is really pent-up demand. That demand is over. And so, when we look at our numbers and we see ourselves growing against those numbers, I think it speaks to both the strength of our business positioning and also the strength of our consumer.

Tejas Shah — Spark Capital Advisors (India) Private Limited — Analyst

Thank you, sir. Sir second, you spoke about the seasonality between 1Q and 2Q, so just wanted to understand is it that the realization drops because of US [Phonetic] and mix change or even volume of pairs sold also drops dramatically between 1Q and 2Q in our business?

Kaushal Parekh — Chief Financial officer

So Q2, Tejas, in India that’s the peak monsoon season. So for us, we are not big in rainy shoes. And hence for us, Q2 is slightly smaller. Obviously, in the end of season sale, we see because of the discounts we see volumes there. However, realization is slightly lower.

But pre-dominant reason for lower sales is the monsoon season rather than anything else.

Nissan Joseph — Chief Executive Officer

Though it favors the Crocs, which is only one of our five concept. The other four concept aren’t favored by monsoon.

Tejas Shah — Spark Capital Advisors (India) Private Limited — Analyst

Fair enough. And the last one if I may. On FILA and Proline, FILA in particular, the brand has a bigger aura than the revenue unfortunately generated in the country. So, what are your plans in terms of route-to-market strategy and sourcing strategy? And what is the royalty that will have [Technical Issues] in the country?

Nissan Joseph — Chief Executive Officer

Okay. So, I agree with you Tejas, I think FILA is underpenetrated and under-indexed in the Indian market today. We see huge opportunities for that brand to grow and become a significant player in the athletic branded space. The other exciting part to it is — it’s not only a distribution agreement where we can distribute the global products developed by FILA, it is also a licensing agreement where we are able to make certain categories of FILA under license from them for the Indian market.

So that’s the two facets of it that is very exciting to us. To do that, you need scale. And fortunately, for us, our fleet of stores are able to provide scale as we start expanding into the license business. We also see opportunities to build the brand from an mono-brand and exclusive brand outlet perspective.

The brand is going to need to be catered and curated through the inception. So right now, we’re focused on first of all, integrating the two operations as you imagine, any acquisition, any merger requires a great deal of integration to happen first and foremost to ensure that you build the foundations for that business to growth, both from a technology standpoint and from a human capital standpoint. But also, to figure out — not to figure out, but to position it and then take it — start the march of the journey down towards where you want to position the brand over the next ten years.

And we see it as a long-term play. It is a long-term license. The licensing royalties we believe are more than competitive, and is in line with what we would generally see in such an agreement. But we believe it is even more advantageous than most.

Tejas Shah — Spark Capital Advisors (India) Private Limited — Analyst

Thanks and happy Diwali to the whole team there. That’s a lot.

Nissan Joseph — Chief Executive Officer

Thank you very much, Tejas.

Operator

Thank you. The next question is from the line of Aliasgar Shakir from Motilal Oswal. Please go ahead.

Aliasgar Shakir — Motilal Oswal Financial Services Ltd — Analyst

Yeah. Thanks for the opportunity, and congratulations on your fabulous numbers. I have three questions. The first is on, if you could just help us with — in this quarter — this year, what would have been a price increase versus 2Q FY22? So out of the total growth, if you could help us with the volume price mix.

Nissan Joseph — Chief Executive Officer

So, to answer your first question, our average price increase is somewhere in the 5% to 7% range. And that is a factor of two things. It’s a factor one of inflation costs, but it’s also a factor of the basket of goods that we’re selling. So, those are the two drivers to it. And I hope that answers your question.

Aliasgar Shakir — Motilal Oswal Financial Services Ltd — Analyst

Yeah. That does answer. Just quick follow-up there. So you know, I mean, you did speak about the market demand traction that you are seeing. But in the lower end of the market or we see a lot of players seeing a lot of pain. So, are you also seeing at any of your lower and I understand that you are at a much higher ASP, but at any of your lower end, any kind of pain? And I mean if you could just help us understand the — if this demand in the ongoing festive season does continue or you see any kind of change in the demand situation on the ground now?

Nissan Joseph — Chief Executive Officer

So, I think you got to read between the lines in our business of the lower end of the segment. We vacated quite a few price points because of the GST hike that happened at the turn of the — turn of the calendar year, right? So, that was one reason for exiting some of those price points. We were forced to — when there was a 7% — 700 basis point increase in the GST rate. So that was number one.

But the second thing is, you know, our focus is to become an affordable premium major player in that space and continue to hold that space. And we operate it with a totally different client. So, to give you a perspective on the lower-end of the pyramid, I don’t think we are the right people to ask for that. What I can tell you is, we continue to see the demand for our products priced at that mid to premium range to be very strong.

Aliasgar Shakir — Motilal Oswal Financial Services Ltd — Analyst

Understood. Second question is on your store addition. So during our IPO we had guided for about I think 240, 250 store in the next three years. Now that we have Fitflop as well as you know, contracts which FILA as well as Proline, should that store addition pace accelerate significantly?

Nissan Joseph — Chief Executive Officer

So just to clarify, we had guided to 260 stores, without counting Fitflop in there, right? That was the actual count. So Fitflop would be incremental over that 260. FILA will be incremental. However, I think the timing of that incrementality needs to be seen simply because we will rationalize stores that are either unprofitable and currently in the network, or that don’t add to the brand ethos that we want the brand to build to.

So, while you might see some initial fluctuations of store counts strictly attributable to FILA, net-net, it is going to be accretive to us, both in value to the business and also in value of stores in the counter stores. That’s the short answer, Ali. But by quarter, we might be — we might see a few fluctuations in which we will be transparent about where those fluctuations are coming from. So people will have the sense of confidence that we’ll continue to be on-track for our 260 for our core base business.

Aliasgar Shakir — Motilal Oswal Financial Services Ltd — Analyst

Would you be able to quantify if this will go up by what, I mean, probably, 20, 30 stores or it could be significantly higher, given that FILA has a much larger opportunity in the market?

Nissan Joseph — Chief Executive Officer

Yeah. FILA has a significant opportunity in the marketplace, right? If you look at our Crocs fleet, it is north of 180 stores. We believe that brands like Crocs and FILA and all of them play in about the same pace of demand, and maybe even more like you rightly pointed out with FILA having a wider and a deeper demand than a Crocs might have in the Indian market.

We are going to evaluate that very carefully. We, as you know, at Metro Brands, are very — have a deep operational rigor and financial discipline. So we look — and we also look at things from a long-term perspective. We have performed consistently over many, many years, and we intend that to continue, and we intend for FILA to be accretive to us at that same level of performance that we maintained in the past.

So whatever we feel is the best course of action to get to that point is what we will execute as opposed to try and hit a target number of stores that might be a little bit less informed this — at this stage of the game.

Having said all that, there is definitely opportunity like you said in the FILA brand in India.

Aliasgar Shakir — Motilal Oswal Financial Services Ltd — Analyst

Got it. And just last question is, with this acquisition, we also have a play in the apparel as well as, I think Proline also have equipment business. So how do you see that? Will this be a periphery [Phonetic] business along with your footwear, or you expect — you plan to kind of even expand in categories beyond footwear now with these brands?

Nissan Joseph — Chief Executive Officer

So, I think the easiest way to look at it is, we don’t think apparel plays a space [Phonetic] in our Metro, Mochi and Walkway stores, right, and we don’t see that needing to come into that space. In the other spaces, we believe that apparel has immense opportunity, the size of the athleisure and the athletic apparel market is considerably bigger than even the footwear market is. So, we think there’s an opportunity there. How we slice and dice that, and then you know, I will be very candid with you while we know what we are very, very good at doing which is operating retail shoe stores in India, we also know that, that required some talent and a team put together. And we’re assembling our best way forward on the Apparel business, but we do see that as an opportunity for India as well, both not only in direct apparel, but also the adjacent categories that go with a brand such as Proline.

Aliasgar Shakir — Motilal Oswal Financial Services Ltd — Analyst

Got it. Thanks for that detailed explanation, sir.

Nissan Joseph — Chief Executive Officer

Thank you.

Operator

Thank you. The next question is from the line of Nikunj Gala from Sundaram AMC. Please go ahead.

Nikunj Gala — Sundaram Asset Management Company Limited — Analyst

Yeah. Good afternoon everyone. Sir, I have a few question with respect to FILA only. So currently, how many EBO stores they have right now?

Nissan Joseph — Chief Executive Officer

Well, ideally, I think — Nikunj, thanks for that question. I think it’s a little early to count those stores, because we believe we need to rationalize that store number considerably. And to give you that number of stores today, we don’t think would be a good representation of what we think it needs to be rightsized to before we set on our growth trajectory for it, right?

So, in a rough number, if you want to know, it’s about 20 to 30 stores. And I say that simply because we are in the process of rationalizing them.

Nikunj Gala — Sundaram Asset Management Company Limited — Analyst

Sure. Okay, no issues. And secondly, your — like, during your due-diligence, did you find any inefficiency in the operation and/or the low-hanging fruit which — because we look at — when we look at the margin profile here, at the new operating profit level, so — still it’s very low as compared to the other brands. So, do you see any low-hanging fruits where you know, due to your expertise you can easily bridge that gap?

Nissan Joseph — Chief Executive Officer

Well, obviously, the low-hanging fruit that you mentioned is — is that they’re under-indexed in India, right? So right there, you noted as the low-hanging fruit of sort. We have a big network of stores, Metro, Mochi stores are capable of selling footwear. As you know, we do a large business with Skechers and Adidas and now Puma as well. All of those are opportunities of FILA as well. And we believe we can grow the athletic business in our existing portfolio of multi-branded stores.

So, that is something FILA didn’t have before. So immediately, if you would talk about a low-hanging fruit, we do have our own store chain and fleet that we can grow the brand then. I think there’s numerous other low-hanging fruit that we’re evaluating and will continue to evaluate. And, I think we remain excited for it simply because we know that we can have line-of-sight on some of the low-hanging fruit out there.

Nikunj Gala — Sundaram Asset Management Company Limited — Analyst

Sure. And when we look at the gross margin profile of the product, which they have, and be similar to the other companies, that is lower to what we are enjoying right now 55% to 57%. So from the margin perspective or the ROC perspective, do you think it will be dilutive initially till the time you integrate and, all you know, when you take over the entire business or you will reposition the brand to match your margin and the ROCE expectation?

Nissan Joseph — Chief Executive Officer

I’d rather speak to a long-term plan. I think in the short-term, there might be a blip, so a little bit left, a little bit right. And you know, I don’t want to start commenting on every little blip that we might face along the journey. What you need to know is that, we have a long-term view on FILA. We have a long-term view where it’s going to be accretive to the value of the business. It’s not going to be dilutive. We’ve done these kinds of things before and knocked it out [Phonetic] of scale, so we know what it takes to run a business that is at par or accretive to our existing business. The really exciting thing about the whole thing is that it’s speaking to a whole different consumer, but we believe that the financial fundamentals of FILA will be very much in-line with our expectations.

Nikunj Gala — Sundaram Asset Management Company Limited — Analyst

Okay, sure.

Kaushal Parekh — Chief Financial officer

Just adding to the gross margins that you referred to for other players without naming any one, you also need to study composition of the sales that they do. See, our focus as Nissan mentioned, over a period of time would be on EBOs, MBOs, our own dot-com website, and obviously marketplace sales. We’ll also do selective distribution which will be predominantly on the outright terms basis. Whereas, if you see for others, they also have good quantum of franchisee stores. And when you have those franchisees stores coming in, obviously, it takes hits hit on the gross margins, because we pass-on certain margin to franchisee for them to run their operations.

So, that needs to be seen in that light. In our case composition is — we may continue to follow our COCO, Company-Owned Company-Operated store approach, and hence they’re strictly not comparable assets.

Nikunj Gala — Sundaram Asset Management Company Limited — Analyst

Sure. Thanks for that. And any incremental investment have you planned for this brand apart from the INR200 crore acquisition like any — you know, work you’ve done on the incremental capital you would need to allocate here?

Nissan Joseph — Chief Executive Officer

Correct. We’ve carefully considered the capital allocation required for both the acquisition and also to reposition the brand. Repositioning of brand does cost capital. The good news as you know, Nikunj is all of this capital would be done without raising any more debt, given that we do have cash as a Company. So it’s one of those things. We’ll continue to evaluate what gives immediate payback, what gives long-term payback and it needs to be a balance between those two as we do our capital allocations.

Nikunj Gala — Sundaram Asset Management Company Limited — Analyst

Sure. Thank you. And lastly, just from the revenue perspective, how much, how big would be the non-footwear revenue contribution in the existing INR150 crores of sales which they are doing?

Nissan Joseph — Chief Executive Officer

It’s about 50-50 — 40-60, 50-50 coming from both the Proline business and the FILA business.

Farah Malik Bhanji — Managing Director

Also you need to remember that once we take it on, this is a business that has a long gestation period unlike our current business. So, for instance in most sports brands and in imported brands you see that they’ve already brought in for spring-summer. So really you will see the change in the third-quarter of next year in terms of how we’re going to run it and what we do with it. So that’s something to keep in mind.

And I think all these numbers will get fine-tuned once we can evaluate, dig-deep and just take on and put our stamp on how we want to grow this business.

Nikunj Gala — Sundaram Asset Management Company Limited — Analyst

Okay. But from your perspective, your focus would be largely in footwear or you also want to focus on the non-footwear part or build the team there, like just want to understand that point.

Farah Malik Bhanji — Managing Director

Like I shared with you, once we evaluate, we do realize there is a lot of opportunity in there. It would be too soon to comment on that. So maybe in a couple of months once we have a little more clarity about how we want to run the business, we’d be able to sort of help you with that.

Nikunj Gala — Sundaram Asset Management Company Limited — Analyst

Yeah, thank you. Yeah, thank you ma’am. Yeah, thanks everyone for your time and inputs. All the best.

Operator

Thank you. The next question is from the line of Prerna Amana from [Indecipherable] Partnership. Please go ahead.

Prerna Amana — — Analyst

Yeah, hello. Am I audible?

Operator

Yes ma’am, you are.

Prerna Amana — — Analyst

Yeah. So, first of all thanks for the opportunity and congratulations especially to the management, very few people are able to walk the talk especially with the store addition. So congrats for being on track. My first question is based on Walkway. So last quarter we saw that Walkway didn’t performed well in Tier one cities, and in Tier two and Tier three it performed well. And even this time we’re seeing that growth has been more from the INR3,000 range above category. So, are we losing market share in that category like Walkway and products below INR3,000?

Nissan Joseph — Chief Executive Officer

So, I think the way that I would read that is, even Walkway have seen price increases driven by inflation costs and driven by the GST increases, right. So that’s what we — you’re seeing a culmination of that. It is not that we are seeing the business dramatically differently in Walkway compared to the rest of it. We think it’s different business than our — the rest of our business.

Prerna Amana — — Analyst

Okay. And how does Fitflop — I know Fitflop is a bit premium range, but since it is priced at extremely high, like how is the consumer demand over there?

Nissan Joseph — Chief Executive Officer

We don’t think it’s priced extremely high, we think it’s priced well. But, the consumer demand on Fitflop has been very strong for us. We know we opened our first store in Chennai, in Express Avenue mall, and it has performed above our expectations. So we’re pleased with that. We also have seen FitFlop sell very well in our multi-branded stores of Metro and Mochi.

Prerna Amana — — Analyst

Okay. And, my last question is based on price increase. I know last quarter we had an average price increase of 7%. So, have you taken any price increase in the last three months that is between Q1 and Q2?

Nissan Joseph — Chief Executive Officer

No. The prices have — you know, the good news is we’re starting to see the input cost stabilize. And while there’s always the possibility of a spike caused by some geopolitical macro reason, we don’t see that as much of a threat today though we are acutely aware of that threat, and we constantly try to hedge our inventory to make sure that we don’t — we don’t have to increase prices right now.

Prerna Amana — — Analyst

Okay. Okay, sir. Thank you, and that’s all I have.

Nissan Joseph — Chief Executive Officer

Thank you.

Operator

Thank you. [Operator Instructions]. The next question is from the line of Ankit Kedia from PhillipCapital. Please go ahead.

Ankit Kedia — Phillip Capital India Pvt. Ltd. — Analyst

Sir, couple of questions from my side. First is on the channel mix if you can share for the acquisition how much comes from EBO, distribution and online?

Nissan Joseph — Chief Executive Officer

So most of the business is a distribution business, followed by e-commerce, followed by EBO business.

Ankit Kedia — Phillip Capital India Pvt. Ltd. — Analyst

Sure. And is it for both the brands? Proline and FILA?

Nissan Joseph — Chief Executive Officer

I’m giving you the average between the two.

Ankit Kedia — Phillip Capital India Pvt. Ltd. — Analyst

Sure. And Kaushal, a question for you. We see nearly INR50 crores of inventory and INR90 crores of debtors on the books. Do they also come with the acquisition to us?

Kaushal Parekh — Chief Financial officer

No. So acquisition, you know, we have just signed the agreements. Obviously, post the completion of CP conditions only after that, you know that consolidation would happen. What you see currently is obviously built-up for the upcoming season and the new-store opening that you see, even from an e-commerce point-of-view, we were approaching the season and slightly higher debtors, [Speech Overlap]… the acquisition.

Ankit Kedia — Phillip Capital India Pvt. Ltd. — Analyst

Yeah. I was speaking more from the acquisition balance sheet of Cravatex actually.

Kaushal Parekh — Chief Financial officer

Okay, sorry, sorry, Ankit. If you can repeat your question I just missed it completely.

Ankit Kedia — Phillip Capital India Pvt. Ltd. — Analyst

If you look at their balance sheet, they have INR50 crores of inventory and around INR90 crores of debtors on their books. Do they also come with the acquisition or we need to, you know…

Kaushal Parekh — Chief Financial officer

Yes. So obviously since we’re doing 100% buyout, all the net assets that will be there in the business as of the closing date would come, we will be taking it over.

Ankit Kedia — Phillip Capital India Pvt. Ltd. — Analyst

And, are all the 20 to 30 EBOs which Nissan mentioned are COCO EBOs or COCO EBOs for FILA?

Nissan Joseph — Chief Executive Officer

It’s a combination of both predominantly a franchise.

Ankit Kedia — Phillip Capital India Pvt. Ltd. — Analyst

And, do you think over the period of time, you want to convert those EBOs to COCO EBOs or you predominantly feel that franchisee model is good for FILA?

Nissan Joseph — Chief Executive Officer

So, we believe in relationships and partnerships and honoring partnership that Cravatex might have entered into, right? So it’s not a question of do we want to convert them to Company-Owned Company-Operated stores, the question is what is right for the franchisee? If it’s right for us to do right by the franchisee to keep them on, we will be more than happy to support them. Having said that though, the future models of the business, we will be strongly leaning towards a Company-Owned Company-Operated model.

And having said that, I say that only because this is a different space to our other business. So we want to be acutely aware that we want to be open to different ways of slicing this. But we would be tainted, if that is the word, to opening Company-Owned Company-Operated stores first and foremost.

Ankit Kedia — Phillip Capital India Pvt. Ltd. — Analyst

And, one last question. From a three-year perspective, do you think the margins for Cravatex can be near the Metro Brand’s margins? Or it will take some more longer?

Nissan Joseph — Chief Executive Officer

Within three years, I think the answer is yes, it will be accretive to our business and we have no reason to believe that it wouldn’t be otherwise we wouldn’t be acquiring the company. I think we all know that FILA is a well-known international brand. A few years ago, FILA was actually the number-one selling athletic brand in our stores. So, we do see the opportunity, we know that we have that customer in our stores as a matter of positioning that brand correctly for the Indian market, given the competitive landscape in India as well.

Ankit Kedia — Phillip Capital India Pvt. Ltd. — Analyst

That’s helpful, Nissan. Thank you so much, and all the best.

Nissan Joseph — Chief Executive Officer

Thanks, Ankit.

Operator

Thank you. 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

Yes, sir. Thanks for the opportunity. My questions are on the margins front. So, Q3 should see higher fresh sales versus Q2. So what is the reason behind sort of gross margins remaining at 55% to 57% when we have already done about 57.3% in Q2?

Nissan Joseph — Chief Executive Officer

So Devanshu, we like to run a financially disciplined business, right? And we believe that by setting our target at 55% to 57%, it ensures that we’re not missing opportunities of certain price points even in the premium segment. Even in the premium segment, we do have key price points that we want to hit. Sometimes to hit those price points, you might have to move your margin points a few points to the left.

We think the best way to capitalize on the market share in the Indian economy is not be rigid about trying to move a margin up and be more focused on ensuring that you’re delivering value for every product that you bring out to the market and driving revenue and incremental sales through that. And hence, the position we’ve taken to say– you know, we’re comfortable at 55% to 57%, we’re comfortable with 30% range of EBITDA, we comfortable with 15% plus of profit.

And you know, the three engines on that plane [Phonetic] seem to work really well for us, have worked well for us over the last ten years, and we believe will continue to work well for us going forward.

Devanshu Bansal — Emkay Global Financial Services — Analyst

Got it. And so, broadly, I just wanted to check on the EBITDA margin front also. So, for a longer-term, medium-term perspective, since your focus is on value — sort of providing value to consumers, 30% is a good estimate with some operating leverage built-in with scale?

Kaushal Parekh — Chief Financial officer

Yes, Devanshu. I think that could be a correct assumption.

Devanshu Bansal — Emkay Global Financial Services — Analyst

Okay. Got it, got it Kaushal. Thanks for taking the questions.

Operator

Thank you. The next question is from the line of Vikas Jain from Equirus. Please go ahead.

Vikas Jain — Equirus Capital Private Limited — Analyst

Hi sir. Thanks for the opportunity. Sir, my first question just to — I heard in one of your comments you mentioned that we are assembling — in the process of assembling a team to run an operational [Technical Issues] of athleisure wear brand business right, is that correct. Is that what you [Technical Issues] recently-acquired?

Nissan Joseph — Chief Executive Officer

I’m sorry we were keen to, what Vikas? You have a little bit of a voice — we are keen to?

Vikas Jain — Equirus Capital Private Limited — Analyst

Sir, are we in the process of assembling a team to run our athleisure wear business that would be coming up from these two new acquired brands? Is that correct understanding?

Nissan Joseph — Chief Executive Officer

That is correct, yes.

Vikas Jain — Equirus Capital Private Limited — Analyst

Okay, okay. And sir, one more thing. I was like reading the previous Annual Reports for Cravatex, sir. I found that FILA — the date when it started into India’s operations and till FY20 numbers that I’m talking about, what according to you — so it did incur EBITDA losses in FY20, where it was largely a normalized year of operation.

So, means, according to you, what is the missing part into the growth, strategy for FILA that we would actually fill in, means what was wrong with it in [Indecipherable] in the past?

Nissan Joseph — Chief Executive Officer

I don’t want to comment about what’s right or wrong in the past specific to FILA. But I can tell you for a brand to be successful in India, it needs a couple of things. What it needs first and foremost is scale and velocity through door count, profitable door count. It can’t be in doors that are costing you more to do business in than you’re making in business. And that’s something that Metro Brands offers any brand in the footwear space and scale at a profitable level.

So that’s number one. Number two is to have a steady supply. And to have a steady supply of goods you need to be well-capitalized. You need to have sourcing capabilities, not only domestically, but internationally right? And so for that, Metro Brands is positioned for any brand to be capitalized and source products on a timely basis and make sure there is a good steady flow of product because if you don’t have product for a season or two, the consumer migrates from you, and it’s very hard to get them back.

Number three, you have to make significant investments in marketing on a consistent basis. That’s another thing that requires capital and Metro Brands has the capital to do that, and the wherewithal to do that. So that’s the third thing you need. So, when you look at all the things that a brand needs, many brands stumble on a lot of these areas through their journey. And when they do stumble, it becomes quite — quite a vicious circle or cycle for them to try and pull out of it. And we believe that with a steady strategy after we evaluate the business, and we look at its potential and we put a roadmap together, that we would be able to unlock the potential that FILA brings.

Vikas Jain — Equirus Capital Private Limited — Analyst

Sure, sir. Understood. And then one last question. The products or the footwear that we are manufacturing, that FILA used to manufacture. We will have these manufactured at our vendor base only right, they won’t be imported at least, right? Is that correct?

Nissan Joseph — Chief Executive Officer

We’re going to have a combination of both imported and localized products. Don’t forget our consumer wants the global trends. And so, that’s why we want to — have to give them access to the global trends and product. We also believe that there is a lot of elevated product that exists in the global range that we would like to bring to India to elevate the brand. At the same time, we do have good sourcing capabilities right here in India and we’re proud of those capabilities that we would continue to source that group of products that makes sense on the local for local production. But we want to have a holistic 360 brand that offers the consumers what they perceive an international and expect from an international brand.

Vikas Jain — Equirus Capital Private Limited — Analyst

All right, sir. Understood. Thank you so much. Thanks for answering.

Nissan Joseph — Chief Executive Officer

Thanks Vikas.

Operator

Thank you. The next question is from the line of the Sagar Jethwani from Phillip Capital. Please go ahead.

Sagar Jethwani — Phillip Capital India Pvt. Ltd. — Analyst

Yeah. My voice is audible?

Nissan Joseph — Chief Executive Officer

Yeah.

Sagar Jethwani — Phillip Capital India Pvt. Ltd. — Analyst

Yeah. Sir, what was the revenue contribution of discounted product during the quarter? This is my first question. And, my second question is on that, we have been focusing on the sports category although we have other four brands in the sports category now. I believe that the revenue contribution of the sports category would be less than 20% of footwear [Phonetic] in our case. So we have been more focused on party wear, formals, casual footwears, etc. So now coming to the sports category there are already established players. How do we plan to position ourselves in this category, sports category?

Kaushal Parekh — Chief Financial officer

Sagar, I’ll take the first question. The end of season sale or say it [Phonetic] discounted sales contribution in Q2 was around 8%. And if you see it for H1, it was up 5%.

Nissan Joseph — Chief Executive Officer

And to answer your second question, Metro does stand for a family footwear store, right? And that means, especially in the Indian market we sell a lot of dress, ethnic, formal wear and casual ethnic wear too, right? And we don’t want to go away from that. Having said that, we believe that we want to own the footwear wardrobe of a consumer, and this gives us an opportunity to further increase the breadth of the wardrobe that we would command for our consumer.

You are right, today actually the sports contribution is less than 20%, but when I look at the growth that was first induced by COVID, it has been quite phenomenal. It has been very strong. For some of the other sports brands that we’re bringing from the outside, we’re their largest customer in India. So Metro has the capability of selling athletic shoes.

Having said that, we’re not going to get far away from our DNA of being a family footwear store or a complete holistic footwear store, in our Mochi stores as well. We believe the opportunity lies not only in our MBOs, but also in building the brand as a standalone. Now, you rightly said there is competition in India, but there’s also a huge growing market, a market that comes from two sources, one is the organized sector growing faster than the unorganized sector, middle class incomes rising, and consequently, our curations [Phonetic] rising, whole awareness of health among the Indian population, and an overall leaning towards sports as a way of life as opposed to just PT session in school on the fourth period, right.

So all those things create tailwinds for this category. So while the competition is always something to be considered, let’s not forget it’s a fast-growing wide category that has a lot of headroom left in it to grow, and we just want to make sure we position FILA correctly with a competitive advantage that can sustain that growth.

Sagar Jethwani — Phillip Capital India Pvt. Ltd. — Analyst

Yeah. So any growth number that you have in mind that you achieved to clock in next two years only in the sports category, any thoughts on that?

Nissan Joseph — Chief Executive Officer

You know, I think the financial discipline that we have doesn’t go that way. What we go is the other way when we say how do we have healthy growth and what’s the number for that healthy growth, right, healthy growth when, I say, healthy growth, I mean gross margins, I mean, EBIT and I mean PAT.

We started there first and said what’s the best we can make, what do — how do we hit that triangle, that vortex [Phonetic] the best. And then we figure out what kind of growth that can then lead to, and that’s how we work it. So, we come from financial rigor first, as opposed to sales enthusiasm first.

Sagar Jethwani — Phillip Capital India Pvt. Ltd. — Analyst

Okay, thank you.

Nissan Joseph — Chief Executive Officer

Thanks, Sagar.

Operator

Thank you. [Operator Instructions]. The next question is from the line of Sabyasachi Mukerji from Centrum PMS. Please go ahead.

Sabyasachi Mukerji — Centrum PMS — Analyst

Yeah. Hi, thanks for the opportunity. I have two questions. First, on the acquisition part. So, I understand that you’re kind of building a team for the athleisure apparel segment. And with this acquisition, do you intend to come up with your own brand, a new brand altogether for the apparel — athleisure apparel segment?

Nissan Joseph — Chief Executive Officer

Okay. So we are fortunate that it’s not like Cravatex did not have a team in place right? So they have a team in place that has been running the business, and we think we can support them better given our scale and given our operational capabilities. So that’s number one. And we are adding talent to ensure that it is adequately — has adequate fuel and firepower in that segment of our business.

We do have the brand Proline, and we do now have the brand FILA, both of them we believe completes the spectrum of goods that you would expect to see in the athletic and the athleisure market. So as of today, there are no plans to launch another brand in that space.

Sabyasachi Mukerji — Centrum PMS — Analyst

Okay, thanks. Next question, my second question is a bit of bookkeeping one. What was the ASP numbers, Average Sales Price for Q2? If I may know?

Kaushal Parekh — Chief Financial officer

It was around INR1,450.

Sabyasachi Mukerji — Centrum PMS — Analyst

So the INR1,450 number is for Q2 not H1, right?

Kaushal Parekh — Chief Financial officer

This is for H1. So it — for Q1 it was INR1,500 and for Q2, if you see, because of the reduction in sale, it was around INR1,400. So on an average for H1 it is INR1,450.

Sabyasachi Mukerji — Centrum PMS — Analyst

So the presentation that contains the average realization for each brands, all the numbers are for H1, right?

Kaushal Parekh — Chief Financial officer

Right, right.

Sabyasachi Mukerji — Centrum PMS — Analyst

Okay. Thanks. That’s all from my side.

Operator

Thank you. The next question is from the line of Akshay Kothari from Envision. Please go ahead.

Akshay Kothari — Envision Capital Services Private Limited — Analyst

Thanks for the opportunity. Sir, what will be the current ASP of FILA?

Nissan Joseph — Chief Executive Officer

Probably somewhere in the INR3,000 to INR5,000 range.

Akshay Kothari — Envision Capital Services Private Limited — Analyst

Okay. And sir, I was just checking out the Cravatex website, and, there are other brands like something called as brands of the one [Phonetic]. These brands we have not acquired, right?

Nissan Joseph — Chief Executive Officer

We are in the process of discussing that with Cravatex as to how to best migrate the other brands. But today we are focused on FILA and on Proline, because we know that we have — we have a deep focus on those two. But we’re not close to some of the other brands that they have in their portfolio. But we’ll evaluate once we finish the due-diligence and close the deal.

Akshay Kothari — Envision Capital Services Private Limited — Analyst

So this INR202 crores is only for FILA and Proline?

Farah Malik Bhanji — Managing Director

No, it includes them.

Nissan Joseph — Chief Executive Officer

No, it includes all the brands.

Farah Malik Bhanji — Managing Director

And we’ve acquired all of them, it’s just that we have to evaluate which ones we’ll continue to grow and which ones we may change.

Akshay Kothari — Envision Capital Services Private Limited — Analyst

And the BB UK is one also?

Farah Malik Bhanji — Managing Director

Which one, sorry?

Akshay Kothari — Envision Capital Services Private Limited — Analyst

BB UK, it’s something 100% foreign subsidiary we are having.

Farah Malik Bhanji — Managing Director

Yeah. So basically we’ve acquired 100% shares of the company. So whatever comes with it, yeah.

Akshay Kothari — Envision Capital Services Private Limited — Analyst

Okay. And Paragon has of course taken for Proline [Phonetic].

Farah Malik Bhanji — Managing Director

Correct. That’s correct.

Akshay Kothari — Envision Capital Services Private Limited — Analyst

Okay. Yeah. And I think you mentioned so, there are certain obligations relating to license fee, so could you clarify something around that?

Nissan Joseph — Chief Executive Officer

As with all brands, you have to pay some form of licensing fee or royalty, right? And so, FILA comes with that as well. Proline does not. Proline is a brand that we will own outright, but we don’t have to pay any licensing fees to any one. But FILA has licensing fees and from what we know in the market, their licensing fees are more than competitors.

Akshay Kothari — Envision Capital Services Private Limited — Analyst

Okay. Thanks a lot and all the best. Wish you a happy Diwali.

Nissan Joseph — Chief Executive Officer

Thanks, Akshay. And to you too.

Operator

Thank you. The next question is from the line of Tanmay Gupta from Motilal Oswal. Please go ahead.

Tanmay Gupta — Motilal Oswal Financial Services Ltd — Analyst

Yeah. Hi, thank you. Sir, we have studied that the cost to MRP for the international brand is near about 1:7 or 1:8. So what could be the cost to MRP for FILA?

Nissan Joseph — Chief Executive Officer

We have no reason to believe that it would vary. But as you know, to do it right, we would evaluate how do we position it from a price standpoint, from a position standpoint and ensure that we work on that from a customer backward lens, as opposed to a markup lens going forward.

But we believe bottom-line though, Tanmay is that, FILA, once we are able to set it on its course will be accretive both in value on all our three segments of our — how we count our business of margins, EBITDA and PAT.

Tanmay Gupta — Motilal Oswal Financial Services Ltd — Analyst

And sir, any — like what would be the cost to MRP for our Metro and other format?

Nissan Joseph — Chief Executive Officer

So, a simple way to look at it is our gross margins is 57%, right, that gives you a good indication of what at least the range that we would be looking at. And we believe that FILA would fall in that range as well. And simply don’t forget when you have a wholesale business that moves the numbers a little bit to the left, a little bit to the right, but it also moves your cost equally in that same space. So if you have a wholesale business, all of a sudden you have no retail cost associated with that sale.

So, what we really like you to take away from this Tanmay is we are committed to maintaining our performance in Metro of 55% to 57% that we’ve done for many, many years, and we maintain — we intend on maintaining that going forward with both FILA and Proline in our mix, in our portfolio.

Tanmay Gupta — Motilal Oswal Financial Services Ltd — Analyst

And sir, is there like you know, the margin for sports and athleisure brands are little higher than the formal brands or the other categories is that so?

Nissan Joseph — Chief Executive Officer

You know, here’s what you got to understand, those businesses tend to be a little bit more of a fashion business. So while it looks like it might have better margin on the front end, you may not have it on the exit and having them, that’s why it keeps picking [Phonetic] them and trying to let you know that what we’re focusing on is, we want to make sure that it hits our price ranges and margin ranges of 55% to 57% and is accreted to what we’re doing and not dilutive.

Tanmay Gupta — Motilal Oswal Financial Services Ltd — Analyst

All right sir. Thank you.

Nissan Joseph — Chief Executive Officer

Thanks, Tanmay.

Operator

Thank you. The next question is from the line of Rajiv from DAM Capital. Please go ahead.

Rajiv — DAM Capital — Analyst

Thank you. Thank you for the opportunity. Sir, in between you said that FILA and CBL could have similar sensibilities… [Technical Issues]

Operator

This is the operator. Rajiv, we are unable to hear you clearly can you speak a little bit more louder?

Rajiv — DAM Capital — Analyst

Is it better now?

Operator

This is better. Thank you.

Rajiv — DAM Capital — Analyst

Yeah. So, in between you made a comment that FILA and CBL could have a similar kind of sensibilities, so personally in terms of store size. And also there is a clear thing that Crocs you basically have Crocs India as an intermediary and in FILA you won’t. And so what is that delta in terms of when you source via Crocs India and that [Indecipherable] will be accretive?

Nissan Joseph — Chief Executive Officer

Yeah, I think — again, I have to really guide you back to the 55. Because when we source from Crocs, though there is a margin in-between for the intermediary as you pointed out correctly Rajiv, they also have Crocs associated with it too, whether it’s designed, developed and import costs, duties that they pay, running SAP, running marketing. So, you got to be careful that you don’t get overly drawn by the sexiness of you know, what an factory exit price is, and what the MRP is. You’ve got to really consider the cost structure in-between and the input costs that go in from when it leaves the factory to when it actually gets sold, and actually to get it made in the factory even, right.

So, be careful is what I say to you in focusing on that. I want to assure you again that we believe we want to — we will be able to get FILAs and Prolines in run and be accretive to the three pillars of our financial pillars, which is our EBITDA, our PAT and our gross margin.

Rajiv — DAM Capital — Analyst

Sure. And so on the — in terms of distribution sir, LFS is off the table is it apart from doing MBO on Metro and Mochi, otherwise LFS is not focused in the FILA distribution?

Nissan Joseph — Chief Executive Officer

Overall today, LFS is a big part of their distribution right. So, what we — I spoke to our MBO and EBO business as the low-hanging fruit that somebody bought up. It’s not that LFS is off the table. Right now, as we evaluate it, we look at all those opportunities to see what those lines of distribution would mean to position the brand correctly in India. And positioning also comes with the word access, right. We want to make sure that our consumers have access to the brand. So, LFS’ do offer access to many consumers that we need to respect.

Rajiv — DAM Capital — Analyst

Sure. That’s all. Thanks a lot, sir.

Nissan Joseph — Chief Executive Officer

Thanks Rajiv.

Operator

Thank you. The next question is from the line of Ankit Kedia from PhillipCapital. Please go ahead.

Ankit Kedia — Phillip Capital India Pvt. Ltd. — Analyst

Sir, just a clarification [Indecipherable], when you talk of the ASP of INR1,500, does this include accessories? Because if I look at your price range more than 25% [Phonetic] of your products are above INR1,500. So if I exclude accessories then what would be the ASP of footwear alone?

Kaushal Parekh — Chief Financial officer

So Ankit, yes, the number that you see is inclusive of accessories. If you just take footwear, the overall ASP would be in the range of INR2,100 to INR2,200 broadly.

Ankit Kedia — Phillip Capital India Pvt. Ltd. — Analyst

And this ASP is including of GST right?

Kaushal Parekh — Chief Financial officer

This is on net sales. So this is net of GST. At MRP level, it would be higher. You need to add approximately 17.5%, 18.0%.

Ankit Kedia — Phillip Capital India Pvt. Ltd. — Analyst

Understood. Understood. That’s helpful. Thank you.

Nissan Joseph — Chief Executive Officer

Thanks, Ankit.

Operator

Thank you. Ladies and gentlemen, this was the last question for today. I now hand the conference over to the management for their closing comments. Over to you, sir.

Nissan Joseph — Chief Executive Officer

Yeah. Thank you all for being on the call this afternoon. We had a terrific Q2, Metro — our team has performed and delivered well in line with our expectations. We are excited about the FILA and Proline opportunity with the acquisition. We believe it has the runway, it’s a white space for Metro Brands and we believe in capitalizing on it in a strategic and careful method. Thank you all again. Happy Diwali.

Operator

[Operator Closing Remarks].