Siyaram Silk Mills (NSE:SIYSIL) Q2 2027 Earnings Call

0:03 Ladies and gentlemen, good day, and welcome to the q two FY twenty seven earnings call of SIYSILK Mills Limited hosted by MUFG End Time. 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 this conference call, please signal an operator by pressing star, then 0 on your touch tone phone. I now hand the conference over to miss Devanshi from MVFJ End Time. Thank you, and over to you. Good afternoon, ladies and gentlemen. I welcome you to the Q2 and FY 'twenty seven earnings conference call of SIYSILIK Mills Limited.

0:49 To discuss this quarter's performance, we have from management, Mr. Gaurav Budhat, President and Executive Director Mr. Ashok Jalan, Senior President and Director Mr. Sarendra Sheti, Chief Financial Officer and Mr. Siyaram Mills Vice President, Finance. Before we proceed with the call, I would like to mention that some of the statements made in today's call may be forward looking in nature and may involve risks and uncertainties. For more details, kindly refer to the investor presentation and other filings that can be found on the company's website. Without further ado, I would like to hand over the call to the management for their opening remarks, and then we can open the floor for question and answer. Thank you, and over to you, sir.

1:39 Good afternoon, everyone, and thank you for joining us today for Siyaram Silk Mills Limited Q2 and H1 FY 'twenty seven Earnings Conference Call. As we approach the festive season, I would like to extend my warm wishes to all our shareholders, investors, analysts and stakeholders for a happy, healthy and prosperous Diwali. We are pleased to have you as we discuss the company's performance and key developments during the quarter and first half of the year. We trust you have had the opportunity to review our financial results and investor presentation, which have been made available on the stock exchanges and on the company's website for your reference. Siyaram Silk Mills Limited has built a strong reputation as one of India's most trusted names in premium fabrics, apparel and textile products.

2:27 Backed by decades of expertise, a diversified brand portfolio and an extensive distribution network, the company continues to cater to evolving consumer preferences across categories. While remaining firmly rooted in its rich textile heritage, the company is advancing its CRM 2.0 journey through a sharper focus on design, merchandising and retail led growth, expanding its presence in the value fashion and ethnicwear segments. Our retail growth strategy continued to make steady progress during the first half of the year, supported by the measured expansion of ZCORD and Davo across key markets. As on date, we have 38 ZCORD stores and 23 Davo stores, taking the total store count to 61 stores as against 70 stores that we have guided.

3:16 We are confident that we shall be able to close the store count at 70 stores across the two formats by FY 'twenty seven. Importantly, this expansion continues to be funded entirely through internal accruals, reflecting our disciplined approach to growth and capital allocation. Coming to the overall industry environment. Despite uneven monsoon and increasing inflationary pressures in key raw materials, the demand across textile and apparel sector remained broadly stable during the first half of FY 'twenty seven. Retail activity received support from seasonal consumption and occasions such as Rakshavandan and Onam. We also continue to see opportunities in Tier two and Tier three markets, where rising aspirations and expanding reach of organized retail are supporting consumption.

4:02 With a larger part of the festive season falling in the next quarter, a significant portion of the festive led consumption is expected to be reflected in Q3. We are also optimistic of the upcoming festive season, and it will boost our give a boost to our performance, and we also revised our revenue guidance to 14% to 15% for this year. We at Siyaram continue to execute our strategic priorities with discipline and agility. Our focus on product innovation, retail expansion and brand development enables us to strengthen our market position while creating a strong foundation for future growth. Our company has delivered another quarter of strong performance with total income of INR $8.27 crores in Q2 FY 'twenty seven compared to INR $7.19 crores in Q2 FY 'twenty six, a growth of 15.1%.

4:55 For H1 FY 'twenty seven, total income stood at $12.93 crores as against INR $11.18 crores, growth of 15.6% in the corresponding period last year. Despite a relatively measured demand environment, we continue to remain focused on driving sustainable growth while maintaining prudent financial management and operational discipline. In line with this commitment, the Board of Directors have approved first interim dividend of INR 4 per equity share of INR 2 each in FY 'twenty seven. This reflects the company's disciplined approach to rewarding shareholders consistently over the years. We will continue to execute our strategy with discipline while creating long term value for our stakeholders.

5:43 On that note, let me invite our CFO, Mr. Suresh Shetty, to take you through the financial highlights and key operating metrics for the quarter. Thank you. Thank you, Gaurav Rajiv, and good afternoon, everyone. Let me take through the company's stand alone financial performance for the quarter and half year ended 09/30/2026. For the quarter two financial year twenty twenty seven, the total income stood at INR $8.27 crores compared to INR $7.19 crores in the quarter two of financial year twenty six, excluding nonrecurring other income of INR 24 crores. During the quarter, fabrics contributed 77% of the revenue, while garments accounted for 16% and EON and others contributed 7%.

6:33 EBITDA for the quarter stood at INR 131 crores in quarter two of the financial year twenty twenty seven compared to INR 121 crores in quarter two of financial year twenty twenty six. Profit after tax for the quarter stood at INR 75 crores in quarter two of financial year twenty seven as against INR 87 crores in the corresponding period of the last year. For the first half of financial year twenty twenty seven, total income stood at $12.93 crores compared to INR $11.18 crores in the first half of financial year twenty twenty six. EBITDA for the period stood at INR 170 crores, while profit after tax was INR 86 crores.

7:25 The company's balance sheet continues to remain healthy, supported by prudent financial management and disciplined approach to capital allocation. Our debt equity ratio as of September 3026, stood at 0.58. With that, I conclude my remarks. We would now happy to take the questions. Thank you. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the touch tone telephone.

8:11 If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Dev Gulwani from Care PMS. Please go ahead. Good good afternoon, sir. Congratulations on great set of numbers despite the fresh season, and you have even increased the revenue guidance. So first question is what was the volume growth and value growth this quarter in the fabric segment? Hello? Yes, Dave.

8:58 So in general, as we mentioned over the previous few calls, we don't look at it as a breakup of value and volume because there is a change in mix of suiting and shirting that keeps evolving over a certain period of time. However, just as you asked in the fabric business, roughly the volume percentage has been an increase of roughly 2.5% and value has been roughly 11%. But again, it's better to just look at an absolute value rather than looking at a volume mix and a breakup of volume and value. Understood. And what price hike has the company taken in current quarter to offset the impact of higher raw material prices? So as we mentioned in the last call as well, raw material fluctuation has been quite drastic, and that depends on a commodity price and demand supply scenario to that extent, and that happens in a more immediate manner. However, as a branded player, we face the consumer through a channel. So it's a branded consumer product, and we cannot follow the exact same trend of raw material pricing going up as well as going down. So it is a more gradual approach to price hike. And I think over the last six odd months, we have cumulatively taken a price hike of about, I think, between 4% to 6% in that kind of range. And that happens in a very gradual manner, and it takes a larger period of time for to absorb everything.

10:17 The raw material side, looking at the geopolitical tension at the moment still remains uncertain. So one has to wait and watch how much, what needs to be done because there is even a chance if everything settles down for things to correct. So we wouldn't want to overdo too many things, and that is why also it has to be taking a gradual approach. And what was the reason behind declining gross margin? So majorly, it is through raw material inflation, but also the contribution of and DEBO is also declining the gross margins? So largely, as you mentioned, it's largely the impact of the raw material pricing that has had an impact on the gross margin and EBITDA to that extent. And for ZeeCode and ZeeCode, we maintained a 150 basis point maximum drop in EBITDA.

11:04 And I mean throughout the year, we'll hit that number. So we are quite confident of matching the guidance that we have given. And what was the revenue contribution from Z Code and Devo this quarter? In total, if you look at the first half of the year, then the retail Z Code and Devo business together has contributed to about in the range of INR 65 crores on the to the top line. Okay. And if we can provide only from ZCODE for this quarter? We haven't been giving you a breakup of these numbers, but the large part of the revenue comes from ZCODE. And the company has also opened 17 stores in the first half. Given the pace of expansion, can we expect the company to achieve 75 to 80 stores by end of FY 'twenty seven compared to the guidance of 70 stores?

11:53 At the moment, we are very confident of achieving the guidance of 70. We've hit already, I think, 61, and it's been on track to go past 70. Now the fact of the matter is that a lot of these properties are built to suit and they are in different stages of construction and therefore giving an accurate number sometimes delays things. So we would stick to this number of 70 and then let's see how it goes and we'll keep you updated on the progress. Okay. Thank you, sir. Thank you. Thank you. The next question is from the line of Dixit Doshi from Whitestone Financial Advisors Private Limited. Please go ahead. Yes. Thanks for the opportunity. I think you said that retail sales was INR 65 crore. So if I'm correct, it was INR 30 crore in Q1.

12:46 So it's more or less kind of flattish compared to Q1. Any particular reason for that? Because we have opened new stores also and also some festivals were there in Q2 as well. So I wouldn't look at it as a quarter on quarter number. This comprises obviously of ZCODE as well as Vivo. If you recall in the first quarter, particularly in April, there was a very good festive wedding season as well. So I mean, we cannot look at it on a quarter on quarter basis. We have given a guidance of INR 160 crores by the end of the year, which we are very confident of achieving. Okay. And now that it's been two years we started this retail operation. Can you share any more metrics?

13:37 Is it possible to share more metrics of the retail business? So we've been indicating that this season now, we are just approaching the festive season in this quarter. And we had the first festive season last year, but that was on a very, very small base, I think, about totally less than 20 stores, both of them put together. So this is going to be the first festive season where we have some kind of a store volume to talk about, and we want to wait till the end of March before we can share something. And I think that the progress that we've made qualitatively, if I speak, has been very positive, and we are very encouraged with the feedback. And incrementally, we've made a lot of learnings and implemented those learnings and seeing results of those learnings. So we are very happy with the progress that we've made in a short time, and we are very optimistic about the retail business.

14:26 And in ZCORE, now we have 38 stores. I think we started with Bangalore, but we were planning to go outside Karnataka as well. So have you done any expansion outside Karnataka? And how has been the response there? So as you rightly said, VCOB, we started with Bangalore and Karnataka. So now I think about 19, 20 of these stores are within Bangalore and suburbs itself, about 10 to 12 stores are in rest of Karnataka. And then we've opened Hyderabad and Chennai, as indicated in the last call. And we have, I think, about three, four stores in Hyderabad and two, three stores in Chennai that we've opened. And incrementally, the store openings will be largely in these two areas apart from what more we find in Bangalore.

15:12 Okay. And have we finalized anything in terms of store expansion for next year? No, I think we're looking this year for the moment. And at the end of this year, in the call, we'll give you a guidance for the next year. Of the course, there will be store expansion, but we'll be able to give you a more concrete number by the end of the year. Okay. Okay. And did mention mention that for in earlier calls that for ZCORE we have to constantly do the expansion. But Devo is a kind of model where you can after a certain point, you can wait for stores to become profitable and then you in are year.

16:05 So we we second '22, 25, something like these kind of number of of stores, which we feel is a good number to be able to run an operation with. And these Devo stores are going to be are already focused in North India, so Delhi, UP, Punjab and Rajasthan. And we'll so it helps us to be in a particular cluster with a particular kind of taste. And for ZCORD, like you mentioned, on our previous call, we said that we need to have a faster pace of expansion just to be able to manage buying at those volumes and being able to turn around product at a quick pace because we are in the fast fashion business. So most of the expansion next year is going to be Zcore. Okay. And last question from my side is any rough time line by when the preference shares will be listed?

16:55 As of today, looking into the circumstances, will say around six months minimum it will take. Okay, more six months more. Okay. Minimum, minimum. Okay, okay. And that's it from my side. And just a suggestion that if possible by year end, once we have more stores seeing to Diwali, if you can share more metrics on the retail side by year end, it will be very helpful. The next question is from the line of Santosh Chetty from LGC Capital. Sir, just a single question. Like you had mentioned that several ZCO stores have already turned EBITDA positive.

17:46 So has the number of EBITDA positive stores increased during Q2? And are you seeing a visible improvement in store level profitability as stores mature? Yes. So thank you for your question. We are not tracking it on a store by store basis. As you are mentioning, we're looking at it as a more holistic number. And when I indicated that we are seeing some store stores as being EBITDA positive, it was not to give a count indication. It was just to give a general directional kind of feedback because we are not giving any quantitative numbers. And for some time, it will take some more time because the volume is very small now. So yes, directionally, positivity is there. The first half of this year has been much better than the first half of last year. And it's not just the old stores that we see that are improving in terms of the metrics, but even the newer stores with the learnings that we have and the new stores that we open, the sizes that we open all the locations that we choose, we are using those learnings from our experience and and opening better stores.

18:46 So in general, the mood is good and the feedback is good. The product is being accepted well. So in general, we're very optimistic about Sikud. Thank you so much, sir. Thank you for answering the question. All the best. Thank you. Thank you. The next question is from the line of Ninesh Verma from Baruksa Securities. Go ahead. Good afternoon, sir. Am I audible? Yes. We can hear you. Sir, I just had two set of questions. The first one being, I think you have reiterated an upward revision in your growth guidance. What are the key factors behind this? So if you see the first half of the year, we've been able to hit about 14%, 15% kind of growth numbers, and that gives us confidence going forward.

19:36 Along with that, the festive season is pushed to the third quarter, which was earlier in October last year. So we estimate that to help us as well get some boost. And then the confidence going into the retail business also in the number we indicated we seem to be doing as for that. And so generally, we feel that we can achieve this kind of 14%, 15% kind of growth number. And that's why we are happy to share that with all of you. Got it, sir. And the second one would be, you had earlier indicated that Tier two and Tier three markets would offer a significant growth opportunity. How have the demand trends been in this market during the festive seasons? Festive season is just starting out. But if you recall about two years ago, rural demand was really weak, and that was that is one of our main markets for the traditional business, particularly the fabric business. Over the last year and continuing to this year, we've seen recovery in that. So Tier two and three are very important for us for our fabric business.

20:30 Festive season has just started, and we are optimistic that the wedding season and the festive season continues you know, do well in these markets. Got it, sir. Thank you. That was also my side. Thank you. Thank you. A reminder to all the participants to press star and 1 to ask a question. Ladies and gentlemen, if you wish to ask a question, you may press star and 1 on your touch tone telephone. The next question is from the line of from J. Realm Stockbrokers. Please go ahead. Hi, sir. Thank you for the opportunity. I'm new to the company, so just wanted to know that how does the management differentiate ZCORE from existing fast fashion brands and they were from existing ethnic wear retailers?

21:19 And how do you see the long term revenue and profitability of both related to the company's existing fabric business? So if you look at both these businesses, first of all, ZCORD and Devo are in completely different market spaces with completely different consumers and different price points, different business altogether. But obviously, there is competition in both these segments. The apparel market in India, when you look at it, is a very large and fragmented market where no one player has a significant market share in the branded category in terms of consumption. The largest point of difference or the mode that we would like to stay for both these brands and our overall business in terms of retail has been that we believe that we since we come from a background of textile and the background of understanding yarn and fabric, we believe that we can provide a better product. We understand product. We understand how the back end of the product works. And that, we believe, is the biggest benefit that we have as a textile company going into retail.

22:21 So in terms of actual differences, I think that ZCODE and they were both are Cearam's interpretation of what fast fashion and Ethniquest should be for the Indian market and the Indian consumer as we understand it. There are a lot of players in both these markets who are doing a lot of good things, either they are national brands or even regional brands. There is a lot of competition, and there's a lot of good competition as well. People are doing a lot of good work. So we have we also have our eye out to understand good is happening in the market, what the benchmarks that people have, and we want to interpret that in our own way with our own product and our own values that come from the lineage of CRMs. Okay, sir. And do you plan to go in the North Of India?

23:13 So in terms of Devo, started this? Terms of Devo, we started with North Of India, and in fact, all our stores are based in North, Delhi, NCR, UP, Punjab, and Rajasthan. For ZCORE, we started with South Of India. And for the moment, we are focusing on the South Of India. It's a large cluster, and we are focused on a clustered approach as that's how we started and that we believe very firmly in. So I mean, as these clusters grow, then we'll keep informing you and keep moving ahead. Okay, sir. Thank you. Thank you. The next question is from the line of Suhani Singh from R. S. Capital. So I had one question.

24:03 Given the encouraging response from the retail business, so what are the milestone milestones which were needed to be achieved before considering a more aggressive store rollout or franchisee led expansion model? Good afternoon, Swani. So as we as when we started out with this project, retail as a business have been new to the company. The product is something that we believe is our strength, but retail operations as a business has been is something that is new. We started out with two different teams and two different setups for Vivo and ZCORD because they're two completely different set of businesses. Of course, ZCODE has is a part fashion business, which is a less cyclical business, less seasonal business, more throughout the year. And in terms of just key metrics, there is so many things. It's not just one thing. One is that the brand is completely new for the consumer. So it takes time for the brands to be a consumer awareness for these brands. But in general, we want to establish so many things together. We are setting up a completely different warehouse, completely different IT system. It's a whole new team, and we're working on a very lean structure where it's almost like a start up when you look at how the business is being expanded.

25:16 So all those building blocks are being put in place. One of the things is not just the store as a consumer sees it, but also the supply chain and the back end of the operations that we want to solidify. So that takes a lot of time. And in the beginning, when you start any business, particularly one that is as complicated as retail, there are a lot of errors and a lot of changes that needs to happen. And the idea was that we need to do that on a smaller scale where it's more manageable and less impact on cost or profitability for the company. So that is the idea. As we see progress in ZCORD, we'll continue to open stores in ZCORD. And they will reach a certain store count to be able to make that more operationally efficient. But as we continue to see more progress, we'll keep opening stores and and keep, you know, updating you.

26:06 Okay. That helps, sir. Thank you. Thank you. Thank you. The next question is from the line of Praveen Sharma, an individual investor. Please go ahead. Yeah. Hi. Good afternoon. Am I audible? Yes. Yes, sir. Sir. Yeah. Sir, thank you for giving me this opportunity. I have two questions. First is on this Devo, you know, also on the ZCODE, you know, we are not offering products on ecommerce either d two c or marketplace. Correct? That's right. Yeah. Because of Devo, at least, you know, I'm calling from experience wherein we needed certain things for the wedding, but it was not a problem.

26:58 Traveling city like Delhi, you know, to... Just to wait. So, you know, like, five India and all they offer. So I think it would if there's not a specific reason not to go for d two c model, you know, at least ecommerce website, you know, I think that should be enabled because that's not a cluster approach in Devo. Yeah. Thank you for your feedback. See, ecommerce and website has been consciously kept out of the plan so far. It's not to say that that's never in the plan. Consumer today is omnipresent consumer where they look at a B2C brand or a consumer facing brand in all formats, and we recognize the importance of that. But this has only been about two years or less in terms of age for retail, and there are so many things to do. And we don't want to divert our focus into doing too many things at once. We are already running these two brands, and we are focusing on a cluster, and we are doing so many things at one time. And that is why this is on the back burner.

27:59 But eventually, and when we do it, we will do it properly. That's the idea. So I think that is something that we looked at in the future. It cannot be avoided for sure, but it's not in the immediate plan as of now. Okay. Because for Devo, when you have a store one in a city or two in a city, one can offering that d two c wherein it has the customer. You know, once I visited the store, one... They know the con... They know the quality and the... You can... You know, if it's enabled, I want them actually buy it through the ecommerce channel very easily. So that's us. And I think that could be done at least for Devo. The second question is what's taking six months of the time for listing these potentials is a specific reason.

28:46 And, you know, there is another question associated to it. There is The interest will be payable from the date of allotment or once they are listed in the five year? See, interest is payable from the date of the allotment every year yearly. And as far as the listing is concerned, necessary application with BSE and NSE has been made. No ice for the... Whatever we are getting the feedback, it's minimum it takes around six months. That's the reason. So we don't have any history. It's precedent for this. So we think that... So being given the, you know, the knowledge to us, so what we are telling that minimum six months it will take.

29:45 Thank you. The next question is from the line of from Philip Capital India. Please go ahead. Yeah. Hi. Thank you for the opportunity. Sir, your first question is on the side. So you have guided for around 100 per hour of effect in '27, including 40 to six per hour for retail expansion. So I just wanted to know how much of this have you spent in the first half of the year? And also, do you expect any changes to the CapEx plan for the rest of the the remainder of the year? So cumulatively, have a CapEx that for the first half of the year of about INR 51 crores. We had indicated about INR 100 crores for the whole year, and we believe that we'll be in line with that.

30:32 Understood, sir. Just second and last question from my side, that is on festive season. So the festive season generally contribute significantly to. So based on the trends seen so far, how has the customer demanding during the festive period compared to your festive season? So festive season has just started, and so we see that the retail movement has seen some... A lot of uptake, know, to follow the festive season and in terms of that. So we believe that that will continue. I mean, for the retail business, it's direct business, but for the wholesale and channel business, it is a lag that comes in. So we believe that as dealer inventory starts clearing out, there is going to be demand. So that is why we've increased our guidance to 14% to 15% because we believe that we should have a good festive season ahead.

31:21 Understood, sir. Very helpful. Thank you. Thank you. Thank you. The next question is from the line of Deepak Malhotra from Cap Group Capital Advisors LLP. Please go ahead. Hi. Am I audible? Yes. Yes, sir. Hello. Yeah. Thank you. My question is basically regarding the... In terms of the under legacy business and the new business which the company has brought into. Now when we look at the legacy business, we have been very strong in the fabrics and even doing very well in the comments. As you enter into the new retail businesses, which is Devo and Deco, there's already, you know, a lot of competition there. And when we see the existing players there, they've been really bleeding if we see that. If we... I won't take names here, but even specialized players, they have been suffering heavily.

32:28 Some of the larger players who have gotten to have a main phase of the competition, and the retail expansion basically incurs at the end of the day a large CapEx. And then it also brings it into the in the AS, you know, complications, which, again, basically gets into the way of valuing the company, the rate should be looked into. So my question is, I mean, with the kind of inflationary pressures which you are facing on the raw material plant. How do we see the competition landscape at present and your strategy going forward? Thank you. So Deepal, first of all, as you mentioned, the legacy business is something that the company has been doing for now almost forty five odd years.

33:23 And in the fabric business, there is some kind of a leadership position that the brand, CRMs enjoys and other brands in the company. We are present in terms of the rural markets. I think every retailer or most of the retailers would have our brands on their shelves. And it's a brand that is known to most people in the country today. And we enjoy that kind of the trust and the brand recall, and we're very fortunate to have that. As we look forward to the next phase of growth for the company, we believe that retail is the next frontier, and we believe that direct to consumer and particularly in channels where the company has not been present in, which is fast fashion and as well as ethnic wear, was something that has a big opportunity that is available. If you see the fast fashion industry as a whole, it is growing more than 2x the speed of the regular apparel industry.

34:18 There are several players, like you mentioned, and each player has their own strategy. But no single player is a large percentage of that market share, even the largest few players would not be a very large number in terms of market share percentage. That gives a very strong indication of how fragmented the Indian market is and how large the Indian domestic consumption is. Today, in the apparel business, the whether it's ethnic wear, fast fashion or any other category, a large part of the business in the apparel business is still unorganized. And that shift to organized retail is going to boost the market share for everyone, not just for us. I mean, today, we are only two years old and a very small player in this retail business. But we when we approach this business, we do it with our own strategy. We have given very that was one of the reasons for the conservative growth. We want to get the business right, get the model right on a smaller scale.

35:14 We've indicated EBITDA loss percentage drop down of EBITDA by 150 basis points. And we stuck to that number in the first year of the business, and we've given a similar kind of number in the second year for this business, and we are confident that we will achieve that. We've already indicated earlier that ZCORD, for example, has seen some stores which are EBITDA positive at store level much earlier than expectation. This is because we approach the business in our way. And we believe that we want to get the business right. We understand product. And retail is, of course, new for us, but we're making good progress in that. And as we open more stores, we use the learnings from previous stores. We use technology to help us expand the business.

35:59 So while there is competition, there will be competition in whatever we do, but we believe that this is an important growth prospect for the company, and we'll take the company forward in the coming times. Last year, retail as a percentage was about 3% of the company's turnover with the given 160 crores that will that is going to increase to 5%, 67% what the company will do this year. So we are very confident of this new project, and we're very conservative in terms of how we want to open stores so that it doesn't impact the bottom line too much adversely. Company is already generating enough cash flow. All the growth is happening through internal accruals. So we are in a well positioned environment to be able to use the cash flow generated by internal resources to be able to expand the company into a new segment, which is related and which will take the company more consumer facing.

36:52 Yeah. But if we look starting either with governments, fast fashion or at least here, I, again, don't want to get into, you know, public and industry companies on con call like this. But they are facing, I can tell you, tremendous pressure in terms of the CapEx they want to take on. We are not seeing, you know, the ROIC on the same at all. And while your point is valid in terms of there being, you know, enough opportunity in the space in all these three segments, but if you look at the balance sheet and the profitability these companies are reporting, I mean, that's a challenge. So it's all I'm trying to say. That's my concern, actually.

37:41 So we are aware of the challenges of the market and how various people are approaching that challenge. We believe that there is value to be taken out from this segment, and that is why we have entered this segment. There is no point in entering a business without profitability, and that is something that, as a company, we value a lot in. So when we spend more money and do capital expense on a project, we there obviously has to be some kind of return. This is a new business for us. But so far, we've been very encouraged with the kind of response. And we have to approach it in our own way. And so far, it seems to be the case. Okay. So one last point. So how do you see the inflation, you know, which is seeping in the annual numbers? Basically, kind of what kind of recovery you see going forward, say, over the next year or so? Because these are challenging times.

38:34 It is very difficult to predict how the geopolitical scenario will point... Pan out. Still, the scenario is quite unstable, and therefore, it's difficult to give you a certain number. There has been a sharp increase in raw material prices. And as a brand, we have been able to pass on some part of it to the consumer, and that normally is a gradual process. So as and when we move forward, we see how things are and how things pan out and accordingly take the required decisions. We have always had an EBITDA guidance of about 14%. It is we believe that it is too early to change that guidance because there is a lot of uncertainty. This 14%, obviously, is without the 150 basis point drop. So far, we want to stick to that number and then see how it goes, obviously, with this uncertainty being there.

39:22 But I don't think that I mean, as the market pans out, that is for everyone. So we have to, as an industry, face it and then take the required actions. So if you were to sorry, just on the last point. In terms of quantifying the raw material inflation, have you seen in the past also such instances because the company has such a long standing history? And how are you able to come out of that? Yes. See, all these cycles are they're all cyclical in nature. It can never be permanent. There have been many instances where raw materials have shot up drastically. COVID also being one of the most recent ones where there have been drastic increases, there's been absolutely no demand. And the company has come out of it even stronger than when we before COVID. So I think the history of the company, the strong position of the company in the fabric and the traditional business and the strong cash flow the company generates helps us navigate these difficult times and also helps us to establish new businesses like your concern earlier.

40:27 Thank you so much. Wish you all the well. Thank you so much. You. Participants, if you wish to ask a question, you may press star and one. The next question is from the line of Soumya Raghuanshi from Nilva Securities. Please go ahead. Good afternoon, sir. Thank you so much for taking my question. So management has stated that the larger format for z code stores were delivering better outcomes than smaller stores. Has this trend continued? Or does it influence your future store expansion strategy? Yes, sir. That is a trend that we are seeing very clearly because the main reason for that is that the product portfolio and the offering to the consumer that we have in ZCORD is a very large one. There is men's, women's, kids, there is beauty products, footwear, fragrances. So there's a lot of variety. It's a complete lifestyle store And to be able to give the consumer a better ambiance and display everything in a proper way, we feel that, that kind of store size is very important. Obviously, when you go to malls, then sometimes you have to compromise on that.

41:40 Plus, you get a larger single flow plate, which helps us display better. So it's a mixed variety, but definitely, the larger flow plates help us be able to present ourselves better. Okay, sir. Okay. Just last question from my end. The retail business continues to require investments. While the core business generates strong cash flows, how are you thinking about balancing growth investments, dividends and future shareholder returns over next two two, three years? So if I look at the history, then the company has been giving continuous dividend every year, and that has only been increasing over a period of time. That has been what has the the company has been doing over the past so many years. Now, of course, this new retail business requires capital expense, but that capital allocation also is very prudent in a very limited manner. We spend about INR 1 to 1.5 crores of CapEx and security of furniture and security deposit per store and about INR $70.80 lakhs of inventory that roughly that a store needs. So that also is on a very conservative and a tight budget.

42:50 So as we move forward, I don't see that the internal accruals, the cash flow generated by the company every year is significantly more than the requirement for the retail expansion. So of course, how the dividend and how the returns pan out is something the Board takes a call every quarter. But so far, we've been able to manage that well. Okay, sir. All right. So that's it from my side. Thank you. Thank you. The next question is from the line of Shalin Seth from SIYSILF. Please go ahead. Hi. Good morning. Good sorry to interrupt you, sir. Shalin, your voice is not audible. It's breaking.

43:42 Hello? Hello? Mister Shalim, can you hear me? Mister? We move on to the next participant. The next question is from the line of from grid security.

44:30 Please go ahead. Hello. Am I audible? Yes, sir. You're audible. Yeah. So I have a few setup questions. So firstly, the EBITDA margins have declined y o y despite healthy revenue growth. So, like, was the pry... Was this pressure primarily due to retail investments or gross margin contraction, higher employee costs or the marketing spends? So the largest part of the decline in EBITDA has been the raw material costs that have paid apart. Of course, retail has been a part to play, but that is well within our budget that we have indicated earlier, but the raw material has been the largest cost. Okay. Okay. Understood. And also, the retail expansion continues to be funded through internal accruals.

45:20 So as the SOAR network scales further, do you expect the funding strategy to remain unchanged? That is something that we'll have to take a call. We so far, we've been indicating on an annual basis. This year, when we we've given a target to reach about 70 stores at the end of the year, that we believe will be all internally funded. For the next year, we still have to devise an indicator plan for opening stores. And accordingly, we'll also tell you how that will be funded. Got it. Got it. And lastly, so I just wanted to know, like, are tier two and tier three markets continuing to grow faster than the larger cities? And also, how are the consumer spending patterns evolving over the premium and value segments?

46:08 It's difficult to tell you whether Tier two and we are growing faster than the larger cities because the traditional business on the fabric side is largely in the Tier two, three cities, whereas the retail business that we have now is more metro oriented. Most of the stores are in Bangalore, Chennai and Hyderabad. So I mean markets are looking good. The festive season, it seems promising. We've given increased revenue guidance, which indicates our confidence in the business and the market at the moment. So we have a very bullish on how on the guidance that we've given. Due to time constraints, we take that as the last question. I would now like to hand the conference over to Divanshi for the closing comments.

46:56 Thank you. And I would like to thank the management for taking the time out for this conference call today, and also thank all the participants. On behalf of MUFG Entyne, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.