Cantabil Retail India Limited ($CANTABIL)

Ladies and gentlemen, good day, and welcome to the Cantabil Retail India Limited Q4 and FY '26 Earnings Conference Call. [Operator Instructions] Before we begin, a brief disclaimer. The presentation, which Cantabil Retail India Limited has uploaded on the stock exchange and their website, including the discussions during this call, contains or may contain certain forward-looking statements concerning Cantabil Retail India Limited business prospects and profitability, which are subject to several risks and uncertainties, and the actual results could materially differ from those in such forward-looking statements. Please note that this conference is being recorded. I now hand the conference over to Mr. Vijay Bansal, CMD, Cantabil Retail India Limited. Thank you, and over to you, sir.

Good evening, everyone. On behalf of Retail India Limited, I extend a warm welcome to all participants joining us for the Q4 and FY '26 earnings conference call. Joining me today are Mr. Deepak Bansal, Whole Time Director; Mr. [indiscernible], WholeTime Director; Mr. [indiscernible], Chief Financial Officer; Ms. [indiscernible] Company Secretary; and our Investor Relations advisers Capital. We trust you have had the opportunity to review our Q4 and FY '26 results. The earnings presentation and financial statements are available on the stock exchanges and the company website. [indiscernible]

Thank you, and a warm welcome to everyone. Now presenting the numbers, stand-alone performance highlights for FY '26. Revenue from operations for FY '26 grew by 18% to INR 82.6 crores as compared to INR 721 crores in FY '21. EBITDA for FY '22 to INR 2.3 crores compared to INR 20 crores in FY '25. [Technical Difficulty] the operational front, we continue to scale efficiently with a total of 652 stores across the country, covering a total retail area of 9.5 lakh square feet. These results affirm the strength of our business model and our ability to drive consistent high-quality growth. We may now begin the Q&A session.

[Operator Instructions] [indiscernible] Your first question is from the line of [indiscernible]

Sir, I wanted to understand something around the now obviously, you have a consistent basis. But what I observed from the data is that your SSG seems to be highly correlated to the monetary policy. So whenever the monetary policy, we see an uptick in your same-store sales growth. And whenever there is monetary policy tightening, the SSG takes hit. And given the inflationary environment that we are in right now, is not a very difficult thing to assume that in the next 12 months, we might start seeing monetary policy tightening again. Can you help us understand if there is any lever that you guys are thinking on the management is thinking of pulling to save this expected decline in the SSG, which is highly correlated to the monetary policy have you thought about it because the data clearly shows that. So if monetary policy tighten discretionary spending will take a hit and I'm pretty sure that the [indiscernible] around that?

SSG last year was around 5%. And in April also our SSG was around 5%. So monetary policy right now is not hampering our SSG growth because in May also we are getting policy [indiscernible] Yes, we are continuously delivering for last many years, 5% to 6% that we have been promising. We are targeting at least 5% to 6% of the same...

What I want to understand is that obviously, I'm looking at the top line and this year has been around in the 15% to 16% range. In Q4, we are talking about. So can you just give us some sense into the new store openings that you're seeing, how do they compare to the existing stores? I mean, in terms of your breakeven point in terms of the adaptability because now you are into newer markets. So I just want to understand how well are new customers adopting to [indiscernible]

So our new stores are giving very good response. So last year, we opened around 53 stores. And right now also around 45 stores are in the pipeline and all stores are performing very -- so we are not facing any challenge in the new markets. And the old stores, as you have noticed doing 5%. So overall, the combination of old stores, new stores are giving good [indiscernible]

The next question is from the line of [indiscernible] from [indiscernible].

Congratulations on a great set of numbers. I just had a couple of questions. So are we seeing any price hike that we would also be adopting considering how the raw material situation is? And are we seeing any impact of raw material price increase in our input cost...

So yes, this is actually price is obviously dependent on our cost price directly already the merchandise is there. But as of now, we have some input material has been taken some hike. Some cost is to be there by the customer and some buyers. So it's a mix. Yes, our prices -- selling prices are dependent on cost.

Okay. And are we seeing any early trends of impact of the cost on maybe considering the footfall as well because of or is it -- are we seeing good response currently as well?

Footfall is good because we are getting the SSG till now. So footfall is fine.

Question on the balance sheet side. We have INR 25 crores under loans. Can you just explain a bit on the nature of the same?

So we have given an intercorporate loan honestly. We are having surplus we have. So we are getting some good amount of returns. Normal market returns in terms of fund is app 6% to 7%. This we have given 12% 1 year, so that is the only...

The next question is from the line of [ Ankit Shah ] from White Equity Investment Advisors.

First question is on [indiscernible] Can you share the number for [indiscernible] and the estimate for FY '27?

If you see the cash flow [indiscernible] that is approximately INR 100 crores [indiscernible] next financial year.

This is the actual cost that you will be paying, right?

Borrowing and interest lease [indiscernible]

Okay. So this INR 100 crores, INR 95 [indiscernible]

INR 99 crores is the actual rental cost for the financial year FY '26.

Okay. So the average is going up by 10% per annum. attribute this to I mean what's going right for us in this [indiscernible]?

This is a mix of obviously some product inflation is there and the better mix in terms of margins, better product margin because we are maintaining 60% of the gross margin. So this year also some better due to optimization of product. We are -- it would be better than existing ones. Exactly what will happen that will take time, but some part would be better than for financial year.

Store is slightly slower than the planned trajectory. So we had planned for 675 stores by F '26. So where are we missing? And what's the trajectory for next year?

So the same thing. Actually, these are -- in my earlier calls earlier comment last 1.5 years. Now we have every year, 10% of our total store that is out of INR 600 for the renewal because [indiscernible] we have opened 9 stores are looking stores renew [indiscernible], we also opened 9 stores. And going [indiscernible]

So we are currently at [indiscernible] stores. We plan to add 100 stores next year is gross.

[indiscernible]

Square area, we should be looking at 15% to 20% per annum addition approximately or should that be different?

We are targeting that. We are targeting that we are targeting this.

The next question is from the line of [indiscernible] from [indiscernible].

My question is related to the gross margin. So in FY '23 about [indiscernible]

Yes. The margin we are targeting on a long-term basis is 16%. giving is getting better than that. However and the overall target to maintain 60% of the gross margin all those things, we still maintain our 60% is the guidance, our internal guidance is to maintain the gross margin.

The next question is from the line of [indiscernible] an individual investor.

Yes. So I just wanted to ask like I wanted to understand the rationale behind not accelerating franchisee-led growth as to why are we not opening franchise stores.

[indiscernible] we are doing bigger stores, we are doing the rental franchise are comfortable with very high investments properties with high rent. So for the stores in those places. But Tier 3 markets where the rentals are less, [indiscernible]

The next question is from the line of [indiscernible] from White Equity Investment Advisors.

[indiscernible]

Sir, this is regarding CapEx cost?

OpEx employee cost and other [indiscernible]

So overall, our -- we are maintaining our overall cost. Obviously, when the sales is going higher in terms of percentage is retail cost last year was 34% this year came down to 33%. So we are always known as a very tight [indiscernible] parameters in terms of operating front-end cost came down, sales up 34% to 33%.

And we expect the same trajectory, the same kind of operating level to play out in the next 2, 3 years?

Absolutely, absolutely. In terms of percentage, if you say it would be -- we are hoping not to cross that maybe plus/minus 1% is different. [indiscernible]

Got it. Sir, can you throw some light on footwear sales? Can you give the numbers for FY '27.

Footwear, right? The same way this year, last year, we have done start 1.5 year, almost on the target of 2%. Going forward, we have a target to increase it maybe end of this financial year 3% to 4%.

Got it. So we would be introducing this across more and more stores or all family stores or how is it?

We are planning it for the online sales because we are getting online traction more in the footwear. So we are fast.

And sir, can you help us understand a little bit more on the kids is it tracking how are the numbers.

[indiscernible] we are around 2% to 3% of total sales. So we are opening new family stores. So last year also 45% family stores total 55% family stores. So in the family stores, we keep. Kidswear is going to grow. But next year, we see it coming to the 4%, 4.5% [indiscernible]

The next question is from the line of [indiscernible] from [indiscernible].

Congrats to the team for strong execution. I have 2 questions. So, if you can explain to me that the gross margin has increased from 53%, 54-odd percent to 57% this quarter, so roughly around 350, 400 bps improvement from last year. And also seasonality also, if I check, this quarter, gross margins are generally on the lower side compared to the other quarters, right? So what has led to this higher gross margin in this quarter? Is it a mix-led thing? Or is it also because the footfall was good, so the discount mix percentage was on the lower side? Yes. This would be my first question.

Talking about Q4, right? So one thing is that there is some obviously better efficiency mix is there. It's a mix of efficiency as well as some correction in pricing. GS has also helped a little bit. So these are the mix of these combination, all 3 combinations. So that is why Q4 was better in terms of gross margin. But overall, going forward, this margin is to be maintained.

Understood. And when you say efficiency, you're talking about.

Rather than efficiency, I will have -- I will say better product mix, higher margin little bit almost same, but slightly on a product mix if you want, I can take sear.

Sure, sure. The second question I had was e-commerce sales number, if you can share for this quarter and last year same quarter? Absolute sales number e-commerce.

Absolute number for the quarter only, right?

Yes, for the quarter. Yes, for the quarter.

So last year, actually, as I explained earlier as well, my last year online numbers, if I take online numbers was INR 98 crores, INR 10 crores broadly you take. This year, it end up with INR 11 crores, right? So the growth is approximately 10%. But in terms of number of leases, I go, my growth is approximately 13% was explained earlier as well because [indiscernible] major play [indiscernible] and Flipkart is having 70% of the total 55 [indiscernible] 12% growth in...

Our next question is from the line of [indiscernible] an individual investor.

Sir, more of a macro perspective, just wanted to understand from you, given the current global situation, which obviously has led to some sort of inflationary pressure on the economy, do you all believe this inflationary pressure affects a retail format like Canter does it impact the demand scenario or the demand perspective at your stores as well or expected to impact?

Yes, there can be an impact on the demand on the goods, but we believe due to our marketing activities and due to our efficient front-end practices, we can manage this sluggish demand if it happens in the future.

So basically, then a follow-up to that is with additional marketing and everything, do you expect that there will be some pressure on the margins with OpEx costs going up? And so if you can just give me a guidance for, say, FY '27 given the current situation on both sales as well as EBITDA?

So the guidance is simple. These are the effect you see never been affected by these few of the months, we have very good same-store sales growth, which will be compensated by in few months, right? First quarter was great, then overall 5% to 6% of the same-store sales growth margins would have been there. Yes, the disturbance on a global level would continue. Number two, whatever the numbers we have been committing in terms of margins, that is a sustainable number. We are completely focusing on our gross margin, which is approximately 60%. The moment we will be able to maintain that our EBITDA margin 30% will always be on the card.

Sorry, but I just heard that basically additional marketing expenses would be given towards.

1.7% as of now. It may go up to 2%, 1.8%, plus/minus 0.1%, 0.2%, not beyond that.

And just a follow-up on the guidance, what's the projected SSG for [indiscernible]

We are expecting to take it forward from 5% to 6%. Otherwise, 5% to 6% would have been maintained. It may go up to 7%, 8%, but it's too early for this, but minimum 5%, 6% would have been there.

Got it. And sir, just last question, given there are a lot many categories which is kind of new or more of experimental categories, everything, do you think broadly on the inventory front or basically, do you see an expansion in the working capital cycle for you means predominantly from an inventory perspective, going into family stores, probably more inventory would have to be stored and everything. So given all these factors, do you see a working capital expansion cycle?

From last year, for last 3, 4 years, we have the best this financial year in terms of inventory days as well as working capital cycle. Last year, inventory days was 123 days, 24 days in fact, we came down to 9 days. working capital was 115 days. This year, it came down to 105 days. We are continuously working on it to maintain it. Always we said it should not cross beyond 120, and we are trying to reduce. So significantly, we reduced it. We optimized it. So approximately near this only 110 days in terms of finished goods inventory as well as 105 days of working capital, approximately would be around this.

Sorry, I missed the last part.

105 days of the working capital for this financial year, 110 days was the inventory, and it would be around this.

The next question is from the line of Abhi Jain from [indiscernible] Capital.

That given the inflation headwind and problems and obviously, it will become more sticky in FY '28 than it is in FY '27. Is there any plan or are you monitoring or does it help if you upload upfront your CapEx and your store expansion and store opening? Does it make sense to increase the pace in FY '27 and then wait and watch in FY '28 basis how the inflation picks out? Because I think cost optimization that will be one part of cost optimizing that will really help you sustain your margins going forward. So any thoughts around that.

Are you asking about the CapEx expense going up due to the inflationary...

Yes, the store expansion whatever is planned, I mean, does it make sense to front load it in FY '27 given that inflation is expected to be globally. And obviously, the cost will rise and the interest cost will rise and all of that will contribute to I'm just wondering [indiscernible]

Interest cost, we don't have because we are debt free. And the CapEx, we have planned to lower our CapEx per square feet because we have right now adopted a new furniture fixture category, which is slightly less cost than what we are doing in the previous year. So CapEx per square feet, we think will go down in this year because the new fixture design has been adopted with a lesser. So this is how we plan to mitigate the inflationary pressure if it comes in the coming quarters. So we have a very clear bifurcation what we are going to spend, how we are going to utilize our cash flows that is very clearly bifurcated how much because everything is from the internal accrual, obviously, we are INR 1,800 is the CapEx per square feet we are adding INR 90 crores, INR 91 crores or INR 100 crores. So that is -- there is no -- in terms of mixing of OpEx [indiscernible] OpEx with CapEx, things are as per plan. No issues. So it will come down as [indiscernible]. So going forward, there is no change in plan in terms of OpEx percentage as well as CapEx cash flow.

No, that looks like out there and nobody knows how it will pan out given the global inflation that we are seeing. So I'm just thinking that does it help to preempt our efforts towards that and mitigate whatever we can right now in FY '27.

The next question is from the line of [indiscernible]

I just wanted to understand what would be the [Technical Difficulty] So my first question is what is the current rent per square.

Current rent per square feet [indiscernible] INR 115 per square feet for the financial year FY '26.

Has it gone up?

Last year, it was INR 120. This year, it's come down to INR 115.

I just wanted to understand on the new store versus old store in terms of the larger stores which currently you are using vis-a-vis the older smaller in size. What is the benefit which we are deriving from?

So now the concept is not exactly the benefit. We are opening bigger stores now. For last 2 years, our average size, if you say as a journey, it was started in last year from 1,100 square feet average size. This year, we end up with 1,400 is my average size. For last 2 years, my average opening size is 1,700 square feet. Obviously, we are opening more family stores, right? So the benefit is that we have a better portfolio of family stores where sizes are not available, it could be men like Maharashtra Gujarat where big [indiscernible]

[indiscernible] Expected EBITDA level.

My bigger family EBITDA that is plus 1.5%. That is what the difference is. But this is not a parameter for opening a store. There are a lot of parameters. But obviously, when we are opening the family, they are giving slightly better.

Corporate office was supposed to -- have we moved into the new corporate office warehouse?

Yes. We are having this conference from the new corporate office itself only.

So was this capitalized in FY '26 capital?

All the building has been capitalized. Overall, the budget work for the building, barring land was approximately INR 50 crores to INR 5, almost everything has been done and it has been capitalized in the book and balance sheet has been taken the depreciation [indiscernible]

Okay. Sir, in terms of warehouse, I understand that the new office also had a warehouse. So what would be -- how large is the warehouse? How much store additional store it can cater to?

So this building is 11-story building, where we are having 4 floors for corporate office and 4 floors have been used for online warehousing. So this has been completely automized with WMS. So this has been building 4 floors has been dedicated for the online warehousing. Our offline warehouse is still separate.

Does that mean we will be catering online Okay. Sir, one last question on loan given to related party or?

Related party for better returns for 1 year only closed in this financial year.

Sure. And last question, if I may ask, what is the current inventory aging bucket? I'm more interested on knowing inventory above 180 days.

Current inventory aging bucket, right?

Yes, yes. So essentially above 180 days, how much inventory would be there?

70% of my total inventory, 70% to 75% is within the range of 1.5 years. And then we have obviously inventory provisioning policy for inventory, which is in place.

And what is the provisioning policy...

One, that is all fresh material, 1 to 3 years, 10% we are making anything above 3 years, whatever made of cost, which is actually going to be real. So 1 to 3 years, 10 years.

The next question is from the line of [indiscernible] an individual investor.

Sir, since we shifted to new warehouse and corporate office, will there be any saving in lease cost in future?

Reduction in lease cost, right?

Yes. Yes, it would be there.

My earlier office building was on lease, that would have been there...

How much will be the saving by when we will realize it quarter 2 or...

INR 1.5 crores to INR 2 crores annually.

And this will be from quarter 2 or quarter 1 onwards?

Quarter 2 onwards. Quarter 2 or maybe quarter 3 onwards.

Okay. And this is only for corporate office and about warehouse?

So as we explained, like say, we were having earlier office, right? Earlier office was there as well as offline warehouse. So this office, we moved, we have 50% of the office space as well 50% of the e-commerce warehousing space, right? And then the offline would be moved to our factory that is already warehouse and another warehouse. So this is how we are being. [indiscernible]

Okay. So this INR 15 crores [indiscernible]

[indiscernible] is approximately INR 2 crores we are going to from maybe on [indiscernible]

Okay. And regarding -- like what is our future plan for using the cash flow because we had given INR 25 crores this year to -- for some intercorporate loan. So for future cash flow, what is our plan? How we will use the cash flow?

So cash flow would have been -- if you see this year, we are having, say, 50% -- INR 50 crores of cash surplus. 50% there. 50% means that is given to non part for better return. But going forward, we have a plan to make a better return in terms of market. We will have expansion plan. Things are in place, which would come from Q3 onwards.

Okay. Okay. So we will do more CapEx from Q3?

INR 100 crores has always been on the plan, then maybe numbers going forward. But cash surplus by the end of this balance sheet would be a good amount of there in the balance sheet. We are obviously going to have a return on whatever the return there.

Okay. And last question is around INR 10 crores in balance sheet. Is there anything in progress or what is [indiscernible]

We are building another in our existing factory largely part of INR 10 crores for this Bud warehouse as well as stores are in pipeline, INR 1.5 crores is a part of that, which we are going to be open in the month of April in the Q1. So that is there. Then some is going in corporate office that is largely 50% part B and the balance is for this office as well as new stores.

Okay. And that will start in Q1, you said, right?

Sorry?

The remaining portion will start in Q1 this quarter.

Yes. This should keep on going. We are keen to keep on opening that store. So always WIP would have been there. Some is going on in factory as well. So some stores would always be there.

The next question is from the line of [indiscernible] from Value Research.

So in the latest presentation, the sales per square feet for FY '25, you have taken INR 753. But in present it was [Technical Difficulty] that we have taken?

Actually, when we are moving to new software, we reassess all the areas. So there are some old stores are then we expanded this area. So 5% of my total area, you can say 20,000 square feet on older stores has been expanded. That is why marginally per square is looking

Right. My next question would be I just wanted to know how far do we reach maturity for a larger family-owned stores?

So broadly, maturity period is still around 1.5 years to 2 years maturity when they have started giving their full sales. the breakeven period is 6 months for any of the stores. So largely, these parameters are same for men's family.

The next question is from the line of Ankit Shah from White Equity Investment Advisors.

Sir, are we expanding our manufacturing capacity...

[indiscernible] capacity of producing approximately 18 lakh to 20 lakh as of now is fulfilling our [indiscernible] 40%. And going forward, this ratio is largely [indiscernible]

Whatever we are manufacturing at our factory, let's say right now, it could be around 25%, 18 to 20 million pieces. So should that be contributing to better margins... Indiscernible] And it is difficult for other units. You can have a small unit for browser and other things, it is a completely technical or imported machine. It's a big setup. So that is why the moment our requirements will increase, we are expanding our existing -- they have better margins. You said this -- this is what we are specialized plant. However, there we produce to, [indiscernible]. Got it. Okay. So now that we are likely to have a cash surplus are we looking at expanding the capacity here or insourcing more and more products at some stage, maybe 1 or 2 years down the line?

So, we are actually core retailers. So our focus is [indiscernible] largely 60%, as I said, but largely would be outsourced to the job work rather than establishing more own plant.

Got it. So we want to focus on retail and whatever we have on the manufacturing side, broadly, we continue with that. Is that understanding right?

Yes.

Makes sense. Sir, in the earlier calls, you were talking about trying to explore export opportunity and you were trying to explore something in Nepal. Can you update us on that or any other export plans?

So we still have 4 stores in Nepal. Nepal where we can. We are exploring it. But on an immediate basis, India is so big. We are expanding INR 1,000 crores is the target, then we have to make it forward. But we are exploring anything [indiscernible].

Got it. You said you already have 4 stores in Nepal?

[indiscernible]

Okay. And you were looking at appointing master something is that -- can you give more detail if that's possible... Franchise for overseas, you are asking about?

Yes, either overseas or Nepal in particular.

[indiscernible] we are not doing business in other countries. But yes, we do have to figure out whether the joint venture kind of model or the [indiscernible] No. stores are comparing stores we are doing on the... [indiscernible]

Fashion category, we are not exploring because we always said that we are into the basic kind of fashion. So we are which are closer to the [indiscernible] We want to remain in this category.

As there are no further questions from the participants, I now hand the conference over to Mr. Deepak for closing comments.

Or the enduring strength of [indiscernible], strong consumer traction and robust financial results. Guided by Vision 2027, we remain focused on accelerating expansion, deepening customer engagement and driving sustainable long-term value creation. We thank our shareholders for their continued trust and look forward to building on this momentum in the years ahead. We hope we have been able to answer your queries. Please feel free to reach to our CFO or IR team for any clarification or feedback. Thank you all.

Thank you. On behalf of Cantabil Retail India Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.