Avenue Supermarts Limited (DMART) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Avenue Supermarts Limited Annual Conference Call. [Operator Instructions] I now hand the conference over to Mr. Rushabh Ghiya. Thank you, and over to you, sir.

Thank you. Good morning, all. Welcome to our Annual Investor and Analyst conference call. I have on call with me Mr. Neville Noronha, our MD and CEO; Mr. Anshul Asawa, CEO Designate; Mr. Ramakant Baheti, CFO, Group CFO; Mr. Niladri Deb, CFO, Avenue Supermarts Limited; and Mr. Vikram Dasu, Avenue E-Commerce Limited. We hope that you've had a chance to look at the presentation, which was uploaded on the exchanges as well as our website. We will start the call with Neville briefly taking us through the presentation. And post that, we will open the session for the Q&A. Before that, I would just like to draw your attention to the safe harbor statement for good governance, and then I will hand over the call. Thank you. Over to you, Neville.

Thank you, Rushabh. As has been a template every year, we will rush through the presentation, which is already uploaded on the exchange, and then we'll open it for Q&A. I will take the first few pages to broadly give you a view of the business and the operating and financial summary will be then taken by Niladri, our CFO. If we go to Page 5. So just to give a broad sense and color about how we think about the business. I think the last year, we would say, in spite of the competitive context in the offline and the online space, our business has been resilient overall and delivering us the desired growth rates. As far as share of revenue is concerned between food, nonfood, general merchandise and apparel, again, has remained reasonably consistent, and we are quite happy with the outcomes. Obviously, there's opportunities to do better, and we can talk more as we take questions. But broadly, the sense is that resilient, competing very well, and we see a tremendous headroom to grow both on the offline and the online channel, but obviously, doing it our own methodical way of growing the business. Go to the next page. Again, gives you a good consistent view about how we grow. So if you look at how we've added stores, it has been an even addition across all states like we've always spoken about because it gives us a better sense on the customer profiling and also operating leverage gets better and better if we have more and more stores opening in the same region. So we've remained true to that concept. But no doubt, there is a huge opportunity to grow in the North of India, and that's where the white spaces are, and we'll talk more about that as we take questions. Go to Page 6, DMart Ready business. Again, like I mentioned in my Q4 comments, I think it has been a year of evaluation, reflection. While some of you may think that, that should have been the year for speed or accelerated expansion of e-commerce, we looked at it in a different way because we pivoted from the pickup plus home delivery to a more focused home delivery business because that's how the market evolved. And I think we have something -- some interesting things to talk about on that topic. And we are more confident now about how we should approach the DMart Ready business in the near future. So that's why we've maintained -- in fact, we are now actually in 24 cities. We've withdrawn from 1 city. But like I said, we'll talk more about that. Let me go to Page 8. We've opened 50 stores last year, and we hope to continue the acceleration and actually try and open as many more than we have opened in the past. Like we've always said that the right method of expansion in the offline space is to, on an average, every year, at least open 10% to 15% or maybe 10% to 20% of your base stores every year. So that allows us to get a good CAGR growth rate on an overall revenue standpoint. We continue to say that India is a huge, huge opportunity from an overall retail space perspective for value retail for a format like D-Mart, and we continue to remain very, very bullish on the offline space. And also, we see a lot of opportunity in the online space. But since we're talking about store additions right now, we believe that we have an immense potential to grow in the country across pop strata. So we remain consistent to that. Before we go to the operating and financial summary, since this is my last session or the analyst meet under this title that I hold, I just want to take a moment to say thank you to all of you for being a tremendous support and also to kindle that alternate thinking through the Q&A, which I thoroughly enjoyed with each one of you. So thank you so much for pushing us harder and also patiently listening to our responses and appreciating what we have been doing for so many years. Thank you so much. And with that, I hand over the next session to be done by Niladri, our CFO. Thank you.

Thank you, Neville. Good morning, everybody. I move to Slide #10, which is the operating financial summary. We had about INR 35.3 crore bill cuts in the -- just gone by year. Like-for-like growth for 24 months plus stores is about 8.4%. We added 2 million square feet of operating space and our revenue from sales per square feet came at about close to INR 34,000 per square feet. On Slide 11, we have mentioned our revenue from operations disclosed earlier, INR 57,790 crores, EBITDA margin of 7.9%, a PAT margin of 5.1%, and we generated net cash from operations of INR 3,700 crores plus. On the days inventory, days payable, so we continue to have inventory close to 31 days and payables continue to be tight at about 7.2 days. We have historically maintained a 7 to 8 days payable terms across. Debt equity ratio is negligible because the debt that you see on the balance sheet is only due to reclassification of AS116 assets, the leased one. Fixed assets turnover came in at 3.4. Inventory turnover ratio was 13.6x. And the return on net worth and return on capital employed came in, respectively, at 14.1% and 17.8%, a slight moderation from the prior year numbers. Moving to Slide 13. The stand-alone sales grew by 16.7%, EBITDA grew by 10.8% and PAT, excluding tax gain, grew by 7.3%. We delivered PAT of INR 2,891 crores, excluding the tax gain. Including tax was about INR 2,927 crores. On a consol basis, the sales was about INR 59,358 crores and the PAT including tax was about INR 2,707 crores, 4.6%. We have also listed in Slide 14, financials of the key subsidiaries for us. Avenue E-Commerce grew sales about 21%, and the PAT came in slightly -- the loss slightly widened to about 7% was the loss at INR 247 crores. Align Retail, which is our subsidiary business, which does packaging of grocery items, grew about 19%. The PAT grew by about 13%. And Food Plaza, the food stalls that we have inside our stores, they grew by about 28%, though we registered a loss because of expansionary phase of the business. That's all on the operating and financial summary.

We can open the session for Q&A now. Ray, you can continue now.

[Operator Instructions] First question is from Abneesh Roy from Nuvama.

My first question is to CEO-designate, Anshul. So you spent 30 years in Unilever, an FMCG company. Now FMCG company versus retail overall landscape is very different. I wanted to understand how do you see this 4 to 5 months which you already spent in DMart and now you'll be taking over as the CEO in some months. So I wanted to understand from an experience perspective and overall landscape, what will be your thoughts? What made you join a retail sector? Last 10 years in Unilever, you spent in Europe and 10 months in Thailand. In last 10 years, India has changed dramatically. And we did see another FMCG company CEO changes happen. So I wanted to understand, given India has changed dramatically, how do you see -- what will be your initial thoughts on the massive consumption change which has happened? And what will be your key thoughts from that? And also the priority as CEO will be taking over -- will the priority be more on doing the same, but increase the speed given now you have entered the UP market? That is the first question.

Thank you. Thank you, Abneesh, and good morning, everyone. It's my first time here. So I'm looking forward to engaging with all of you in the years ahead. Abneesh, you asked -- you made a lot of comments about me and my experience. I'll focus a little bit on a couple of things which I picked up from your question. So first and foremost, yes, indeed, it's been 10 years that I've been away from India. I'm coming back after 10 years, and India has changed quite dramatically. I personally have enjoyed the dynamism that this market, the people here have and also the opportunities that exist in business and especially in a business like retail, modern retail that D-Mart is part of. Now 30 years in an FMCG company, a company like Unilever have been highly enriching, lots of different experiences across geographies. And I think one thing remains consistent between, I think, FMCG companies and now that I've moved to DMart, organizations succeed only when they are customer-centric. And I think that is true in FMCG, and that's even more important in retail. In my last 4 months that I've spent in DMart, and I must say that we've had between Neville and myself, a very structured and planned approach of this transition. So the first 4 or 5 months, I've really spent in trying to understand the organization, the operations, the people and the culture of this business. And I've been through a fair amount of -- I've spent a fair amount of time in stores, in the distribution centers. I've traveled now into many of our key markets and met a lot of people. And I think that has really helped me in these last 4 months to understand this organization and of course, also understand the opportunity that lies ahead. So I think that has been very, very well planned. And I think also during the course of the day, we'll also possibly talk about the transition time lines. But so far, whatever we have planned between Neville, myself and the Board, we are on track as far as that plan is concerned. Now I think you also mentioned if there is anything different or anything that I am planning to do as I transition into this role. So at this point of time, very initial observations. I think the business is on very, very strong fundamentals. It's been built over the last 20 years, of course, with the vision and leadership of Mr. Damani, but also a very strong management of Neville and his team. And what I see at least is that these fundamentals and the culture of this organization doesn't really need to change. Yes, of course, there are opportunities to improve. There are opportunities to accelerate, and we can talk about them in the coming days. But what I see is a strong business, which now needs to be scaled up, a business where we need to have capabilities spread across more and more of our geographies. We need to have a talent pipeline, which is able to tap this opportunity that lies ahead of us.

My last question will be to Neville. Neville, if I see Slide #5, 2 of your categories have declined as a percentage of sales. So Foods has gained. So if you could elaborate the dip in the margins that you have seen in the last 1 year, how much of that is because of the mix change? So Foods is higher by 78 bps as a mix, and we are seeing, say, 40 bps drop in terms of the EBITDA margin. If you can explain that bit? Second related question is from FMCG yardstick. I do see most FMCG companies now speaking more on a profitable growth rather than just promotion. Of course, toothpaste is one clear aberration. So in your stores, are you also seeing now that more -- it's more of an innovation-led drive and less competition, say, from the local players from an FMCG perspective, if you could highlight that -- is there more rational competition? And are national players coming back in the core nonfoods and core foods category in both the categories?

So Abneesh, broadly, on the gross margin, I think our gross margins have slightly been better this year vis-a-vis last year. And if there's been a slight deterioration from a perspective of what we aspired to what we delivered, I think there are 2 things that are happening and which has remained consistent throughout that there is continuous competition in the FMCG space. From a price-led, discounting-led perspective, FMCG continues to be very, very competitive on pricing. And at the same time, on the non-FMCG piece, okay, the mix is -- within the non-FMCG, the mix is shifting more towards lower-priced products. So to that extent, there has been a mix -- margin mix impact. But overall, there hasn't been any major impact -- adverse impact, which we need to worry about. In general, like I said earlier also, the alternate modern trade formats are emerging. And from -- within that, when you look at the general merchandise and apparel segment, obviously, we see that in the apparel segment, there is more innovation and there is more competition. So apparel continues to be a little softer compared to general merchandise. But like I mentioned even earlier, apparel is a smaller contributor to the GM&A business. So it doesn't affect the P&L to that extent, yes. So I hope I've answered that question. On the overall scheme of things of innovation-led opportunities, I think the D2C brands are doing a significantly better job than the incumbent large FMCG companies. And wherever we see an opportunity to capture that to the offline and the online space, we try and do that. Large FMCG companies are trying hard, but I think there are fundamental challenges there, and we all know about that. But yes, from an innovation standpoint, we see newer companies doing a better job there, number one. Number two, as a platform, DMart as a platform, I think we operate on the principle of pricing or the principle of value. So the format automatically creates a level playing field for anybody who has good products and that can deliver a great value because our philosophy is simple. We have a very clear-cut principle about how much margin we should retain. Everything else goes to the customer. So whoever -- whichever company has a great product, has understood the segmentation clearly, okay, DMart is a platform to be because we are fair to everyone. It doesn't matter who's big, who's small. So it's a great equalizing platform on which if the product is great, customers like it, it will sell. That's the broad philosophy. I hope I've answered the question.

One last follow-up, and I'll end there. So when I see your Foods, that is an interesting mix of commoditized categories and branded FMCG kind of category. So I wanted to understand the logic of putting both together because both are so different, right? On the one hand, you have groceries, fruits and vegetables, which are, I think, completely commoditized and then dairy and staples also, which are almost commoditized. -- putting that in the same bucket, which has hardcore branded foods, what is the logic behind that? And from a growth perspective, is there something which is different? Ideally soon to have the branded part of this bucket in the nonfood. What is the logic behind separating those 2?

What do you mean by doing both? We've been doing both for -- since our inception. I mean these I've not understood the question. We really don't look at it from a brand versus nonbrand. We are not a FMCG company. We're a retailer. So we will ensure that whatever customer wants is available. In fact, what does the value retailer really try to do? I mean we love products which keep very, very small markups because of the branding strength, right? That's our job. I mean, how do you keep the pricing under control. The retailer does that job, a value retailer does that job. So in fact, I would be very happy to sell everything commoditized where it's cost of production plus a small margin and give to the customer. So I would think about it the other way around. Makes sense?

No, why I asked this was if you see in the first category of Foods, which is 57% of your category and which is growing also, we don't get a clear picture. Is the fruits and vegetables or the grocery or the staples part which is driving growth or say the branded because the margin profile will be different in both these 2, within the same bucket.

Yes, we don't disclose it, Abneesh. I now get what you are trying to ask. But we are selling what the customer wants. Margin is secondary. First, what customer wants is what we deliver.

The next question is from Aditya Soman from CLSA.

And Neville, firstly, thanks for your very honest answers and always engaging conversations. So we'll miss you on these calls. But in terms of questions, 2 here. Firstly, you talked about sort of the white spaces in North India, and we saw you open a store or 2 in UP. So can you talk more about how this new cluster will evolve for you? Any differences that you're seeing compared with the earlier clusters that you have opened as you expanded in other states in North India? And what took you -- or what finally made you make that decision to enter a state like UP? And then the second question is on private labels or exclusive brands, as you call them. So you have 2 types, obviously, one are the ones that are distributed by Align Retail, which are mostly the DMart Ready products. And then there are these exclusive brands that I see you build. Any sense on the scale of the brands outside of Align Retail since the Align Retail ones we can calculate, but the ones outside of Align Retail, I see that in terms of shelf space, they are now very prominent across home and personal care categories. So those are my questions.

Thanks, Aditya. Yes, I'll take 2 questions separately. So obviously, North India and UP being a very large part of it, that's where large clusters of population is there, and we also have very, very large cities there, which we totally -- I mean, I will not say defocused, but because we are a West focused and a South-focused retailer, we came in here late. So we see a huge opportunity. If you want to accelerate store expansion, which probably over the next 6 to 8 months, I'm going to put disproportionate time personally also because North of India is what I'm going to handle from a real estate acquisition standpoint. So that's the whole thing. That's the logical reason why we are now doubling our bets on North India. And on the follow-on question related to that, on what are we seeing different in North India? Actually, the beauty about the model is that it works everywhere. I mean the fact that DMart now is equally successful in the Punjab as well as the Tamil Nadu as well as Rajasthan, Gujarat or in AP, in fact, simplifies a lot of things from an operating standpoint. So I think that is very refreshing that our model is acceptable everywhere. So in fact, going to newer states is not complicating thing, except for supply chain, obviously. And we know how to figure that out. But from a customer standpoint or consumer standpoint, the more and more we are going and growing to newer places, it is building more and more confidence for us that this model works everywhere, right? So that's to answer the first question. The second question on private label, I've been -- I've asked this question multiple times. I respond in the same way all the times and this time also, I'll answer the same way that private label optically seems to be a very, very interesting large opportunity as a margin maximizer. And yes, we do agree with that, but it's a long game. It needs a lot of effort. You have to run this business like an FMCG business, but without the overheads of the FMCG business, if you know what I mean. So it's not very easy. And you are competing with the strongest of brands and the brightest of minds, which retail has a limitation. So private label has great opportunity if there is a decent ecosystem of high-quality manufacturers available there to deliver the products to us at the right cost. And then India, like I've always said, has very, very smart entrepreneurs. We tend to look at the FMCG segment only from the MNCs or only from the top 3 or 4 FMCG companies who probably will have decent margins. But there are a lot of local entrepreneurs who run the FMCG business with very strong brands at decent margins. So we have to look at it from an overall perspective and then decide does this subsegment really have an opportunity to have a private label. So from that standpoint, it's not as simple or as easy as somebody else would imagine. We don't take it -- we don't consider it to be that easy. So it will be a slow and steady approach to private label. But in general, if you want a broad color, I think we are reasonably pleased with how our private label team is running the business. So from that extent, I think we are pretty happy about our progress. But I can't give you numbers, I'm just giving you broad color.

Yes. Fair enough, Neville. I mean just maybe on the private label point, just pushing on a little bit. I mean, if I look at a category like liquid detergents, fairly large category, growing very rapidly. I've seen that now you have 2 brands operating in that space, I think, and which is a space, again, multiple new entrants. So as you mentioned before, some of these D2C brands also pushing in that space. With all these D2C brands, obviously, a lot of these are using same manufacturing facilities that I see that you are using for your private brand. So does that mean that you are already -- I mean, there are already manufacturers that are coming up as we push away from, let's say, the 2 or 3 dominant brands in the past, and that gives you an opportunity, maybe not like in very short term, but over a 5-, 7-year period to grow that business meaningfully.

So actually Aditya, I think a lovely category you picked up. In fact, that makes my response that much more easier. If you look at the liquid detergent category, right, it was always being dominant by a premium high selling price per liter kind of category, right, the 2 largest MNCs. And certainly, what did you see? You saw a huge disruption there. You had some other guys coming in and positioning it at the mid-tier segment and the cost per liter just plummeted. So when you have FMCG companies operating like that with that kind of razor-sharp focus, looking at segmentation opportunities and all of that. And these are categories which are getting created. See, private label has a space where the category is already very, very well evolved, okay? It has been there for a very long time. Strong brands have got created. And when brands become extremely strong, they keep fatter margins. And they're very consistent month-on-month, year-on-year, growing with a very good decent sized base. It is in those places that a private label has an opportunity. Creating categories is not our job. Creating categories is a brand company's job, okay? We should be focused on being a very strong retail operator. First priority is running the retail business, not to create brands or not to create a private label portfolio. So I hope I've answered the question, especially on new categories. I always tell my team that beware, don't even go there. That is the job of the FMCG company, not us.

Understand, very clear. And lastly, all the best for whatever role you take up next.

The next question is from Sheela Rathi from Morgan Stanley.

Just a follow-up on private label because you had a discussion on that. While I hear you on the FMCG side, but when you think about general merchandise and apparel part of our portfolio, is there a case to take private label share higher at the earliest? That was my first question.

Yes. Sheela, I've answered this over the last 4 to 5 years. There is no reason for you to see any of the products that are on shelf on general merchant, merchandise and apparel to not be a private label. They are actually all private labels or pseudo private label. Some manufacturer putting some -- his own label doesn't allow him to charge any major premium. When we negotiate with them, we always negotiate cost of manufacturing, his margin and the selling price to us. That is our margin, and that's how it is. So when you walk into a DMart store and you look at the apparel or you look at the general merchandise, a very small component of that is really a brand per se brand from the true sense of an FMCG branding standpoint. And I've commented on that earlier also.

So largely, it is close to being a private label for us. That's what you're trying to say.

Yes, yes.

Second question, you talked about new D2C brands doing better than FMCG. Now what are your thoughts on onboarding D2C brands on the platform and particularly premium D2C brands on the FMCG side? Because I see that is still missing at least on the DMart Ready platform.

That's because they have their own perception. I don't -- I'm not complaining. See, D2C brands, you see the premium guys, they are very clear about their positioning, right? So for all elite residents or businessmen in India, they all think that DMart is meant for the middle class and the lower middle class, right? That's the perception. I can't help it. So they decide not to come. In fact, we break our head chasing them, why don't you launch and they refuse to launch, by the way. So it's not -- it's the other way round.

So is the reality different that is the DMart Ready customer is different from the DMart offline customer?

Yes, but I'll answer that question more holistically. When you look at a DMart shopper, a DMart shopper attracts all pop strata of society within a 3 to 5-kilometer radius. It's a misconception that's only for middle class and lower middle, okay? But in typical any pop strata structure or any structure, you have a pyramid, right? So DMart Shoppers reflects the social economic strata of society within that physical radius. So obviously, optically, when you see in a DMart store, what do you see? You will see relatively lesser rich people shopping compared to the middle class and the lower middle class, right? So that's one point I would like to make. On DMart Ready, DMart Ready obviously is a relatively higher order socioeconomic strata of society who would like the material to come to the store and are not as price sensitive as a DMart store shopper. So that's the difference. And one more question -- one more part of the question, which will kind of close the whole thing. We do not like to launch a very, very small revenue sized D2C brand. So whenever a small revenue sized D2C brand comes to us, we tell them, please build decent size, okay? Because decent revenue size indicates that it is acceptable to a larger ecosystem of consumers because only those kind of products make sense to us in our store format as well as our e-commerce format. So to that extent, we are different. We don't believe in the long tail, even on the e-commerce format.

Sorry, just one clarification. So you're saying that if we launch a new D2C brand, it has to be launched both online and offline or it may not be...

Not necessary. Not necessary. They're mutually exclusive.

Right. Okay. Now just a couple of questions on the recent quarter, Neville. First is we talked about deflation in staples, which resulted in some impact to our P&L. And just want to understand that in the past, what kind of inflationary benefit we have seen? I mean, how should we think of this playing out and how it has played out in the past?

I'll make an attempt to answer this. But broadly, I'll tell you, whenever inflation -- in fact, I was just reviewing the commodity business yesterday, it's fascinating when we see some of these data, but I'll just give you some color without giving you any specific numbers. But in general, what happens is whenever inflation is in the range of, say, 5% to 7%, consumption trends don't change so much at the product or category level -- when consumption -- when inflation rates go double digit or higher, you see a huge swing on consumption. Like I'll just give you one example that I was reviewing yesterday, coconuts. Coconuts inflation is 50%. So when inflation went up by 50%, consumption dropped by some 20% -- 20%, 25% in volume terms. So India continues to be an extremely value-conscious shopper buyer. And this plays out, we see this even in fruits and vegetables. So anybody who says that we use analytics to review and forecast how much of vegetables I need for the next year will go horribly wrong because it is totally dependent on the pricing. So you will always have a range of 3 or 5 vegetables which need to be sold at a particular rate per kg. So if they don't fall within that, something else sells, whoever substitutes that, that sells more. So from that standpoint, Indian consumer is very, very price sensitive. Like for example, think about it, how much of coconut is consumed in your -- as a value to the overall grocery basket value. It will be very -- it is a small percentage, but still consumption drops. So that's the broad color of it.

So Neville, we have seen a -- I mean, the contra benefit right now. Is that what you're saying that there is deflation in staples. So probably there is a volume pickup, which you would have also noticed.

Exactly huge volume pickup. So whenever there is a deflation, you get huge volume pickup in those categories because people buy more of that and substitute something else.

Okay. My final question is we -- even in the last quarter, we talked about that we are making investments to build a superior tech-related investments for e-commerce. Just want to understand that I believe it's going to be ongoing, but I mean, to what extent this is going to continue for us to achieve a certain scale and scale up the e-commerce business faster? I mean, how long we will be making these investments to accelerate the pedal there?

So our scale up on e-commerce has got nothing to do with the tech investment. Our tech ecosystem is very, very robust. It works really well. I don't think it's related to that. It is the choice that the organization has taken in terms of what should be the speed and scale at which the e-commerce business has to grow. So it is more a decision-making thought process rather than the capability of buildup. All tech is already built up. The tech works well, everything is fine. And it's also scalable. And I think I spoke about that even last year that there is no limitation on the tech side. But it's a choice that the organization has taken in terms of how it has to calibrate the growth for the e-commerce business.

Next question is from Amit Sachdeva from UBS. Amit, we can't hear you. If you're on a headset, request you to use the handset.

Handset, is it? One second. Can you hear me now?

Much better, yes.

Okay. I'll speak louder. I would say thank you so much, Neville, for the opportunity and thank you for your leadership. I find it very encouraging to hear that there's a greater focus on the network rollout. So my first question is that given this impetus, given the whole ecosystem around retail is changing, does that change the ambition on structural growth that you're targeting for, say, next 5 years? I mean we are [indiscernible] 15% would be store growth. That's the kind of every year you want to target. That's [indiscernible] fast as well. Does that change any picture? It's more of...

Amit, sorry, your voice is not very clear. Amit, I'm sorry, but your voice is not very clear. Just can you repeat the question?

I think you're in a low network area. So...

Do you want to dial in back? We can carry on with some other questions and let you join in as well.

Let me dial again. Just one second in case it's not very clear. Let me dial back, please.

Yes. We'll move to the next question. Next question is from Keshav Bahety from Jefferies.

This is Vivek. Neville, firstly, thank you for a great letter. Really enjoyed reading it. One thing I was very curious to ask you, when you look back, are there any areas that you think you could have -- I mean, DMart has obviously done extremely well under your leadership. But are there any areas that you think you could have probably not done better, but done things differently when you look back?

I think better will be a better thing to say. Differently, no. I think if I could have -- and this question I've asked myself multiple times over so many years. And I don't think I would have done anything differently. We are all very proud of what we've created. But better, I can definitely say this that we could have accelerated store expansion better. So -- and I think that job is unfinished. So I'll continue to chase that for whatever period I'm here, and we'll accelerate store expansion. See, Vivek, we are very, very clear about this, that great respect for what has happened in the quick commerce space. In fact, I acknowledge this a couple of years back also saying that this will become a very large business. So great stuff. They've done amazing work. But the country with its size of population, diversity, geographical space, all of that creates also a huge opportunity for a brick-and-mortar business, an efficient brick-and-mortar business like ours. So we continue to remain very, very bullish on the brick-and-mortar business. That doesn't mean that we don't understand what are the opportunities on the online space. We will also play on the online space, but through our own model. Like I've spoken earlier, we will create an online model which suits us, okay? We want to create something which is unique and hard to copy. That's our principle. That has always been our principle, right? So -- but coming back, the only thing I could have done better is probably accelerate store expansion more. We should have been maybe 600 stores by now or maybe 650 stores by now. So to that extent, yes, there is -- that could have been better.

Okay. Got it. And in that context, and I'll come to quick commerce for sure. But in that context, do you think -- I mean, you have -- I would call it still an experiment. So you have experimented with long leases. Do you think that could have been an answer and that could be the answer going ahead?

No, Vivek. I answered that earlier in the previous analyst meets also that long lease doesn't solve the problem of availability of high quality or decent quality real estate. We just need to hunker down and put in more bodies and more minds and more acceleration on property acquisition, which we continue to do. Like I said earlier, see, real estate is a very, very micro market business, right? You don't have -- people are trying, but you don't have a pan-India real estate operator. So developers, land acquisition, everybody tries to focus on their micro markets, not -- in fact, somebody recently told me it's not even cities. A lot of the developers are like only operating in Kandivali-Borivali or some are only around in Chembur, so things like that. I think from that perspective that here is a retailer. It's a retailer. It's not even a real estate developer, and he's trying to acquire real estate all across the country. It's not easy. But we like to do stuff that is difficult because then that's how you create more. So yes, so that's the way we think about it.

Okay. And the last follow-up on this. So Neville, you -- so the reason of owning the land is mainly because of the constraint in securing long leases. Is that the reason?

One of the reasons.

Sorry?

It's one of the reasons.

Which is what -- in case, let's say for whatever reason, because you have -- I'm sure you will have tremendous amount of feet on street in the areas that you operate in. Even if there are long leases, I'm not sure you will change -- you will want to have those long leases even if the real estate is good, which means that it is beyond just the availability, right?

Yes. So obviously, availability and this has come from the promoter thinking, right? I mean we are there for good. I mean, we want this business to survive beyond our lifespans or our children's lifespans. That's the thinking. That's all come from Mr. Damani. And I mean I was a kid when I joined DMart, I was just 28 years old. And imbibed those values impact, we saw that, that works. And we think that we strongly believe in that principle. And at the same time, I mean that doesn't prevent us from being agile and everything else about how the business has to be run. But the relationship strategy is very clear that we are there for good.

Perfect. This is useful. Second on quick commerce, everyone's favorite subject. So you mentioned that India is not one, there are different set of customers. But when I just purely sitting in 2024, 2025, when I look at the products listed on your platform, DMart Ready versus the quick commerce platform and at least in terms of pricing, whether of individual products or as a basket, it's not very different. So as a user, when I want to -- even if I'm in a relatively smaller town as compared to Mumbai, Delhi, why -- I mean, what's the proposition that you offer if the competition offer around the same pricing, but the convenience of 10 minutes as against -- in your case, it's still a bit elongated cycle. So is this -- you expect this quick commerce competition to be very different in the next decade, which is why you are stuck to your gums? Or is there something else that you will say, which is a different proposition? Because pricing-wise, you are not the cheapest, I would say, or very close to where the quick commerce folks operate at?

So Vivek, I'll answer this question a little differently because whether it will be your word versus my word on the pricing. What is more important to look at is how am I doing as a business, okay? Now if you look at the last 2 years' trend, in fact, the last year's trend where there was so much of intensity of quick commerce, what has happened to our business? What has happened to the DMart Ready business? In fact, we have to see it in the context of the fact that we were shut down so many other pickup points. And at a point in time, pickup points as a business was a reasonably large share of the overall business. Today, the dominant share of our business is home delivery. So moment we shut down the pickup points, almost all or more of the business migrated to home delivery. Now we have delivered a 21% or 22% growth rate vis-a-vis last year purely on the ready business, okay? So we are very objective, hopeless objective analysis on our performance. Numbers say everything, right? So if our e-commerce business has grown at this level. And that is in spite of the limitation. We don't have enough fulfillment centers. The more fulfillment centers we open closer to the markets of delivery, more we will grow. So I think we are okay. We are charting our own course, and we are fine. So I don't see -- had our business declined or had our business been flat, then you would have said, look, our proposition is not working within the realm of how quick commerce is evolving. It's not.

Okay. Okay. And pardon me for just taking it a step further. If I say, Neville, that quick commerce, you reduce discounts and taxes and everything, so GOV to NOV, NOV to net revenues, we get to a market size of about, give or take, about INR 70,000 crores. Now you can say that, yes, you have grown 20%. But is that enough in an industry which is growing like 100%. So again, I know market shares have no meaning. But end of the day, you have underperformed and fairly meaningfully versus the peers, right, in a way? How do you...

I have no comment on that. We will set up our own course. You're absolutely right. This is your derivation on the numbers. But we will run the business the way we think is most right from a long-term perspective. Totally agree with what you're saying from that standpoint. But my answer more specifically is that one of the best ways to counter quick commerce is not actually really digital. One of the best ways to counter quick commerce is to have more and more DMart stores because from a value proposition, we are -- we have an amazing positioning. So for a value customer who is spending INR 5,000 or INR 10,000 a month, she or he can really see that they will save significantly more when they come to the store. At the same time, yes, there is a top 20%, 25% of the population of a city who wouldn't mind paying a little bit extra to get the product delivered at home. And we are trying to bridge that gap. So let's look at it from a standpoint that at one end, you have high convenience, high price point. And the other end is DMart stores, which is deep value, but obviously, it's not as convenient, right? But it's deep, deep value. We see a huge opportunity in between, okay, where we deliver the products at home, but at a decent value. That's what we're trying to achieve.

Next question is from Amit Seva from UBS. Am I better now? -- thank you for your leadership for all these years. And my question first was that you made 2 very interesting comments that we should have been 600 stores by now. And second thing you said is that the best way to respond to quick commerce is to open more stores. So I think that's a very encouraging thing to hear. But in that context, I also quote you that you want to open stores 10% to 15% growth every year. Now this is more or less what you did in the past. So in that sense, I want to check with you, given the new realities, has that growth ambition changed a bit? Because there is an opportunity to accelerate and you yourself acknowledge that to counter that, you need to grow faster. So in that sense, that 10% to 15% kind of network area is still a very kind of, I would say, underwhelming ambition, if I may say, or in fact, the real ambition is larger and you just want to give us a number, so that's 10% to 15% is the number, or where I'm coming from is, should we go back to 20% growth trajectory rather than staying at 17%, 18%? That's the question number one. And what it would take to get there?

So Amit, you've always been consistent with your pushing, and I appreciate that. And probably you could look at the management change from that perspective that while I want to focus on running the business, probably I'll have more time to focus on adding more and more stores. And I'm very confident that we'll have a significantly larger number of store openings in the times ahead. In fact, I'm very, very confident, very, very bullish that we will be able to accelerate. And it will have -- also have disproportionate time from my side to focus on this area.

Great. That's very, very good to hear. Just a related question, Neville, is that obviously, the marginal expansion would come largely in Tier 2, Tier 3 towns. And one of the key concerns that I've heard from many is that throughput in those stores would be probably lower than metro cities and hence, incremental revenue would be lower throughput and hence, although area expansion would grow, but at the same time, the net revenue growth would be slightly lower. Is this something that you resonate with that the revenue growth should perhaps have a little bit of lowering down impact on the overall growth trajectory? If I assume some SSE as well? Is this a fair understanding of how it will play out or some other dynamic we need to understand as well?

So Amit, I have mentioned this in previous analyst comments also that smaller the town, lesser the revenue per square feet, but then lesser the investment. End of the day, in a business, ROI is the key, right? So we look at ROI level. So that will continue to be the focus. And acceleration of store additions will mean a better CAGR on top line growth rate, right? And to your point, Amit, we may go on discussing about this, but like such as on our performance. So you'll see. I mean, so I think I haven't been as open about our future growth on store additions. I'm just giving you color that we will -- we are -- okay, let me put it this way. Considering what's happening in the country from a competitive context perspective, including QC, I think we will double down on our investments on store additions because we don't see our store financial metrics deteriorating because of online. I hope that makes sense.

Got it. No, that's very, very encouraging to hear, Navil. My second question is for a bit Anshul and you both. Now that the leadership change happens, my sense is that there is an opportunity to rethink about how organization was structured in the past and how organization will be structured in future? So in that sense, has the people angle will be different or the way category leadership assortment was designed from a people point of view. Is there a change there in the thinking? And if it is, then what three changes Anshul would see, which would be a staff departure from the past? And how we should think about the people leadership in managing that growth and transition? Have you made any leadership changes already? Or how are you thinking about that?

Amit, this is the way I think about this. Anshul, Managing Director till Jan end -- Jan 2026. I think it is not appropriate to ask this question to Anshul next year. There are a lot of discussions that we are having internally about what it should be. Anshul will have a free hand to run the business once he takes over. And obviously, he'll come on the table with his own ideas. Let him have that conversation with the Board and get a sense of what needs to be done. And I think this question is fair to be asked in the next analyst meet.

Fair enough. And just last bit, if I may. Given the quick commerce world has around with us, and if you ask any quick commerce people, they would tell you that the assortment is evolving every month and things are changing very rapidly and there's an exponential growth even in smaller towns as well. While they are picking up grocery business? Have you picked up some learnings that you need to change assortments and you could do a little bit different than what you've done in the past? Is there an assortment thinking changing because the environment is changing around you? Or we are still sticking to our principles of what the assortment could look like? Is there a change in general merchandise thought process and whether this business could evolve differently even though fashion is part of the plan? What I'm thinking is, are you making some real effort in changing the assortment mix? That's the question.

So Amit, this has always been the case throughout our 20, 25 years of a business that nothing remains static in this business. You are constantly observing what's happening around you online, offline, what products are selling, what are not selling well. I mean it's a continuous process. So our merchandising team's job, their basic existence is to look at this. You have to be relevant to the shopper and the consumer all the time. So it's nothing to do with just QC. But in general, we keep a watch on everything. And I just wanted to tell you that even for vendors, our job is to reduce friction for vendors. So anybody who wants to come to meet us to launch products, we try and make it as easy as possible. Like for example, we have a Tuesday walk-in. You don't need to have an appointment. So if you are not getting an appointment, you just walk in on a Tuesday unannounced. Obviously, your waiting time will be longer, but you just sit in the reception, somebody will be there. And you will just tell us the story about why your product should be launched. So are you a INR 50 crore brand? Are you a INR 100 crore brand? You just tell us -- we have some templates. And if they qualify, I mean they immediately get a meeting and the product is launched. So that's our job. I mean If you don't do that, you won't exist.

Next question is from Avi from Macquarie.

I wanted to first check with you on the DMart Ready business. At the start of the call, you said you had some updated thoughts, now after 2 years of consolidation, how are you looking at DMart Ready? What next phase that you're looking at, if you could share some color over there? And also on margins, last time you told us that there is a potential for improving gross margin here by looking at mix, but maybe it's not fallen through this year, but how should I look at that? If you could kind of share your thoughts there as well.

This is only for Ready, right, Avi?

Yes, yes. Only for Ready. Only for Ready.

Yes. So yes, I do remember saying something around on that -- on those lines for Ready, but then also there is a competitive context that plays out, right? So you have to compete from that standpoint. Broadly, what we feel is that the Ready business will not take -- will not make you lose too much of money. So that's one broad view that we have. From a cost of operation standpoint, also, we remain consistent with that view that there is an opportunity to reduce cost. But then if you are in the expansion phase, then that kind of gets postponed a bit. But in general, we believe that there is an opportunity to accelerate the fulfillment center and try and go closer and closer to the market. There could be an opportunity, like I said, to enhance margins. There could be an opportunity, but it's all dependent on the competitive context and the positioning of value that we continue to see. So I can't give any forward points of view on when will it be profitable or breakeven or all that. But broadly, we feel that this is a business that can be broken even in a couple of years. So that's broadly what we feel about this.

Got it. And if I'm correct, the niche that you're targeting is not this value with a bit of convenience on it, right? That's what you're essentially looking to provide for DMart Ready?

So broadly, our view is that over a period of time, customers will see the benefit of shopping or migrating from other platforms of e-commerce to us because they see value. And we will be focusing on delivering that in the most efficient way so that we can compete in the market and still account a small margin. That's the view.

Got it. Okay. The second bit is on the store addition. Now clearly, your comments are encouraging, even with North India coming back and your focus now being in it. Do you have a number in mind? Or should we look at 10 to 15 now going to 15 to 20? Any numbers there if you could share?

Yes. Very difficult, Avi. We've always said that we'll not be able to give precise numbers. But you'll see -- I mean, you'll see this is what we disclose on a quarterly basis or whatever is under the criteria of disclosures on store openings, you'll see the numbers coming. But I can't give you a number.

Even for next year, Neville, any range for store addition? Sorry, I'm pushing a bit but in case.

But I mean it won't be less than 50, right? I mean if you're talking so much about it...

Lastly, Neville, on the quick commerce bit. Now you've been clear that quick commerce has been a great story, but -- and there has been a potential that you had said at first, it can be 1%, 1.5% sales impact on same-store sales. Now I wanted to kind of get from you that given the performance seen in the last year, you think a lot of it is already seen for us and what we see in the numbers is a reflection of quick commerce plus a weak demand or that 1%, 1.5% was -- so I'm just trying to appreciate, is that behind us? Or how do you see that?

I'll again give you color without giving you any forward-looking statement. We had a gut feel. This is a gut feel we said 1.5%, right? Now if you look at Page 10, FY '24 versus FY '25 like-for-like, from 9.9%, we went to 8.4%. So more or less that. Now within that, if you look at city-wise, it's very interesting data. Depending on which city has what level of intensity on pricing or discounting, we see an impact in our stores, right? So these discounting come in waves. And when they come in waves, we also compete and then it does have a marginal impact to our like-for-like growth for those stores or those cities. But also, please appreciate, and this is a response not just to you but to the entire analyst community, that please remember that we also lose share to our own DMart Ready. Our DMart Ready is also very dominant. Like, for example, DMart Ready, now don't ask me how much it is percentage-wise, but DMart Ready is a very, very dominant share of D-Mart stores in Bombay, because that's where we started from. So our philosophy is very clear. We go where the customer wants us to go. So we will not try to restrict our growth in Ready business because it's going to make us lose our store in D-Mart stores. D-Mart stores will run on its own foundational principles and strength and Ready will run on its own. Considering the legacy and the thinking that the promoters have about the business, they are very clear that the business has to make money or at least come close to breaking even, okay? So that's the broad philosophy, and that's why it's a staggered approach to E-commerce. Otherwise -- and that's why the management is so obsessed on trying to reach or at least be close to breakeven so that we make -- we have a point of view on saying that, yes, we have to compete on the E-commerce business, too. So I hope I have given you a color.

Next question is from Arnab Mitra from Goldman Sachs.

My first question actually on quick commerce is slightly different that do you think there's anything differently you are doing in your offline business because of how big QC has become and it will become in the next 2 years in terms of service levels or anything of that sort? That's the first part. And secondly, on the DMart Ready, any work you have done on slotted versus immediate delivery? I know you have -- you earlier had a view of slotted delivery, but any refreshed thoughts on that? And not doing immediate delivery, is it largely a cost-related decision? Or are there other things that are going on there?

So if you're saying that should we deliver in the next 30 minutes or 20 minutes or 1 hour, obviously not. We don't do that. Can we do deliveries in the next 3 hours or the next 6 hours? Of course, yes. Our basket values are significantly larger. That, in fact, gives us a sense that customers like us. Customers who use us like us. That's very clear. The stickiness is awesome. So when you look at stickiness factor of DMart Ready vis-a-vis other online retailers, I think our stickiness is order of magnitude much larger than others. So people who know us love us. But not too many people shop with us because we don't spend that kind of money to acquire customers, okay? So that's one part. We don't believe in these jargons about slotted and non-slotted and all of that, right? We constantly are doing trials. And in fact, we already have around 11% or thereabouts of our orders being delivered in 3 hours. We have, what, 65% of our orders being delivered in 12 hours already, okay? We're making tremendous progress there. By the way, without impacting cost structures much, right? Our vision is to deliver almost all our orders in 6 hours. And I think for the basket value, see, the DMart Ready shopper is not shopping for immediacy, okay? So delivering in 6 hours is decent. It's good, and that's what we are targeting. So -- and now practically, all orders are delivered within 24 hours. Obviously, it's like you're talking -- I mean, people say, what are you talking about when everybody is delivering in 30 minutes, you're talking about 24 hours. I'm just throwing numbers. But I'm saying our philosophy is 6 hours [Foreign Language]. We should deliver everything within 6 hours. And within that, there will be some orders, some certain percentage of orders, which could be delivered in 2 hours, 1 hour, 3 hours, whatever, right? So 3 out of 6, we should be delivering everything. And the current cost structure and the current model allows for that. I hope I've answered the question.

Just a follow-up on this. I mean, I get your point that the need for immediacy may not be there. And it seems that the spread of QC is almost creating that need. The consumer is getting used to a service level, which is 30 minutes, 40 minutes, whatever that number is. So in that context, my question was that is -- not going for that less than 1 hour, is it largely a cost decision that you feel you will not be able to run that business profitably if you do it there? Or why not experiment with that and see if it is possible to be done? That's where I was coming from.

Okay. Let me answer it this way. My first priority is value and then is immediacy. So within the construct of delivering value without losing your shirt, losing money, how much earlier can I deliver? That's the way we will be thinking about the business rather than thinking that immediacy is the first priority, not really.

Sure. Understood. And my second -- sorry you were saying something...

So what I'm saying is we'll have competition, right? So we don't mind if the same shopper is buying from somebody else and also buying from us. We just want to take a larger pie of the pantry. It's as simple as that.

Got it. Got it. Navil, my second question was, if I look at the headline return on capital, it seems to have slightly moderated last 2 years. Should we not worry about this because you think of this as a transient phase, you are accelerating store expansion and ultimately, the health of the business is good? Or is there a situation where you think fundamentally the business makes a little lower ROC because of the competitive situation or anything else that has changed in the environment?

I'll give a nonfinancial answer with the limited financial knowledge that I have. I think the reduction in ROCE is primarily because of accelerated property acquisitions and the capital employed because of that, which effectively should be seen in a positive light, but that means that we are looking at a larger inventory of stores, which are going to come in the future. Niladri, can you add some more?

Yes. I think it's about ones that you mentioned about more properties being acquired and which are not giving results yet because they are in various stages of construction. And obviously, they will give results in the longer duration is our thinking.

And also one thing, just to give you a conservative feel to this, that real estate prices are going up. So that also should be factored a little bit in. We don't want to create too much of excitement on this area. But the reality is the real estate costs also are going up, which is being featured on the Slide 3 on Page 12, where the fixed asset turnover is slightly deteriorated, because a combination of both. The per location prices are going up. And also, we have some of this new stores which have opened, which are higher value.

Got it. And one last question. You've mentioned in the last couple of quarterly releases about costs related to improving consumer experience. Could you just elaborate? Is this offline, online? And is large part of the investment to improve the experience to the levels you want already happened or it's work in progress?

It's primarily offline. More or less, I hope, and that's the direction I've given to the team also. I think we've done decent investments. It should remain the same, but let's see. But at the same time, see, if I don't take the number too seriously, but just as an indicator. Suppose I open 100 stores a year. Obviously, the financials are going to deteriorate, because then you'll have a large chunk of new stores whose operating costs will be higher than my existing base, right? So you have to look at it from all aspects. But yes, in large metros where the intensity of commerce was higher, we said, look, even if it means losing a few basis points on profitability, but we have to double down on the experience in the store. And hence, there has been a slight deterioration on the margin profile of stores.

Next question is from Ishan [indiscernible] from Kotak Institutional Equities. There seems to be no response from the line of Ishan. We'll move to the next question. Next question is from Nihal Mahesh Jham from HSBC.

Two questions from my side. Navil, you highlighted that obviously, North India expansion right now is the pet project that you are currently focusing on. Speaking specifically of, say, the UP market, this market is different in a way that there are certain large retailers which have a very high share of private labels in which they operate. And where this may end up impacting is that at least from a basket value perspective, despite the value that we offer, there would be certain players who would be offering a much better deal for a certain basket that gets created. So how would we then try addressing that kind of a hindrance in a market like UP, which is unique, say, to the other states in India?

Too early to comment, but we're reasonably confident we'll be able to compete, but too early to comment. Maybe reserve this question for next year, and maybe Anshul will be able to respond to that. But I obviously don't see much of a challenge there from that standpoint. But like I said, we just opened Agra now, and we'll see. But I don't see any issues there.

We'll definitely follow up. And second question is yes... if you're commenting something, I'll wait for my second question.

No, you can ask the second question, and I'll add on to the previous question. I'll just ask for some data. I'll respond to that. I just want to comment, so -- but you go ahead with the second question.

Sure. Now the second question was obviously a lot of discussion on this call and always on quick commerce. Now if I just think from a customer perspective, and this is not a question, maybe a comment from you that, when I think from a customer proposition perspective, you take that there is a certain discount that D-Mart still offers on the offline format versus, say, what quick commerce does. There is a checkout time involved when you go to a store, travel time involved. And if that discount has been shrinking and maybe is not commensurate enough at this point in time for a customer to step out, are we, on our understanding, believing that the customer cohort who is obviously going to prefer moving to QC or online is small and that is based on your understanding of the market? Or what incrementally does say a D-Mart store offer that it makes a customer step out, assuming that the value difference is in a way lowering over the last few years?

So if I understood your question, you're saying what is it that D-Mart stores offers that makes us confident about the model vis-a-vis quick commerce? Is that the question?

Absolutely, assuming the fact that the incremental difference in the value that we are offering has been shrinking over the years, at least if you look at the prices that we offer in store versus what is available on the website for these commerce companies?

So Nihal, the broad view is that we keep tracking data. See, not everything will have an explanation. There are certain things which we believe could be a reasonable explanation, but we would not prefer to talk about it. But let me put it in a very simplistic form. When you look at QC, E-commerce with brick-and-mortar retail across the globe, we believe that value brick-and-mortar retailers have a tremendous economic positioning, okay? It is a moat. The brick-and-mortar value retailer has a huge, huge moat, right? So -- and because of which you see global data on all these big retailers, nothing has happened to them. And for all the, what should I say, discussion around QC, look at the operating cost of the QC vis-a-vis look at the operating cost of a value retailer like D-Mart. So that's the moat, and we believe we'll exist. That's broadly -- and -- the market is huge, right? So we just need to focus on our business.

Next question is from Anand Shah from Axis Capital.

Just one question there. I mean, if I look at Arnab's question that you have been looking to improve the service levels and then if I look at the manpower additions that you've been doing, it's sort of almost about 20%, 25%. And it seems that post-COVID, this number of people, let's say, per store on average had gone down and now you have built back up in line with this focus on improving customer service as well. So is that sort of now coming full circle? I mean, let's say, on average, if you need us for the number of manpower per store has come down. Is it now back to the optimum level or you are still looking to sort of build it up?

See, store headcount, I think let's put it this way, probably we've I would say, over it a little bit, a little bit. I think there is opportunity for calibration. I think the stores can be run more efficiently with more better focus on execution. If there's one thing which we have not spoken so far, we've been talking for like one hour now. We haven't spoken about it. I think there's an opportunity to improve execution at stores. We need to have more dedication, more focus on running the stores efficiently. So there is an opportunity there. But at the same time, will that reflect in P&L next year? Maybe not because I'm going to extend or add more number of stores per year, then P&L may get deteriorated. But we are talking all in basis points. I mean, I'm not giving any indication that there will be deterioration beyond that. But yes, from a capability and all of that standpoint, I think we have done a decent job over the last few years from that standpoint.

Got it. Got it. And I mean, from a margin viewpoint, of course, I mean, it seems that bulk of the drag on the margins has been largely because of this staff cost, whether you look at staff as well as the contractual employees that [ is club ] and other expenses. So I mean that drag, I mean, if I set aside the store expansion that you were looking to accelerate and hence, you may see some more, but would that sort of now hit sort of a bottom there and at about 8% margin? I mean, internally, would you say these are the kind of threshold margins you would target? Or if it deteriorates and you want to exit business, you are okay with it?

Anand, I would recommend -- I think that's the direction internally. We will not be bothered so much about gross margins or expenses because these move a few basis points here and there, and we really don't bother about that so much. What we really are bothering about or bothering, I would say, paying attention to is how fast can we grow. I think that's the bigger question to ask. What's the CAGR rate at which we need to grow. Deterioration on gross margin, a little bit of deterioration on on operating costs is perfectly fine because those are always in basis points.

Got it. And just lastly, on your -- this focus to accelerate the store expansion. Of course, the balance sheet or the cash flow is also a constraint because you have this real estate acquisition model. And so you only generate so much cash flow, which you can then eventually use to build pipeline. So I mean, is it also coming from the fact that you've already built a lot of pipeline as you indicated that you are now looking to execute that and open and accelerate a lot more? Or you would be open to stretching sort of your balance sheet to look at avenues to sort of accelerate this further?

So we've discussed this internally. The reasonable debt is fine. I mean, so if we get great opportunities from a real estate acquisition standpoint, we are happy to raise debt, but limited under control. So that's not off the table.

Next question is from Percy Panthaki from IIFL Securities.

I think this question has been answered in some form, but just looking for a little more clarity on this comment you have made for the last 2 quarters that we are investing in increasing service levels. What exactly does this mean? I mean, can you give a couple of examples of what you have changed in the store to improve the service quality?

It's just basically focusing on having better headcount, better [ proportion ]. Better headcount so that you have a better experience as a shopper in a store, especially on a weekend. So for example, you should not get any out of stocks or the relative experiences of out of stock significantly reduces. Second is that queues are not long. All checkouts are operational. Sometimes because of the over-obsession of cost control, managers decide not to hire appropriately. So trying to pay attention to all those things because the metro city shopper has been more discerning and has now got more choice. So you need to get into a psychological contract that gets for this extra effort, which is traveling to the store, if everything else is fine and your checkout is quick, you're getting all the stuff that you want, you're ensuring browsing is good, everything is neat and clean, things like that. So we saw an opportunity to invest there. So that is one area. Second is in the non-store area, we found that there has been a rapid inflation on warehousing, whether it is warehousing rentals, warehousing employees, there has been unprecedented inflation in wages there. And hence, we had to take a huge call on increasing wages beyond the usual, and that is also what has impacted the P&L.

Understood. So have all these initiatives which you have in mind that we should do so and so, so and so to improve the service quality, have those initiatives already been implemented? Or are they in process of getting implemented and therefore, some sort of this cost increase will sort of continue? This is apart from the store acceleration leading to the cost increase, that point I'm keeping aside.

Yes, more or less, Percy, I answered this question just before your question by somebody else. Yes, more or less done, more or less done.