Bata India Limited (BATAINDIA.NS) Q2 FY2026 Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Bata Limited Q2 FY '26 Earnings Conference Call hosted by Batlivala & Karani Securities India Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Akhil Parekh from Batlivala & Karani Securities India Limited. Thank you, and over to you, sir.

Thank you, Vishika. Good afternoon, everyone. On behalf of B&K, I would like to welcome you all for 2Q FY '26 conference Call of Bata India. From the management side, we have with us Mr. Gunjan Shah, MD and CEO; Mr. Amit Aggarwal, Director of Finance and CFO; and Mr. Nitin Bagaria, AVP and Company Secretary. Without taking much time, I'll hand over the call to Mr. Nitin Bagaria for his initial comments. Over to you, Nitin.

Good evening, everyone, and welcome to the Bata Q2 FY '26 Earnings Conference Call. We have Gunjan Shah, MD, and CEO. We also have Amit Aggarwal, Director, Finance, and CFO. We have shared the presentation with the stock exchanges sometimes earlier. We will be taking you through the same. We will navigate the slides as well as the page numbers. On Page 2, we have the disclaimers. I am sure you have gone through the same. I will now request to Gunjan to take over and thank you once again for joining.

Hi, everyone. Thank you, Nitin. Welcome to the call. I will jump directly into the presentation, which was already uploaded, but I will try and see if I can also index you to the slides. I'm moving to Slide 3. This has been the journey. This is just encompassing the full flow of the journey that we have been under for transformation of customer experience and therefore, driving growth. Inventory declutter, that has been a big part of this entire process, especially post COVID. And I think we are towards the high end of it. I will show you the progress on that. Revamping the whole customer store experience and ZBM was at the heart of this entire piece, and we've been talking about it for the last few quarters. We'll see where we have reached. Backed by this was basically then coming out with focused marketing campaigns behind stories. And we've seen some elements of it and many more coming along and therefore, the investments that go behind it, having cleaned up the experience as well as the inventory declutter. And having done that, how are we wanting to push for expansion. And last but not the least, I think I'll give you a glimpse of how we are looking at the product funnel and the product portfolio getting reimagined. I will talk a lot more of it down the line in subsequent quarters because that work has just got started significantly. With that, I will move to Slide 4, which is on basically the inventory declutter complexity as well as inventory reduction. On the clutter piece, Slide 5, as you can see, that continues. The number of assortments in the store has significantly come down, largely, as you will see, correlated to aged inventory and discontinued lines. So, a lot of that reduction is coming from there and therefore, focus towards best sellers as well as to whatever is the stories and therefore, new collections of us. Clearly, that is showing up to us in feedback from consumers, et cetera. They're able to see the new stories and lines much better because we have reduced the clutter. What that allows us to also is dedicate inventories towards these products that we want to showcase and sell well, and which is showing up in the availability going up now index much higher at almost about 14% better. So, sizes, availability, et cetera, I think there is still some scope. There is a large customer first project, which I had briefly talked about last time. That is gathering significant pace, and we will see jump shift, especially on the availability piece going forward, having reduced the clutter. Moving to Slide 6. Inventory in absolute year-on-year, again, the reduction continues, double-digit reduction despite having much better availability, therefore, showing the health improving. Health also comes about in the subsequent 2 charts that you see in the 2 quadrants. Freshness is at almost the peak level that we are seeing since COVID. And we do see scope for improvement further on this, which is basically absolutely fresh product, which is less than 6 months old. And last but not the least, I think inventory turns, we have reached almost 2.2, and we ideally want to push for at least 2.5. And that significantly improves not only in terms of financials, working capital, but more importantly, in terms of our agility of the supply chain to cater to demand patterns, et cetera. So, the pipeline being a little more cleaner allows us to cater much faster. Having done that, in the same sequence, as I mentioned on the transformation piece was store experience, which is Slide 8. If we can move to that. I think the center piece of this entire piece where there are many other smaller initiatives, but the biggest piece was zero-based merchandising, enhancing customer experience, decluttering stores, enabling more seating in the store, et cetera, I have spoken about it. So, I'll not repeat all of that in the previous quarters. But now, more importantly on how we are progressing, we know there are benefits. We give us delta like-for-like and revenue per square foot, et cetera, and consumer experience scores. So now we are not only expanding stores across our network, while we have penetrated literally across the country, and therefore, we've got large stores done everywhere. But however, we are also now gradually now wanting to paint cities. As you can see last quarter, so just to make sure it's clear, this is not the cities where the 400 or the 300 that we are sitting on, they're spread across. But now we are also simultaneously not only expanding but making sure now cities get painted completely. So, there's a full-scale benefit coming through in the city. And therefore, 2 cities that we have managed to put under our belt is Gurgaon and Mumbai. A few more that are being panned out in the next quarter, which is December quarter. As you can see, the total doors, we should be able to hit almost 50% of our store turnover by the next quarter end and hopefully even almost Pareto, that is 80% plus by the next year, hopefully much faster. We have also seemingly cracked the model of moving this much faster. So instead of doing almost about 60, 70 stores a quarter, we should be accelerating much faster now, having crossed some of the other elements that are required for this. Moving further to the stories and marketing campaigns behind it. So, Slide 10, we did invest in this quarter despite the disruption that we saw on GST. Some of it we didn't anticipate so acutely, but we were very clear that we want to invest, and this trend will continue. We will want to make sure that we invest, and that's what you have seen overall from our marketing investments. The key campaigns that we focused, I think one of the biggest ones that came out of the story-focused campaign, and I'll talk a little more about the product portfolio and the funnel reimagined was the Victoria Ballerina. And we tried to make this really large, especially in some of these ZBM cities that we have painted, and we did see encouraging feedback. So not only the city overall had an impact on its footfall as well as like-for-like, but also in terms of the ladies category from a national perspective, which started growing towards the flag end of the quarter despite the GST disruption. So, we are obviously very encouraged by this, both not only the mechanism of making sure it's slowly focused, but also the Victoria Ballerina itself. It seems to be something that gets associated with partner very strongly and has a very large usage location and therefore, volume opportunities. So, we will -- you will hear a lot more of this going forward. Next one was on Power. There were 2 large stories. One was on Stamina, and the other one was on Easy Slide. Easy Slide is actually something that we are far more bullish on even now. Last quarter saw it hit almost 4,000 pairs per week. The gold standard that we want to hit is about 10,000. So, there is still a lot of headroom, and we hope to achieve that nearer in this quarter itself. There is a lot of inventory that's in the pipeline as well as a range and a bouquet coming through on that. And similar was from a slightly more premium series on performance-based footwear. Hush Puppies similarly saw 2 distinct campaigns. The first one was Office Sneakers, the hybrid one. I think that's given us a great response, right? I think I have some numbers coming in a subsequent slide. But the iconic collection got launched towards the fag end leading into the festive season. And with our most premium shoes, I think the highest price now is at about INR 20,000 we launched here, along with obviously a social influence of celebrity that you see there. Last but not the least on the marketing front was the GST communication itself. We were the first on the move on this literally the -- I mean, I think a few days or hours after the announcement of the Prime Minister. And obviously, subsequent clarity that we managed to emerge with on the 22 of September when it became effective. And we actually, I think in terms of making sure that the clarity was very clearly visible to consumers, and we did see encouraging response. Obviously, once that communication clarity came through to consumers post 22 and a lot of it stays. Moving to the next section on network expansion. As I've been talking about it on Slide 16, one of the key cornerstones on this expansion has been a franchise story. While this is a slightly more shorter term over the last about 18 months or 6 quarters. But over the last 4 years, it has moved from less than 100 to almost now nearing towards 700. It gives us access to unique towns. We are wanting to make sure that this is now basically encouraged for multiple store partners. We have almost half the number of franchise partners that have got more than 2 or more than 2 stores with us. And there are no reason why they should not at least in the cluster have about 5 stores. So, there's eminently large possibility both from an enabler of partners as well as from potential trade areas wherever India is organizing. So, focus towards obviously smaller consumer cohorts and extremely profitable. So that will be a big driver, and our ambitions are pretty large. We want to increase this run rate, and we know where the unlocks lie on this. We will obviously want to make sure that expansion also continues. SIS is the other piece that I want to talk about. This is shop-in-shop, commerce stores in large department and high throughput areas. We had gone through a consolidation where we were actually relooking at the business model. It was not a very growth-driven kind of a business model that we were running. And that transformation was underway for the last about 6 months. And I think now with all our partners, we have undergone that transformation. The business model and contracts are in place, and now we should see significant expansion coming back into this. I see huge opportunity on this in terms of attracting newer consumer into the fold of Bata and its brands, both Hush Puppies and Bata. Last -- while this is a new topic on the last piece on this entire transformation journey, which is the product funnel reimagined, I will not speak too much on this, but basically, the whole objective is to get a lot more science into and the rationale behind what we bring in as new products on to the table and not only on to the table, but also what we carry forward from season to season. So we want to make sure that this pyramid is as sharp as possible with fewer toolkits that allow us to have much better control on comfort and technology, making sure that styles is what gives us economies of scale driven by uppers on the same molds and kits that are there, right? So having a variety of uppers that gives us much better control on both quality of materials as well as in terms of economies of scale and therefore, cost of product. And last but not the least, making sure that multiplied into color base and which then gives us variety. This is the best practice across the world in the footwear business. And I think this ratio, and I'll talk a lot more of it as we progress, you will see a lot more numbers as well as progress talking on this going forward. And the benefits that come in, Victoria Ballerina, Easy Slide are a couple of examples, very clearly showing that this is the way benefits come through to us. But we'll talk a lot more. So the whole funnel is under scrutiny right now. Other highlights, Floatz continues its journey. HP Office Sneakers, I talked about. On the customer front, as I said, we have graduated now from Net Promoter Score to Google scores, and that is continuously seeing improvements. We want to be proud enough that we can even tomorrow talk about it to consumers walking them into the stores, et cetera. And hopefully, we'll get there. The score did improve slightly in this quarter. KROs for multi-brand outlets continue to expand. And we did see obviously transition impact, which I have talked about in my press release on the GST 2.0 transition. But post 22, obviously, it's been a reasonably good uptick. VRS was introduced in Batanagar. So that on the focus on removing basically legacy cost structures as well as disabling or non-agile supply chain elements continues. And we are seeing significant movement on that front. This was one step in that direction. We also saw disruption in July because of our largest distribution center in the North, which covers all our channels in Jamalpur. It covers almost about 40% of our inventory, and that did go through a very unplanned abrupt transition in terms of a 3PL partner. We obviously stabilized after that, and we've got a gold standard partner now. And obviously, there was some reward that we got. I will hand over to Amit to talk you through the financial highlights. Amit?

Good afternoon, everyone. Overall revenue from operations stood at about INR 8,000 million, which is a decline of about 4% compared to the previous year from a Y-o-Y perspective. Now, as Gunjan mentioned, there were 2 key events which impacted the top line. One was the RDC operation, which got partly impacted. It's for one of the largest distribution center. And second was the GST transition. As a result, there was a lot of consumer as well as customer deferral in buying because of the rationalization exercise, which was being planned. The gross margin stood at lower versus by about 150 basis points versus last year same quarter. However, sequentially, it has improved by 190 basis points compared to Q1. This erosion in gross margin versus last year mainly on account of 2 events. One, in order to excite consumer and as well as the channel partners to continue buying pre-rate rationalization, there were certain additional incentives and schemes which were run, and that has led to certain impact on the gross margin. The second impact, the continuous push in terms of having a much cleaner inventory pipeline. As you would have seen, the freshness has gone up by almost 7% compared to the base year. So here is to keep fresh inventory running and whatever is getting slightly aided or not from a range with perspective, the intent is to expedite the liquidation as early as possible. From an EBITDA perspective, the decline is about 220 basis points, largely emanating from, one, from a gross margin. Two, as Gunjan mentioned in the previous slides, that there has been a continued investment in A&P is what we are driving it. And you would have seen in the number, the A&P investments have been almost 2x compared to the previous period. And we are doing almost 3.5% versus 1.5%, which is there in the base previously. And the endeavor is to continue and sustain A&P investment in the range of 3% to 4% going forward.

Thank you, sir. We request the moderator to move to the Q&A section.

[Operator Instructions] The first question is from the line of Sameer Gupta from India Infoline.

Firstly, if you quantify the impact of GST-related disruption that you have called out, both in terms of your channel partners as well as consumers, whatever the best judgment that you have idea is to understand the normalized growth or decline this quarter had these issues not been there?

So Sameer, in our -- whatever analysis, what we have done internally and looking at the number post the GST transition, what we look at, especially from a consumer footfall perspective into store post the GST reduction, we assume if the transitions would not have been there, we would have at least reported a flat revenue versus the 4% decline what we have seen there right now from a top line perspective.

Got it, sir. This is very clear. So, 400 basis points is broadly the impact in result.

Yes.

Okay. Great. Secondly, sir, on margins, now I've asked this before also. Now if I look at the EBITDA margin on a pre-Ind AS basis, this is after accounting for rent. And also, if you adjust for the royalty accounting change that has happened in fourth quarter of last year, I believe the margin is somewhere 7.5% for this first half. Now I understand that largely a function of weak same-store sales. But historically, also we have had periods where the volume growth or the same-store sales growth hasn't been really impressive, but margins still used to be in a particular range. At the peak of it, they were at 16% and largely around 12% margin range is what we used to deliver. So, I mean, what is then pulling this down? I mean, is there a factor apart from same-store sales or subdued sales, which is pulling this down? I understand marketing spends have gone up. But even if I adjust for that, it is much below what it used to be. This franchisee network, a margin dilutive channel? And more importantly, apart from same-store, what are the other levers that you can use to pull up the margins to at least 10% plus levels from here? I know it's a lengthy question, but I'm sorry, I need clarity on this.

Yes. Sameer, thanks for raising this. If you look at purely from a dilution perspective, as I mentioned, there are -- for the -- specifically for the current quarter, there are 2 large impacts, one being the gross margin erosion. Now gross margin, again, is a function of 2 things, which I mentioned. One is that to ensure that there is a continued footfall as well as the conversion because of the GST-led price reduction, the reforms were announced sometime mid of August, while the rate were applicable from September 22. It was a very, very long transitionary period where at least what we witnessed from a data perspective. There was a deferral in terms of buying, right? So what we like to do is entice consumers with communication, and that's where Gunjan also covered as part of the slide that we were the first mover advantage in terms of ensuring and communicating with the consumers that while the revised rates are applicable from September 22, we went ahead and started passing on those additional the GST-related benefits effective first week of September itself. Similarly, certain incentives were run for channel partners, specifically in case of franchise and distribution business to ensure there is no deferral of buying and whatever support is needed by them to liquidate and minimize the inventory holding, which is at a higher GST rate, which will otherwise would have led to working capital blockage at their end. So that piece got impacted -- that impacted the gross margin for the quarter. Second, the drive to continuously improve the freshness, right? So earlier, what used to happen that the old stocks were heavily cleared during the EOSS period. What we are moving away from doing that, we are constantly driving the freshness so that entire discount which gets applied during the EOSS period, that comes down effectively. So broadly in the next quarter when the EOSS is there, ideally, the markdown spend, which otherwise we would have incurred, you may call there is an advancement and recognition of the same earlier. So, it should be a lower markdown in the subsequent quarter, which should help us recover some of the gross margin, which we have lost during the quarter.

Got it, sir. Just a follow-up here. Is there an EBITDA margin range that you are targeting? And what will lead us to that?

So while we don't give you a forecast, Sameer, right? But some of these were typical, how do you say, incidences/actions for the quarter gone by. So, we should not see them repeating. The other piece that I can definitely tell you is that as Amit was also describing this entire piece of freshness as well as inventory clearance or health, a large part of the journey from a health perspective, I think we have crossed and therefore, the commentary that he gave on the EOSS load and therefore, the markdown impact, we should see that benefits coming through, and that's the whole reason that we want, right? I mean you keep a healthy inventory, so you don't have to do deep discounts later on rather than do it clear it at a lower discount earlier. But unfortunately, right, we have to take the hit earlier, the benefits come a little later. So, one-offs GST related, et cetera, obviously should not get repeated. We should not have those incidences again. The other one is the benefits of inventory should flow through as long as we maintain the discipline. The total inventory, we still have, I think, some way to go. I still feel that there is much better turns that we can hit. So that's where we keep an eye on that. The other levers, VRS, et cetera, obviously, are not going to repeat all the time.

We have next question from the line of Saurabh Kundan from Goldman Sachs.

I have 2 questions. The first one is if you could please share the same-store sales growth of your company-owned stores for festive versus festive last year. So, I'm talking about Navratri versus Navratri comparison, if I could get the same-store sales growth number for your co-owned stores for the last 9 to 10 days of the quarter versus the last Navratri.

Okay. Saurabh, we don't reveal and share that. But what I can tell you is what I mentioned in the commentary is that there was obviously a disproportionate impact and which is what I think in the previous conversation, Amit commented till -- because of this transition and some amount of impact of the warehouse-related disruption last quarter did impact our overall growth. But we do see an uptick, obviously, post the 22. Some of it, I guess, must be also to do with backlog getting pickup demand coming through. But we will and are hopeful of structural benefits coming through. One is all the action that I've talked about. The second one is from a structural ecosystem that the GST would have started giving. We do see some signs of that coming through even in the lower price point products, which were under stress for the last 2 years or so.

Okay. But if you could give us just an idea of how the festive demand was quantified. I'm talking about only those last 9 days. I know in the commentary you said that there was a pickup, and I understand it also involves some sort of backlog but some sort of an idea there will be quite helpful to see what's happening to the underlying demand.

So I would say it has been much better than what we have seen for the last few quarters, and I'll leave it at that.

Okay. Okay. The second question is your channels, including franchising and distribution, but still under some kind of stress, and you indicated that you tried to support them. How long before the channel hygiene there is okay and the channel health there is okay and you start getting your primary sales? Could it take another couple of quarters?

So just to clarify, Saurabh, it was during the transition period. So let's say, the rate rationalization announcement was made by somewhere towards the mid of August, while the rates were announced in the first week of September. Now the moment the rates were announced and the benefit was visible to all the channel partners, there was a deferral in terms of buying because what could have happened, you would have purchased at, let's say, 12% and sold at 5%, 7% becomes an ITC blockage from a channel partner perspective. So, what we were all looking at is how to defer the buying so that they are able to buy after 22nd September at 5% to avoid any blockage of working capital in the nature of ITC. So, the moment 22nd September happened, the buying resumed and everything is live now. It's just that the backlog we could not service in just 7 to 9 days of the remaining 8 days of the month. Therefore, some of those spillover orders flowed to October. But right now, it is normal.

Yes. So, there is no long-running disruption that we see and therefore, any kind of a gross margin impact from a support perspective. That was, as I mentioned to some other person, it was a one-off thing that happened in the quarter.

Got it. I was just trying to understand like there must be inventory in the channel, right, let's say, in your distribution channel, which if I recall correctly, is maybe 12%, 13%, 14% of your business. How about that? That also would have been bought at a higher GST, and I mean...

See, from a consumer perspective, given the company decided to pass on the MRP reduction and the channel partner anyway has that advantage, it is not an actual loss to them. The entire conversation was around the blockage of ITC. Because if I purchase at 12 and sell at 5, right, the working capital gets stuck because I will be able to utilize this ITC not in the immediate month, but let's say, over a period of 5 to 6 months, and there was a reluctance from channel partner to invest the [indiscernible] to that extent. But purely from a margin perspective, there is no impact channel partner also with the recent GST rate reduction exercise.

We have next question from the line of Tejash Shah from Avendus Spark.

I just wanted to -- see disruption we called out, but I thought that there were tailwinds also in terms of Navratri and our exposure to East India where this festival is very prominent. We saw many East-heavy retailers, both listed and unlisted, kind of calling out to be a decent quarter. So just wanted to know, was it that we could not kind of capture that demand because of the disruption?

Tejas, so East is -- we are -- okay, we are reasonably present and penetrated in the East, but it is about 20% of our business from a turnover perspective, right? So, it is not so prevalent that it can move the whole thing both ways, right? So -- but yes, I mean, the Durga puja related preponement, et cetera, and Navratri related, that did come through. But as we mentioned somewhere else, in the conversation was that there was a disruption-related impact on 22 that was obviously not recovered as fast. The backlog obviously got cleared over a period of time.

Sure. But Gunjan, even if we adjust for that, that we called out that 4%, flat growth does not kind of show that kind of exuberance or recovery that we have seen in some of the other like-to-like retailers. So, what is your read on consumer sentiment then because of this flat number?

Yes. So, within this, then there is -- there are 2 segments that -- obviously, this whole piece that is -- that I talked about in my presentation, Tejash works towards that, obviously, right? The second piece that's there is that there is this whole piece, which is -- we will see what the structural impact will come through, but the pressure that was there in terms of the 40% of our portfolio, which is below 1,000. And that ideally with the pass on that has happened, et cetera, we should see hopefully that coming and bouncing back. So those are the 2 levers that are there, right? One is obviously the work that we are doing in terms of consumer experience end-to-end. And the other piece is obviously the price point-related pressure that is there on the lower end [indiscernible].

Perfect. And the last one, not related to the quarter...

Brand expansion, if I may add, Tejash, right? Now as I said, the journey was to make sure that we fix what we have and get that going. Now that confidence seems to be there. And therefore, as I said, we will do now aggressive expansion, especially in the channel that I mentioned.

Very clear. And last one, if I may. Gunjan, when I looked at our interactions over the past few quarters, it seems we have been ticking all the right boxes in terms of interventions and growth drivers that we are trying to repair. Yet for one reason or another, numbers haven't quite come through. So where would you narrow down the core of the problem, which is still not responding?

See obviously, we all want numbers to be better, right? So, Tejash, there's no question about that. I think our hypothesis is exactly on the lever that we are working on, right? And therefore, having got the confidence on setting the right part of the portfolio or the journey right is where now the investments are going into marketing, which you have started seeing now, investments into now expansion in the right channels. And last but not the least, the one that is now picking off is the entire thing of product funnel getting reimagined. So those are the areas that I think we can do much better on. And hopefully, that should result into all of this finally cumulative impact.

So any model territory or market where you believe that you would have done all these changes that you spoke about and the numbers are kind of coming much better than what we are reporting at aggregate level?

Yes. So, example is the ZBM store, where if you look at the deltas, what you see from a control perspective, even from a turnover perspective, there is a good delta. And ZBM is what represents our going philosophy in terms of the right availability of products, the right assortment, the right consumer experience, right? So, there is what we see that once you do those concepts right, the growth will come.

So just to add on Tejash, right? So, 3 parts, right? One is ZBM, as Amit just mentioned, right, which we have been now tracking for some time. And at large scale, it still continues to give us significant delta. And we want to make sure that we paint things faster, right, and which is what the agenda is. The second piece is on the marketing piece. I didn't elaborate on this, but we did do an over-indexation within this quarter, which was in the places where we have managed to paint green. And we did see a significant difference being made to the overall city from a like-for-like as well as footfall perspective. And the last one that's there is on the product imagine, right, the Victoria Ballerina classic case. One scientifically designed format, giving options literally on a bouquet, a strong association and story with the Bata promise and a simplified price positioning, I think gave us fantastic results. So, we will bet on these much larger and on a wider scale as we see these successes coming through.

We have next question from Prerna Jhunjhunwala from Elara Securities.

Just wanted to understand your strategy in terms of value versus premium and how it could impact volume versus ASP. Lastly, as you focus on increasing volumes from lower-priced products as well and focusing on Hush Puppies and all these brands for premiumization. So where do we see as a vision for Bata India, where it is positioned? And how do we see volume growth and ASP moving once this GST related disruption actually flatten?

Okay. So, it's not positioning of Bata India, by the way. Bata India is a corporate name, right? It's positioning of the brands. And right now, there are 2 large banners in operation, right, which is Bata and Hush Puppies. As I mentioned in the presentation, Hush Puppies is our premium driver, and that has seen, obviously, with the traction that we have seen on premium side of things, et cetera, in the portfolio, it has seen continuous expansion. Now EBOs, both co-ow as well as franchise combined, we have crossed 150 now on last count, let's say, September versus, let's say, about less than 100 till about 2 years back, right? So that sees continuous expansion that will anchor the entire premium side on specifically comfort -- and as I said, comfort casual kind of space, formal casual space. We will -- there also, there are growth levers from a portfolio perspective in terms of -- there are 2 large growth levers. One is on NFT. I think the badge value is very strong. We can leverage it across many other categories that consumers' wallet consumes. So non-footwear-related stuff, and we are seeing exciting traction on some of the products that we have gotten there. The second piece in Hush Puppies is the ladies section. Ladies offerings, the ladies call to action, the mind share for ladies is not as high as it for men. And I think we've got a right to it. Most of -- more often than not, couples do walk in, and we can monetize both of them. So there are 2 clearcut levers besides expansion, et cetera, on the Hush Puppies side. On the Bata side, Prerna, it is going to be also -- I would say the growth will be driven by a mix of both volume as well as value. We will not want it to be only value-driven. We have realized that, that's very critical. However, the price points that are on the lower side have been under pressure for some extended period, and therefore, some of the benefits have not come through. We are expecting, and we do see some early signs of it because of, obviously, the value proposition that we have done. We have reindexed products. We have brought in new products at competitive price points. But wherever we can add in technology and features, we will charge for premium and classic example being Power, Easy Slide, the whole story that we have created over 3 years as well as, let's say, -- but Bata Comfort, et cetera. These are technology/feature-driven products, and they do sell at ASPs, which are significantly higher than overall ASP. So, it's a 2-pronged thing. I hope I've been able to answer, Prerna.

Yes. But I just -- as a follow-up on this answer, I just wanted to understand, as a company, how do you see the volumes and ASP moving? Because these are 2 different strategies merging. And I know it is consumerization where you cannot really pinpoint on what will work first and what will work second. But as senior management, you would be having some vision wherein how this should pan out and how it can deliver growth on a volume and ASP basis at the end of the day, we need growth on volume and ASP.

Bata will continue to drive volumes. We will want within that the full price sales to go up significantly, and that's what the whole inventory was all about. And we do see now that coming through, as Amit mentioned in a commentary on markdown and therefore, gross margins. Premiumization, as I said, will be driven by certain categories of products as well as portfolio and Hush Puppies. So, it will be a combination of both. As I said -- and I think it's going to be a medium-term trajectory that I can comment on. Quarter-to-quarter, there will be variations based on contextual circumstances.

Understood. Now sir, just wanted to understand this quarter, how was the volume growth and what was the ASP decline because of this inventory declutter? And if you could also give us some sense on how is the consumer behaving on a INR 2,500, INR 2,800 plus price point and below price point? And how are you going to take it forward?

Okay. So, the latter question, we will wait for -- as I also mentioned that there is some amount of backlog, et cetera. So, we don't know what's the structural piece. While we do see an uptick definitely post 22nd. But the fact is that what is the structural behavioral change, et cetera, we'll wait and watch on that front. So, I'll hold my answers on that right now, while do we see some traction coming through on the lower price point products. So that's where I limit myself. But between, let's say, INR 1,000 to INR 2,500, which I heard you ask versus INR 2,500 plus, we will wait for a little more time while we make any commentary on that. On the first piece, which is on ASP versus this, I think last quarter, we would have been flattish on ASP. As I said, premium has done much better. So the mix obviously lifted the ASP, the inventory declutter and the clearance on that front lowered the ASP. So, both of them nullified each other, overall flat on ASP.

Okay. So, it's in fact, the decline is largely volume driven.

Yes.

Okay. And sir, how do you see any -- do you see any margin impact going forward in terms of the strategy moving ahead? Because this quarter, we -- definitely there was some disruption, but do we get back to similar margins that we were doing earlier in the next 2, 3 quarters.

I think Amit commented on this Prerna, pretty much in detail in the prior question, but I'll let him summarize it also.

Prerna, again, I'm saying, see, the company is slightly shifting from a deep markdown during the EOSS period to consistently clearing up inventory and not waiting for the EOSS period. Therefore, what you see the slightly higher markdown leading to margin erosion. So next quarter, which is a big EOSS period, we should see significantly lower markdown impact on gross margin because many of those actions are continuously being done in the current quarter as well as in the previous quarter. So next quarter, the overall margin should come out to be better compared to the previous year.

We have a follow-up question from Sameer Gupta from India Infoline.

Just a clarification one. On the zero-based merchandise, I see in the presentation that you've completed Gurgaon and Mumbai. Just wanted to understand what does it mean? Does it mean that all stores in Mumbai now are on zero-based merchandising? Or it means whatever stores you had assigned to be on zero-based merchandising in Mumbai are now completed?

Okay. So largely, the objective is all stores. But however, within that, there is some factor that they apply. And -- but broadly about 90%, I would say, Sameer. So, most of the stores.

So 90% of Mumbai stores -- Bata stores in Mumbai are now on the zero-based merchandising?

Yes.

Okay. Got it. Another bookkeeping question. Can you just quantify the percentage of portfolio now, which is below INR 1,000, between INR 1,000 and INR 2,500 and the rest would be above INR 2,500.

Okay. So about 40% below INR 1,000, 40% between INR 1,000 and INR 2,500 and 20% above INR 2,500. 40%, 40%, 20%.

Okay. Got it. And just a clarification on this also. So, I heard in an earlier interview, like 3 days back, you mentioned that premium is 30% of sales. So, what exactly do you call premium? Is it a price point?

Yes, it is price point driven, right? But it's a combination of price point as well as brand. So, I think it would have been depending on the context that was set, but I would have commented based on, let's say, basically INR 2,000 plus or something like that. So, there are various categories of products, which also have price point above. And therefore, INR 2,000 plus would have been in that range. I think it would have been in context of a question.

Got it. So basically, understanding again is like an open footwear, even if it is, let's say, less than INR 2,000 can be classified as premium in your understanding? Or no, that's INR 2,000 plus...

Yes. I mean I can't give you a concrete example immediately, but there are Hush Puppies products, which are, let's say, for example, below INR 2,500. So, there are similar examples in Power, the other way around, et cetera, et cetera.

Got it. So, it's more of a subjective definition.

Yes.

We will take that as the last question for the day. I would now like to hand the conference over to management for closing comments.

Thank you, everyone, for participating. If you have any follow-up questions, you can get in touch with me. Thanks, everyone.

On behalf of Batlivala & Karani Securities India Limited, that concludes this conference call. Thank you for joining us. You may now disconnect your lines.