Raymond Ltd (RAYMOND) Q4 FY23 Earnings Concall Transcript

Raymond Ltd (NSE:RAYMOND) Q4 FY23 Earnings Concall dated May. 10, 2023.

Corporate Participants:

J. Mukund — Head, Investor Relations

Amit Agarwal — Group Chief Financial Officer

Sunil Kataria — Chief Executive Officer, Lifestyle Business

Harmohan Sahni — Chief Executive Officer, Realty Business

Analysts:

Abhijeet Kundu — Analyst

Chetan Mahadik — Systematix — Analyst

Shreyansh Jain — Swan Investments — Analyst

Priyanka Trivedi — Antique Stock Limited — Analyst

Prerna Jhunjhunwala — Elara Securities — Analyst

Chaitanya Rao — Individual Investor — Analyst

Presentation:

Operator

Ladies and gentlemen, good day, and welcome to the Raymond Limited Q4 FY ’23 Earnings Conference Call, hosted by Antique Stock Broking Limited. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. Abhijeet Kundu from Antique Stock Broking. Thank you, and over to you, sir.

Abhijeet Kundu — Analyst

Thank you. On behalf of Antique Stock Broking, I would like to welcome all the participants in the earnings call of Raymond Limited. I have with me Mr. J. Mukund, who is the Head of Relations — Investor Relations of Raymond Limited.

Without taking further time, I would like to hand over the call to Mr. Mukund. Over to you, Mukund.

J. Mukund — Head, Investor Relations

Thank you, Abhijeet. Good evening, everyone, and thank you for joining us for our 4Q FY ’23 earnings call of Raymond. I hope you would have received a copy of our results presentation. Today, I would like to urge you to go through this along with the disclaimer slides.

We have with us from senior management, Mr. Amit Agarwal, Group CFO; Mr. Sunil Kataria, CEO of Lifestyle Business; Mr. Harmohan Sahni, CEO of Realty Business; and Jatin Khanna, Head of Corporate Development.

Now I would like to hand over the call to our Group CFO, Amit, who will give you a brief summary of quarterly performance before we open up for Q&A. Over to you, Amit.

Amit Agarwal — Group Chief Financial Officer

Thank you, Mukund. Good evening, ladies and gentlemen. Thank you for joining us today for the earnings call to discuss the results of the fourth quarter of fiscal ’23.

Let me start with a brief overview for the quarter. The quarter took off slowly as the discretionary spends were less at the backdrop of inflationary pressure, resulting in toned down impulse purchases by the consumers. However, the winter weddings provided some tailwinds to the quarter and that saw an uptick in our fabric and apparel offerings. As the quarter progressed, we witnessed increased momentum in trade channel and we saw order booking in the primary channel for current summer wedding season.

Now, let me talk about the fourth quarter of fiscal ’23 performance. We are happy to share that the fourth quarter of fiscal ’23 recorded the highest ever fourth quarter revenue of INR2,192 crores, a growth of 8% over INR2,032 crores in the fourth quarter of fiscal 2022. This is the sixth consecutive quarter of record performance. The revenue growth was driven across all B2C and B2B businesses in domestic markets and garmenting business in export as well as engineering business.

I am delighted to share that we recorded highest ever quarterly EBITDA of INR379 crores with a healthy EBITDA margin of 17.3% as compared to an EBITDA of INR358 crore in the fourth quarter of fiscal 2022. All the businesses contributed in delivering the highest EBITDA in the quarter with Branded Textile, Branded Apparel and Real Estate leading the front.

During the quarter, we generated free cash flows, led by improved profitability and net working capital reduction and further reduced net debt by INR243 crores, leading to a lower net debt at INR689 crore as on 31st of March 2023, as compared to INR932 crore as on 31st December 2022.

During the quarter, the company recorded certain exceptional items amounting to INR92 crore — INR93 crores, which included an expected credit loss of trade receivables and write down of inventories in apparel, amounting to INR76.5 crores. This is mainly related to the provision on account of a large format store that faced operational issues and impacted the industry including other businesses.

Other exceptional item includes an expense-related to offer for sale, reimbursement of stamp duty claim against property, plant and equipment as per Arbitration Award in favor of company and retrenchment compensation in engineering business of tools and hardware almost amounting to INR16.8 crores were written off.

We reported a net profit of INR194 crores for the quarter as compared to INR263 crores for the same quarter last year. However, we had considered a one-time deferred tax adjustment of INR177 crore in the fourth quarter of fiscal ’22 and in this quarter, fourth quarter ’23 of INR65 crore. So therefore, the adjusted PAT, would have been INR129 crore in the fourth quarter of fiscal ’23 as compared to INR86 crore in the fourth quarter 2022, an increase of 50% on a year-on-year basis.

Now, let me also talk about the full year performance which on a consolidated basis, the financial year 2023 has been and accomplishing year, full of milestones as Raymond delivered on a consolidated basis highest ever revenue of INR8,337 crore, reflecting an increase of 31% compared to previous year revenue of INR6,348 crores.

We also delivered the highest ever EBITDA of INR1,322 crore with a margin of 15.9%, which is a 50% increase compared to the previous year EBITDA of INR881 crores. It was reflecting the EBITDA margin of last year of 13.9%. We also recorded highest ever net profit of INR529 crore, doubling from a INR260 crore in the previous year.

In the landmark year of delivering highest ever revenues, EBITDA and net profit, Raymond clocked a healthy double-digit topline growth of 31% during the year, led by a strong momentum and robust performance across all our businesses. With the record performance of fourth quarter ’23, Raymond has demonstrated a strong revenue and profitable performance for six consecutive quarters.

As far as our B2C business of Branded Textile and Branded Apparel is concerned, we successfully leverage the core strength of our brand, coupled with our wide distribution network across the country. Given the fact that FY ’23 had incremental wedding dates, we witnessed a strong demand for customers for our product, especially for wedding celebrations, as well as festivities.

In the export markets, adoption of China Plus One strategy and vendor consolidation adopted by global brands continue to drive the performance of our garmenting segment. The engineering segment performed well with resilient demand in the domestic market, while export orders were impacted due to significant challenges of global inflation, euro depreciation in the first half and devaluation of currencies in certain geographies.

Now about the real estate performance, we performed very well during the year, along with significant milestones being delivered. The total value of the bookings for the first — for the three project amounted to over INR1,600 crores during the year. The first three towers in the Ten X Habitat project, our first project were delivered two years ahead of RERA timeline. In the newly launched project, Ten X Era, 100 units were sold within seven days of launch. Overall, with increased sales and cost optimization, the company has been able to report highest ever annual PAT of INR529 crore in fiscal 2023. For the year, fiscal 2023, the Board of Directors have recommended a dividend of 30% for the year.

Now let me discuss the segmental performance for the fourth quarter fiscal 2023. In terms of Branded Textile segment, we reported a topline of INR902 crore, a 2% growth over INR886 crore in fourth quarter fiscal 2022 and EBITDA margin stood at 21.8% in the fourth quarter fiscal ’23 as compared to 22.7% in fourth quarter 2022. The quarter witnessed contrasting trends as we are — as we witnessed moderate consumer sentiment impacting the secondary sales during the first half of the quarter. However, this was made good when eventually the sales picked up at a later-stage of the quarter due to primary channel bookings for the current summer wedding season.

Additionally, the quarter also saw an average transaction value, grew by 27% as compared to Q4 of the previous year across our pan-India The Raymond Shop network. We continued our marketing initiatives, product innovation in suiting and shirting fabrics, including linen and we focused on casualization to provide the requisite impetus to our sales. Thus, the segment reported a robust EBITDA margin of 21.8%, led by enhanced operational efficiencies.

Now let me talk about the Branded Apparel. Branded Apparel segment showed a healthy sales growth, up by 19% to INR332 crores as compared to INR279 crores during fourth quarter of previous year. The growth was driven by incremental customer conversions, especially in EBOs and MBOs.

In our portfolio of brands, the growth was led by ColorPlus, Park Avenue and newly launched Ethnix by Raymond. The segment also witnessed incremental healthy EBITDA margin of 15.8% as compared to 11% in the previous year. Now the margins improved due to higher sales and increased operational efficiencies as we closed some of the non-performing stores, reduced redundancies and reduced discounted sales products.

Now coming to our retail network, we continued to further strengthen our retail footprint by opening 50 new stores during the quarter, led primarily by Ethnix by Raymond EBOs, along with new EBOs for Raymond Ready To Wear, Park Avenue and ColorPlus stores. The expansion was across metros, Tier1 to Tier 3 towns on pan-India basis. In line with the stated strategy of Ethnix store expansion, we opened 16 stores during the quarter, leading to a total of 61 stores of Ethnix by Raymond as on 31st of March 2023. The remaining 34 stores were opened for Raymond Ready to Wear, Park Avenue, ColorPlus and The Raymond Shop.

Also in line with our strategy for maintaining a healthy retail store portfolio, we have closed almost 42 non-performing stores. On a net basis, during the quarter, we added eight stores, leading to a retail network of 1,409 stores as on 31st of March 2023, spread across 600 towns and cities in India. Amidst the backdrop of winter wedding season, we witnessed strong traction of large purchases by our customers, leading to significant improvement in average transaction value and, as mentioned earlier, the TRS network reported 27% growth in average transaction value as compared to previous year.

Now let me talk about the garmenting segment, which reported a very strong growth of 44% to INR305 crores compared to INR213 crores in the previous year, due to higher demand from our existing and newly acquired global customers. Given our strong capability in manufacturing fabrics, as well as garments, increasingly we have acquired new customers on account of vendor consolidation, along with China Plus One strategy adopted by leading global brands who prefer integrated suppliers to be their core partners. EBITDA margin for the quarter was 6.6% as compared to 3.4% in the previous year, mainly due to operating leverage and operational efficiency.

In terms of High Value Cotton Shirting segment which has reported a growth of 7% to INR187 crores, compared to INR175 crores in the previous year. Segment sales grew by 7% in Q4 ’23 versus previous year, led by demand for our cotton and linen fabric offerings by our B2B customers in the domestic market. The segment reported EBITDA margin of 10.4% for the quarter as compared to 8.6% in the previous year, mainly due to better realization and operational efficiencies.

Now let me talk about the performance of the engineering business, which is consolidated under JK Files & Engineering Limited. In the current year — current quarter on an aggregate basis, the sales grew by 7% to INR219 crores in Q4 ’23 was compared to INR205 crores. In the domestic market, the demand momentum was well maintained, especially in the passenger vehicle, commercial vehicle and industrial sector, driving growth in ring gears, flex plates and bearings categories along with files.

In the export market, we witnessed growth in — growth in driven by ring gears category and well supported by other key categories in a globally inflationary environment. However, the EBITDA margin stood at 14.9% compared to 16.6% in the previous year, mainly due to devaluation of currency in certain countries.

Now, let us talk about the Real Estate business. During this quarter, we launched our third project Ten X Era in Thane in February 2023 and received an overwhelming response from the customers. We received about 100 bookings within seven days of launch. This reaffirms our customer confidence and acceptance of our high quality products coupled with the fast paced construction momentum in the ongoing project. In our three projects in Thane, we received bookings for 300 units with a value of INR473 crores during the quarter. Overall, 80% of the total units have been sold in the first project Ten X Habitat, as well as in the second project the Address by GS and 25% of recently launched units in the Ten X Era project.

Coming to the operational and financial performance, the construction momentum in the two existing projects of Ten X Habitat and Address by GS maintained well. The business delivered a strong sales performance of INR289 crore, along with an EBITDA margin of 24.3% for the quarter.

Now, let me talk about the detailed project-by-project. Our first project, Ten X Habitat, received 114 bookings in the current quarter, with a booking value of INR148 crores. In total, we have sold 2,451 units have been booked as on 31st of March 2023, which accounts for about 80% of the total inventory with a booking value of INR2,550 crores.

Our premium residential project, the Address by GS launched in the third quarter of fiscal 2022, continued to receive good response from customers with 44 bookings in this quarter. And the total bookings made for this project amounts to 434 units, which is also about 80% of the total inventory with a booking value of INR1,142 crores.

In our new project Ten X Era, we received total of 141 bookings during the quarter for a total value of INR204 crores. Overall, during the quarter, we received 300 bookings for a value of INR473 crores. The total booking value for all the three projects for the full year FY ’23 has been close to — over INR1,600 crores for 138 [Phonetic] booking units.

Now, let me start about the project-wise construction details. In the Ten X Habitat project, the tower wise construction is as follows. As stated earlier, we have received occupational certificate for the first three towers and from Tower 4 to 8, the terrace slab has been completed and Tower 9, 25th slab completed and Tower 10, 24th slab has been completed. As far as the progress on the second project is concerned, the Address by GS for Tower A, second floor slab has been completed and Tower B [Indecipherable] floor slab has been completed. In our new project, Ten X Era, the excavation work is in progress.

Now let me talk about the operating costs, working capital as well as the cash flow. In terms of an operating cost for the quarter, our opex cost for the quarter were INR562 crores as compared to INR506 crores in the same quarter, resulting — same quarter last year, resulting in the opex to sales ratio being slightly higher at 25.6% as compared to 24.9% in the same quarter last year.

With a sustained focus to drive growth and build a strong brand equity for the future, we are investing in advertising, sales promotion and retail expansion for future revenue growth potential. Accordingly, our advertising and sales promotion costs have increased to INR35 crores in the fourth quarter compared to INR32 crores in the fourth quarter of last year, resulting in A&SP cost to sales ratio being at 2.1% compared to 1.6% in the same quarter last year. Also there has been increase in the cost, mainly on account of inflation which has impacted wages and other incidental costs.

On the working capital front, with our continued focus on efficient working capital management, during this quarter, we have been able to reduce the net working capital to 53 days which is two days lower on a quarter-on-quarter basis from 55 days in December 2022. We have seen strong cash collections in place, which has been able to help the reduction in receivables. On an absolute terms, our net working capital is lower by INR51 crores to INR1,265 crores in March ’23 vis-a-vis INR1,316 crores in December 2022.

Now regarding cash flows, on the backdrop of strong profitability during the quarter, we generated significant free cash flows, which has been primarily used for debt reduction. Our gross debt stood at INR2,100 crores as on 31st of March 2023 and we continue to maintain strong momentum in maintaining liquidity levels with cash and cash equivalents of INR1,400 crores as compared to a INR1,090 crores as on 31th December 2022. The cash and cash equivalents are a combination of cash, bank balances and short-term investment. Overall, our net debt reduced by INR243 crore and stood at INR789 crore as on 31st March 2023, as compared to INR932 crore as on 31st of December 2022.

The interest cost in the quarter is INR64 crore, which is higher by INR7 crore on a year-on-year basis, as compared to INR57 crore in the same quarter last year. It is an increasing interest rate scenario, our interest borrowing costs has increased to 8.9% in the fourth quarter as compared to 7.9% in the third quarter and higher interest on lease liabilities on account of increase in the stores which are opened has been taken on rental basis as well as the notional interest due on the deferred approval cost for the real estate project. Overall, our net debt to equity ratio, which was already at a comfortable level of 0.33x in December 2022 has further reduced to 0.23x in March 2023.

Now, we spoke about the recent corporate initiative, which the Group took. We have undertaken the deleveraging initiative and sold our FMCG business to Godrej Consumer Products Limited. The consideration for the sale has been received by our associate company Raymond Consumer Care Limited on 8th May and accordingly the transaction stands concluded completely. The proceeds are being utilized to repay external debt of the Raymond Group. As we speak today, INR600 crore NCDs have been issued by Raymond Limited to RCCL, and the proceeds from the same is being utilized for repayment of external bank debt.

Now, let me talk about the outlook which we see in the marketplace for the first quarter. The current quarter started with moderate consumer sentiment in the month of April as secondary sales were low. The K Curve recovery continues to play as the discretionary spend has been impacted for the low-income household while there is an upsurge in consumption of high-income household. However, from the end of April and early May, we are witnessing an uptick in the consumer sentiment, given the wedding season in the month of May and June. We expected the related demand to gain momentum in the coming days.

From retail store network, strong focus exist on building retail excellence and we are geared up to expand the store network, mainly through asset-light franchisee model to open about 200 stores in the next 12 months to 18 months. This will be driven by large store network expansion for Ethnix by Raymond to cater to fast growing ethnic wear market. In the garmenting segment, export lever continue to be China Plus One strategy and the global retail industry is undergoing consolidation. We have a strong order book in place for the next couple of quarters.

In terms of our raw material prices, we look at it that the wool and the poly viscose continues to remain stable. And over the last couple of years, the cotton prices have increased significantly. In the recent quarter, the price has stabilized, but continued to remain at a higher level as compared to pre-pandemic levels. Also over the last few months, there has been increase in the price of linen flaxseed. However, now it is maintaining at higher levels. However, we have been able to largely pass the price increases to our customers with a time lag.

As far as the engineering business is concerned, we are witnessing that the domestic retail demand in consuming sectors are healthy and we expect the same to continue. However, in the export market, the inflationary trend continues to be in the economy of European countries, and U.S. and currency devaluation of certain developing economies.

We are closely working with our customers in accessing the demand and catering the requirement. From raw materials cost perspective, the steel prices have recently moderated — moderately soften after going through an inflationary trend for the last two years. However, we have the ability to pass on the same with the time lag.

In the real estate market, we continue to see the growth momentum in the residential market. The construction activities are in full swing in both of our projects and the construction activity has started in the recently launched Ten X Era as well. We expect to stay on course.

Regarding the net working capital, over the last few years, we have been consistently optimizing the net working capital in terms of number of days, and we continue to maintain the same. From a cash flow perspective, there is a continued focus to generate significant free cash flows from the profitable growth of the business and our asset life expansion model is very well in place.

As far as capex is concerned from retail store expansion, as already stated, it will be a franchisee model. However, we will be opening some flagship stores at certain critical marquee locations. In the garmenting business to address the increasing demand for our products, we are investing into line expansion and expanding capacity in growth categories in engineering business. Overall, including the above, the growth capex and maintenance capex of our plants, we expect to invest around INR200 crores to INR225 crores in fiscal 2024. Overall, the company expects to be on a profitable growth momentum.

Now, we’ll be happy to take questions.

Questions and Answers:

Operator

Thank you. Ladies and gentlemen, we will now begin with the question-and-answer session. [Operator Instructions] The first question is from the line of Chetan from Systematix. Please go ahead.

Chetan Mahadik — Systematix — Analyst

Thank you for the opportunity. Firstly, can you tell us what will be the drivers for the EBITDA margin expansion in Branded Apparel from 11% to 16%?

Amit Agarwal — Group Chief Financial Officer

Sure. Do you want to give all your questions and then we answer or how do you want us to do?

Chetan Mahadik — Systematix — Analyst

Okay. I will tell you my questions. Second is on how has the growth been in suitings versus shirtings during the quarter? And can you also put some light on the order book growth for garmenting during this quarter? And lastly, can you tell us about JDA status of the Mumbai project?

Amit Agarwal — Group Chief Financial Officer

Garmenting and fourth one was JDA question. Okay. So, Sunil?

Sunil Kataria — Chief Executive Officer, Lifestyle Business

Yes, okay. So I’ll take the questions. Okay. So, first, let me tell you related to the question on the suiting versus shirting growth that you’re talking about, okay. So, I think, as you know that we have been investing heavily behind both the segments in terms of category development. Our [Indecipherable] slightly different between suiting and shirting. In suitings, since we are a very strong market leader, we will develop the category. We are doing this at the premiumization, right. In shirting, we believe we have a huge headroom to grow in terms of market share gains. So within the two segments, we have focused one on premiumization in suiting, and secondly, in terms of shirting, we’re focused on linen growth as well as the mass end of the market. So we have done these two strategies and that is continuing to be the critical strategies going forward.

We have seen very sharp gains in terms of volume growth in both these markets which are much ahead of the market trends and that is something I can tell you versus shirting versus suiting. The shirting growths are obviously much faster than the suiting growth, given that we have much higher headroom to grow.

Amit Agarwal — Group Chief Financial Officer

Yes. I think that is what about the suiting and the shirting growth. Now let me talk about the apparel, garmenting and the JDA project. As far as apparel margin, you see the focus has been, very clearly we have always spoken, there is an operating leverage piece. And as you see that, we have been able to increase almost 20% sales, quarter-on-quarter we have been able to get that operating leverage.

Second, we have been consistent rationalizing some of the stores, which has not been profitable. We have taken out those stores which has helped in improving the margins.

Third thing what has also happened is certain level of discounts, certain quantum of discounts, which we were supposed to give in the marketplace, we have been able to manage the sales achievement of INR332 crores by giving a lower sales or the proportion of such discount is lower. And I think that has a big support and our whole philosophy going forward is how to control the discounts on that. That’s the three major reasons in terms of getting. Third — fourth thing is basically the casualization which we are doing consistently is helping us to get more and more full price savings.

Now as far as the garmenting, you see we are very, very comfortable in terms of having the order book. It ranges between three months to five months every time. It is not something, which suddenly it goes to eight months, nine months or suddenly it comes down to two months. We are maintaining that lead time of anything between four months to five months and we are exactly in that spot. So we are looking, so far as we speak today, comfortably August and September level of order bookings.

As far as JDA projects, we told you that we continuously are looking into this project. As and when we get the full approvals in place, we will launch that project.

And I think Sunil would like to add some of the points.

Sunil Kataria — Chief Executive Officer, Lifestyle Business

Yes, just one point which I also want to add to the point which Amit has already shared on the apparel margins. See one of the big focus areas was also has — for us also has been improving retail excellence efficiencies within our current stores. So one thing which we have seen in this quarter is also a very, very sharp and handsome growth, which is in like-to-like growth or what we call the same store core growth across all our brands in quarter four. So that has been a pretty strong growth also for us driven by retail efficiencies.

Chetan Mahadik — Systematix — Analyst

Yes, yes. That answers all my questions. Thank you.

Amit Agarwal — Group Chief Financial Officer

Thank you.

Operator

Thank you. The next question is from the line of Shreyansh Jain [Phonetic] from Swan Investments. Please go ahead.

Shreyansh Jain — Swan Investments — Analyst

Hello, this is Shreyansh from Swan. My first question is, sir, if I look at your cash flow statement, we’re seeing some increase in inventory. So could you explain that from INR259 crore, we’re seeing about a INR525 odd crore increase in inventory? And also, could you explain the bifurcation of this?

Amit Agarwal — Group Chief Financial Officer

Yes. I think, broadly, what happens is the inventory increase is primarily to cater to the market. As we continue more and more on through the EBO stores, you will see these inventories being made available with the new fashion, new trend. As we continue to open more and more ethnic stores, you will see those inventories being made available, so that there is a wider choice available. And the sales pickup in any of the new stores which you open, it doesn’t happen from today to tomorrow. It takes a maturity anything between six months to 12 months.

So, therefore, what we are trying to do is, as we have opened almost 60 stores, in terms of in the last six odd months, w are putting the inventory in these stores, which is going to be sold over the next few months. And therefore, you have seen an inventory increase.

And the other thing on the shirting side also we have launched some of the new collections, which are just going out into the market based on the season’s requirement that has also help required to be increased of the inventory.

And maybe if — Sunil, do you want to add something on the inventory?

Sunil Kataria — Chief Executive Officer, Lifestyle Business

Yes. So, I think, one of the major pieces — see we are very, very cautious about buildup of inventory and that is something an area which we track very closely at a operating level. So, I think, the one of biggest pieces you will see across that three levers for us is, one is the largest lever is what Amit talked about the store expansion. Secondly, we are also doing casualization. So we are also trying to improve certain new product ranges and launch them within our current stores as well. So, I think, these are two areas which will play a role in terms of some inventory increases that you may see. But otherwise we are very cautious in terms of tracking how the whole inventory movement happened across our stores.

Amit Agarwal — Group Chief Financial Officer

Yes. And just to supplement, we have also the real estate business and you know we talked about the Ten X Era project, which we have just launched in the month of February. So you would see that the kind of approval expenses and such things we have been paid, I think, almost INR150 crore is on account of that also, which has been invested behind these inventories, which once we start selling and making a little bit more construction on the percentage of completion method, you will start seeing reduction of the inventory and moving to the revenues, which is the nature of that business.

Shreyansh Jain — Swan Investments — Analyst

So if — if I want to sum whatever you said, so out of INR525 odd crores of increase in inventory, INR150 odd crore would be in the real estate business and the balance would be in your apparel and your textile business. Is that understanding correct?

Amit Agarwal — Group Chief Financial Officer

Yes, broadly, yes.

Shreyansh Jain — Swan Investments — Analyst

Okay. Sir, my second question is on the ethnics. So could you just give us a broad sense on the numbers that you’re doing and where are we in terms of the profitability in that business?

Amit Agarwal — Group Chief Financial Officer

Can you repeat, I couldn’t get the question properly, sorry?

Shreyansh Jain — Swan Investments — Analyst

My question is that in ethnics business, what kind of numbers are we doing and are we — where are we in terms of profitability?

Amit Agarwal — Group Chief Financial Officer

So, look, ethnics business has just started. We are opening the stores, putting — making the advertisement, bringing — making the customer aware. So at this juncture, it is more in an, what should I say, incubation or just starting taking off this business. So we’ll not really see the profitability at this juncture. However, we continue to make the higher gross margin, north of 65-odd-percent, we make the gross margin. And for me, that is the most important test that are our product being accepted or not, which is being accepted and delivering us the gross margin. Post that, if you have the store and the support and the branding advertisement that comes on top of it.

Shreyansh Jain — Swan Investments — Analyst

Okay. My other question I had is, we’re seeing an increase in investments from INR65 crores to about INR314 crores, which is sitting in a non-current investment. So this is — is this amount that we’ve received from GCPL that is sitting in your non-recurring investments?

Amit Agarwal — Group Chief Financial Officer

No, no. So what happens is, you see there is an investment in one of the associate companies which had eventually an investment into Raymond Consumer Care, because a value has been identified of the Raymond Consumer Care and therefore I have to consider in the books a write-up of that investment to the current market value. Previously, I think, it was considered at a much lower level compared to the INR2,825 crores. And that is one of the primary reasons for the increase in the investments.

Shreyansh Jain — Swan Investments — Analyst

Okay, okay. And my last question is, sir, what kind of ROCEs should we now look at going ahead [Indecipherable] perspective?

Amit Agarwal — Group Chief Financial Officer

Look, I would not like to give you a future guidance, but I can tell you what is my demonstrated performance. Operational ROCE is in the range of 27%, 28%. And you know, look, the fundamental of the business is now as a company, as the Raymond Group, we are sitting with INR1,500 crores of liquidity available post FMCG transaction and which will enable us to drive growth both in the Lifestyle business as well as in the Real Estate business. And we have very clearly outlined that how the Lifestyle business is going to grow, how the Real Estate business is going to grow. Real Estate, I have still 60 acres at Thane land which I can develop. And since my inventory is already sold to the tune of 80% in the first two projects, I need to launch some of the projects in order to take forward. And the margin is very clearly proven is in the range of 25-odd-percent.

Similarly on the Lifestyle side, if I look at it, there a great opportunity for us to build upon through the distribution network expansion, which we talked about, there is a big plan for distribution expansion. Ethnic which we control the wedding space so to speak, wedding won’t — it would not be possible in the country that the wedding happens and the Raymond suit does not get cut. So similar is an opportunity for me in the ethnic to take a larger market share with our retail expansion. So, I look at it. Second is our shirting, because we are introducing new price points, new ranges, we see a growth opportunity in the shirting as well as the typical apparel brands with the Park Avenue, ColorPlus, Raymond Ready To Wear, these all brands have the growth trajectory set out.

Shreyansh Jain — Swan Investments — Analyst

All right, sir. That helps. Thank you so much.

Operator

Thank you. The next question is from the line of Priyanka Trivedi from Antique Stock Limited. Please go ahead.

Priyanka Trivedi — Antique Stock Limited — Analyst

Thank you, sir, for the opportunity and congratulations on good set of numbers. Sir, my first question is on ethnics business. Sir, what would be the revenue of ethnics for the quarter and for the year?

Amit Agarwal — Group Chief Financial Officer

Sunil?

Sunil Kataria — Chief Executive Officer, Lifestyle Business

Yes. Yes, okay. See, right now, I would not give you exact number in the quarter. But I will tell you the way we look at ethnic stores. As Amit mentioned, see we are in a very incubation stage in terms of ethnics and we have right now reached around 61 odd stores margin. And even as we talk, the numbers are ramping up every month very strongly. The bright benchmark for us to and key KPI is really to benchmark our ethnics business would be — the store which, let’s say, stabilize after eight months to nine months, we have certain kind of benchmarks that we would like our store to reach in eight months to nine months and certain benchmark that we’d like to reach our store to reach in 12 months to 15 months.

How are they doing? And that I can tell you that, the kind of sales per square foot metrics, the kind of conversion metrics that we have set for ourselves, on those the ethnic stores which are stabilizing, they are I think in a pretty healthy zone right now. We at the same time are doing investments in term of advertising and as well as what we call as localized catchment marketing. And that I think is building up pretty well for us. So, I think that is where I would say that the way ethnic stores are ramping up right now. We are pretty satisfied with the trajectory of growth that we’re seeing per square feet within the stores.

Priyanka Trivedi — Antique Stock Limited — Analyst

Okay, okay. And sir, in terms of the total store additions of 200 that we are doing, how much of — I assume around 100 of them would be from ethnics, so balance would be — around 100 would be for the other apparels brands or — right?

Amit Agarwal — Group Chief Financial Officer

Yes. So that’s what the — the target is to do another 100 odd stores for ethnics and the rest would be split between three brands, which is Raymond Ready To Wear, Park Avenue and ColorPlus.

Priyanka Trivedi — Antique Stock Limited — Analyst

Okay, got it. And sir, we highlighted that we have increased our ad spends and it contributed around 22.1% [Phonetic] of the total sales for the year. So is — are we looking to increase that number going ahead or would it be more or less in that range itself?

Amit Agarwal — Group Chief Financial Officer

Yes. Look, I think, very clearly we have spelt out that we want to make sure that these brands are seen very properly. And that is why we would invest for the next one years to three years behind this brand. And very clearly, we would go out and spend — on the normal spend anything between INR60 crores to INR70 crores more on a yearly basis regard — behind these ads in order to create a proper visibility, so that we can demonstrate that these brands have a very strong sale here [Phonetic] and coming very strong revenue growth. And that is exactly the purpose behind these brands and the ad spend.

Priyanka Trivedi — Antique Stock Limited — Analyst

Okay, sir. And sir, in terms of the store rationalization for TRS that we did for this quarter, are we — are there any further rationalization going to happen going ahead? Or are we done with it?

Amit Agarwal — Group Chief Financial Officer

Look, stores rationalization is a continuous process. You know, I cannot say that it is done or it was not done, because what happens is, we are very focused on two things. As Sunil rightly pointed out that the KPIs set for the stores is sales per square feet. We have a timeframe that X store will deliver in this time in this city X rupees per square foot. If it is not delivering, we may give few months grace and if it’s not working out, we will have to take a hard call. We cannot continue to have this position that we drag, drag, drag. And that is why you can see that even in the last year, we did shut some of those stores. But we are very clear, the store expansions will be on a drive. It’s a big part of our growth strategy. But something if it doesn’t work out, you have to take a hard call. And we are prepared to take a hard call.

Priyanka Trivedi — Antique Stock Limited — Analyst

Okay. Got it, sir. And sir, my next question would be for the Engineering businesses. So if you have to look at the auto numbers, the revenue has declined 6% on year-on-year basis. Any particular reason for that?

Amit Agarwal — Group Chief Financial Officer

No. You see basically what happens is, in the auto sector, very simple that the first half was completely impacted because of depreciated currency in euro, because we have in the auto side almost two-thirds as export. And it’s because — and it was significant in the, what is this called, European markets. And because of the currency, which got impacted, partly it got offsetted because of the good demand in the domestic market. So that’s the reason for the drop in the auto segment. But in the last two quarters, we are seeing a decent jump.

Priyanka Trivedi — Antique Stock Limited — Analyst

Okay, sir. Sir, and lastly, on our Real Estate business. So, two questions on that. What would be the potential of our Ten X Era project in terms of revenue, as well as the cash flows? And the second would be that the land parcel that we’re having, how much of that would be transferred to the Lifestyle business and how much of that would say in the Raymond business? And that’s it from me after this.

Amit Agarwal — Group Chief Financial Officer

So, let me first give you the answer for the second one. As I mentioned, INR1,500 crore in a liquidity, which we would have available, based on 31st March, pro forma numbers of 2023. Now going forward, obviously, all our businesses are significant cash flow generating, which will further add to the kitty to the cash flows of the business.

So what we are considering is that we would be net debt free business and have this INR1,500 crore appropriately allocated in some period of time to see that how each businesses would require the growth and the capital to make sure that they achieve the long-range plan, which has been prepared by each of the businesses.

Harmohan, are you there?

Harmohan Sahni — Chief Executive Officer, Realty Business

Yes, I’m there. Can you hear me?

Operator

Yes.

Amit Agarwal — Group Chief Financial Officer

Yes, we can hear you, we can hear you. Please talk about Ten X Era project.

Harmohan Sahni — Chief Executive Officer, Realty Business

Yes, hi. The Ten X Era, the revenue potential and the cash flow potential is about INR1,400 odd crores. So we’ve just begun and we sold about 100 units, whatever we had launched about 25% of the inventory — of the launched inventory has been sold. So we’re expecting over the next 3.5 years, 4 years, the execution period, we will realize about INR1,400 odd crores from the…

Priyanka Trivedi — Antique Stock Limited — Analyst

In terms of the cash flows, right.

Amit Agarwal — Group Chief Financial Officer

No, no, no.

Harmohan Sahni — Chief Executive Officer, Realty Business

Cash flow as well as revenue both.

Amit Agarwal — Group Chief Financial Officer

No, but revenue will be INR1,400 crores. Obviously, the EBITDA will be the net free cash flow available for this — for future growth would be in the range of 25% of that.

Priyanka Trivedi — Antique Stock Limited — Analyst

Okay, sir. Got it. Yeah. Thank you so much. That’s it from me.

Amit Agarwal — Group Chief Financial Officer

Hello? Operator, we are connected or…

Abhijeet Kundu — Analyst

Hello?

Amit Agarwal — Group Chief Financial Officer

Yes, yes. Are we connected now on the line?

Operator

The next question is from the line of Prerna Jhunjhunwala from Elara Securities. Please go ahead.

Prerna Jhunjhunwala — Elara Securities — Analyst

Thank you for the opportunity and congratulations for the performance. So just wanted to understand your Branded Apparel business. Could you help us with brand-wise performance in the quarter and the year?

Amit Agarwal — Group Chief Financial Officer

Yes, Sunil will take that question, brand-wise apparel performance.

Sunil Kataria — Chief Executive Officer, Lifestyle Business

Okay. So, as I’ve mentioned earlier in the call that in terms of our strategy, we have identified three power brands within branded apparel. And I’m keeping ethnics aside because that is another segment altogether that we have launched and it’s in incubation stage. So the three power brands, the focus for us is Raymond Ready To Wear, ColorPlus and Park Avenue. And across all the three places we have seen, we have started investing towards expansions. We are very clearly seeing trends which are positive across all three brands. So it is very difficult to actually if you ask me to differentiate between that. Is there any brand order which is the laggard or any brand which is outperforming, but clearly, we are seeing trends in terms of that Park Avenue as we have started doing casualization. Our share of casualization has started increasing. And that is driving a very healthy growth.

In terms of ColorPlus, what we see is that we have a very strong loyal set of customers which repeat, in fact it may be one of the best in the industry, the repeat and retention scores of our ColorPlus consumers that again continues to drive our very, very high bill values.

And Raymond Ready To Wear, where again our journey has started on casualization. We are seeing that percentage also continues to grow. So between the three, I would say, all the three power brands are doing pretty strong double-digit growth across.

Prerna Jhunjhunwala — Elara Securities — Analyst

Okay. So if I want to understand casual versus occasion and formal wear, then do you — would you — would you mean that formal and other portfolio is witnessing some sort of slowdown currently, as compared to casual segment?

Sunil Kataria — Chief Executive Officer, Lifestyle Business

No, it is not in fact. In fact, if you see formal wear, interesting part of this is, I mean, in our shirting growth which is our ready to stitch growth, all it’s not Branded Apparel. We again continued to see good growth happening in formals. It is not that formal is slowing down versus casual, it is just that our presence in casual early was lower. So obviously our bases were lower in casual. Now as we started doing casualization journey, obviously the growth rates of that will be very different, because the bases are small. So our saliency is shifting between formula failure and casual. Since the bases are so different, it doesn’t mean that one is going slow versus the other. That would not be a right comment, I would say.

Prerna Jhunjhunwala — Elara Securities — Analyst

Okay, that helps. Sir, second question is on EBITDA margins, reported very healthy EBITDA margin 15.8%. How would you — how should we see this margin on a sustainable basis? And maybe in the next two years to three years with higher sales, should we assume that the margins could only be better from here?

Amit Agarwal — Group Chief Financial Officer

Look, I think what we have got is one quarter we got the 15.6%. As I said, there was less of discounted sales proportion, but going forward, you know the markets of the apparel, especially in the threes, Park Avenue, ColorPlus, as well as Raymond Ready To Wear, you will see the discounting, which is summer of season sale and these all sale keeps happening and you have to discount.

What I think is we are going to get a significant operating leverage as we continue to grow the stores, retail footprint and with the support of the advertising and such things. So what I talked about earlier of INR60 crores, INR70 crores of an additional investment behind these advertising spend. If you take out that for the next one year to three years, I think we are very comfortable to say that we should be getting more in the range of 14% to 15%. And past two years, three years, we see very clearly a 15% EBITDA margin. I don’t see a problem in delivering 15% EBITDA margin.

Prerna Jhunjhunwala — Elara Securities — Analyst

Okay. And what would be the revenue mix between EBO versus MBO?

Amit Agarwal — Group Chief Financial Officer

So, I think, look EBO, we are expanding, but you see the uniqueness which Raymond Group has, the reach which it has created over so many towns and that MBOs, if you see to a smaller city which is a Tier 5, even that MBO would keep a Park Avenue shirt. And I think that is going to be a healthy mix, but I would say, we continue to open the EBOs and we will see a growth in terms of EBO percentages. I will ask Sunil to give a specific on it.

Sunil Kataria — Chief Executive Officer, Lifestyle Business

Yes. In fact, in Raymond, there is one unique piece that we have to keep in mind. As we are expanding our branded apparel strategy, one is very clearly, as we’ve talked about that we’re going to open another 100 plus stores in Branded Apparel business, non-ethnics, right. So that itself is going to lead to a EBO expansion. Second part, our EBO mix would be driven by the fact that we want to — as we do this advertising spends, we would like our throughput per existing store itself to increase. So the EBO growth should be much, much faster than any other channel, driven by two facts, one will be new stores opening, which will have their own gestation period, but they will obviously continue to add footprint and has increased salient.

Second is, we believe that as advertising spends go up, as casualization happens, as we enter new segments, we will drive much more throughput through our current stores, that’s one part. The second part of our strategy, which actually while they are not really EBOs, but the fact is, we have 1,000 plus kind of Raymond stores with us, now which also sell apparels for us. So they are to remind in that sense, a captive MBO or captive retail points for us where there is no competition, but we sell our multi-brand retails also there. So they also — would also benefit from apparel throughputs happening through advertising.

Now, between these two channels, we expect them to over a period of time, in fact TRS is already, the Raymond stores are already pretty big for us. We expect over a period of time between these two stores, the EBO and the Raymond stores to become roughly be around two-thirds of our overall business.

Prerna Jhunjhunwala — Elara Securities — Analyst

No, that’s helpful. Sir, on Branded Textiles, what should be the growth strategy? And where do we see this Branded Textiles segment growing and we’ve done very good EBITDA margins this year. So now, are these margins sustainable?

Amit Agarwal — Group Chief Financial Officer

Yes, the margins are sustainable, because we have been in this bracket of Branded Textile, around the 20%, 21%, which we should continue to maintain. There is no doubt about it. One quarter here and there, we don’t talk, but in general, these margins are something which is sustainable. And look, the Branded Textile has got two large components. One is the suiting and one is the shirting. We see a great opportunity for us in the shirting segment and we believe that can drive significant growth going forward.

Sunil, you would like to add something

Sunil Kataria — Chief Executive Officer, Lifestyle Business

Yes. So, I’d say again, we don’t — I think, one piece, which we’ve been talking now recently in many of our calls is that the Branded Textile itself has two sub-segments. And the rules and the opportunity in the two segments are very different. In fact it is a policy for us to believe that the brand, the overall Textile business has slowed down because they are sub-segments which we need to see differently. We are a very strong market leader in suitings. There, our job is to develop this category and drive value growth in that category through a wage, through a premiumization route, and there you will expect a strong revenue growth — we will try to drive revenue growth there.

In terms of shirting, we believe we have a huge headroom to grow in both the mass end of the market and maybe the premium linen end of the market. So there is a premium strategy, there is a mass end of the strategy there. And they are driving market share, would mean that we’ll get both volume as well as value growth. So you should see these opportunities, two very diverse and different set of opportunities and we believe shirting is a huge, huge headroom to grow.

Prerna Jhunjhunwala — Elara Securities — Analyst

Sir, can we assume 14% — 15% odd growth in this segment driven by shirting business?

Sunil Kataria — Chief Executive Officer, Lifestyle Business

Yes. You know, I wish, it was so easy to give such a firm number of percentage in businesses, but I would say range would be distinct. What we are aspiring for? We are aspiring for a high single-digit growth in terms of suiting business driven by premiumization and we’d like to drive again maybe a double-digit growth in terms of shirting in that range going forward. So, I think, these ranges are more important, rather than getting locked into one number.

Prerna Jhunjhunwala — Elara Securities — Analyst

That’s helpful. Last question on garmenting and high value shirting segment, on your current capacities, what would be the optimal revenue that we can do?

Amit Agarwal — Group Chief Financial Officer

So, if you look at on the garmenting, we are utilizing our capacities to the tune of 87% and 90% month-to-month depending upon the product, maybe jacket is more complicated compared to a shirt. So, basically, we are at 87% to 90%. And therefore, we are considering this expansion of building additional lines over the 12 months to 18 months. We are putting almost 30% increase in the capacity in the next 18 months.

And as far as high value cotton shirting is concerned, there also we are utilizing the capacity. But in the high value cotton shirting segment, we have the opportunity that you can buy the gray fabric from the market and we are known for finishing the — high-quality finishing of the fabrics, which we will continue to expand. And as the market grows and we participate in the growth of the market, we should be able to increase that segment as well.

Prerna Jhunjhunwala — Elara Securities — Analyst

Okay. Thank you so much, sir. Sir, one on garmenting. You were adding capacities in India or in Ethiopia?

Amit Agarwal — Group Chief Financial Officer

Between the two places, both the places.

Harmohan Sahni — Chief Executive Officer, Realty Business

Both the places. Okay. Thank you so much, sir.

Amit Agarwal — Group Chief Financial Officer

Thank you.

Harmohan Sahni — Chief Executive Officer, Realty Business

Very helpful.

Amit Agarwal — Group Chief Financial Officer

Thank you.

Operator

Thank you. The next question is from the line of Chaitanya Rao, an Individual Investor. Please go ahead.

Chaitanya Rao — Individual Investor — Analyst

Yes. Thank you for the opportunity. And many congratulations for the great set of numbers and exceptional FY 2023. Actually all my questions are rather answered earlier. Just wanted to confirm where I’ve missed. Earlier you had stated that the 60 acres of land is [Technical Issues] for further development. So is my inference correct that this is excluding the three projects which Raymond has already offered?

Amit Agarwal — Group Chief Financial Officer

Yes, 60 acres is available after these three projects. Yes, that’s correct.

Chaitanya Rao — Individual Investor — Analyst

And is it possible for you to say at present, that what — what have you all thought about doing of this 60 acres of land or it is for further…

Amit Agarwal — Group Chief Financial Officer

I think as and when we have the announcement of the projects, you can consider that as that point of time, we announced that project because it is premature for me to say what are we going to do, but we are going to develop. You’ve seen the success, the way we have delivered, demonstrated our capability in terms of the construction pace, sales velocity, we feel very confident that we continue to have a decent market share in the Thane micro market. And obviously we want to give the best quality of living to the people who want to buy in our project.

Chaitanya Rao — Individual Investor — Analyst

So the 60 acres of land will also be considered for the reality space only?

Amit Agarwal — Group Chief Financial Officer

For real estate business. Yes, yes, yes, it will be in the Raymond Limited.

Chaitanya Rao — Individual Investor — Analyst

Okay, okay, got it. And next I wanted to confirm that regarding the INR15 crore cash you were stating from the sales proceed of the GCPL this thing. Am I right that you have not yet confirmed that actually what you will be using and how will we go about this INR15 crore this thing, cash?

Amit Agarwal — Group Chief Financial Officer

Yes, so we will allocate, basically it is based on the certain debt and the certain cash which is there in the respective businesses. Based on that, we will define that how we are going to utilize this money.

Chaitanya Rao — Individual Investor — Analyst

Okay, okay. Got it, got it. That’s all from me. Thank you.

Amit Agarwal — Group Chief Financial Officer

Thank you.

Operator

Thank you. [Operator Instructions] As there are no further questions, I now hand the conference over to Mr. Amit Agarwal for his closing comments.

Amit Agarwal — Group Chief Financial Officer

Thank you very much for participating in the call and looking forward for taking the discussions into the next quarter. Thank you.

Operator

[Operator Closing Remarks]