Brainbees Solutions Limited ($FIRSTCRY)

Good day. Good evening, everyone. Welcome to Brainbees Solutions Limited Quarter 4 and year ending FY '26 Earnings Call. This is [ Harsh Kabra ], and I have with me Mr. Supam Maheshwari, Managing Director and CEO of the company; Mr. Gautam Sharma, Group Chief Financial Officer; Mr. Vivek Goel, Chief Business Officer of the company; Mr. Abhinav Sharma, Country Head of Middle East Business Operations; and Mr. Anuj Jain, CEO of the GlobalBees. Kindly note that this call is meant for analysts and investors of the company. We wish to highlight that the call is being recorded. And by participating in this event, you consent to such recording, distribution and publication. [Operator Instructions]. We will be covering the presentation in the beginning of the call, and we will thereafter open for the Q&A forum. We would like to point out that some of the statements made in today's call may be forward-looking in nature, and the disclaimer to this effect has been included in the investor presentation shared with you. With this, I request Mr. Supam Maheshwari to take it over.

Good evening, everyone. Welcome to our last quarter presentation for FY '26 ending March 31 '26. So we'll be taking it through our performance for both the quarter as well as for the full fiscal year FY '26. Yes, [ Harsh ], can you please move forward. So as usually, you will see we'll -- yes, please continue. Yes. So this is all what we will cover today in FY '26 performance, India and segment-wise. India multichannel, international business, GlobalBees and other segments and overall financial summary and some supplemental information, which is already there in the presentation advertised, which has been available for everyone, both at [indiscernible] site as well. So now we'll [ stay ] dive into FY '26 and Q4 performance. So key highlights for the quarter 4 as well as for the FY '26 consol business, if we talk about, we continue to remain free cash flow positive for the entire FY '26 for the consol business. Overall revenue increase has been 12% year-on-year for the FY '26 over FY '25. And overall, 24% year-on-year increase in adjusted EBITDA adjusted for [ ESOP ] cost for FY '26. And overall, a very meaningful drop in net losses for both Q4 as well as for FY '26, 57% and 23% year-on-year. From a segment perspective, all 3 segments -- key segments are in -- I'll go one by one, India multichannel. As we have been talking about for last 2 quarters that our endeavor is to focus on growth and make certain structural, I would say, key initiatives that we have undertaken in the last few quarters, which have started to yield results. So sequentially, if you see year-on-year basis, every quarter, we have made improvement on the right-hand side, you can see the growth. Quarter-wise, we have been able to demonstrate growth in Q4, now we are at 11-point -- we are at 11.4% in Q4 growth and despite competitive intensity, which continues to remain in the quarter. And our initiatives specifically in offline channel that we had talked about in the last 2 quarters that was expected to go live in Q4 in the [ SS '26 ] has gone live and has also yielded and resulted in a mid-teens growth in the GMV for our offline channel in India multichannel. So that's a very good outcome of our initiative. And overall, we believe that with the current initiatives that we have taken across in the India multichannel, we believe that this trajectory of sequential quarterly better growth will continue in FY '27. So FY '27, we continue to believe that because of our initiatives that we will have a better growth overall for FY '27 than compared to the entire FY '26. We're happy to state that we continue to remain PAT and cash flow positive for an India multichannel business for the entire FY '26. In the international business, we continue to remain seeing the elevated promotional pressures from the horizontal commerce players that we have talked about, which entered the market in late quarter 3 of FY '25. And -- but we continue to remain super laser sharp focused on sustainable growth and has been able to reduce our adjusted EBITDA losses by 33% for the quarter 4 year-on-year basis and 35% for the entire FY '26. So it's been a very good progress on the international side as well because our goalpost is to build the business in a sustainable way and reduce our losses to 0 as earliest possible with a certain structural math, both in terms of gross margin improvement as well as through obviously home brand expansion and sales mix expansion. On the GlobalBees front, we had a very strong quarter on both organic side as well as profitable growth. We delivered 28% of core category year-on-year growth in FY '26 with roughly around INR 92 crores of adjusted EBITDA post corporate expenses. And we'll talk about it in a little more detail as we go along. But these were the highlights that we wanted to talk about. Moving further, you will see -- [indiscernible], can you move on, please? Yes. Performance for the consol business at a GMV level, we increased by 10% over FY '25. Revenue overall grew by 12% to INR 8,547 crores. And adjusted EBITDA has been -- has increased by 24% on a consol basis year-on-year to around INR 486 crores. And cash profit for the entire year on a consol basis has roughly reached to around INR 312 crores, which is a 49% increase over the last fiscal year. Obviously, happy to report that we continue to PAT and cash flow positive in India multichannel business and also on a free cash flow positive on a consol basis. Business segment-wise detailed performance. In India multichannel for the full year, our revenue grew by 9%. International revenue grew by 10% globally is around 20% and other segments, largely preschool grew by 11%. Gross margin in India multichannel, as you remember in our Q3 presentation as well, because of the heightened competitive intensity, we had close to around 140 bps of gross margin pressure that we saw in Q3, which has continued. And a bit of the other gross margin loss that we saw was largely because in our manufacturing part of our business, which is, again, very transitional because of the 2 factors, which is rupee depreciation as well as crude-linked raw material prices, which has gone up. The good news would be that these are very transitional in nature. These will be passed on to the customers and the impact of the incremental gross margin loss apart from the Q3 will be regained back in quarter 2 as they are being passed to the customer in a regular BAU. On -- and in international, we saw a significant improvement in the gross margin expansion to 150 bps, leading to 22% increase in gross margin in GlobalBees 9% and others 11%, leading to adjusted EBITDA for India multichannel around INR 505 crores, international improvement of 670 bps with overall reduction of 35% year-on-year basis. GlobalBees 160 bps improvement and 153 percentage improvement over FY '25. And our [indiscernible] segment also saw a 21% improvement overall from FY '25 on the adjusted EBITDA. Moving further, Q4 snapshot, our GMV grew by 10% for our consol business. Our revenue from operations grew by 12%. Our consolidated adjusted EBITDA grew by 18% to INR 118.7 crores and cash profit grew by 4% around INR 72.3 crores. Moving further, now we can go to our segment-wise performance. India multichannel, which is our largest segment, we will talk about the key initiative updates that I'm sure all of you are eagerly waiting to hear on. Very happy to state that we have deal worked hard on building our -- and extending our key initiatives, [ RocketBees ], which was 13 cities in Q2, 22 cities by the end of Q3 and now by end of Q4, we have moved up to 62 cities. And overall percentage of our online delivery volumes were able to deliver 40% plus by end through our RocketBees initiative, which is obviously having a far and room for better tax than some of our other shipping partners and resulting into incremental growth as well as customer experiences in the [ pin courts ] that -- and the cities and the [ Pincode ] that we are delivering for under the RocketBees. We will continue to expand this. We had promised that we will deliver to around close to 50-plus cities and more than almost 45% to 50% of our volumes in our online sort of business by middle of the year, we have been able to deliver it ahead of the curve, and we comfortably should cross that number by the next quarter end. On quick, again, happy to report that we had started the pilot phase. Now we have expanded the pilot phase to we are very clear that we will be going ahead with the strategy no longer a pilot anymore now. It is doing extremely well, and we have expanded to 5 cities over last few months. This initiative was started from first of December 25 and just been a few months -- by end of March, we were -- we had crossed 5 cities. And here, we are doing select catchments in the cities and in the catchments that we are doing, we are already crossing 20% of our overall online orders under our quick initiative. And where we are able to deliver the customer in less than 3 hours. And we expect over the full year of FY '27, our quick deliveries over entire shipments should cross roughly around 10% of our overall online business. So this -- we will continue to expand on lacking basis nonstop as we have been able to leverage our COCO stores, our warehouses, our stock is network and a few of the [ dark stores ] as well. So this has been a very good experience. Customer experience has been superb here, and we continue to believe in the strategy. And we believe that as we increase more cities, more catchments within the existing cities where we have opened. We will continue to get the love of our customers and be able to defend all our -- some of the categories that we had impact from some of our competitors, especially around it. So we will continue to double down on our expansion of [ Quick ]. And we see extremely happy that we really have executed well on our 2 initiatives. On the third initiative that we talked about is was addressing both [ footfall ] as well as the growth in the offline channel, we wanted to fix the product mix. And we have launched in [ SS-26 ] somewhere around March, and the impact has been fairly solid. As you can see in the year, GMV growth for Q4 in the offline business has been around 15%, which has grown substantially from Q1 to Q2 and Q3 and Q4. So all our 3 initiatives have been delivering well. I would only have only 1 point to make that why -- most of these initiatives are fairly new. If you look at RocketBees, it's just hardly a few quarters, and it takes time to build a mature city under RocketBees the area under the car or the number of shipments within the city that we can serve through a RocketBees, it takes time to build that network. So the real impact of RocketBees, you see as more and more customers get impacted and build their repeat cohorts and build their frequency while having great customer experience. And likewise, for the [ quick ] and the offline initiative has just started. So you can be -- to ensure of that in FY '27, the growth for the off-line channel should continue to be as strong as what you have seen in the mid-teens in what you've seen in Q4. So with all these 3 initiatives, we remain fairly, I would say, confident of the FY '27 growth will be much superior than the FY '26 and this gives us the confidence and clarity of what -- how we are actually being able to execute and we'll be able to deliver that. Moving further I would request Vivek to take India multichannel progress make over to you.

Thank you, Supam. So I'll take you through the progress of India multichannel in this quarter as well as financial year. So happy to report that in financial year '26, we grew by 11% in terms of GMV and India many channels. And for the first time, we crossed $1 billion in GMV for the Indian multichannel business. So moving to some of the key updates. As Supam has already shared on some of these things, we witnessed sequential improvement in year-on-year growth rate for revenue despite heightened competitive intensity during the last 2 quarters. Our diapering category continued to witness heightened competitive intensity during the quarter, which led to pressure on both growth -- on growth as well as margins. Whereas our non-diapering portfolio, which contributes to over 85% of our GMV remains very robust and continues to perform well. Our annual unique transacting customers stand all at 11 million. Our orders for quarter 4 FY '26 grew 10% and GMV grew by 12%. Our GMV for FY '26, as I already mentioned, grew by 11% year-on-year. Can we move to the next? So as Supam has mentioned, even in India multichannel business, we have continued to see sequential improvement in revenue growth. For quarter 4 FY '26, we grew by 11%, in terms of our revenue. For FY '26, over FY '25, we grew by 9%. However, as Supam has mentioned, that our gross margin has seen some further dip largely in our manufacturing operations, which is because of rupee depreciation, an increase in crude-linked raw material prices because of geopolitical situation. If not for these volatilities, our gross margin in Q4 would have seen a similar drop, which was because of the competitive intensity in diapering as Q3, which we saw in Q3 year-on-year. Further, if I would say, we have recovered almost 80 basis points of this loss in our EBITDA for Q4 going to our operating leverage benefits. Now I'll pass it on to Abhinav for international updates.

Abhinav, you're on mute.

I'm sorry. I had to unmute myself. I forgot about that. So good evening, everyone. Thanks for joining the call. So we'll go over the first 2 slides for our international business. For those of you who joined for the first time this call, we just go over certain metrics here. So very favorable sort of demographic market opportunity lies ahead of us in the international market. As you can see, the birth rates are slightly higher in KSA as compared to India. The spend, as you can see, are substantially higher in both the markets, KSA as well as in UAE versus India. So that's a large opportunity there. And obviously, the childcare market size forecasted is also significantly high, not as high as India, but significantly higher for the international market. So that's the market opportunity we have in front of us, and we'll speak more about it as we move along. Can you go to the next slide, please? So in UAE, we've been live since October of 2019 and in KSA, we've been live since August of 2022. So in both the markets, we are we are offering our customers the flexibility to choose the language of their choice, English or Arabic. So we have our app in both English and Arabic, largely operating as an online platform in both the markets, UAE and KSA, and our [ AOVs ] as compared to the international segment as compared to the India business is about 4x as higher. Next slide, please. Now this is an important slide. This shows you the evolution of our progression of gross margins for our International business segment versus in comparison to the India multichannel. And the reason is because we, as a business in the international segment, are about 5 years old. And as you can see, we've clocked the same gross margins as India had clocked where it was 8 years old. So we are well on track in terms of gross margins improving year-on-year, quarter-on-quarter, and you will see it in subsequent slides as well. Key important points here, the playbook that is being used and defined also for the international business has been played out in India as well. The levers that we -- some of the levers, not all, but some of the levers that I wanted to highlight here for gross margin expansion or increase in the home brand share of top line. And within home brands, also the fashion business -- fashion share to the business. Also improving our gross margins in both home brands as well as third-party margins because third-party brands also are equally important because it's a consumer-facing business. So obviously, it is what the mom likes if they like our home brand, which they do, plus, if they want to choose anything from the non-home brand or the third-party brands, we offer that as well, but ensuring that the margins make sense on the third-party side as well with the economies of scale that we see going forward. Also, obviously, as we grow, we will see, as in any business, operational efficiency is kicking in. So gross margin improvement levers. A couple of them I've just spoken about. And these were the same levers in play in India as well in the progressive years that India saw in its business. So very comfortably stacked here in terms of the way forward, what we need to do to grow the business sustainably. Next slide, please. So some of the key highlights for FY '26. We continue to witness promotional activities and heightened promotional activities by any horizontals that we spoke about Supam spoke about in his close 2 slides. However, we continued on the path of sustainable growth as we have been over the last 4 quarters, progressively. We've seen a reduction in EBITDA losses by 33% year-on-year for the quarter in FY '26 and 35% on a full year basis. FY '26 versus FY '25, AUTC increased by 7% in this quarter, Q4 FY '26 versus same quarter last year. Orders grew by 6% year-on-year FY '26 versus FY '25. Next slide, please. So $10 million plus in revenue in FY '26, and we should see this growing progressively as we move along. The key highlights here, this quarter, we grew 9% over the same quarter last year. More importantly, 470 bps margin expansion on the back of a 9% growth. And for the full year, we had a 20% -- 240 bps margin expansion with a 10% growth. So while we are growing sustainably, we also ensure that our gross margin expense and that you can see on the right-hand side where our EBITDA losses for the same quarter. Last year, we were lower by 33% in absolute terms. And as a percent of revenue, we went from 15% to 9%. For the full year, we reduced our losses from INR 140 crores to INR 90 crores, a reduction of 35%. And our losses now stem at 10% versus 16% in FY '25. Next slide. Again, as we've spoken earlier, on multiple quarterly calls, our prime focus has been to not just grow the business but grow it sustainably, not chasing top line at any cost. But growing our top line, ensuring that we reduce our losses substantially. So you can see the progression here from FY '23 to FY '25, there has been 80 bps reduction in losses. And again, in FY '26, over FY '25 was a 674 bps reduction, which, like I mentioned in the previous slide, which is 10% of our revenue versus 16% last year. Anuj, over to you, please.

Anuj, we can't hear you. Okay. We can hear you now.

Now you think have -- okay. All right. So I'll just give you an update on [indiscernible]. So we look at is, let me just we treat it through how GlobalBees is structured. So we have essentially 4 broad categories that we look at, which is home utilities, appliances, fashion and lifestyle and beauty personal care, health and personal. So these are the 4 broad segments in which we operate. As you know, over the last year, it's been a very important point for GlobalBees where we've been rationalizing our portfolio of brands to focus on the ones that will pan to time growth as well as profitability. We can move on -- next slide. So if I look at the overall performance for the year and I look at specifically the 4 categories, we did a revenue of INR 1,876.8 crores, which was a 28% year-on-year growth and a INR 91.9 crore adjusted EBITDA post corporate expenses, which translates to 4.9% of revenue. These core categories are the ones that we will continue to focus on in the long term. The rationalization of other brands are the ones that are witnessing lower revenue growth and had been incurring losses. We're almost at the tail end of rationalization of these brands and our endeavor is to complete this rationalization by this quarter end. So that we're able to then move on to a sustainable top line growth and bottom line growth as outlined in FY '26. Okay. We can move to the next slide. So if I compare our performance in terms of revenue and adjusted EBITDA, we look at revenue first. So in the last quarter, we had a 15% growth quarter-on-quarter. This quarter to last FY '25 quarter 4. And at a full year -- on a full year basis, we grew by 20% on a consolidated basis. The 20% is lower than the 27% of core brands purely because of the rationalization of brands as I have mentioned earlier. All of this growth that I'm mentioning is organic because the last acquisition that we have made at GlobalBees was in September 22. In terms of adjusted EBITDA, we have now in quarter toward FY '26. We did an adjusted EBITDA to was corporate expenses of INR 26.5 crores, which is revenue, 9x increase from the quarter 4 FY '25 adjusted EBITDA post corporate expenses, which was at 0.7%. So you had a significantly healthy growth in our EBITDA -- if I look at it on a full year basis also from FY '25 to FY '26, if you moved from 1.4% over 3%, INR 56 odd crores of adjusted EBITDA post-corporate expense is a 2.5x increase. Okay. We can move to the next slide. Overall, as you will observe, there has been a continuous trend of improvement in our bottom line over the years from FY '23, where we were negative to even in FY '24, we will be EBITDA negative. Now in FY '26, we stand at a healthy 3% adjusted EBITDA plus corporate expenses. This is also adjusted for stock cost. So this 3% includes the rationalization of brands, but it's improving as we now. That's the update that I had on GlobalBees. We can move to the next slide. Now Gautam will take [indiscernible] seconds. Thank you.

Thanks, Anuj. So this is our last segment, fourth segment, which is called as Others, represent the preschool business continuously growing from [ 1.8 ] preschools end of FY '24 to more than double end of FY '26. And in terms of number of seats enrolled, it's almost 3x in 2 years. Next slide, please. Healthy growth in revenue, 11% growth in revenue in FY '26 over FY '25 and around 220 bps improvement in EBITDA from 24% in FY '25 to 27% in FY '26. Now we talked about the consol performance. So why -- these numbers have been previously covered by Supam in a very [indiscernible] way. So India multichannel business, it's a 9% growth in '26 over '25, 8.8% adjusted EBITDA for FY '26. This was 9.5% in FY '25. This is largely because of, as Supam [indiscernible] mentioned, some pressure in gross margins, which is, a, on account of heightened competition in our diapering category, which represents business. And the second one is basically a dip in Q4 because largely in our manufacturing business because of rupee depreciation and the increase in the [indiscernible] raw material prices. This dip there is a lag in terms of recovery from the customers' lag of around 1 to 2 quarters. So from Q2 onwards, the gross margin loss because of crude-linked raw material prices and a bit should be covered. So we'll be recovering the lost margin. International business, Abhinav talked about, despite of a 10% Y-o-Y growth in FY '26, we managed to reduce our losses by almost INR 50 crores from a loss in FY '25, we reduced our losses to [ INR 90 crores ] in FY '26. So from 16%, that's come down to 10%. GlobalBees business continue to grow very well, while on a consol level, it's a 20% growth. However, if we talk about a clean slate that is the growth in the core category, that is 28% and has delivered an EBITDA of 4.9%. And as Anuj mentioned, the rationalization of the other brands should be over by Q1 FY '27. So we should see a complete organic growth of the core business starting Q2 and also the EBITDA, which is 4.9% in FY '26. Others, which is preschool business, 27% EBITDA and 11% growth. Next slide. So all those -- the those 4 business segments, it basically gives us a 12% growth in Q4 on a Y-o-Y basis and a similar growth in FY '26 over FY '25. Gross margin dip, we can see a gross margin. Again, this is because of 2 reasons. One is the decent gross point of India multichannel business, which Supam maybe explained, I also explained in the previous slide. And the second reason is a slight dip in the gross margin in the GlobalBees business. However, we maintain or we increase our EBITDA in Q4 for the full year in [indiscernible] business. Consol adjusted EBITDA, despite of a dipping gross margin from 37.4%, we have come down 6.2%. We still managed to increase our adjusted EBITDA on a consol basis, both at a Q4 level and also at the full year level. So Q4 adjusted EBITDA has increased by 18%, and the full year adjusted EBITDA has increased by 24%. So this ends our presentation. The other slide, those are supplemental. Let's go back there.

I'm happy to take questions.

Thank you, team. We will now move on to Q&A. [Operator Instructions]. First question is from [ Jinesh ], please unmute yourself.

[indiscernible]. So you have taken various initiatives to improve the delivery performance for your online business like delivering to your own network. So what percentage of orders are delivered through these networks? And what is the logic -- logistic cost increase in the Q4? And what is the expected increase in FY '27?

So [ Janesh ], I think the percentage of orders that we were delivering by roughly around Q3 and were some 28%. Now we have crossed 40% plus end of March or '26, and we will continue to increase it. Our goal post was to reach close to 45% to 50% by middle of the year. I think we remain -- we believe we are ahead of the curve, and we should be able to deliver it before the next quarter ends. And in terms of cost, there is a marginal front loading of the cost that actually happens, both for RocketBees as well as for the quick because it takes some certain time to reach to a little maturity within a city in terms of the number of shipments that we can do under RocketBees. So until then, you have to front load, but over -- so we will have some impact of 40 to 60 bps in a -- from a few quarters, but in the medium term, as the network matures, our costs will normalize to a regular cost structure that we had, and that cost will be -- excess will be nullified. So that's how -- I hope I've answered both your questions in terms of what percentage of shipment as well as on the cost front.

The next question is from [ Vishal Doshi ]. [ Vishal ], please unmute yourself.

Sir, my question is, how is the store business -- in doing -- and you have only added 10 COCO stores in FY '26. What is the plan for the store opening in financial year '27?

So in fact, we have mentioned in our previous calls as well that because of the macros, we wanted to maintain capital efficiency, and that's the reason we a kind of post opening of company-owned stores in FY '26. Given the initiatives that we have taken to improve the off-line growth, Q4 numbers are a testimony to the improvement in growth, which is -- the growth is best in last 7 quarters. So we'll double down on our approach to open a company-owned source in FY '27 and hopefully, with the mix of COCO as well as COCO stores, we should be opening roughly 100 stores in this [indiscernible].

The next question is from Tejash Shah. Tejash, please unmute yourself.

Am I audible?

Yes.

Supam, Just first question, interventions that we have made on India multichannel business, the areas of the pin codes that we are actually now fully deployed in terms of whatever interventions we had to me. What are the key operational and financial parameters that you are seeing which gives us a lot of confidence that once we roll it out fully, it will actually kind of bring back what the momentum that you're missing for last 1 year.

Sure. So Tejash, both can answer this question. But Vivek, I'm going to maybe start. So look, it's a fair question. And both for RocketBees initiatives as well as for the [ quick ] initiatives, we have felt that there is a clear superior customer experience that we are able to deliver which is what we had originally planned with these initiatives. And when I say it's a very tangible incremental outcome, and with that, we are also experiencing incremental growth in those catchments for [ quick ] as well as in those cities where we have RocketBees has reached to a certain maturity in terms of the total number of shipments in that city. So with that, we believe as we increase area under the curve, both for RocketBees as well as for the [ quick ] and as it improves, this will give us with a lag effect because it takes time to reach to a certain volume or to a point where we have certain volume in the city. And as we reach there, we will have a benefit of incremental growth being accrued to our overall online business. [indiscernible], do you want to add anything?

Yes. So Supam, as you rightly mentioned that we are seeing a lot of positive movement on the consumer experience metrics. So from that window, very confident that as the network matures, for RocketBees as well as [indiscernible] expands, we should see a good positive impact on our FY '27 growth. And so I think that's --

And this is the key operating metrics that we see is basically a reduction in commerce [ teletext ] delivery pad on-time delivery, which is probably the best in the industry. It's more than 92%. All these factors put together, as Supam mentioned, there could be a lag in terms of seeing a tangible growth in the online business. But yes, we have already started seeing good results in terms of service metrics, and we strongly believe that FY '27 online growth should be much superior compared to the growth that we have given in FY '26.

Sure. And Gautam, this intervention that you spoke about on KPI, it will largely reflect in better AOB frequency or recruiting more users on the platform.

It will be both. It will be improving the retention as well as acquiring more number of customers.

Perfect. Second, just if you can elaborate a bit what exactly is the source of this gross margin pressure. You touched upon a bit on certain categories. But is it more of a competitive pressure, which is hurting us or inflation or mix of everything playing out together?

So we talked about there are -- on the India multichannel, there were 2 parts to it. We saw 140 bps that we saw in Q3 that we explained. That has continued. It will take us a couple of quarters for the international discounts or international intensity to go away. We had seen this pressure in 2016, 2017 as well. But everything normalized and lately, a few more plays in the [indiscernible] have joined sort of -- and again, there has been the same intensity has been carried forward in the largely horizontal commerce player as well. So we believe that it's probably a 4 to 6 quarters sort of a phenomenon. It will go away. So that's on the 140 bps that we are talking about that we spoke in Q3 that has continued for this quarter. The remainder part of the gross margin loss in the -- in Q4 in India multichannel. It's very transitory as especially coming from our manufacturing and which is crude-linked input cost as well as rupee depreciation. And as it gets passed to the customer, you will see pumping back fully recovered in Q2. So it's just transitory in nature. In past, it has happened, but such a steep depreciation and such a steep include -- increase in crude prices has not happened in the past. At least we haven't seen it. But since it will get recovered from the customer. So from Q2 onwards, as Gautam mentioned, we'll be back on track this part of the loss will be recovered in our Q2 numbers.

So just to add, what will improve the gross margins going forward, the gross margin expansion levers, which is increase in home brand mix. There is a separate slide in additional disclosures, which basically talks about the GMV mix of our home brands. Fashion mix increase, again, there's a separate slide, which basically clearly shows the increase in the fashion mix, continuous negotiation of third-party [indiscernible]. So these factors will continue to play on, which will increase the gross margin going forward. The second factor which Supam talked about that the manufacturing business loss of -- loss in gross margin will be recovered starting Q2. So that will again add to the implement in gross margin. The third one is the discounts, especially in the library category, which led to a 140 bps recent gross margin in Q3. That will also be we believe it should be probably in the next 4 to 6 quarters. That should also come back in the business. So all these 3 factors will help us regain the gross margin in probably starting from Q2 are probably in the next 4 to 5 quarters.

Perfect. Just one follow-up, if I may. This pressure on diapers from quick commerce in terms of margins? Is it coming from largely the unlisted players? Or are you seeing any behavioral change once you get listed and you start chasing profitability or the behavior is across same in terms of losing money or being aggressive on this category.

No, it is not specific to any low cost or it is across the board. It is -- it's more of a platform phenomenon than a brand phenomena.

So just to answer that question, we have seen it both in listed and unlisted platforms, and that has led to a further price competition from the horizontals, which are unlisted as well. So it is across from commerce and horizontal where there's a price competition, which is resulting into this loss as of now, which we -- as Supam and Gautam mentioned, which seems to be quite irrational. And typically, the cycle takes a few quarters to subside, and that's what we expect as well.

The next question is from [ Jan Paravalos ]. [indiscernible], we can't hear you.

Okay. So I think go back to -- Yes. So [ Abinash], next question we'll take from you.

I have a couple of questions. So how is AI benefiting us? So I wanted to understand that.

Okay. Is that the only question? Or I thought that was -- others. Okay. I think, look, AI has sort of multifaceted ways of improving both from a revenue optimization, gross margin optimization as well as improvement in productivity, efficiencies. So it has far faster -- I mean, I would say multiple facets of improvement that one would see in the primary usage of AI. So it will be -- I can give examples because otherwise it will take a little longer for me to be able to explain every point across different facets. It is very fascinating to be able to come up with answers and able to get information processed, whether it is benefits that we can drive to save costs, like, for example, you can save your supply chain cost in terms of making a product line much faster than what you had otherwise we're taking. That leads to an improvement in working capital, to improvement in how you will build your -- for your [indiscernible] kind of models to be able to be more relevant, more effective to improve conversions. So there are a number of opportunities that we are utilizing within the company as to -- across different facets of running a business to not just use it only in typical sort of a call center savings or automated voice bot, chat bots, e-mail bots, but across the board in different facets to be able to optimize our costs as well as efficiencies, productivities as well as revenue optimization and even to the extent of discount or maybe the gross margin optimization. So there are -- these are at various stages of evolution. Over a period of time, you'll be able to -- some of you have already got the benefit, some of the benefits you'll accrue over a period of time. So maybe we can take this question a little more offline if you have more interest, but that's a broad list of it. There's too much excitement in time in the entire organization, what we all can do with the AI.

To sum up, we are working on cost efficiencies. We are working towards revenue expansion and margin expansion as well as people efficiency. So every single aspect, I think AI has already entered in the organization.

What kind of -- what percentage of bps or something we can expect as a benefit in the long run? Is it -- do you have any number or?

It's too early to comment on that, but I think that this is going to be a meaningful outcome as we go along. It should definitely be a meaningful outcome. We'll be able to speak more in the subsequent quarters because this initiative has just been -- just started a couple of months back. So it's premature for us to talk about the overall improvement that we do. But we remain very focused on the benefits that it accrue, it's not small. It's going to be meaningful. Therefore, we'll reserve comment on that. But maybe in the next quarterly update, we can probably share that number as well.

One more question I had. So we are trading at a pretty low valuation compared to our revenues. Is there any risk of someone trying to acquire us and is there any chance of we are doing buybacks or something?

Look, we haven't taken -- we haven't discussed this. We haven't -- I think we are we are focused right now on what we can execute to be able to deliver a far superior growth in FY '27 with expansion in our adjusted EBITDA. That's what we are focused at rest of the stuff that you talked about, we haven't experienced that in the past, maybe, but we haven't really thought through it yet as well. Yes, we have sufficient cash on the company, but we haven't discussed any of these buybacks and stuff like that so far in our internal discussions or even board discussions.

In the interest of time, we'll just take one last question. The next question is from Percy Panthaki.

Yes. Sir, just wanted to understand this off-line channel. I think this quarter, the growth is higher than the overall India multichannel growth rate? So just 2 questions from this. One is what really has changed or what initiatives have you taken to revive the growth in the off-line channel? And secondly, if that channel has really grown faster than 11%, which is your overall growth, that means the online channel has done a single-digit growth. So what is the reason why the online channel growth is so low given that the overall category itself might be growing at 10% and organized share within that is increasing? Just wanted to understand the reason for this low growth.

Yes. So Percy, Supam talked about the initiatives that we have taken in the offline business, and we are talking about this initiative since our last presentation. That's basically changing the product assortment from a [indiscernible] depth strategy. That has really played out very well for our off-line business, especially the COCO business, and that has resulted in a significantly higher growth in our offline business, which is around 15% in Q4 on a Y-o-Y basis. In terms of online growth, Percy, it's not single digit. So online GMV growth is roughly 10.5% in Q4. And it's around the same range for all the fourth quarters between -- hovering around 11% to 12%. However, given the initiatives that we have taken around faster deliveries both in terms of delivery through our kit-based network and [indiscernible], which we believe should be delivering at least 10% of our online orders by end of this year, we believe we should be able to deliver a much superior growth even for the online business in FY '27 compared to the FY '26 online growth. So both the channels online, offline, Supam talked about that -- the growth that we have delivered in Q4 should continue even for the rest of the part of FY '27, and online should also deliver a much better growth -- better growth while the cost is front loaded, the cost of logistics is front-loaded. The results, the actual -- this is the tangible business comes with a lag. And hopefully, in coming quarters, we should see a much superior both in online business also.

Percy [indiscernible] mix has changed for both offline, online GMV mix hasn't changed what you see in FY '26 over FY '25. So there is no material change in that. So I believe with the lag effect, I think you should see a growth bumping back in online as well. So compounding the effect of that, you should be able to see. That's why we are very confident in India multi-channel GMV growth will be much superior than the FY '26.

Understood. Next question I had, again, India multichannel business only. Given that there are the margin pressures which you said can continue for a few quarters more. On a full year to full year basis, FY '27 versus FY '26, do you think that EBITDA rupees crore EBITDA can have a double-digit growth?

Yes. If you look at it, are you talking about India multichannel only, right?

Yes.

Yes, you will have it, Percy, sure. Effectively, we are seeing -- the EBITDA, I would say the drop that we have seen because of manufacturing should be recovered fully by Q2. So we'll have 3 quarters of that benefit. So I don't think that effect will be there. And yes, the diapering effect will continue -- may continue for the full year. But margin expansion from the 85% of our category will -- should continue as well and the overall growth that we are anticipating will be superior. So there -- and also, you'll get operating leverage also coming out. So we still believe that we should be able to do a much superior sort of a growth to answer your question, both in terms of top line as well bottom line.

Right. And one last question, if I can squeeze in. Just wanted to sort of understand on a benchmark basis, what you are doing on delivery versus how the competition is doing the delivery. So with RocketBees, I mean, own delivery, how would that compare to the structure of players like, let's say, Amazon, [ Nia flip card ], et cetera, do they also do their own delivery? Or are they completely outsourced the same way that you were, let's say, a year ago? Just wanted to understand, I mean, within the industry practice, where do you fall on the spectrum?

So Percy, I'll just answer in 2 points. One, I think you have to understand the BB and Kids business is fairly complex from a supply chain perspective, both from a warehousing perspective as well as a first my last month delivery standpoint, because we are dealing with a category where you have almost 10-gram diaper [indiscernible], 30-kilogram [indiscernible] that has to be delivered. And it's fairly complex to have that size of spectrum in terms of managing our supply chain from availability to and very fragile products as well on top. So given that, nothing that what we do, how we do can be really compared with some third-party either shipping companies or third-party commerce players, whether it is the names that you have mentioned. So I won't really directly compare. But what we have built in RocketBEes is a fairly asset-light model. And they use -- the technology is completely announced. So the entire technology stack that we have built is being used by dedicated partners that we have regional local who are -- and we manage the first mile in the mid-mile although on a total asset-light CapEx-like basis, and the last mile partners are actually delivering and giving us a superior way of delivering and giving the better customer experience, then otherwise that we were being managed through third-party, the landscape fully can't be compared. But at the same time, it was totally asset-light. We're utilizing first mine mid-mile on our own, again, asset-light, but fully dedicated partners who are only delivering our shipment, not mixed shipments of third party and not other brands and us -- that's not the case. It's only dedicated first car deliveries that the last mile partners make.

So this last mile partner, would it be dedicated for all the other players also? I mean -- or is it something unique to our business model?

Well, different plays have different sort of models per se. I won't be able to say that in a few cities, people may have different models in few cities they may have third-party model, like if you utilize their third-party player, they may aggregate shipments of different companies or different brands and different platforms. So there are different models for different companies, there is no one model that every company follows.

Understood. Understood. So are we planning at some point of time to go 100% RocketBees? Or we will sort of stabilize at certain percentage and keep doing business of the certain percentage as per the old methodology?

We will continue to improve the coverage of RocketBees. It will be very difficult to go to 100%.

We still have some time in hand. So we'll take the next last question from [ Jan Prasana ].

Just a couple of questions on India multichannel. I know the basic thought process behind RocketBees and quick was to, let's say, increase both customer satisfaction and from an ordering perspective, get back, let's say, some of the pains which customers had of the date delivery. So just from your initial takeaways over the past 2 quarters. If you could share on places where you've implemented both quick and RocketBees, are you seeing higher transaction of orders versus places where RocketBees is not there. Is that giving you confidence heading into FY '27? And the second part -- second question is on the international business. Has there been some part of the international business also impacted by the Middle East which has led to this low single-digit revenue growth? And is that also leading -- I mean, I know on the cost side, you have been working on getting the margins down to at least a breakeven. But just if you could impact has that also impacted some movement towards breakeven on the international business?

[indiscernible], I will let Abhinav take the second question. But the first question answer is -- the same question was asked by Tejash. So answer is that we are seeing incremental growth in the cities as well as in the catchment that where we are serving both RocketBees under [ quick ]. So therefore, we'll continue. We have clarity of what we are executing. We are watchful of the metrics, service metrics that Gautam has spoke about. We'll continue to improve on that and bring more ready under the curve and build that incremental growth as we go along. So -- that's an answer to your first question. Second question, I'll let Abhinav speak on the Middle East.

So your second question is related to the current evolving situation and how it impacts the business. Is that correct?

Right.

So [ Jen ], the situation we all know what is happening. However, our -- it has been a little bit of a moderation in consumer sentiment. I'm not going to stay -- say anything else about that. But yes, there has been and there is some import complexities also is happening as we speak. However, I think fundamentally, for our business and our goalpost, as we've shown in the last so many quarters now has been -- or sort of a path is towards sustainable growth. So we are continuously focusing on our top line optimization and gross margin expansion. Our home brands are the most important -- one of the most important levers to improve gross margins. This situation is beyond anyone's control, so to speak. But this is also an opportunity as the way I look at it or the way we look at it internally is also an opportunity when we can optimize further on our processes within our discounting strategy is our marketing costs and reaching out to the right consumer who has -- who will potentially give us a longer sort of an LTV that we desire. And while we do all of this, also improve our home brand mix in the top line that we generate. So this is a unique opportunity, but our focus is the same, growing and not chasing top line at the expense of obviously reduced cost or very high marketing expense. While we hope that the situation ends sooner than later, but I think there are a lot of learnings for us in terms of how we optimize and how we continue to on our path to sustainable growth.

Just to conclude, we will continue to reduce our losses. What we did in FY '26, we will continue to do the same thing in FY '27 also.

Sure. Fair enough. Sir, if I just may squeeze in one last question. Just on the relevance of the 6 to 12 years age, which you've extended your category. If you could just give us in terms of how that is doing well in the past couple of quarters. Just -- that's more I'm just trying to understand from a retention of customer point of view. How is that shaping up? If you could just give some thoughts on that?

So [ Jen ], I'll probably take up that question. So we are seeing a positive traction, and we continue to see a positive traction in 6% to 12%. That remains the fastest-growing part of our business when it comes to age group of children. As we continue and basis that we continue to build our assortment, which is more conducive. So overall, it is good news on that front. And at the same time, if there's a slide in the supplementary slides, which shows our long-term cohorts being very strong for like a consumer who's been acquired 10 years back continues to transact with us. There is a good segment of that consumer. So all of that indicates towards a good positive future on the 6 to 12 for us.

That was the last question. I just hand it over back to the management for any concluding remarks.

No, thank you, everyone. Thank you for your time. Thank you. Thank you.