Raymond Lifestyle Limited (NSE: RAYMONDLSL) Q3 2025 Earnings Call dated Jan. 31, 2025
Corporate Participants:
Sunil Kataria — Chief Executive Officer
Sameer Shah — Chief Financial Officer
Analysts:
Abhijeet Kundu — Analyst
Mohit Khanna — Analyst
Vicky Punjabi — Analyst
Anuj Jain — Analyst
Mithun Aswath — Analyst
Naitik Mutha — Analyst
Unidentified Participant
Sanjay Parekh — Analyst
Presentation:
Operator
SA SA Foreign. Ladies and gentlemen, good day and welcome to Raymond Lifestyle Limited Q3FY25 earnings conference call hosted by Antique Stock Broking 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. Should you need assistance during the conference call, please signal an operator by pressing star and then zero on your touchstone phone. Please note that this conference is being recorded.
I now hand the conference over to Mr. Abhijit Kundu from Antique Stock Broking. Thank you. And over to you.
Abhijeet Kundu — Analyst
Thank you. On behalf of Antique Stockbroking, I would like to welcome all the participants in the Q3 FY 2025 conference call of Raymond Lifestyle Limited. Today we have with us from senior management of Raymond Lifestyle Limited Mr. From Group CFO Mr. Sunil Kataria. CEO and MD Mr. Samir Shah, Chief Financial Officer, Mr. Jatin Khanna, Head of Corporate Development and Mr. Sunny Disa, Head Investor Relations.
Without taking further time, I would like to hand over the call to Mr. Sunil. Over to you, Sunil.
Sunil Kataria — Chief Executive Officer
Okay. Good evening everyone. Thank you, Abhijit. And first of all, warm welcome to all the participants in the call today. And thank you for joining us for the Q3 FY25 results conference call. At the outset I would like to also wish all of you a very happy new Year and to your families as well. I hope all of you have got an opportunity to go through our financial results and the investor presentation which have been uploaded on the stock exchange as well as the company’s website.
Now before I start my discussion on our third quarter fiscal 25 performance I would like to provide a brief update on the macroeconomic conditions as we saw it. As we enter the third quarter of FY25, the Indian economy continues to demonstrate resilience despite economic. Uncertainties. As we all know, India’s GDP is projected to remain at around 6.5% which is a little lower than what we thought in the beginning of the year. However, consumer spending continues to remain weak which is an important trend and this trend continued in this quarter. Lower CapEx and persistent high inflation has significantly impacted discretionary spending as households prioritize essential goods and services over non essential items. One of the factors that we’ve seen impacting this whole thing is the CPI which is the consumer price Index have remained elevated continuously and the food inflation continues to be sticky. Now I will talk about the performance highlights. Our revenue was slightly higher over last year by 2% in this quarter at rupees 1796 crores. The global economy has faced significant headwinds including fluctuating commodity prices, supply chain disruptions and varying consumer demand patterns. In the light of these challenges, it is a testament to our business model and and the strength of our brand. Our EBITDA at rupees 221 crores with an EBITDA margin of 12.3% was lower as compared to the same quarter last year mainly due to weak consumer demand scale deleverage and upfront investments in retail store expansion and advertising and an adverse segment mix. Now I’ll come to some of the segmental performance highlights. Branded TechStart the branded textile segment revenue declined to Rs. 856 crores which was a decline of 6% in this quarter as compared to Rs 909 crores in 3Q24. This is predominantly on account of a weak customer’s demand. The segment EBITDA margin was at 18% in Q3FY25 as compared to 21.6% in the Q3FY24 and again the impact primarily that is flown through is the KD leverage. The branded apparel segment revenues are higher by 5% at INR458 crores compared to 437 crores last year in the same quarter. This performance on account of rollout of new range of product launches and a sustained investment behind brand building and marketing in this quarter. Our strategy remains focused on expanding our distribution network with an emphasis on premiumization, casualization and strong brand building. We also continued to expand into adjacent categories and one of which has been Ethnics by Raymond which we started around two years back and the newly launched lease by Raymond which got rolled out a quarter back in order to complete the product shoot of the Complete man in this quarter towards the latter part, and I would say towards the real end of December, we have also entered into the innovate category with a launch of Park Avenue men’s innerwear. With this, we’ll be entering the core innerwear category. And this be a new range which is made with trendy design and very differentiated new age fabrics and product constructions. This is positioned in mass premium to premium segment in terms of pricing. And it keeps consumer style, fashion and functionality in mind. The branded apparel segment delivered an ebitda margin of 9.6% versus 13.9% in the same quarter of the last year and this was led by upfront investment in retail store expansion and advertising spends. During this quarter we have opened 61 new stores including 14 stores of Ethnic Inspire Raymond in the 61. As we stand, Ethnics by Raymond now has 143 operational stores. The total retail network now stands at 1653 stores spread across 600 plus towns and cities of India on 31st December. Further, we also opened 5 new made to measure outlets taking the total to 51 stores to cater to the needs of the new aspirational consumer. Coming now to the garmenting segment, during the quarter we reported a revenue of crores in Q3FY25 as compared to rupees 261 crore in the same quarter previous year. During the quarter EBITDA margin was at 7.8% as compared to 11.3% reported in the previous year. The EBITDA performance in this quarter was impacted on account of product mix due to addition of over 15 new clients across key markets including the US, UK and Europe, some higher freight costs on account of Red Sea crisis and the incremental cost of blue collar manpower training. As a result of capacity expansion, our vertically integrated supply chain which enables seamless conversion from fabric to garment continues to provide us with a distinct advantage in the market. This integration supports our growth ambitions and positions us as a unique player within this industry. We are currently expanding our capacity, a move that will significantly bolster our global standing. Once this expansion is complete, we expect to become the third largest suit maker worldwide, paving the way for further growth and customer acquisition. Coming to the High Value Coordinate shielding segment, the revenue declined by 6% to INR201 crores compared to INR214 crore in the previous year. The EBITDA margin for the quarter stood at 10.3%. On the balance sheet front, we have reclaimed our net debt free position with a net cash of 61 crores as of Q3FY25. The net working capital stands at 89 days which is INR1553 crores in December 24 versus 97 days INR1692 crores in September 24. This decrease is mainly due to reduction in trade receivables and good inventory control. We remain focused on optimizing our networking capital further. Our brand today engages with approximately 12 million customers daily through our diverse product offerings we are continually expanding our range to provide a comprehensive suite of products embodying the essence of the complete man. Our primary objective remains to establish a long term sustainable business by continued investments in our retail store expansion, product innovation and. And marketing. Now, looking ahead on the outlook, we expect a gradual recovery in demand as we have observed a positive start in both our textile and apparel bookings for next year. We’ll be back to the growth trajectory clearly in FY20, FY26 and we continue to build on our initiatives to deliver sustainable growth and value to our stakeholders. We appreciate your continued support and engagement as we navigate the opportunities ahead. Thank you once again for joining us today and we look forward to addressing any queries that you may have.
Questions and Answers:
Operator
Thank you. Ladies and gentlemen, we will now begin the question and answer session. Participants who wish to ask a question may press star and one on your touchstone telephone. If you wish to remove yourself from the question queue, you may press star and two. Ladies and gentlemen, we’ll wait while the question queue assembles.
We have the first question on the line of Mohit Khanna from Punatha Investments. Please go ahead.
Mohit Khanna
Good evening guys. I just had a question regarding what is a sustainable range of EBITDA margins that you would look at when all the expansion related costs are over. Secondly, if we have to think about the future growth, what are the segments where we should think about? Because right now it seems that high value shirting or even branded textile have come down while garmenting continues to grow strongly.
Sunil Kataria
Thank you. So first of all, I think the answer to the first question is we clearly see a sustainable EBITDA margin of around 15 odd percent for us once the whole retail expansion is stabilized. And that we are pretty confident. We have been pretty close to that even the last year and we do not see any challenge in reaching that level on a sustainable basis.
Regarding your second question, okay, so I think the growth segments very clearly for us clearly remain to be, as we had earlier mentioned also that our strategy is threefold and we do not see any deviation to our core strategy. And the strategy is there’s a core segment of fabrics or branded textile as we call it, which we clearly see that we will nurture that and that will be something which will be giving us good EBITDA margins.
And while it will be slow on the growth and we keep on doing through premiumization there. The second part are the two critical growth categories for the three critical growth categories for us, which is branded apparel, ethnics and garmenting. And we are very confident that these categories where we are doing investments, once these little headwinds of the economy settle down, which is something which we’ve seen across right now on urban discretionary spending, that model remains to where we are headed and that will be a strong growth category for us.
And third, as we have always mentioned that we are in a phase of investment behind new adjacencies, and that’s a phase which I expect will continue for a while. For next couple of year to three years, two to three years. And those are entering to new categories. And new categories already take more time to build, but they will give us multiplier growth. And these two categories which we have immediately entered are one is sleepwear, which is just three months old, and inner, we are just a couple of weeks old. And these are two really clearly are the ones which we believe can give us some new vectors of growth. As we go forward, we may see more vectors, but right now I think this itself is a handful for us and this is where we see growth model emerging for us.
Mohit Khanna
Right, Just a follow up on that one. So EBITDA margins are down to 12.3%. So do you see a gradual recovery from here on or do you see we have a bottom to be made before we start increasing our margins and by what is the timeline when you would like to achieve the 15% EBITDA margins?
Sunil Kataria
Yeah, so first of all, I think we can see recovery happening from here clearly because I think this was a mix of, as we talked about, weak consumption, demand scale deleverages and upfront investments happening across the business. So we’ll start seeing a gradual recovery happening clearly on EBITDA margins and I think we’ll see the full recovery happening in FY26.
Mohit Khanna
Thank you. I’ll get back to you. Please.
Operator
Thank you. Participants who wish to ask a question may press star and one on your touchstone telephone. We have the next question. Vicky Panjabi from UTI Mutual Fund. Please go ahead.
Vicky Punjabi
Yeah, hi. Thanks for taking my question. Just quickly. I mean, while I understand the cost of, you know, kind of ramping up a factory, but this quarter, I think even the gross margin was well under pressure. Can you help me help explain as to, you know, why? I mean, was there any discounting or incremental promotional expenses that impacted the GMs during this quarter?
Sunil Kataria
You’re talking about overall gross margin or you talk about the garmenting segment.
Vicky Punjabi
Overall. Overall.
Sunil Kataria
Okay. So if you see primarily the reason for overall, you know, gross margin decline was the scale deleverage, you know, our business. If you see there has been a scale leverage which has happened and with certain costs which are fixed in our model, this leads to a gross margin depletion. That is one thing which happens. Second, big impact which has happened in this quarter is the area of garmenting and that is which also has contributed its bit to the gross margin decline.
And there, I would like to tell you there’s a bit of a strategy which is playing out for us that as we are expanding and going for growth in garmenting. There is one piece which is we are consciously making a choice is new customer acquisition because we are expanding to new geographies or for example, US will be roughly around 50% of our market. And we have started expanding to Europe. We are trying to increase our shares in UK As a result of that, we are actually acquiring new customers of very different kind. But in the. Premium end of the market. For example, some of them could be PVA, some of them could be, you know, Tommy, etc. Now these people, as we get into any new customer, the entry point into new customer happens with a segment which are, for example shirts. And then over a period of maybe a 12 month odd period, as the confidence in the relationship gets built, as your benchmarks get set, you start moving up the assortment in the product ladder, moving towards jackets and then suits. And that is one piece which is consciously started has played out for us that we have got new customers. We started doing new customer acquisition and that is where the play of mix in garmenting got affected. But this is not sudden or this was not as if we got taken aback by this. This is consciously a choice which we made. This quarter also had an adverse sales mix of the sales decline which happened in textile. And if you see between the entire segmental mix of our organization, Textile has one of the higher gross margins. So once a scale deleverage happens in our branded textile business, a segmental mix impact also comes into place. And that is also the factor which has happened. So I think these are the two to three broad reasons which are left to this.
Vicky Punjabi
Yeah, but nothing related to the, I mean, increase in promotional intensity just because the growth was challenged during the quarter?
Sunil Kataria
No, nothing, nothing. We don’t, we have not done any extra discounting or anything like that.
Vicky Punjabi
Okay, okay. And just to understand the impact of growth because for this quarter the growth even relative to, well, I understand the consumption environment was difficult. The growth relative to peers also looks very subdued. Any thoughts in, you know, what were the reasons and how do we change that going forward?
Sunil Kataria
So in fact, one thing which I would like to point out, you know that our overall secondaries have shown a very positive trend. And what has happens in our business also is that people, you know, normally the way the trade behaves is that they have done and they do bookings for us, let’s say in the quarter of July, etc.
And then since what happened was that the booking started in July and then the first half was slower, right. Then they wait till the secondaries get over and they become a little cautious. Our secondary numbers of this quarter were pretty healthy. And that is something which has given us a lot of confidence. I think it’s a matter of time.
And because the trade is a little cautious, given the urban spending discretionary trend which is playing out, I think that is something which shows to you in a bit of a primary, etc. At the same time, I want to point out one thing that we are right now seeing bookings in all the three segments, which is suiting, shirting within fabrics, as well as our apparel booking for the next year, autumn winter season, which begins and they are currently underway or kind of finishing. And there is a very pretty. Positive trend that we are seeing among all these three bookings which will play out for us in FY26. And this is a early green shoot sign that we are seeing in our bookings which were very different last year. So I think this is something other trend that is along with our good improved tertiary and secondary sales along with these bookings that are happening, I think this tells us that, you know, FY26 will be a growth year for us.
Vicky Punjabi
Sure. Thanks. And just last one, I mean while we are kind of confident about that 15% margin, if you can help me understand the bridge, because if I look at the growth categories, I mean textiles would rank the lower in terms of growth categories. So the other growth categories have lower margin. So by the basic nature of the mix it would be difficult, I mean it should be difficult for us to ideally reach the levels of margin that we have seen historically. So any thoughts on what would be the pathway to this mid teens margin?
Sunil Kataria
See, we have always maintained this, that a mix of this would be that, you know, our branded textile business will drive the EBITDA margins which would be in the range of around 20 to 21% kind of margin which we had maintained till now till a couple of quarter back. You know, and that’s the margin which we have actually if you see increased over the last two years pretty substantially. And we’re pretty confident of holding on to 20, 21% kind of a steady state there.
Secondly, apparel also we in fact I want to point out in Apparel that the primary shift that you’ve seen this quarter because we have invested substantially behind advertising and branded apparel as we had called out at the beginning of the year. And that’s almost double digit jump in the advertising spend that we’re doing.
And we also see over a period of time apparel EBITDA margin to be also settling down in the range of around 13 to 14% over a period of time. So if you see that business will settle down at that level, branded textiles would be As I said, 21 to 20 odd percent. And then our garmenting business also, because there is strategy playing out will come back to a double digit EBITDA margin. And I think this mix as a blended will give us a 15% which is the model where we are following and which are pretty confident of.
Vicky Punjabi
Okay, sure. Thank you.
Operator
Thank you. We have the next question on the line of Anuj Jain from Globe Capital. Please go ahead.
Anuj Jain
Good evening everyone. I just want to understand the last congr which has happened in the first week of November. So our take was due to festive demand, which was in the third quarter, from October till December, all the festivals and marriage season, everything. We were looking at pretty healthy demand. You know, it’s for October and first week of September and suddenly what happened, you know, in the demand afterwards that we are saying on ground demand is not that good. It’s really tough. We just want to understand what has changed in the first month and. In November and December. So if I understand your question is that did anything change between the first part of the quarter, second quarter, Is that what you’re saying?
Sunil Kataria
No, no.
Anuj Jain
In the month of November, first week when we had our concord of the second quarter, we were looking at pretty healthy demand for the festive season as well as, you know, maladies like 48.
Sunil Kataria
Sorry, I understood the question. So October was.
Anuj Jain
We were looking at pretty healthy demand and suddenly things change in the month of November and December. So can you just help me out? What is actually happening on the ground?
Sunil Kataria
Yeah. So Anish, like I pointed out, one pretty good sign for us is that our secondaries have been very healthy. So that is across all the segments that we have seen a good secondary flow, which is clearly the theme that played out on the wedding side. So that is one piece.
Secondly, at the same time, the wedding season, one piece we have to see is that this time in a way, in a its own good way, the wedding season is a staggered season. Unlike being concentrated in 60 days, it is spread out over 120 days, almost four months. So the secondary, the wedding season will be a prolonged one.
So one is our secondary trend has been positive. B, the wedding season is staggered. Third, I would at the same time say there is definitely some counter effect which is happening in the market of this urban discretionary spend which may have played its role in wedding not being as bullish in terms of spend as it would have otherwise.
So I think one may be macro factor which is playing out, but I think the other two part is internally secondary are pretty healthy. And the second is it’s a staggered wedding season.
Anuj Jain
Okay, thanks. That was from my side. Thank you.
Operator
Thank you. We have the next question from the line of Mithun Aswath from Kiva Advisors. Please go ahead.
Mithun Aswath
Yeah, hi sir. I just wanted to understand since you already have some established brand and you need to still establish scale in some of them, is there actually a need to get into these adjacencies for growth or rather focus on where you’re strong and continue to deepen there? That was the first question.
And the second question is, despite this ramp up in the number of stores, the revenues are not coming. So would it be better for you to calibrate the growth looking at how demand actually pans out so that you would still continue to be profitable? So just wanted your thoughts on that.
Sunil Kataria
Thank you for this question. I think the first one is a pretty interesting strategy question which we had also tried to answer during our earlier investor calls. See, we are playing out current. What is a three to five year strategy? And I think we should not get deterred only by a few quarters of overall weak sentiment in the market playing out. So what is our long term strategy and it’s a fair question that you’re asking, is that how do you overall balance between growth and core segments? So we said we are actually looking at two major areas of growth. One is our growth segments of branded apparel and garmenting and ethics, or I would say branded apparel and garmenting as a real core group. Ethics I would put into the new adjacency. Now, the three new adjacencies that we are talking of is really ethnics, sleepwear and innerwear. Now, very clearly, if you see the middle two segments of branded apparel and garmenting will give us good, strong growth and that we’re pretty confident. But at the same time you need multipliers and that multiplier has to be obviously where you get in if you are right to win. Now, clearly, ethnic wear, Raymond, ethnic segment in India is on a trajectory because of the fundamental shift happening in India. The wedding’s nature is changing. The weddings have become from two days to five days. In that out of five days, three days, people are going to wear ethnic wear. And given the way we have been a wedding brand, it’s a fundamental shift that we also need to go and take and because we also have a right to win. So there’s no debate in our mind that that journey stays because if we have to keep out the wedding segment and the wedding needs of the Indian men, those five days have to be dominated by us. So that justifies the need itself. The second is, as we mentioned last time in speak, we are a brand for the complete man. This is a completely different strategy of democratizing a completely unbranded market just three months into it. Honestly, it’s not that we are spending huge crazy monies also there, but we clearly see a huge right to win in the basis of price and product disruption. So we believe that’s a clear right to win for us. The question can be asked, okay, why inner war now? Inner way, as we’ve always maintained, we don’t see a disruption being done by us there. It is an adjacency where we will not do very large scale investments. But we see that we have opportunity to grow because we have our own Raymond stores, which are 1,000 stores, which today do not have a innovator segment. The same customer walks in there, they will just pick up, it increases. My SPSF, I have got Park Avenue stores of roughly 150 right now, which will become over time, maybe 200. That gives me a space. We will invest little bit in the invest definitely behind the top end MBO outlets. So none of these are the ones where we don’t see either a very clear right to win or a need to be. And these are the categories of the future which will give us multipliers. Two middle categories that I talked branded up as garmenting will give us steady growth. And one thing on the core category we have to acknowledge is that branded textiles will not be a double digit growth segment. And hence these two others will offset the growth. While branded textiles, along with our two growth categories will give us EBITDA margins,
Mithun Aswath
Right? No, I’m just trying to understand how you could get top line growth quicker because you have several brands in your stable, and some of them may have kind of become a little. Old or they may need to be renewed. Like say Akala plus was an excellent brand at one point but I’m not sure where it is right now in the scheme of things. So I’m just trying to understand is there any one or one area where you could see very fast growth because ethnics as well will be, you know a seasonal foreign affair. Something where you know there’s actually a pull factor for people to come and purchase.
Sunil Kataria
Yeah, I think it’s a very good question and I think one of the pieces, you know. So let me talk to you since you’re asking this question specifically within our four brands in branded apparel. So we clearly see there are a couple of low hanging fruits and where we’re seeing already pretty good signs of good strong double digit light to add growth.
Also happening in some of these vectors like one brand which I think is the most low hanging fruit of ours is Raymond Ready to Wear. This has been maybe a business we have within the branded apparel piece. While Raymond is obviously we are known, we are ingrained in everybody’s mind. In the Ready to Stitch segment we a couple of years back we were just 35 stores of Raymond Ready to Wear. Today we are close to 100 which we believe still is not the threshold.
Now the moment Raymond enters into Ready to Wear we have seen all our Raymond Ready to Wear stores are doing very well right now and they actually clearly people actually people get surprised that Raymond also has Ready to wear and that’s something which they are discovering now. And and one of the reasons for doing this whole advertising spend is because you’re right we want to go and invest behind three brands in branded apparel.
One is Raymond Right to Wear where the task is very clearly get distribution reached to people make them aware that Raymond has Ready to Wear. Moment we do that the task is done. We have launched ceremonial suits and jackets and that a very exceptional response we are getting. And I said this brand is clearly seeing very different ltls compared to any other brand right now.
The other task which you clearly mentioned is we are in the middle of refreshing color plus an iconic brand which defines the tone of the market. I think this is a brand which requires a little bit of a trajectory change. And one of the pieces if you go to any color plus stores maybe over the next three months or so you will find a the new identity has started coming into place that’s taking an investment that we are making the whole look fresh and completely sporty.
Second is we have rolled out new collections from SS25 further changing in AW26, which is next to AW26, what we call it. And that’s where we’ll see a different color plus, also emerging Park Avenue. The new retail identity is already rolled out. And today, in our own stores, Park Avenue is becoming a hybrid brand of both formal and casual.
And while I cannot disclose a certain number because of competitive reasons, the casual salience of Park Avenue has already started shifting within our own stores. I obviously can’t give a number because it’s competitive. So all these three strategies are panning out. Raymond Reltivier, Park Avenue, and Color Plus. And these are three focus brands where we don’t believe that we obviously need to invest the scale of ethnics. And they are not seasonal in nature at all.
Mithun Aswath
Sure sir. Thank you.
Operator
Thank you. We have the next question from the line of Natic from NV Alpha Fund. Please go ahead.
Naitik Mutha
Hi sir, thanks for taking my question. My question is regarding branded textile. Now we have seen almost three consecutive quarters where we have seen de growth in this segment. Now even the smaller peers in this segment have. I’ve seen some sort of growth, you know, if I look at nine month number, nine month to nine months. So I sort of want to understand why is this happening?
Because I still don’t understand in a quarter where you know, wedding days are higher compared to last year, same quarter we’re still seeing bigrow. So is it because there was a larger inventory in the system or you know what exactly is happening?
Sunil Kataria
So I think three points on this. First of all, you know our scale is maybe 50, 30, 40 times on this. So you understand when the scale is such large the percentage growth is growth on maybe a, you know, 100 crore percentage growth on a 2000 crore brands are very different. So that scale does play out both ways. It plays out positively. It also plays out when the market conditions get tougher. That’s one.
The second piece is as I said our channel trains to pick up bookings in advance and then they wait for the seasons to kick in and the secondaries primaries to get cleared over a period of time. The bookings to get cleared. Our secondaries in this quarter across all segments have been pretty healthy and that is something which is the one thing which is very positively played out for us and what we expect is that over a period of time now it should translate into again positive growth for us in the bookings and as I mentioned somewhere earlier in the call also that we are in the middle of three bookings right now, both branded fabric segments bookings and an apparel next year aw booking and all the three bookings have started off on a positive note.
So I think it’s a matter of the play out which is happening right now in terms of secondary growth being healthy and then transitive bookings. I think that’s the only difference. Otherwise I don’t see anything else of whether we have, you know, lost out to anyone, whether there’s any market share losses, nothing of that sort and we track that pretty closely.
Naitik Mutha
Right.
Sunil Kataria
Also in the past, you know it just shifts over a period of 2, 3/4 and 2/4 and then it plays out and as again said some of the biggest positive signs for us which we’re pretty happy which will translate for us in FY26 is the what we’re experiencing the currently ongoing bookings, you know.
Naitik Mutha
Right. Right. So can you give the number in terms of growth, in terms of bookings that you are seeing year over year so that we get some sort of sense.
Sunil Kataria
This is a completely confidential data. Two reasons it’s completely competitive. B, we are right on the middle of it and even fancy close. I mean, this is a difficult data to share.
Naitik Mutha
Okay, no problem.
Sunil Kataria
But we have, I can tell you this has given us a very, very good comfort, the kind of growth that we are seeing in it, which will play out for us in FY26. And this is a clear shift which has happened from if you had asked to me maybe around, you know, six, eight months back when we’re talking about different kind of a booking panning out in maybe AW24. Now I think SS25 and AW25 for apparel are playing out differently. So it’s good growth and I think that gives a hell of a lot of comfort.
Naitik Mutha
Got it, sir. So my question is again on the under textile margins, how confident are we of, you know, doing 20% plus margins? Because you know, from what my understanding is, we have done 20 plus margins in this segment for one or two years in the past, but not more than that. So how confident are we about doing 20% plus margins?
Sunil Kataria
Okay, if you ask me for any segment, if we have the confidence most, this is this one, you know, other segments will have their own plays. You can do some very like, I can be very honest in branded apparel. I may take calls of doing some very disruptive advertising spends for a few years and we’ll call it out. This is a, this is a place where we have the strength, you know, and we’re pretty confident that, you know, we will retain this 20 to 21% margin.
I mean one or two quarters here and there scale deleverage has happened, but this is a pretty much where we think we have stabilized. We have that the moment our scale comes back, they just close through for us. Secondly, also one more piece which we have taken a conscious choice in the last six months because of the weak market sentiment is we also have the ability to take and we do tend to take 1 to 2% price increases every year in our branded textile segment.
This time because of the weak market we started a year back, we have taken a conscious choice not to do that price increase because the markets have tough. We said, okay, we’ll postpone price increases, which otherwise by and large you do. 10, 1 to 2% is nothing, especially consumer inflation in the range of 5 to 6%. So that’s something which we have held back so that also we have conscious strategy. And the third is the bookings.
When we always do the bookings, there is one piece which plays out in bookings is that our bookings always happen at a premium end of the segment. Most of these bookings will give us a premium mix because the trade comes, dealers come and they choose. It’s a kind of a trade show which happens. They actually choose all the premium designs. They the product innovation is there. And once bookings become healthy, it also ultimately shifts your product mix towards premium segments. So that also is if this plays out well, what is going right now.
So I think this premium bookings mix coming back, conscious choice to not take price increase, which if economy start bouncing on next year will definitely play that out and scale coming back. This is a pretty confident place to be that in FY26, we should be back to this number of 20, 21%.
Naitik Mutha
Got it, sir? Got it. Now, my next question is on the branded apparel segment. I just wanted to get some sense on, you know, in terms of growth. How are you seeing growth in the newer categories versus the, you know, older. Established brands like Park Avenue etc if you could just give some color on how is the growth between these two categories separately.
Sunil Kataria
So when you say new categories like for example see the new categories are scaling up so whether it is ethnics whether it’s. I mean in a way it’s too early to talk it just a couple of weeks we are just still not hit the market fully right sleep we are scaling up. So I think as over I will talk about a period of like say next four to five quarters if I were to give that kind of direction.
Clearly I see in the newer categories the scale will build up and they will obviously in terms of percentage growth will be multipliers. So that will happen. They will be investment mode also for next two to three years. In terms of our branded apparel, very clearly we are invest. We are very clearly seeing that we are going to be continuously investing in brand building.
As I told you some of the one question which I said earlier that we have clearly seen there are some real low hanging jewels in our system like Raymond ready to wear the Park Avenue or color plus these they all three are going to play out differently. I believe Raymond ready to wear matter of a scaling outlet so that we get at least a reach.
The brand is so well known we just need to tell people it’s in ready to wear color plus a trajectory change happening, a shift happening will take some time. But a brand which has a hell of a lot of power and park venue. I think the transition has already happened for us. It’s a matter of just staying the course. So these brands will continue to give us steady growth. Our ltl seem to be pretty okay right now even in a tough market condition. And the other brands, the bases are small, they will give us multipliers.
Naitik Mutha
So sir, the 5% growth that we have seen in this segment year over year, if you could just break it down to how much have we seen the growth coming from the older established brands versus the newer categories that would give me a better sense of this.
Sunil Kataria
Yeah, I can see this will become a pretty much, you know giving the information around what exactly the scale of each of the segments. But I can tell you we have seen pretty mid single digit kind of LTLs across our stable brands and the new brands are scaling up in this. I can say one thing, for example ethnic brand which is two years into the making right now we are going to be crossing 100 odd crore threshold level this year on ethnics.
So that is something which clearly is the testimony to the proof of concept on ethnic’s brand, for example. That is one of the new segments which I can talk of. Others are too early, sleepier, as I said, three months and three weeks kind of thing. So ESSENCE would cross under crores. Clearly proof of concept. Established products very well established stores experience established. So clearly we see a trajectory building up there as well, in effect.
Naitik Mutha
Got it. Thanks. That was very helpful.
Operator
Thank you. Participants who wish to ask a question may press star and one on your touchstone telephone. We have the next question from the line of Komal from K Investments. Please, please go ahead.
Unidentified Participant
Yeah, thanks for the opportunity. Specific question related to pat. What? What are we targeting in terms of PAT number next year?
Sameer Shah
Hi, this is Sameer here. I mean we don’t give any forward looking guidance but as Sunil mentioned that next year FY26 we are looking at strong growths so we should see kind of a much better pat definitely as compared to current year
Unidentified Participant
That we know because before demerger we were having 475crores of pat and after demerger the other expenses have floated up and they were one off which was not expected. So can you give in our definitive terms that what are we exactly? I mean are we going to cross 4 and 5 crores next year or it will take some of the longer time. And can you also briefly explain what are why other expenses are broken up? I mean it is because of brand whatever we are trying to build it is in gestation period or these two.
Sameer Shah
Yes, I think couple of things. One is again we would shy from you very specific numerical guidance in terms of pat. In terms of other expenses I think there are multiple reasons. One is we had increase in advertisement kind of expenses. So this run rate is going to be there forward. I mean 300 odd crores for a quarter. That is what I’m trying. There are multiple factors. What I was saying is there will be no increase in advertisement expenses which is what is the case current year there will be nsola, you know kind of expense increase especially on employment and so on so forth.
So all those you know growth led expenses will continue. Right. Going ahead. But we will again, I mean you know see a strong FY26 as mentioned earlier.
Unidentified Participant
Then what can be the EBITDA margin for FY26 consolidated some definitive number?
Sameer Shah
Well, I think it is difficult.
Sunil Kataria
Okay. You are basically asking us have you done your annual operating plan and can you share this? Honestly we obviously in the middle of working on this but as you said we are pretty confident over a period of you know couple of years we will reach 15% EBITDA margin. That is something where we have been and that model we stayed our course and next year would be a pretty different piece playing out for us. But I think you can keep a number of 50 odd percent in mind. You know that is where we are headed
Unidentified Participant
For next year. Right.
Sunil Kataria
You know nobody can predict whether it’s one year but yes, that’s where we’ll attempt. You know that will go.
Unidentified Participant
Okay sir, all the best.
Operator
Thank you. We have the next question online of Sanjay Parikh from Soham Asset Managers. Please go ahead.
Sanjay Parekh
Yeah, so you know few micro questions but one is, you know I was a little intrigued that Q2 is normally a lull quarter. Q3 is supposed to be better, but when I see Q3 turnover it’s 1796 crores versus 1735 which is just 60 crores or so. So normally where the seasonal pickup should happen it’s not reflected. So while you all have discussed it in the call but about the secondaries and primaries, but. Do you think somewhere we are losing out on market share or internal analysis? That’s the first question,
Sunil Kataria
Yeah. Okay, so the first question, very clearly, I think I’ve been talking about this whole theme of that, you know, we have this whole thing that we tend to do bookings in towards the early, you know, part of the year, the first half of the year, and then it tends to play out as the market picks up through secondaries. So one thing, there’s a very sharp difference in our secondaries of this quarter versus previous quarter.
So that’s clearly trend which is played out, because the question which you’re really asking is, has the consumer offtakes played out differently between the two quarters? And that has definitely started playing out at the same time. I’ll tell you one background context which everybody’s calling out is that while the wedding season has been pretty decent, there is definitely a little headwind which is playing out a counter effect, which is, nobody can deny that is there’s an urban discretionary spend pressure, which is a countervailing factor.
But between the two quarters, our secondaries are paid out very healthy and very positively. What this is going to lead to is how does it lead to our bookings in this, you know, coming season? And that is again, a trend which is now visible to us, that earlier traders taken bookings since the first half was bad, they were sitting on certain inventories, secondaries happened, secondaries clearly played out differently.
Now it is going to translate into bookings. And the first signs of the bookings for the next year are looking positive. So I think that’s how it’s played out.
Sanjay Parekh
Okay. Okay. And the second thing is one is the cost, so I mean, one is the gross margins, which is nothing to do with leverage. But generally this goes for improvement with the other costs, which even my other colleagues addressed there. Given that we have tough environment, can we have, you know, more control on cost without compromising on your investments in the future for growth?
So if there is scope, you know, that could, in a tough environment, it can really help. So there, you know, when I see the other cost at 30%, it’s pretty high. So compared to peers. So they’re just, you know, just an observation. If you can do something on that cost control and cost reduction and your comments, and then there’s one more small question, and then I’m done.
Sunil Kataria
Okay, thank you for the point and observation. So I think one thing which can assure you, and you know, this is something which we are very, very conscious about, you know, in fact, we have a project called a Project PI running consistently in our organization, which leads to a, you know, a very, very micro every function threadbare project identification for improving cost efficiencies and operating efficiencies.
And that has contributed in this year also significantly. I think the three countervailing factors which have happened for us, which maybe would have not fully mitigated the impact of a weak environment, is that we are not budging away from investment behind. A brand building. B we were very, very below threshold levels in stores as we talked about even a year back. So we are basically trying to reach threshold levels of stores. And that is something where the investment is happening. And the third is there has been a little bit of international factor which we didn’t anticipate which have played out is Red Sea crisis leading to some small one off freight increases. And then this whole thing that we have played out in terms of, you know, increasing capacity in garmenting and hence at the same time recruiting people and training them. So some of these are upfront future investments which seem to have, which if you see optically have counter offset and not made our cost projects visible as such or the benefit of the cost project visible as such. So I think maybe two, three consistent upfront investments have played out at the same time that actually if the market may not have helped us, I think that’s one maybe theme which is played out. But rest assured we look at every cost with a pretty much tooth comb, you know, and given this whole environment we are doubling down further on that. But point fairly assume we are on the same page as you.
Sameer Shah
Thank you very much. Last is we have a debt free company. Why the interest cost is still so high at 54 crores. So the interest also actually bakes in rentals expenses. Right. Because as per the statutory P and L, the rentals expenses part of them sit in interest as well as in depreciation. But you’re right, I mean being you know, net cash company, the delta interest is you know, relatively on the lower side.
Sanjay Parekh
Oh, so okay, so what would be the rental part of this 54 crores.
Sameer Shah
So we have to look at both interest as well as depreciation. Right. I mean overall, you know, piece and the rental expenses it is residing in interest will be how much the rentals residing in interest is close to around 20 crores.
Sanjay Parekh
Okay, yeah, 34 crores. 34 crore is pretty high for a net cash company. So can we see this coming down?
Sameer Shah
But you have to also see it along with other income. Right. So because what happens is there will be some, you know, kind of investments which gives us other income and then there will be some borrowers which will have net net. There would be a, you know, kind of arbitrage gain.
Sanjay Parekh
Okay. Because see in the other income, I mean while I’ll go through the result but you know presentation or other income is always others which is 28 crores. So we always tend to have to find out that what is the other income or the operational income and
Sameer Shah
Sorry, in the statutory P L you see the other income actually has moved up by close to around 10 odd crores. Right On a year over year.
Sanjay Parekh
Okay. And last one, you know we had this analyst meet in Gujarat where we had a target of 2200 crores on 28 of EBITDA. Given where we are and we’re not talking of quarter now the long term plan, do you think we still on that target of 2200 crore by 28?
Sunil Kataria
Okay, first of all, you know there’s. Long term plans have to be kept in mind given a couple of market conditions. But I think our aspiration remains the course in that ballpark, right? I wouldn’t say that it’s exactly 22, 28 but I think we definitely remain in the aspiration of reaching there. But maybe this could happen 12 to 18 months later given this because nobody saw at that time that India would get into a suddenly like all companies. Talking of the headwinds earlier first half was rural. You know headwinds are playing out in India for a year now. We suddenly seen a phenomenon of urban discretion spend coming under pressure. So I think long term plan aspirations stays the course. Timing may change by 12 to 18 months kind of thing.
Sanjay Parekh
Sure. Best of luck and thank you very much.
Sameer Shah
Thank you.
Operator
Thank you. The next question is on the line of Devansh from Inquitus Wealth Advisory. Please go ahead.
Unidentified Participant
Hi sir. So my first question was on the line of apparel segment. So if you see it is the last quarter that we had was in the Q2. It’s supposed to be seasonally weak. Still we have performed, we have given a PBIT loss on the apparel segment. Is it just because of the retail store expansion or is there anything to read on apart from that?
Sunil Kataria
So again I think one key difference in our model of apparel versus other is that we have a hybrid model model in apparel where part of our retail channel like EBOs etc are secondary LED models and then we have wholesale and trade channel which does primaries which behave pretty much like our fabric model.
So we have this Hybrid 2 model. Now what is clearly as I’m again been talking about and which is at the core point of the quadrant fee for us is that our secondaries have been pretty healthy across every part of our retail channel. And that is something which is very different from what we saw in the first half of the year and which we’re expecting and it’s translated into secondaries.
Now obviously there’s a certain part of our branded parrot channel which does bookings just like the fabric channel in the first half. Now as secondaries happen, they start playing out in the bookings towards the second part of the year which is let’s say starting now having talked about that, that has that secondary lift off that we’ve seen started translating into bookings for the next clearly in the apparel business also where the bookings are currently underway, we are seeing a pretty much very positive and good bookings happening from trade which are very different from when what were the trade phenomena of booking, let’s say the first half of the year.
So I think that shift is happening. Just remember one thing, that in our branded apparel also, there’s a hybrid model which has play, which is part bookings and part retail offsets. Pure play, like our own stores.
Unidentified Participant
Okay, and how do we see January at the month? How. How was the. So as you said, there was a consumption. The consumption was weak in the quarter three. How are we seeing it in the January?
Sunil Kataria
I would say more of the same. You know, I don’t think, I think there any fundamentally shifted between December and January. I think it’s been a mixed bag. There have been, I would say weekends do tend to pick up then we’ve seen weekdays go a little slower. So I think some part of that urban decision spend is playing out. I expect this Honestly very difficult to predict.
We are hoping the finance minister does some magic tomorrow. Right. To really give some more spur to this whole urban discretionary pressure that we are seeing or other overall inflationary pressures on the food. I think those are some critical stimulus required but I’m hopeful on that. But more of the same.
But as I said, one good part I would say is not about quarter four, but actually going forward beyond quarter four. Is that for us what we are sensing from our trade partners, what we are sensing from our channel partners and what is reflecting in our booking this thing? You know, these are guys who are the closest to the market. You know, they read it better than anybody else because they’re sitting out there. What we could sense from them six months back and in their bookings and what we are sensing on them now is pretty different kind of sign. And that’s a positive. On the positive side.
Unidentified Participant
Okay. Okay. And this, this booking and the branded textile segments too?
Sunil Kataria
Yeah, that is in all the three segments that we do. I mean two, two parts of our branded segment textile and branded apparel. All three are underway. Looks good right now. Obviously when I say good, let’s see how it pans out over the period once it closes. But yeah, it is healthy and I mean it’s online with our expectations across.
Unidentified Participant
Okay, great. Thank you.
Operator
Thank you. Participants who wish to ask a question may press star and one on your touchstone telephone. We have the next question from the line of Rahul Bharatwaj, an individual investor. Please go ahead.
Unidentified Participant
Hi. Thank you for the opportunity to put in one request to the management team. Would it be possible for us to include market share trajectory in our quarterly performance reports like for the different categories we have. It’s our aspirational market share, where we are currently, how we are progressing quarter on quarter and what are the steps we are taking to get to our destination? Would this be possible going forward?
Sunil Kataria
Hi, Rahul. I think you know you’re putting my wish list on the table, honestly if you ask me. FMCG guy, all my life lived on bread and butter of Nielsen, you know, month on month. So one thing honestly in this industry, what I’ve seen, whether it’s the retail industry, which is pretty large on the retail channel side, very difficult to get market shares. And fabric is a complex trade piece because it’s led by bookings across. It has got multiple components, like my own Raymond store, which are 100% market share. Because that’s a captive channel for me. Then there are multi brand outlets which I can tell you where my own estimate is that I would be holding maybe 50, 60% market shares and then there could be a third, you know very, very small retail what you call micro retailer channel which nobody reaches and they go through wholesale. I have been also trying to see if there is any way to map it as of now not able to crack this one to be very honest that is there a way to get some dipsticks, some samples done. We are still trying to put our head around it as of now I don’t have an answer whether I can give it to you right now but this is a question which we would like to also solve. We’ve been debating some kind of dipstick, some kind of panels. We’ll see as and when we are able to put it together we’ll definitely love to share this because more than sharing with you it’s a very good indicator for one own self. You know also
Unidentified Participant
Yeah it probably could also be a good exercise for some of the newer segments that we are starting. You can give some color on, you know, who are the market leaders. So aspirationally where is it that we want to be if that’s possible at least in the ethics and
Sunil Kataria
So Rahul, that point we take. So as the new categories move forward like I’ve told you already that one piece, I mean one can always deduce market share within ethnic where it wants. I mean because we are early, we are just 24 months into it, we are expecting ourselves to cross the milestone of 100 crores. Now what is a branded ethnical market? One can always put some numbers and talk about it but we’ll be happy to share the new categories aspirations definitely. You know.
Unidentified Participant
Thank you. And the second question would be more on you know by when do you think we will start benefiting from operating leverage? As I understand as of now we are kind of in the opposite side. It’s more like operating deleverage right now. When do you think we will be kind of done with most of our capex expenditure and then going ahead operating leverage should start kicking in.
Sunil Kataria
Okay, if you see I think as I said when we started off, let’s say around 18 months back on this journey in fact I would say really we started pumping it up really last 14 to 18 months. On the retail side if you see we have been really below threshold levels on stores so we are just in the middle of it. We’ll take maybe it’s another, you know it’s overall a 36 month journey for us. I would say we are maybe 12, 13 months into it would take another couple of years, I think really to get the journey get completed.
At the same time, we will keep on calibrating environment, we’ll keep on being cautious about it. We do not while we set goals for ourselves in terms of reaching those threshold store levels. It’s not that we are going to be running about it blindly, even if, let’s say we find certain environmental headwinds become tougher. So we will keep it doing in a calibrated way, we’ll keep it doing in a cautious way. But I guess 36 month journey, we are in the. First phase of it, maybe another 20 to 24 months still to go. But we’ll do it in a, you know, in a, you know, pretty much measured with our eyes open kind of a manner.
Unidentified Participant
Thank you. Good luck.
Sunil Kataria
Thank you.
Operator
Thank you. That was the last question. I would now like to hand over the call to Mr. Sunil Kattaria for closing comments.
Sunil Kataria
Okay. I think thank you to all the participants for taking out time to come over. I think it’s a pretty interactive section and really appreciate your questions, and I hope we have been able to give you answers to them and give you clarity on our plans going for the future. Good luck to all of you and thank you very much.
Operator
Thank you. On behalf of Raymond Lifestyle Ltd. That concludes the conference. Thank you all for joining us. And you may now disconnect your lines.