Page Industries Ltd (PAGEIND) Q2 FY23 Earnings Concall Transcript

Page Industries Ltd (NSE:PAGEIND) Q2 FY23 Earnings Concall dated Nov. 10, 2022

Corporate participants:

V.S Ganesh — Chief Executive Officer

Chandrasekar K. — Chief Financial Officer

Gagan Sehgal — Chief Operating Officer

Rahul Shukla — President and Chief Retail Officer

Analysts:

Gaurav Jogani — Axis Capital — Analyst

Tejash Shah — Spark Capital — Analyst

Nihal Jham — Nuvama — Analyst

Madhu — Canara HSBC — Analyst

Rishi Modi — Marcellus Investment Managers — Analyst

Ankit Kedia — PhillipCapital — Analyst

Akhil Parekh — Centrum Broking — Analyst

Swati Jhunjhunwala — DT Capital — Analyst

Devanshu Bansal — Emkay Global — Analyst

Samil Bua — India Infoline — Analyst

Presentation:

Operator

Ladies and gentlemen, good day, and welcome to the Q2 FY 2023 Earnings Conference Call of Page Industries Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. V.S. Ganesh, Managing Director of Page Industries Limited. Thank you, and over to you, sir.

V.S Ganesh — Chief Executive Officer

Thank you so much, and good evening, everyone. It’s a pleasure to talk to you. And thank you all for joining us for this call today.. An exciting time for us to be in the industry such as ours. With an increasing urban population, rapid urbanization, growing aspirations for global brands, shift in organized retail and an increasing awareness for branded in a way, to name a few, it gives branded players like us a huge market to explore and to grow. I’m delighted to inform you that we have registered a robust revenue growth, record margins and earnings per share performance added by good growth across all our product categories.

We actually have recorded the second best quarter in our history, just behind the Q1 record which we had. With the demand environment being lukewarm, with inflationary pressures abating a recovery in consumption, we are happy to announce that we actually recorded a 7% volume growth if we look at the growth without mask. Overall, the reported growth is 1%. But if we look at our core categories, our volume has grown 7%. And in our core category, the revenue has grown 20%. But if we include mask and if we compare, then it’s a 16% growth. We continue to intensify our focus on distribution, modern trade and e-com to drive product strength, increase consumer engagement while making substantial progress in the digital-led marketplace.

Looking ahead, despite the volatile macroeconomic environment, we remain very confident in our ability to further build on to the progress made so far and continue to drive strong top and bottom line growth. This is made possible by our incredible teams who came together to connect closer to the consumer than any time before. Let me take you through some key highlights before CFO details the financial performance for the quarter and for the half year. Our Q2 revenue has grown by 16% year-on-year but shown a degrowth by 6% quarter-on-quarter if you look at the strong Q2 of last year base, whereas volumes have grown 1% year-on-year If you look at actually the core category, we have actually grown 7%.

So like-to-like, if you compare, it has shown a de-growth of 10% quarter-on-quarter. Coming back to the volumes, our overall volumes are, as I told you, without mask, it’s a 7% growth.. As of September end, we are present in 118, 000 MBOs, 1, 191 EBOs and 2,741 LFS. Our channel expansion continues to be in line with our growth plans. I’m very happy to share that we have opened our first flagship store in Kona Place, New Delhi. And a few days back, we opened our 10th PBO in Dubai. We are also now present in [Indecipherable]. Moving into the macro environment and this effect, I’m pleased to report that the supply chain is back on track despite witnessing major demand shifts. We have invested heavily on mobilizing inventory both to manage input cost volatility and bring our stock levels to where it should be.

During the quarter, we faced very high inflationary trends which impacted nearly all costs, including cotton, which is now softening, packaging, fuel, logistics. However, we managed this, and we were able to partially reverse the strength and hold on to our margin strength and calibrated pricing actions, strong budgets and expense control measures and optimum use of inventory. Our expansion plans are in line with the accelerated sales growth trend and that we are seeing in the marketplace. And this is supplemented by strengthening our relationship with our supply chain partners.. We’ll continue to have disproportionate attention on our growing categories, namely Athleisure, the women’s range and juniors.

Our retail expansion has equal focus for Tier three and four towns as we have for metros and Tier one and two. I’m delighted to inform you that our Speedo business is back on track, and the revenue numbers are very encouraging, and it is in line with our budgets. I would like to take this opportunity to thank on your behalf the 28,000-plus associates for the great work they have put in and for showing a very robust performance during the quarter.. I have today Mr. Gagan Sehgal, our COO; and Mr. Rahul Shukla, our President and Chief Retail Officer, who will be more than happy to answer any questions that you may have in this domain as regards sales and modern trade. As usual, I’m joined by Mr. K. Chandrasekar, our CFO, who will now give you further insights on our Q2 financial performance. Let me thank you once again for joining the call today. And I pass on to Mr. Chandrasekar.

Chandrasekar K. — Chief Financial Officer

Thank you, Mr. Ganesh. So welcome, everyone, to the call, and thanks for being here and your support to Page. So jumping into the financial performance for the quarter. We had revenues of INR12,550 million, and that, as Mr. Ganesh explained, is the best Q2 in history on the back of the best quarter ever, which was the previous Q1. The last year Q2 was INR10,840 million. So there’s a growth of 16% in value and about a degrowth 6% quarter-on-quarter. The EBITDA is INR2,379 million, and this is a growth of 2% over the last year Q2. And there is a degrowth of about 20% quarter-on-quarter. EBITDA margins are coming in slightly lower at 19%, which compares with 21% year-on-year and 22.2% quarter-on-quarter.

We have not pulled back any of our opex which are contributing to the growth of the Jockey brand. We have spent more on opex, mainly on advertisement. In building that housing capacity, we have spent on digital media advertising. And the e-com growth has been good. So therefore, there are attendant commissions. And so the opex has been more. The gross margins remain to be around 39%. So the opex in Q2 has taken the EBITDA to about 19%. The Q2 PAT is INR1, 621 million, which is a growth of 1% year-on-year and a degrowth of about 22%. The PAT margins are 12.9%, and it compares with 14. 8% year-on-year, and the quarter-on-quarter is 15.4%. As I already said, the gross margins have been 39%, which is generally at par. So the pricing decisions which you have taken have been vindicated.

As far as the H1 is concerned, these numbers obviously, because of a weak pandemic Q1 last year, clearly, are looking extremely good. H1 revenues are the best, again, in the history, INR25, 963 million, which compares to only INR15,855 million last year H1, which is a growth of about 64%. Similarly, the EBITDA for H1 is INR5,357 million compared to INR2, 676 million, a growth of 100%. EBITDA margins are 20.6% for H1 this year as a whole. And last year was only 16.9% because of Q1 under absorption. The H1 PAT is INR3, 692 million,,and it compares with INR1,714 million only last year H1. This is again a growth of 15.4%. With respect to cash and cash equivalents, we have come down to about INR833 million.

And this compares with INR3,144 million as of June 2022. This is because we have continued to invest in inventory, and we have gone a little ahead of the curve as far as inventory is concerned, which should rationalize a bit going forward. But we have a healthy inventory, and that should support further growth in Q3 and Q4. Inventory actually stood at INR13, 592 million as against about INR11,200 million in June. Net working capital has not gone up because a lot of it is the buildup of inventory has come from the cash reserves, I mean, as well as the payable is more. So net working capital was INR7,880 million, which compares with about INR7,300 million at June. So with that, I request that we move to the Q& A session.

Questions and Answers:

Operator

[Operator Instructions] We have the first question from the line of Gaurav Jogani from Axis Capital.

Gaurav Jogani — Axis Capital — Analyst

My first question is with regards to [Indecipherable] on the volume growth that you mentioned. That is, ex of the core category, 7%; but overall, 1%. So does it mean that the noncore products sold a bit higher during the pandemic period and which is now normalizing? And if that is the case, how should we expect the volume growth going there?

V.S Ganesh — Chief Executive Officer

Yes, actually, the — when we talk about the non-core product, which is actually what you were talking about, that is the mask. So the mask numbers were pretty deepened during Q1 and [Indecipherable] because of the pandemic. Now that post pandemic actually, that will be degrowth. And that’s what we meant by the noncore. So if you look at our core products minus the mask, that [Indecipherable] 7%, which considering the inflationary pressure and market environment, we feel this is a decent growth. And if firing on all cylinders [Indecipherable] and get back to [Indecipherable].

Gaurav Jogani — Axis Capital — Analyst

Sir, my second question is with regards to the sharp increase in the opex cost, and that is largely led by two factors. One is led by cost, and the other is opex, that I assume is due to the advertising expense. And you have mentioned in the press release about the employee cost increasing on account of the capacity — capabilities building. So if you can highlight more on the same, is the cost –are the costs expected to remain at the same levels going ahead? Or this was a quarter phenomenon, maybe you see normalization from there?

V.S Ganesh — Chief Executive Officer

Coming to opex, there are a couple of things. One is [Indecipherable] we hardly had any advertisement [Indecipherable] now that we are [Indecipherable] we need to go back to activities and [Indecipherable]. We are back to normal [Indecipherable] those expenses are concerned, which is very essential for the [Indecipherable]. And we have also invested in our warehousing capabilities. So when you started new operation in the first 3, four months, [Indecipherable] higher [Indecipherable].

Operator

Excuse me. Sorry to interrupt, sir, the audio from your line is fluctuating, Mr. Ganesh.

V.S Ganesh — Chief Executive Officer

Okay. Is it better now?.

Operator

Yes, it’s better. Thank you.

V.S Ganesh — Chief Executive Officer

Yes. So I was talking about marketing expenses which we had to take, which was not there [Indecipherable].

Operator

Sir, I’m sorry to interrupt again. Let me reconnect your line, sir. I will a hiring freeze as far as management talent strengthening is concerned during the pandemic. Now with the growth trajectory which we are looking at and with the retail expansion which we have, we need to strengthen that, and we have invested. So these are all investments for the future. And because we are very, very optimistic about the volumes. And this is — in fact, if you see the overall numbers, even the revenue growth is actually around 20% if I don’t look at the mask as a category. So these are necessary investments with the growth trajectory we have.

Gaurav Jogani — Axis Capital — Analyst

Just one last question for [Indecipherable] one. If you can help us with the tax rate guidance for the full year as well as the capex guidance for the year.

V.S Ganesh — Chief Executive Officer

[Indecipherable], do you want to take the first part?

Chandrasekar K. — Chief Financial Officer

The capex guidance, on the capex, we are planning to spend about INR250 crores upward. What was your first question? Sorry, the line wasn’t clear.

Gaurav Jogani — Axis Capital — Analyst

Actually, so the tax rate guidance actually because if you see the first half tax rate, that’s been around 24%. So for the full year, it’s obviously… Can you — not very audible, I’m sorry. Yes, sir, the tax rate for the first half is around 24-odd percent. So what should we take the tax rate for this year, FY ’23 and FY ’24?

V.S Ganesh — Chief Executive Officer

Should be more or less same. So when I look at Q2 this year, we had an effect to lower tax rate because for all the new employees, we declined the [Indecipherable], and that was not there. Not many people were joining. So for the new employees they are eligible for some reduction. So due to the effective tax rate of Q2 has come down. But overall, if you look at H1 versus H2, it will be more or less in the same range.

Gaurav Jogani — Axis Capital — Analyst

So sir, if I understand it right, it would be around 22% or 22.2%, whatever the H1 number is?

V.S Ganesh — Chief Executive Officer

Correct. Correct.

Chandrasekar K. — Chief Financial Officer

Q2 was 23.7%. Last year, it was 25. 3%. So I expect the effective tax rate to be in the range of about 24% on a full year basis, yes.

Gaurav Jogani — Axis Capital — Analyst

Okay. And that would be the same for ’24 as well, right? the next year?

Chandrasekar K. — Chief Financial Officer

I guess so because there is really no change in the corporate tax rate. It is only because of certain — the reductions that we get like what we mentioned. So there is more in there will be more exemption on that count. So one should expect around 24% to be there.

Operator

[Operator Instructions] We have the next question from the line of Tejash Shah from Spark Capital.

Tejash Shah — Spark Capital — Analyst

A couple of questions from my side. Sir, first question pertains to increase in inventory. So just wanted to know what is the nature of this inventory buildup [Indecipherable] could build up before the value? Or is it that we have expanded our pipeline to service the right basket of products that you are doing? And how should we think about the inventory going forward from [Indecipherable]? I’ll take that question, Mr. Ganesh?

V.S Ganesh — Chief Executive Officer

Go ahead.

Chandrasekar K. — Chief Financial Officer

So thanks, Tejash, for the question. So obviously, we have — if we’re looking back about two quarters back, the raw material prices are moving up, and we prepositioned much of the inventory, and we also ordered and paid everyone well. So we have gone a little ahead of the curve, as I mentioned at the beginning. So the raw material, we had about six months in our inventory at the end of March, and now it is has come down to about 3.7 or so. And — but we finished those from about 2.5 has gone to about three months. So — and right now, we are not building much of raw material inventory until we sort of take the optimum level of inventory of FG as well. So going forward in Q3 and Q4, you would expect the inventory to go down. In terms of composition from the 13,600, about 8,000 million is FG and 5,000 million is raw material, and the remaining is work in progress.

V.S Ganesh — Chief Executive Officer

So this was more of a strategic during which we make sure those times, if you look at six months back also, the supply chain was not all that robust and we wanted to risk mitigate by having stock. We were also seeing a lot of demand fluctuations, and we thought we should have good enough stock across the portfolio so that we can quickly — we can build agility and meet the changing market demand. Now that things have normalized, we are having much better control, and the buys are reduced, and we are leveling up the stock levels.

Tejash Shah — Spark Capital — Analyst

Sir, second question pertains to distribution. So the highlight of the last 18, 24 months of our strategy was very rapid distribution expansion. And you mentioned earlier that we wanted to capitalize on the supply chain constrained by the competition — for the competition. So where do we see this lever now playing out? Because we have now rapidly expanded touch points, so how should we think about that lever in next 18 to 24 months?

V.S Ganesh — Chief Executive Officer

I think Gagan Sehgal can throw more light on this. But before I pass it on to him, let me tell you, I think there is much more headroom as far as the reach is concerned. We are looking at a PIN code by [Indecipherable] level when we look at the potential. We have a huge potential to grow, and we need to have much better reach. And therefore, we will continue to have the right expansion as far as retail expansion is concerned, both for channel sales and for EBOs. But Gagan, you want to throw more light on this as well?

Gagan Sehgal — Chief Operating Officer

So thanks, Mr. V. Thanks for the question, Tejash. Yes, we did on a rampant distribution drive in the last 24 months. And one reason was also there is a lot of reverse migration because of pandemic [Indecipherable] Tier four towns from the metro cities. And we needed to grow there and be available near the consumer. So that is why the ramp in growth [Indecipherable] was strategic at that point in time. We wanted to fill in all the gaps, and we do not want consumer to travel far to get our goods. At the same time, as Mr. Ganesh had said, we still see a huge headroom. But I mentioned in the past few quarters that we need [Indecipherable]. One, we do not want to disrupt [Indecipherable] credit partner [Indecipherable] doing very well.

So there is no idea to open another MBO next to them. But we are looking at gaps [Indecipherable] all our outlets. And wherever we see a little gap, we are today present in all one lakh plus towns. But we have gone deeper. We are present in less than 50,000 towns [Indecipherable] potential, which is [Indecipherable].. So this drive will continue. I won’t say it will be rampant like we opened 30,000 outlets last year, but we have already opened 8,000 in H1. So there is no reason why it will not continue, but we will only do it where we do not disrupt the current trade partner. At the same time, the ease of consumer is important and strategically [Indecipherable] So it will continue. I don’t think every year why we should not grow at least 10,000, 15,000 or 20,000 outlets.

Tejash Shah — Spark Capital — Analyst

And are you able to expand this distribution without diluting terms of [Indecipherable] like you’ve seen in many other company as you expand and go rural or beyond your core areas. You have to extend more credit period or terms changes. Are we seeing that kind of pressure with this expansion?

Gagan Sehgal — Chief Operating Officer

So whatever distribution — that’s a very good question, by the way. Whatever distribution expansion that we have done, there is no subsidy in the cost to serve. The distributors and partners are profitable. The reason is that as we go deeper and say there is a market in a Tier four town, you don’t need to open 10 outlets in that market. There is one strategic outlet which showcase our brand, right? And there our brand can be positioned because we are a premium [Indecipherable].. So it’s very selective. And the throughput per outlet in the smaller towns is almost the same at metros because in metros, you will have a large number of outlets. So from that perspective, the terms of trade has not changed at all, and it’s not compromising in terms of credit. Yes, when you open an outlet for the first time, that maybe we can nurture the outlet because he was not keeping our brand before. Maybe post that, [Indecipherable] so there’s no dilution to the terms of credit. It’s all the same base, the smaller term or the larger term.

Tejash Shah — Spark Capital — Analyst

Great. Great. And then last question, if I may. Sir, for the first half, we are very well within our long-term margin guidance of 20% to 22%. But looking at where we are on 2Q, would you need any pricing intervention to improve margin from here on? Or we can actually crawl back to those levels without any pricing intervention?

Chandrasekar K. — Chief Financial Officer

Thanks for asking that question. As we look at it today, I don’t see a need for an immediate relook at it because the input costs are coming down. The cotton prices, as you can see, is softening, and we can see that happening for many inputs. So that should offset some of the pressures which we have. So if that is not going in line with our budget, then we may relook at it. But as things stand now, we are well under control.

Operator

We have the next question from the line of Nihal Jham from Nuvama.

Nihal Jham — Nuvama — Analyst

Sir, three questions from my side. The first one was that over the last 2, three quarters, we have been facing a supply [Indecipherable] given the kind of demand that we see. Was there a case that now that a lot of our manufacturing has got normal that this quarter, the primary sales would have been higher than secondary given there was a requirement to fill the channel? Just wanted your thoughts first on that.

V.S Ganesh — Chief Executive Officer

Well, Nehal, the secondaries are in line with primaries. We keep a close watch on this. So we always — we are happy that there is no much such problem. The secondaries are very much in line with primaries. Gagan, you want to add any more?

Gagan Sehgal — Chief Operating Officer

You have answered it, Mr. V. The secondaries are in line with primary, and we keep a very close watch because we don’t want inventory buildup happening at the distributor point. But what has happened is it has helped us because of the better supply chain, the distributor is getting exactly what he wants. And the market is getting exactly what they want. So whatever primary is happening is getting sold because it’s in line with the retailer demand and the end consumer demand.

Nihal Jham — Nuvama — Analyst

Understood. That was helpful. The second question was on the fact that if I look at your volume growth, excluding the mask business, it is 1%. And the distribution growth, both in terms of the EBOs and MBOs, have been reasonably strong if I look at the run rate over the last 2, three quarters also. Given you also mentioned that the throughput per store is more or less similar, why is it that maybe a volume growth for a core category has not been in sync with that?

V.S Ganesh — Chief Executive Officer

So Nihal, if you see the core category, we’re seeing the core category has actually improved [Indecipherable].

Operator

Really sorry to interrupt, sir, but your audio is fluctuating.

V.S Ganesh — Chief Executive Officer

Okay. I’m sorry. Is it better now?

Nihal Jham — Nuvama — Analyst

Yes.

V.S Ganesh — Chief Executive Officer

So Nihal, what happened was we were one of the first companies that we were able to bounce back Q3 during last quarter, Q2 post-pandemic. So we have a strong base there. So if you see across the consumer brands, companies which bounced back very quickly have always recorded this kind of 5%, 6%, 7% growth because last Q1 we lost 28 days. And if you see historically, we — our Q1 is always the best quarter. And we front load the inventory, which didn’t happen last year. So one, because we lost 28 days; and two, the partners — distributors and partners didn’t want to overinvest because times were very uncertain. And when the dust settled and when normalcy came back in Q2, there was huge buoyancy and we did well there. So this 7% growth is on that strong base. So there — so if you see they’ll be eating into the inventory and they were correcting it. Today, this growth is on a normalized inventory as well as distribution partners [Indecipherable].

Nihal Jham — Nuvama — Analyst

Understood. Just last question on the distribution part was that when you were looking at targeting the — say, the incremental outlets, are we primarily looking at [Indecipherable] stores and garment stores? Or we are looking at exploring other revenues also for the [Indecipherable]?

Gagan Sehgal — Chief Operating Officer

Actually, you’ll be surprised that what we actually explore during COVID, it’s not just the [Indecipherable] stores. Obviously, that’s the core. But there are all kind of unconventional outlets who during COVID were not able to survive and they moved to apparels and specialty [Indecipherable] at least 50 in [Indecipherable] outlets [Indecipherable].

Operator

This is the operator. I’m really sorry to interrupt. Mr. Sehgal, your audio is fluctuating.

Gagan Sehgal — Chief Operating Officer

Better now?.

Operator

Yes, sir. Please go ahead.

Gagan Sehgal — Chief Operating Officer

So it’s not this whole stores. We are evaluating and exploring other options. Like I was mentioning, places where the brand does not get compromised. But today, you will see the big outlets near the petrol pumps, we are even present there. And so there are all kind of unconventional outlets that have come in, and in fact, they wanted to partner with us. So as we continue our distribution expansion plan, it will be in line with where we need to be present. And at that point of time, if a outlet which cannot represent the brand in the best possible manner, if you have any other alternate, we’ll go ahead with that also. So we have all kind of different [Indecipherable]. For example, our masks and socks today are present in chemist shops as well, right, or cosmetic shops. So we are not just exploring [Indecipherable].

Nihal Jham — Nuvama — Analyst

So sir, just final question would be that, out of the outlets that we have, what is core to the Innerwear and Athleisure category [Indecipherable]?

Gagan Sehgal — Chief Operating Officer

Can you repeat the question again, please?

Nihal Jham — Nuvama — Analyst

Yes. I was asking of these 118, 000 MBO outlets, what would be core to the Innerwear category and Athleisure ex of the masks that we are selling?

Gagan Sehgal — Chief Operating Officer

Actually, I — there is a lot of disruption on the line. Maybe it’s on my line. So if I can be reconnected or if Mr. V.S., if you could take this question. I’m not able to get it. look at beauty shops, they even — some of them even sell [Indecipherable], and some of the gyms sell [Indecipherable]. So maybe the inventory is very, very curated, the product range which they keep, which is very, very relevant for them. But we do explore. But bulk of them, as you rightly said, are apparel or garment shops. Most of them are multi-brand outlets which focuses on garment. And there are a few which may be doing only kidswear. They may only juniors. But that is how we have been focusing. But bulk of them, most of the outlets which we have are garment shops which sell a whole range of clothing.

Operator

We have the next question from the line of Madhu from Canara HSBC.

Madhu — Canara HSBC — Analyst

Sir, just on the modern outlets like [Indecipherable], so are they acting as a competitive Athleisure segment because they are penetrating fast in the urban areas especially? So whether the footfalls from our EPO, the potential [Indecipherable] losing to some of that and volume can get impacted?.

V.S Ganesh — Chief Executive Officer

Rahul, do you want to take that?

Rahul Shukla — President and Chief Retail Officer

Yes. Am I audible? So the market is very [Indecipherable] as far as Athleisure segment is concerned. We do not see any decline in footfall just because there are a few departmental stores which are coming up. They have their own strategy taking to the family and the segment that they’re going to operate in, our customers are really clearly very loyal to the brand and [Indecipherable] clothing that we do have, Athleisure, activewear, Innerwear. So we do not see any impact coming in because of the expansion of department stores.

Madhu — Canara HSBC — Analyst

Okay. And in terms of next 2, 3-year perspective, in terms of your distribution expansion, I mean, I mean the EBO expansion momentum will continue because a lot of disruptions are happening on the channel through e-commerce and all that. So any read on that? And second, on the RM is actually cooling off in terms of cotton present. Are we carrying the high cost inventory which it can now impact us in second half?

Rahul Shukla — President and Chief Retail Officer

I will answer the expansion, then maybe, VS, you can do the last question. So we’ve been opening close to 150 to 200 stores a year. And there’s no reason that this trajectory is going to slow down any time in the next two years. [Indecipherable] Retail to more than 2,500 plus towns across different channels of — that we have, the [Indecipherable]. Where EBOs right now at present only in 408 cities. So the amount of opportunity that exists, the potential that exists is enormous for a very long time. We will continue to track this. We are building capacity to increase this expansion as we go forward.

V.S Ganesh — Chief Executive Officer

And Madhu, answering your second question, we will — we are not going to overbuy any longer. We will be buying only what is absolutely essential because we are with sufficient inventory, raw material and finished goods. So we will be actually utilizing that before we spend more cash to buy more material. And secondly, we had done a lot of work on the supply chain side to improve on time in full deliveries. And in fact, it started reaching high 90s. In fact, the last month is 97% on-time in full. So with that kind of predictability in supply chain, we can afford to have less buffers as we move forward. And we are closely working with the vendor partners, and they are also stabilized as far as the operations are concerned. So we are utilizing the material on hand.

Operator

We have the next question from the line of Rishi Modi from Marcellus Investment Managers.

Rishi Modi — Marcellus Investment Managers — Analyst

So I have a few questions. First, on the EBO front and the athleisure front. So how much of our revenue contribution comes in from the EBOs and the athleisure segment? And then I’ll maybe get into the second part of the athleisure questions if you can get me this answer first.

V.S Ganesh — Chief Executive Officer

Yes. So Rishi, as you know, we actually don’t give those segmental numbers because it is not good for you and me because this is something which is sensitive as far as competition is concerned. So I may not be able to give you specifics, but I can tell you one thing. Athleisure segment is actually growing, and our modern trade is also showing robust growth because people tend to go back to offline or brick-and-mortar. And especially Athleisure, they want to experience the buy, and you should be in — most of it happens in EBOs. So both are growing. And we are also coming — we have also come out with a very exciting product range. Today, we have a very rich product portfolio which is actually fueling the growth.

Rishi Modi — Marcellus Investment Managers — Analyst

All right. Okay. And since this is mainly a franchisee model, right, so the two key determinants for the franchisee would be the payback period and the like-for-like growth. So can you shed some light on like how much is the payback period for an EBO store that you all are targeting? And has there — what’s been the like-for-like growth over the last 3, four years, I guess, pre-COVID versus today for your EBOs so that we know how much? Like what’s the growth trajectory for existing EBOs?

V.S Ganesh — Chief Executive Officer

Mr. Rishi, I think Rahul will be the right person to answer you on this. Rahul?

Rahul Shukla — President and Chief Retail Officer

Thank you. So we — like you rightly said, we operate through entire model which is in our [Indecipherable] business model, where [Indecipherable] obligations are clearly [Indecipherable] responsibility to invest in the fixture, furniture, store rentals. And our responsibility is to show that they get merchandise [Indecipherable] strong, and they continue to do great business. The very fact that we’ve been opening 150 to 200 stores year-after-year is a clear reflection of the fact that the franchisees find this business model profitable, extremely profitable.

And that’s why, in fact, we have a large number of clients who have multiple stores with us across — we have now close to 1,200 stores. The number of franchisees are 600 plus. So this reflects the faith and the confidence of [Indecipherable] in the store [Indecipherable]. The second part of your question, which is about the license growth, in fact, for the last many quarters, the retail channel actually has delivered double-digit — high double-digit growth across the channel and a positive like-for-like growth, except for one quarter where the lockdowns impacted the number of days that was in quarter one of last year. Otherwise, consistently [Indecipherable] a very positive like for like growth.

Rishi Modi — Marcellus Investment Managers — Analyst

Got it. That’s encouraging. Second, my question is on the supply chain, right? So you said that we have recently achieved a 90% plus predictability on supply accuracy, and you’ve tied up with a vendor to help us with this. So could you shed more light on what’s happening to get our fill rates up and our supply chain more robust?

V.S Ganesh — Chief Executive Officer

Yes, Rashi, so what I said, predictability, meaning the supply — on-time supply from our supply partners, be it raw material supply partners or finished goods supply partners, have increased. And this is mainly because we also sometimes, if there are any raw material issues for the garment vendor, for example, outsourced vendor partner, we are actually helping with the inventory which we have. This is also one reason wherein we decided to have higher inventory because those were times when working capital were [Indecipherable], and we thought we would rather put our money to better work during those times so that we can get mobilized capacities.

And with that, it has helped the partners, and today, they are back on track. And that’s why the on-time supplies have improved to high 90s.. So when this happens, it actually improves availability for the [Indecipherable] also because, as Gagan rightly said some time back, when the inventory health improves, you sell the right thing at the right time rather than giving an alternate and pushing some other product and which creates the triple effect with [Indecipherable] effect in the supply chain, and it pushes you through peaks and troughs. Now that we have good availability and we are fulfilling the true demand of the market rather than pushing, this really helps in the long run.

Rishi Modi — Marcellus Investment Managers — Analyst

Right. So your primary sales growth and your secondary sales growth is in tandem with each other, as you mentioned earlier, and that’s reflective of these initiatives?

V.S Ganesh — Chief Executive Officer

Yes, absolutely. And we are also moving to a more or less more to ARS. And that is also helping quite a lot because that means our fulfillments are based on the true rate of sales and based on the true market demand.

Rishi Modi — Marcellus Investment Managers — Analyst

Right. Understood. And you brought in an external consultant or something you mentioned. Or is it just for this, you mentioned some external — you tied up with an external vendor for your supply accuracy modeling?

V.S Ganesh — Chief Executive Officer

No. What we did is we have one of our supply chain planning agents which we have is — which was [Indecipherable] ADA, which is a world-class support system for supply chain planning and management. So we have implemented that. And with that, we are able to have much better supply chain optimization. We have also talked with the vendor…

Rishi Modi — Marcellus Investment Managers — Analyst

I’m sorry, what was the software name, I couldn’t get you?

V.S Ganesh — Chief Executive Officer

It’s called Blue Yonder. It was known as JDA, now it’s called Blue Yonder. We have [Indecipherable] that. And with that, our supply chain team, we are working on supply chain optimization. And we also planned some delay differentiations are possible during [Indecipherable]. So for example, we keep some uncolored fabric, we call it gray, and we can afford to color it just in time so that we can get much better speed to market. So we are able to do these kind of interventions efficient. And by having rationalized very, very strategic supply partners, they’re also willing to take risk and preposition raw material to enable speed.

Rishi Modi — Marcellus Investment Managers — Analyst

Right. So now today, what would you say your fill rates are for — at the MBOs and EBOs?

V.S Ganesh — Chief Executive Officer

Yes. So fill rates based on the primary orders which we are getting is almost in, I can say, early 90s to mid-90s. And our demand accuracy is improving rapidly because of the ARS implementation. And the ARS implementation is ongoing. So as we keep — today, we have reached around 80%. And as we reach 100%, this will improve. And the strength of inventory also helps because if there are any fluctuations also, the buffer stock really helps.

Operator

We have the next question from the line of Ankit Kedia from PhillipCapital. Please go ahead.

Ankit Kedia — PhillipCapital — Analyst

[Indecipherable] from my side. First is on the demand environment, you mentioned in the opening remarks demand is likely lukewarm. So can you just elaborate more, is it across categories where we are feeling pressure at the entry level and even across geographies in Tier 2, Tier three markets, the pressure is higher on the demand? Or it’s broadly brand-based?

V.S Ganesh — Chief Executive Officer

Well, we have grown. So against a high base, what has happened is the draining of inventory and people not willing to invest during uncertain times and actually utilizing the stock and all actually fueled huge sales at that time because when it dries up and when the supply is also tight, people want to buy and get the share. So all these disruptions were there. And today, it has normalized, so we have a healthy inventory. And if you see general softening, but one of the areas where even though we have grown and, for example, even though we have grown in the category Athleisure has comparatively grown lesser than other categories, this is very much understandable because this is back to office time. It is not any longer work from home. So the Athleisure utilization comes down. And the share of the wallet comes under pressure because everybody, when they want to go back to office, the demand for formal wear goes up. And when the wallet share goes for formal wear, Athleisure may be parked. So we see these as temporary basis, which I think it’s a passing phase and we are overcoming. And the various initiatives we are taking, including improving the distributor health of inventory through ARS, we will be able to bring all this back to track.

Ankit Kedia — PhillipCapital — Analyst

Sir, my second question is regarding the pricing action. If the pattern sizes continue to fall from today, would you be willing to reduce prices given that the competition reduced prices? Or you will prefer to do more A&P spends and other initiatives to [Indecipherable] initiatives or reduce prices? Given that you’re in Q4, your modern classic factory is also going to come in, which is going to be a very big factory, so from a Tier 2, Tier three market perspective push, can you see a price cut if not a price increase?

V.S Ganesh — Chief Executive Officer

Then if I look at and read the pulse of the market, I don’t think price is an issue. The consumers don’t feel our product is expensive. And we always positioned our product as a value for money reposition for our consumers, and it continues to be the same. So none of our supply partners, retail partners or none of our consumers, when we interact with them, none of them feel we are pricey. And if you see our current EBITDA, so it is not in line with our usual numbers. We knew this when we were doing the last price intervention of around 3. 69, we knew there will be a quarter or so, wherein the prices will be — and EBITDA will be under pressure. But we didn’t want to increase the price because it’s always looking at long term, we always knew this high price of the input can’t sustain itself and it will soften. So we kept that in mind. [Indecipherable]

Operator

I’m sorry to interrupt, Sir, the audio is slightly fluctuating…

V.S Ganesh — Chief Executive Officer

Do you want me to repeat what I was…

Operator

Yes, sir.

V.S Ganesh — Chief Executive Officer

Yes. So what I was saying is the price increase, which we had last time when we did, we knew that the raw material in the medium term will soften. And we kept that in mind and we knew even if there is going to be a short-term pressure on EBITDA percentage, we will not outprice ourselves to increase the price because we always wanted to be a vary for money brand for consumers. So we have already budgeted. And today, when I look at it, the raw material price movements are in line with what we assumed in our budgets.

Tejash Shah — Spark Capital — Analyst

Sure. Sir, my last question is regarding scrap sales. So last year, if I see we had INR150-odd of scrap sales from the past run rate of around INR50 crores to INR50-odd crores. That would also come in the base this year or the again at the plant is very, very high. So if you can just throw some light on why last year, the scrap sales was high? And is it coming in the second half in the base for this year?

V.S Ganesh — Chief Executive Officer

Two things. Scrap sales was low during pandemic times because these are smart time vendors who have cash issues. And so they were not able to take it at the right price. And we also thought we will wait for getting the right price. And second, we also find much better vendors who can take the scraps. And therefore, we are also getting better rates than before.

Tejash Shah — Spark Capital — Analyst

So that would also be in the base for the second half of this year and which would also impact margins given that scrap will directly flow to EBITDA. So would bulk of that be in the second half of last year. So the second half of this year will have some base impact of that as well?

V.S Ganesh — Chief Executive Officer

I actually don’t know because this is not a big component. I don’t think this can swing the needle that much. So finally, I need to check, and I don’t know whether KC can throw some light on this.

Tejash Shah — Spark Capital — Analyst

Yes.

Chandrasekar K. — Chief Financial Officer

See, I don’t know what you mean by an because the — there is also a large sale to our FOB vendors. So taken together, it is — the INR22 crores, right?

Tejash Shah — Spark Capital — Analyst

Sir, I’ll take it offline with you separately, sir.

Chandrasekar K. — Chief Financial Officer

Yes.

Operator

Thank you. Before we move to the next question, we would like to request participants to limit their questions to during the initial round — we have the next question from the line of Akhil Parekh from Centrum Broking.

Akhil Parekh — Centrum Broking — Analyst

My first question is on the category-based growth. Would it possible to share like the first half of the year, which category grew faster than it was lost.

V.S Ganesh — Chief Executive Officer

Al, actually, if you see first half of the year, all categories have actually shown good growth, been attrition…

Operator

Mr. Park, are you able to hear us?

Akhil Parekh — Centrum Broking — Analyst

Yes, yes, I can now…

Chandrasekar K. — Chief Financial Officer

Yes.

V.S Ganesh — Chief Executive Officer

If we look at the first half of the year, we are very happy. In fact, all categories have shown good growth for mask, which is natural. It is on expected line. The way all categories have shown growth. In fact, all our channels have also grown. So in that sense, we are in a very good position. Even with back to office, Adisa has actually grown. Maybe the rate of growth might have been — might not have been as high as Q1, but it has still recorded growth.

Akhil Parekh — Centrum Broking — Analyst

Okay, okay. So at lesser is growing even if we compare with the param period, that is what you see.

V.S Ganesh — Chief Executive Officer

Yes, yes. Because we have — one is because of the retail expansion. Second, we were also — it was a discovery for our consumers. We were able to attract a lot of new consumers during that time. And so there are repeat bikes happening. Retail expansion is helping and the product portfolio enrichment, which we have brought in is also helping. In fact, our work lease is also something which is a very exciting product range, which people can wear both for Lisa and for work. So what our product development has done is amazing. And with that, we are continuing to see growth. As you know, there is a huge potential category with single-digit market penetration at 7%, 8% there is so much headroom for us to grow in this category, even though it is post pandemic. So we will continue to work aggressively on these categories.

Akhil Parekh — Centrum Broking — Analyst

Yes. Good to hear. And second, on the channel-wise contribution, if you can please share like how much was — how much of the sales has come from MBO, EBO and modern trade and e-commerce.

V.S Ganesh — Chief Executive Officer

Akhil, I’m sorry, we — as you know, we usually don’t give those splits out because it’s — we feel it’s very sensitive to give those splits out.

Chandrasekar K. — Chief Financial Officer

Okay. Okay.

Akhil Parekh — Centrum Broking — Analyst

No problem. — and best wishes for coming quarters.

V.S Ganesh — Chief Executive Officer

Thank you. Thank you so much.

Operator

We will take the next question from the line of Swati Jhunjhunwala from DT Capital.

Swati Jhunjhunwala — DT Capital — Analyst

So my first question was what was the volume growth in the core categories as well as overall Q-o-Q over quarter 1 of FY ’19.

Chandrasekar K. — Chief Financial Officer

It was mentioned a 7% over the year-on-year.

Swati Jhunjhunwala — DT Capital — Analyst

Yes.

Chandrasekar K. — Chief Financial Officer

So I don’t have a ready number on the comparison of Q1 I can…

Madhu — Canara HSBC — Analyst

Can get back with you. Yes.

Swati Jhunjhunwala — DT Capital — Analyst

Okay. And second question is related to the capex. So the INR250 crore guidance that you have given, is it for the full year of like FY ’23 or is it for the second half? Because I assume in H1, we have done around INR88.8 crores sort of capex…

Chandrasekar K. — Chief Financial Officer

Yes. I mean, it is for the second half, it could be more than that. It all depends upon the — how the pace of the Odia expansion coming up. So any we’re pitching that it should go live in Q1 of FY ’24. So 250 is something we expect to spend in H2.

Swati Jhunjhunwala — DT Capital — Analyst

Okay. Okay. And last question is, for this time, our margins were already low at around 19%. So in Q3 and Q4, do we expect the margins to go up? Or do we expect it to be around the same way like below the previous 4 quarters?

Chandrasekar K. — Chief Financial Officer

We typically pitch for 20% to 21%. There is no — there is a question mark on the margins getting achieved. And as you know, the advertisement is not a linear spend. While some of the capacity creation of manpower and warehousing is. So given that the raw material prices are also weakening, we should expect to — I mean, even in this quarter, the margin has been pretty good, 19%. So going forward, we should aim for at least 2021, in the next 2 quarters.

Swati Jhunjhunwala — DT Capital — Analyst

Okay. And just the last question

Chandrasekar K. — Chief Financial Officer

The

Swati Jhunjhunwala — DT Capital — Analyst

Sorry, just a last question on the ad expenditure. So how much was the media ad expenditure as per the end of this quarter?

Chandrasekar K. — Chief Financial Officer

How much was the?

Swati Jhunjhunwala — DT Capital — Analyst

The ad expenditure as a percentage of sales.

Chandrasekar K. — Chief Financial Officer

We spent about EUR440. And as a percentage of revenue, it was about 3.5 million in Q2, and it is about 3.5%.

Swati Jhunjhunwala — DT Capital — Analyst

Okay. So should we assume that 3.5% would be the approx percentage for Q3 and Q4 as well?

Chandrasekar K. — Chief Financial Officer

Typically restrict between 3.5% to 4%. But again, it depends. It’s not necessary that it must be a campaign, there must be a reason like digital presence and all that. So yes, that would be my answer.

Swati Jhunjhunwala — DT Capital — Analyst

Yes. Thank you.

Operator

We have the next question from the line of Devanshu Bansal from Emkay Global.

Devanshu Bansal — Emkay Global — Analyst

Sir, what was the volume contribution of masks in this quarter for Q2 FY ’23?

Chandrasekar K. — Chief Financial Officer

Hello

Operator

This is the operator, Mr. Ganesh, can you hear us?

Chandrasekar K. — Chief Financial Officer

Yes. I can hear you.

Devanshu Bansal — Emkay Global — Analyst

Yes. So I was asking what was the contribution of masks in this quarter, Q2 FY ’23?

V.S Ganesh — Chief Executive Officer

It was very low. In fact, it’s very, very soft. It is. The uplift is post pandemic. It is in a few thousands per month from the 100,000 we might have had pre-pandemic.

Devanshu Bansal — Emkay Global — Analyst

It was…

Ankit Kedia — PhillipCapital — Analyst

Last year…

Devanshu Bansal — Emkay Global — Analyst

About…

Chandrasekar K. — Chief Financial Officer

Around 0.2%.

Devanshu Bansal — Emkay Global — Analyst

Sir, your voice is breaking, I’m not able to get the number you are saying or even for last quarter, if you can mention the number.

Chandrasekar K. — Chief Financial Officer

Or revenue contribution in…2% quarter business

Operator

Mr. Shane, I’m very sorry to interrupt. Maybe I’ll need to disconnect and reconnect your line, sir. Just give me a moment, please.

Chandrasekar K. — Chief Financial Officer

Ride here my answer… No.

Devanshu Bansal — Emkay Global — Analyst

No, sir. I do not hear the revenue and volume contribution for the last quarter for March.

Chandrasekar K. — Chief Financial Officer

The revenue contribution of mask was about 2%. It is much less than 1% this year, Q2.

Devanshu Bansal — Emkay Global — Analyst

Okay. And volume contribution, sir?

Chandrasekar K. — Chief Financial Officer

It’s been a similar range. Just second on that. It was about 5% in terms of volume…Last year…And yes, it’s about 0.5% this year, Q2.

Devanshu Bansal — Emkay Global — Analyst

Got it. Secondly, I wanted to understand, sir, in Dubai, you now have 10 stores. So what is the outlook for the Middle Eastern geography as well as do you have your own manufacturing operations there as of now?

V.S Ganesh — Chief Executive Officer

So Middle East is a huge growth opportunity area for us. If you look at all our licensed overseas territory, this is the most exciting place. So we are actually focusing on the Middle East, especially Dubai. And it is — we are making good investments. Our partners there are investing. That’s where we have 10 just open very recently in Dubai. We are also present in places like Dubai Mall. So the — and the performance so far has been engaging and the partner is therefore investing further on the business. When it comes to supplies, no, we do support the supplies from here manufacturer applied to units or from outsource vendor partners from here — because it’s very important we take care of the quality of the product, and we are responsible for it, and it’s coming from our sources.

Devanshu Bansal — Emkay Global — Analyst

Got it. Do you plan to open your own manufacturing operations there?

V.S Ganesh — Chief Executive Officer

Not as such because it operationally, it can be very expensive. We may not get the operating cost advantage because, as you know, raw material base is not there, all raw materials will end up getting imported there. Labor cost is much higher there. So we may not be very competitive we manufacture there. Second, today, for the volumes, it doesn’t also justify with the scale invest a manufacturing facility there.

Devanshu Bansal — Emkay Global — Analyst

Got it. And if you can speak something about the potential, the industry and the growth trends? And how do we sort of — what is the current market share? And how do we see our market share improving in that geography?

V.S Ganesh — Chief Executive Officer

Well, as you know, the economy — we — despite the recession and all that, I think we are in a better position. And I think India is going to be a growth story. And there is a estimated growth of the middle income bracket, and retail is getting more organized with all this and outside in, which is happening, it’s very rapid.

Operator

I’m sorry to interrupt the reading…

V.S Ganesh — Chief Executive Officer

Yes, is it better now?

Devanshu Bansal — Emkay Global — Analyst

Yes, sir. And sir, my question was for Dubai, not for — if you understood it for India, then my question was for Dubai, the industry and industry growth prospects.

V.S Ganesh — Chief Executive Officer

Oh, yes. Okay. So again can also throw more light on this, but it is very, very exciting one. The thing is to start with, there’s a huge expat community — we actually buy from here and goes and they have been the first early loyalist of a brand and the footfalls. And now we can see even the local population is well accepting because of the quality of the product and the range which we are offering. And that is where we are — the sell-through is so good that our partners are even willing and are already gone ahead and invested in Dubai Mall, which is a very expensive place to be in.

And they are finding it to be a viable business proposition in such places, the mall of the buy, Dubai Mall. So there’s a tremendous opportunity there for us to grow. And the penetration is very low. What we have is some very luxury brands, which are Supra premium. And there is very little mid-premium brands present there. And then there are all these other local imported stuff which is there. So in the mid premium, the space, there is a lot of space there, which is not occupied. This is where we are seeing a huge potential for us to grow the business. again, do you want to add anything more?

Swati Jhunjhunwala — DT Capital — Analyst

Sir, I think you have actually captured it beautifully. But just to a couple of points from my side is currently, what we see huge potential there. That is the reason why first is to position the brand? And how do you position the brand is to have your exclusive brand outlets in the best malls. And the partners are seeing that, hence, if you see from last year from 4 to 10 EVs, we have expanded at that rapid space. Now there is a local Emirati population. And there, it is not a question of who actually is your target consumer, almost everybody is your target consumer there. And once the brand is positioned, we also see a huge potential in the local population there, which wants products from brands like Jockey, but we are creating right now, and we are working on more and more awareness. That is what we are focusing on. And I think it’s going to be a very, very exciting market for us going forward, we can expect very, very healthy growth in years to come.

Operator

Thank you. We have the next question from the line of Samil Bua from India Infoline.

Samil Bua — India Infoline — Analyst

Sir, just looking at your comments, you made this call. So number one, the distribution expansion we have seen during corvettes that will continue but at a slower pace. Second is that we don’t intend to take any more pricing given the current raw material situation. So based on these 2 constructs, is it fair to conclude that there is the revenue growth momentum that we are seeing currently on a Y-o-Y basis, we should see further moderation from here on?

V.S Ganesh — Chief Executive Officer

I don’t see any reason for further moderation. I think we will get back to the growth. This is — as I see it, 7% was more of a thing because of

Ankit Kedia — PhillipCapital — Analyst

Probably…

Operator

Sorry to interrupt again, there’s a slight fluctuation — so one moment, just one more — please go ahead, sir.

V.S Ganesh — Chief Executive Officer

Yes. Am I audible now?

Operator

Yes, it’s better.

Chandrasekar K. — Chief Financial Officer

Okay.

V.S Ganesh — Chief Executive Officer

So Mr. Benson, what I was saying is the — generally, if you see all consumer goods segments during the festive season, the offtake was the sale grew was not as good as the market expected. It has softened. So I see it will rebound because it’s a temporary phase is what I see. And when I look at distribution and the inventory is getting corrected, we have taken a lot of actions. So the health of the inventory is improving, this should help us to have better sale sell-throughs because this will mean much better working capital utilization for them, better rotation of the money, which is going to be not only profitable for them, but also to leverage on the growth which we have planned. So I see this as a short term. But last year was turbulent and we had our peaks and crops. So I think we should look at how it is going to pan out for the year. I’m sure the way it is looking at, at the end of the year, we will be very much on courts as per our budget and plan. We have been looking at very aggressive growth, and we are very optimistic that we’ll be hitting that…

Samil Bua — India Infoline — Analyst

Right

Operator

Ladies and gentlemen, that was the last question and we will now close the question queue. I would like to hand the floor back to Mr. Chandrasekar for closing comments. Please go ahead.

Chandrasekar K. — Chief Financial Officer

Thank you all for dialing in to this call. Apologies for some of the audio issues we are facing. Thanks for your support to page. Have a good day. Bye-bye.

Operator

[Operator Closing Remarks]