Electronics Mart India Limited (EMIL) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Electronics Mart India Limited Q3 FY '25 Earnings Conference Call. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on date of this call. These statements are not a guarantee of future performance and involve risks and uncertainties that are difficult to predict. [Operator Instructions] Please note that this conference call is being recorded. I now hand the conference over to Mr. Karan Bajaj, CEO of Electronics Mart India Limited. Thank you, and over to you, sir.

Thank you very much. Good evening, and a very warm welcome to everyone present on the call. Along with me, I have Mr. Premchand Devarakonda, our Chief Financial Officer. We have uploaded our results and investor presentations for the quarter and 9 months ended FY '25 on the stock exchange and company's website. Hope everyone had a chance to go through the same. In 9 months FY '25, revenue recorded was at INR 5,246 crores, reflecting a year-on-year growth of around 10%. EBITDA stood at INR 337 crores with EBITDA margin at 6.4% and pre Ind-AS margin at 4.7%, respectively. The challenging macroeconomic environment driven by persistent [ inflation ] pressure, subdued discretionary demand and slowdown in real estate market in urban pockets. Large appliances continue to dominate as the largest revenue contributor according to -- accounting for 45% of the revenue in the 9 months FY '25. Mobile and small appliances contributed 42% and 13%, respectively. The store network expanded significantly during this period with 14 new stores opened in quarter 3. In Telangana, 2 stores were added, 10 stores were opened in Andhra Pradesh and 2 in the national capital region. Gross store opening in Q4 are expected to be between 10 to 12 stores, taking the total count beyond the 200 store milestone at the pan-India level. By December '24, the total store count rose from 177 stores as of September '24 to 191 stores comprising 178 multi-brand stores and 13 exclusive brand outlets, spanning 78 cities across 4 states. In the NCR region, total number of stores reached 26. The company has outperformed its full year guidance in terms of store addition by adding 31 stores during the 9 months ended period. As of December '24, inventory days stood at 46 days. The company continues to prioritize inventory optimization, enhancing cash flow conversion, further fortifying the balance sheet position. India's economic outlook remains optimistic with the projected growth of 10.3% to 10.5% in the upcoming fiscal year, up from 9.7%. The anticipated growth is supported by increased on capital spending and a rebound in demand driven by premiumization. Further, the union budget of 2025 has introduced significant personal income tax relief by lifting the taxable income limits. With an estimated INR 1 lakh crores being distributed to the middle class, this move is expected to enhance disposable income, direct boosting consumer spending, particularly in the consumer durable sector. With greater purchasing power, households are likely to increase their spending to purchase or upgrade their home appliances and electronics driving overall demand growth. Benefiting both manufacturers and retailers in the consumer durable industry. EML's competitive strategy focused on developing a comprehensive product portfolio and forging strong partnership to capitalize on the region in the demand. But offering a wide array of high-quality products, EMIL is positioned to meet the diverse need of consumers, ensuring customer satisfaction and loyalty. The company's collaboration with renowned brands enhances its credibility and appeal allowing to capture a large market share as demand continues to rebound. To conclude, we have actively expanded our store portfolio over the last 2 to 3 years. However, as the store matures and achieve higher throughput, we expect to see a stronger recovery in the unit economics. As revenue growth stabilizes, it will lead to improved margins on the account of operating leverage. We remain cautiously optimistic on demand recovery, mainly through a strong summer season coming forward. With this, I refer Mr. Premchand Devarakonda, our CFO, to update you on the financial performance. Thank you all.

Thank you, Karan. Good evening, and warm welcome to all the participants. Let me begin with the Q3 FY '25 financial overview. Our revenues for the quarter stood at INR 1,885 crores as against INR 1,775 crores in Q3 FY '24, a growth of 6% year-on-year. EBITDA for Q3 FY '23 -- FY '25 stood at INR 99 crores as against INR 115 crores, a degrowth of 14% year-on-year. EBITDA margin for Q3 FY '25 stood at 5.2%. Pre Ind-AS EBITDA for Q3 FY '25 stood at INR 67 crores, which works out to 3.6%. PAT for Q3 FY '25 stood at INR 32 crores as against INR 46 crores. SSS Growth Q3 FY '25 was 2.8% negative, mainly due to a slowdown in Hyderabad region. Excluding Hyderabad region, all other region have decent SSSG. Now moving on to 9 months of FY '25 financials. Our revenues for 9 months FY '25 stood at INR 5,246 crores as against INR 4,761 crores in 9 months FY '24, a growth of 10% year-on-year. EBITDA for 9 months FY '25 stood at INR 337 crores as against INR 342 crores, a degrowth of 2% year-on-year. EBITDA margin for 9 months FY '25 stood at 6.4%. Pre-index EBITDA for 9 months FY '25 stood at INR 245 crores with a margin of 4.5%. PAT for 9 months FY '25 stood at INR 129 crores as against INR 143 crores. For 9 months FY '25, SSSG stood at 3.8%. ROCE and ROE on an annualized basis for 9 months FY '25 stood at 16.4% and 11.2%, respectively. The working capital days as on 31st December 2024, stood at 52 days. The gross debt and net debt to equity stood at 0.4x and our net debt-to-EBITDA stood at 0.3x. Pre Ind-AS cash flow from operations to INR 453 crores. With this, now I open the floor for question and answer. Thank you.

[Operator Instructions] The first question is from the line of Manoj Gori from Equirus Capital.

Am I audible?

Yes.

So my first question is on the sales side. So when I look at the overall brand's performance, whether we talk about large appliances in who are largely into refrigerators and washing machine with the categories which have been -- relatively been under pressure. Plus when I look at some of the [ ECD ] categories of the companies which have reported their numbers. So both in 2Q and 3Q, when I look at the sales performance, it seems to be a bit on the higher side as compared to us. Even if we look at Whirlpool or [ IFP ], they have reported double-digit kind of growth during Q3, despite a lot of sales would have been done during September month as the channel would have obviously stocked up for the festive season. So just wanted to understand where is the disconnect because when I look at our performance, that definitely seems to be a bit muted when I look at the brands performance.

So Manoj, you're absolutely right. So if you look at the cluster division that we operate today in, whereas our mature stores are all -- majority of them are in the Hyderabad cluster, which is at a flat or negative growth by 1% or 2% for us, especially where the larger appliances has been a stronghold for us for a very long time, except AC because AC, you've seen a very good growth coming from almost 40-odd percent. And that is both value and volume growth. Whereas if you look at the breakup, when we look at a breakup of refrigerators and washing machine, unfortunately, we could not see a higher double-digit volume growth in these clusters, whereas our newer clusters like Telangana upcountry market, Andhra Pradesh and Delhi NCR have outperformed and done really good. But unfortunately, what happens is that these clusters are really small on the total overall contribution that they have on the total balance sheet. So until unless our major -- so this was a problem with us with the last quarter as well. So until unless, Hyderabad does a good performance -- until unless it is -- till the time it is a bigger cluster for us, there's always going to be a much lesser growth you will see for us, especially in the refrigerator and washing machine category, whereas the volume growth is around 2% or 3% only. Whereas if you see mobile phones or if you see air conditioners, kitchen appliances, where the growth is much higher then you will see an in-line performance across geographies, and that would help us grow better. But saying that, we keep an eye on an every day market share across categories and competition very closely to make sure that nothing is going wrong with us in Hyderabad because that's the biggest cluster for us. And that is on the positive for us where we've not lost even 0.5% of market share in across categories. So that is a good positive sign for us. And there are a lot of other reasons for the market to be a little slower in this region where we operate in Hyderabad. But we are quite optimistic that for the summer coming up, it is gearing up quite well for us. And right now, the weather is also on our side where it is supporting us, where it has become a little hotter during the day in Hyderabad. So we're quite optimistic going forward for this cluster also to outperform and deliver us better. And to add up to your question, one more thing, Manoj, I would like to give out is that out of the 170-plus stores that we operate, around 75, 80 stores today are the stores which have not reached the maturity level. So in the drastic period of last 20 or 18 months, you might have seen a lot of store expansions that happened. So till the time these stores mature enough, that is where you will see the actual true colors of the store performance and giving us a higher growth. And these are all in the newer clusters in Delhi NCR, AP, Telangana, whereas in Hyderabad, we've hardly opened 2 new stores. So there's not about new account that added up in the existing market in this region. So that is why you would see the market getting a little slower, not supporting us the way we wanted the growth to be. But we're quite optimistic and quite happy with how it is shaping up now.

Correct, sir. Sir, two subparts on this side. One, if you look at the Hyderabad business, obviously, we have a very strong presence over there. Like are we confident that we are not losing any market share into this market? And probably these are the markets which are facing some issues at this moment.

Absolutely. As I told you, so that is what we -- as a homework we do every day, across teams and across categories. And if you deep dive into the volume growth that is there in the market today versus what we are delivering. And at the same time, the new categories, they're doing very well for like built-in audio, kitchen appliances, the other categories has actually shape up really well in the last quarter onwards really started focusing on other products to be started selling better for us, and you would see a good growth. AC is an exception. AC will see a 40% growth, it's because the penetration was lower, all the brands are very aggressive. And unfortunately, for the last few years, you might have even seen discretionary growth in pricing as well as the ASP is also going up, especially in the large appliances, which unfortunately, this year is not that great. We're not seeing the support of price increase coming our way or the inflation is going where we would get a higher growth rate in terms of value. That has not been supporting us, whereas the volume growth has been in the single digits for the larger appliances, especially television at 5%, 6%, washing machine that both at 2%, 3%. So you will not see a major jump in value contribution from those categories as well.

Correct. So our market share remains intact in Hyderabad. Secondly in Delhi, if you look at even in the third quarter, our sales growth was roughly around 9%. So that's on the SSG side. Again, if I look at yes, in AP, Telangana, we did saw some challenges. So did we see similar kind of challenges even in Delhi NCR because even there, if you look at the SSG seems to be a bit sluggish than what we would have been expecting.

So see, that number that has been given is lately given for the stores which have been matured over 12 months. So if I actually see what is in line, so that is -- that number would be upward of 20% for us. For -- or if I give you an exact number, that would be around 22.5% for SSG for the stores which have been operating for 12 months, stores which are over above that is around 8% to 9%. So you would see that decrease, I mean, you see the change there. But overall performance of Delhi NCR is up by almost 50% if you compare the quarter-to-quarter number. And for the first 9 months, it's up by 60-plus percent. So we're quite happy with the performance there. And that is what we're expecting. Definitely, yes, it is a newer market. The more we fetch out of that market, the better it is for us and more sooner, it becomes mature and stabilizes for us in the coming time because a lot of stores that have opened up are not even 12 months old. So we are quite optimistic about that cluster as well and it is going as we decided that we'll touch a certain throughput for the first set of 8 stores that we had opened up in '22 August. So those are in line. So majorly, the SSG that you would see is for those set of 8 stores that we had opened initially, and then after that other stores, whereas the stores that we opened in the last 24 months are up by 22%.

Correct. Sir, lastly, if I may ask one more question. So obviously, today, when we look at roughly 60%, 65% of the revenue comes from Hyderabad market, and we do understand these are matured markets. The stores are very mature. And accordingly, there will be a negative drag on the overall SSG performance. So this contribution changing, probably new stores getting adding up in the SSG calculation next year, and how do you see this 60%, 65% moving to roughly around 50%, 55%? And by when should we expect that? So there are 2 questions. One, what would be the new percentage, new store additions in the SSG for next year? And second, it would be probably by when should we expect Hyderabad's contribution to come down to 50%, 55%?

Manoj, for the next year, so like for this last quarter itself, see right now, for the first 9 months of this year, we opened around 31, 32 stores and other 10 to 12 stores are in the pipeline that will open up -- we've already opened up a few stores in Jan and Feb and few more stores opening up in March as well, especially in the Delhi cluster. So this year, we would end up FY '25 closing, would end up an addition of around approximately 40 stores, whereas for the next year FY '26 also, we have 35 stores that are already getting ready for us. So in the next 2 to 3 quarters -- coming 2 to 3 quarters will end up opening other 25-odd stores in FY '25, whereas FY '25, we should be closing the addition by around another 35 to 40 stores. So that we've already shortlisted in the existing clusters. I'm not even adding a new cluster to this. So to take the count up to almost 225 to 230 stores in the next financial year. That is the idea for the company for the addition of stores, which will majorly be in the existing clusters in NCR Delhi and AP and Telangana. So that is the plan. And as I told you earlier, to almost out of the 200-odd stores that will end up by Q4, there will be 80-odd stores, which will still be not matured or still under matured in the time that we would take it to get mature. So almost say, 24 to 36 months, it takes around the store to get matured. So that is the number of store count around 80-odd stores will be still yet to touch the maturity levels in the coming times.

[Operator Instructions] The next question is from the line of Yash Tara from RSPN Ventures.

Am I audible?

Yes, sir.

So first question with regards to accounting of discounts. If you can explain what leads to reduction in gross margin in the month of December, even historically. And how are discounts accounted in the books?

Sir, can you repeat your question because you were not that clear.

Yes. So my question was with regards to accounting of discount. Historically, also, the gross margin reduces in the month of December. If you can explain how you account discounts and what leads to reduction in gross margin in the month of December?

Sure. Sir, whatever the sales promotion activities or cash back offers we roll out during the festive season, so that will be adjusted against the revenue. As a result, the gross -- I mean, net sales realization will come down. So that will obviously reduce the gross margin.

Okay. But then what is the sales promotion number in the other expenses, if you see, there's a line item on a sales promotion. So what does that include?

Sales promotion is the -- normally, we also participate in the dealer buy down charges. I mean that is interest subvention to be borne by the dealer is accounted under the head sales promotion.

I'm sorry you did not get it, sir.

There are 2 things, sir. The dealer buydown is nothing but the interest subvention to be borne by the dealer. So that is shown under the head sales promotion, whereas cash back offers will be knocked off against the sales revenue.

Interest subvention?

Yes, these are 2 different.

Okay. And if you could give me the gross debt, I think the debt was supposed to be reduced by the financial year-end, but the amount of interest has increased quite a bit. So what has led to that increase? And if you give me the amount of gross debt?

Sir, to answer your question, the interest would even contribute from the Ind-AS 116 adjustment that we do. The interest and depreciation would be a little higher because we keep on adding up stores. So the rental adjustment on the lease liabilities added up in interest and depreciation after EBITDA rather than the expense out on rental income because that is the method that we follow. But in terms of the actual debt, if you want, I can give you a breakdown on that as well. Give me a second. So [indiscernible] open the [indiscernible]. Yes. sir, if you actually see the term loans that are there, versus the borrowing that is -- so there is a decrease in the term loan, working capital requirement and there is an unsecured working capital loan. So there are 3 different [ debts ] that we operate in, whereas the working capital has gone up significantly, it's basically because we started purchasing for the Diwali season. And then eventually, that will come down if you compare it to the March numbers versus 31st March numbers and 31st December number. So there will be a significant decrease there. If you look at last quarter versus this quarter also, there is a significant decrease there, whereas the term loan for buying properties has gone up a little bit because we end up buying a lot of properties, a lot of institutions due for us, which we completed in quarter 3. That was all the advances that we had given out in the previous quarters as well. So the term loan would have gone up a little bit. But whereas, if you see the working capital loan and the unsecured working capital loan, both have reduced drastically.

And can you please give me the amount?

Yes, sir. So from the secured working asset loan, which was at INR 429 crores previously, has come down to INR 322 crores. And unsecured working capital loan has reduced to INR 19.82 crores -- sorry, INR 1.9 crores.

So I guess, the total debt is around -- sorry around, INR 325 crores.

[Foreign Language] term loan has increased. Term loan has now up to -- has gone up to all the properties are put together INR 200 crores. So total borrowing, if you see in the 31st December, it would be around INR 530 crores.

Okay. Okay. And with regards to guidance, do we still maintain the annual guidance, which was earlier given, I think it was around 15%. Do we still maintain it? Or are we supposed to reiterate or revise the guidance?

That should be in line with the numbers. So the growth is around 10.5%, 10.6% to be precise for the first 9 months. And then we're looking at a decent growth coming in, in the quarter 4. So in line with what we were expecting, so that should be there. But the bottom line revision was already discussed in the previous quarters as well because the expenses gross margins got diluted by 0.75% and the expenses up by almost [ 5.6%, 5.7% ]. So we're expecting the bottom line to take a little impact in the previous quarters than the previous year, and it will be in line with what we were expecting it to be. So we don't see a drastic change there. But -- so we're quite optimistic in terms of what is in future for us, especially looking at the performance in Jan and Feb. And then the other clusters that we're operating, especially Delhi, Telangana upcountry market and Andhra. And the new stores also that we opened up are performing quite well for us. So we are in line. There are times where a company would face a situation like this, but we are quite comfortable, and we are quite optimistic on what is up in store for us.

Okay, sir. Only with regards to the first question, the interest subvention which is something I'm not really clear about. Can I get back to you on that?

So if you compare the quarter 3 FY '24 number, which we stood at around INR 48.3 crores has increased to INR 51.5 crores in the FY '25. So this is basically the dealer buydown because most of our sales happen through NBFC like Bajaj Finserv, IDFC, HDFC. So what happens is that when a customer walks in, especially during the Diwali period, the price becomes very competitive. And usually, no dealer charges, the dealer buydown. So there are 2 major aspects when financing a case is one is the manufacturer buydown and the other one is dealer buydown. So manufacturing like Samsung, LG, Apple would bear their side of interest, whereas the dealer also is charged the bit. So the customer gets absolute 0%, interest-free EMI. So usually a lot of dealers would embed that pricing in the cost itself, whereas we don't do that. So any mode of payment on our store would have the actual discounted price available for the customer, whereas if he ops for a financing option through NBFC, then there is a dealer buydown charge, which we take it under our hit as a cost to us. So that is where that is something directly proportionate to the sellout that we do through NBFC just like a credit card charges.

[Operator Instructions] The next question is from the line of Tanay Shah from DAM Capital.

Just wanted to understand, has there been any improvement in demand across the product categories which we operate in? And given that winters have not been so harsh, have you kind of started seeing some sort of stocking for the summer led products like the RACs and all the other smaller appliances as well. So just wanted to understand on that aspect. The second question would be in terms of water heaters, what we do, right? So how has the demand been in the previous quarter? And if you could just kind of give some flavor on that as well?

Sure. So definitely, as I told you, like the summer has settled a little early here in the region. So we would see a little higher growth coming in air condition and air cooler for us. Usually, we would start off by [indiscernible] and it has already started up right now. So we have preponed it by 15, 20 days. So that is an advantage that we're looking at as we talk right now. So the demand looks good, especially mobile phones that was a little sluggish for the last few quarters, especially after the S25 launch, we saw a good sellout during the first week of February. But obviously, whenever a new model launches, it's there for a week 1 day. So we've not attribute that to the whole quarter, but we saw good demand coming in there as well. So the premium phones are still doing good for us. So there is not a slowdown there. The built-in appliances, the kitchen appliances overall has started doing very well. And then water heaters and the room heaters, both did perform really well, especially in the North region, during the last quarter, whereas water heaters in Hyderabad are at a single-digit growth, whereas a newer clusters, again, across the country because of summer year, you would see a little slowdown in the going quarters for this water heaters and room heater category. But saying that, now it has become more like a 365-day product, if there's a new apartment or a villa coming up, usually people put in these product categories, whereas real estate has been a little slower year in this region for the last few months, we would definitely see that kind of an impact. But once everything stabilizes and the real estates start picking up and the new home buyers are moving in, not only room meters, but a lot of other -- water heaters, but a lot of other categories also see definite improvement going forward in this region.

So if I got that right, you're trying to say that we preponed our stocking for RACs and air coolers much to before like around 2 to 3 weeks and demand is supposedly going to be good. And at the same time, we're saying that water heaters did better in the northern market. Is that right?

Yes, yes, absolutely. And so what happened is that we already -- irrespective of the season of preponing or postponing we usually start stocking up as early as January. So we were all ready for RAC business and air cooler business anyway, but now we've started stocking up a little more depending on the sell-out that we're doing on a daily basis right now.

Understood. And another thing I wanted to know was just sort of a different kind of a question like what percentage of our overall sales would be consumer finance? Like what would be under...

65%.

65%.

Yes.

[Operator Instructions] The next question is from the line of Saumil Shah from Paras Investments.

As you mentioned to previous participant, we are in line to achieve our revenue guidance of 15%. So in terms of bottom line, can we achieve our previous year's PAT?

A little bit too early for me to comment on that. But yes, definitely, obviously, if you compare to the previous quarter that we've delivered, there has been a decline. So I can't deny that fact that there was a decline in the PAT level, but we're trying to improve them. But obviously, we won't be able to surpass with a very big growth number in terms of the PAT margins this year. So that will be also in line with more or less what we delivered last year. But we're confident that, that will happen. But I can't promise you that it will surpass those levels and grow much above that because we've already passed 3 quarters in this year.

Okay. And in terms of guidance for FY '26, what can you expect in terms of revenue and EBITDA we can reach on our earlier guidance?

Sir, next year, things right now, it will be too early to comment on next year again. But with the new store additions that have happened and the stores are about to get mature, a lot of stores are yet to get matured and the new stores that we'll be opening up next year, I think a 15% Y-o-Y growth should be quite comfortable for us to achieve next year as well.

And in terms of EBITDA margins?

It should be in line, sir.

In line of this current quarter or the previous quarters?

No, the same number that you would do on a regular basis, the percentage wise, it should be in line with...

Around 7% to 8%?

15% more or less. Yes.

No, I'm talking about EBITDA margin is around 7% to 8%.

Yes, EBITDA margins at pre Ind-AS levels are at 7%. So [indiscernible] pre Ind-AS level at 7%, which we look at 1.2%, 1.3% lower post adjustment of rentals there. So I think that should be the number that we are looking at around 7% -- 6.8% to 7% comfortably.

Okay. Okay. And sir, my final question, sir, in terms of debt, where can we see by end of this year? Net debt.

The debt levels, again, by the end of this year, would -- again be in line only what you've seen on 31st March is because [Foreign Language] so a lot of advances go out, a lot of inventory is carried. So the debt level will be basically for working capital only for the inventory. And once the cycle will go down, say summer end, so you would see the decrease in quarter 1 numbers [indiscernible] exit the season by June so the inventory of cooling products reduces drastically.

Okay. Okay. So by March end, we can see around INR 500 crores of net debt?

[ Lesser ] than that, sir. And then there will be 2 cycle because after summer you can get [indiscernible] that you see an increase in working capital for these 2 quarters. And then we reduce the way reducing 31st December, it is drastically reduced from what it was in previous quarter.

[Operator Instructions] The next question is from the line of Dhruv Modi from DSM Securities.

Am I audible?

Yes, sir.

Yes. So I have 2 questions. Like first question is, which brand and specific categories witnessed like sluggishness during quarter 3 of FY '25?

Sir, the category is majorly that you would see -- so there was not a decline in volume. So I would not attribute it to a decline in volume growth, whereas volume growth was say, a single-digit growth across television, washing machine, refrigerator, larger appliance category. But sir, unfortunately, what has happened, the price increase in those categories. In fact, for the premium products in television, the price reduced a little bit. So you will not see a major -- I would not say a major degrowth there because of volume, but in terms of value. But categories that outperformed really well were air conditioners, telephone, mobile phone division, small appliances did very well. So these categories eventually contributed to the growth coming in, but other televisions [indiscernible] washing machine and refrigerator contribute in line with what the other categories did then overall larger appliances would have seen a much better number.

Okay. Okay. Got it. And the other question is like why has our employee cost increased by 29% on a year-on-year basis?

Sir, the employee cost majorly for the new clusters that are there, because the teams across AP Telangana, Andhra and Delhi, have also been increased. So you would see a little higher expense going up there compared to the previous quarter because the team expanded. Now we've got a lot more people in these clusters, especially Andhra also could divide it to a newer cluster because the number of stores there are increasing. There are another 15 stores that are in the pipeline for the coming year. So definitely, we need to increase the team there as well. So the costs are all under control in terms of what expenses overall we're looking at like the manpower cost, marketing cost or any other cost. Costs which are variable in terms of major like sales promotion or finance costs are directly like the credit card charges or NBFC charges, which are directly proportion to the revenue that we generate on those businesses. But apart from that, all other expenses are all under control in terms of what we had expected it to be. So nothing is in red where we feel that it is gone over our expectation. But building a team takes a little time, especially for the newer clusters and all. So that is the major reason for the cost of employee going up.

Okay. Okay. And the last question I have is like what is our store opening guidance for FY '26?

So FY '26, sir, another -- I'll give you the Q4 number, also. Q4 number we'll add up on the 10 stores this year by the end. And then another 35 stores are in the pipeline for the next year, sir, out of which we might start opening up stores by the first quarter itself. So 35 stores have already been signed up for the next financial year.

The next question is from the line of Pratik Poddar from Bandhan AMC.

Karan, just one small question. The 35 stores, which will open next year, what's the split between Telangana upcountry and AP?

Sir, around 6 stores in the Delhi NCR region and the rest of them are in the South region, sir.

And how much is the split of the 29 between, let's say, AP and upcountry?

Hyderabad would be 3 stores, 15 stores in Telangana, 15 stores in the Andhra upcountry market and the rest of them in Telangana upcountry market, sir.

Hyderabad, you said was 3, right?

Yes.

So around 11 stores in Telangana, upcountry.

Yes, sir.

Okay. Okay. And what is the split this year? Out of the 40 stores -- sorry, just before that, you said gross stores, you'll add 10, 12. Is it -- does that mean that you'll be cutting -- I mean, closing some of the stores? Or this is the next store add for quarter 4.

No, no. 10 stores, we'll add up in the next -- in this quarter, Jan, Feb, March quarter 4.

That's gross you said. So I just wanted to confirm, gross or net?

No, net, net, not gross. Gross totally, we opened around 32 stores this first 9 months now. [Foreign Language] We are good doing. Don't worry.

Surely. Sir, just the 40 stores which you had, maybe can you just help me with the breakup between again, same NCR, Hyderabad...

Yes. So till now, what we've opened up is around 6 stores in Delhi, 5 stores in Hyderabad, Telangana upcountry market would be 7 stores and 14-odd stores in Andhra Pradesh. This is what we opened up this year in the 9 months. Jan, we've already opened up 2 stores between Jan and the last 45 days, we already opened up 2 stores in Delhi, which [indiscernible] 10 stores are more on addition [indiscernible] which Janakpuri will open up this week. So Janakpuri already -- the soft launch is done. So because of the graph there, I mean, because of the pollution being higher there, the construction was stopped for the last few months. That is why delay same thing what happened last year where we opened 6 stores on 30th of March last year as well. So this will be a similar number this year as well. We will end up opening up the majority of the stores by this week, next week and the last month of this year. That is the idea for Delhi, India. And then a few more stores opening up in the Telangana upcountry market and Andhra as we talk. So [indiscernible] would be around 40 stores, which will take the total store above 200 stores for the group. And next year, again, 35 stores, what we've already signed up for FY '26 where the handover to the property or the construction is under our way, where we start opening up by the first quarter of next year.

Okay. Sorry, just going back, 40 stores, 10 stores are in NCR, how much would be out of this 40 in AP and Telangana, how much is AP? I mean ex Hyderabad?

Ex Hyderabad, would be around 50 [indiscernible]

So basically, this year, you have not opened any store in Hyderabad. That's a fair understanding?

Yes.

Okay. And what's the store count of Hyderabad? Last question.

So Hyderabad store counts stands at 69 stores. That includes all the EBOs put together.

[Operator Instructions] The next question is from the line of Ankit Kedia from Phillip Capital.

Questions from my side. You've given the store level breakup across regions. If I look at profitability, so next year, what are you modeling in terms of margins for NCR region? Given the 9 months, they are pretty much flat today, so if the growth trajectory is similar to what we have done this year, will we be able to do 6%, 7% margins for the first 10, 12 stores, which were there in NCR?

So Ankit, those stores definitely, yes. If you look at store-wise EBITDA also profitability, gross margin levels, those stores will be at that count. But if you look at the new stores that will definitely drag down the overall number for NCR. But the mature stores will be all in line, probably not 6%, 7%, the way it is back home in Hyderabad or AP and Telangana, it will be down by 1% or 2% because the expenses there initially would be a little higher, say, your cost of manpower, rental marketing and all in terms of the revenue that we generate per store because the productivity cost is much lower compared to the existing market. So you would look at those numbers being a little higher and the gross margins or the EBITDA numbers at the store level would be down by 1% or 2% compared to the existing market. But saying that overall number in Delhi, which we have guided that we will touch a certain throughput, it is on par with that. And we're quite optimistic on that region going forward. The new big stores that are opening up, 6 of them are all the big clusters like Kalkadi, Janakpuri [indiscernible] that we opened up recently. So all are bigger cluster stores. And going forward, we feel that Delhi should be shaping up quite well for us in FY '26 as well.

Sure. And if I have to look at new state entry, next year, are we planning any, say, getting into Lucknow side of the market? Or it will still be purely NCR next year?

So definitely, the existing classes need more stores. That is why the additional 35, 40 stores in the coming year would be definitely be there. But saying that, we even had to look at a balancing act between existing clusters, the newer cluster that we would approach. So there are new clusters like Odisha, Western UP, probably Lucknow, a part of Hariana expansion that we're doing from Gurgaon and Manesar and Diwali. So definitely the new market that we're looking into, but I'm not sure that how soon we'll be able to start those operations in those areas because more than that, we want to fortify our existing clusters. And Delhi is a very good market today. Delhi, we would be ending up at 30, 32 stores by next year. So we want -- by opening of next financial year, so we want to be more stronger in that region. So if it demands for us to open more stores in Delhi NCR or periphery of Western UP, we'll start immediately. So right now, we'll end up the year first and concentrate on increasing the productivity in the existing stores and growing in existing markets and then take a step forward in the new clusters.

Sir, my last question is on commission and incentives. Given that your growth this year has been a little muted around just double-digit. Do you think brands will give you the similar incentive and commission what you were getting before, given that in South market of predominantly Hyderabad the core market, we [ haven't grown ] actually, in decline.

Yes, yes. So that is in line, so that would not change per se because see, you're not looking at a degrowth by 50%, 70% 100%. You're looking at big number change there. You're talking about few digits here and there. So brands don't take it for a right for such a product, such a growth or degrowth because the growth is coming in the newer markets, so overall contribution that we give out to the brands are in line with what our contracts are or what we promise. So that doesn't change per se. But if you keep on degrowing quarter-on-quarter with a much higher number or you stop doing a brand or a soft catering to their product range or anything of that sort of a major decision like that, then that will impact your margin, not the smaller changes here and there. Because they have to understand, right? They understand the market, how it is behaving. And it is not a temporary relation that you create with the manufacturer. That is why we deal with a bigger brand, where ours much stronger than a quarter.

Fair point, sir. And my last question is on the mobile handset sales. We are seeing a disproportionate increase in mobile handsets, which comes at a lower margin. Are you comfortable at this 43%, 44% and obviously 9 months, the number is lower. Or it's just that the demand in mobile handset continues to be so strong that the margin trajectory will be forced to be lower because of that?

Sir, I can't understand the question well, you mean to say that the margins in mobile are going to be lower than other categories. That's what you mean to say?

They are lower. We know that, but it's -- do you have a conscious choice to keep a mobile revenue mix at a certain percentage because it's impacting your margins?

So sir, that is beyond our control. So usually, I mean, like the healthiest position would be like any category which makes more money sells better, right? So that is an ideal situation for any retailer, but you can't demand what sells on the floor. So if there is a good demand for us on mobile front, we definitely would like to cater to that. And it is not only a short-term product margin that you look at. Mobile on a whole is a bigger category, a much bigger ocean than what it looks like. So why don't we cater to that audience as well. So there is nothing stops us from catering to that audience irrespective of the margin profile between large appliances and mobile phones. So we'll be glad to grow in any of the categories that come our way. And mobile phone is a very good market to grow in. And then eventually, a customer walking into your store, it be audio built-in, kitchen appliance, small appliance in any category today, you can't shy away from selling it because the cycle of a customer is not necessarily only for one product category that keep on coming to your store, right? So they're looking at array of products. So you've got to -- as retailers focus everything and make sure the customer gets a one-stop solution for everything that he wants.

[Operator Instructions] The next question is from the line of Rohan Gupta from [ SQ ] Securities.

Most of the questions have been answered. My only data-related question is when do we expect the Hyderabad cluster SSSG to normalize?

Sir, Hyderabad SSSG because of stores being all matured and the productivity costs are very high. So obviously, if this needs to get positive, does not necessarily that Hyderabad will become like a 5%, 7% kind of an SSSG. So even if it comes down to 2%, 3% kind of a level, it is good enough for us. This is in line which we see that it's going to happen going forward, and we're quite optimistic on that. So there is no worry on that. Definitely, yes, that is being the largest cluster, the whole balance sheet turns around if that cluster doesn't perform well. But looking at the big days like 26th January that went passed by us right now or the coming times now, I think it looks positive.

The next question is from the line of Mehul Desai from JM Financial.

Yes, just the store additions, I missed that part. Can you just reiterate your total store additions that you are looking at in FY '25 on an [ exit ] basis and on FY '26 also? And also can you split in FY '25, whatever stores addition -- I mean, stores you end up? How much will be in core South market and in NCR region?

Okay. So sir, the additional stores was around 32 this -- for the first 3 quarters of this year, or the first 9 months, out of which 6 stores were in Delhi NCR, around 14 stores in the Andhra market and Telangana, including Hyderabad were around 12 stores. So that was the breakup for the 32-odd stores that we opened up this year. And then another 10 stores will add up in this last quarter, Jan, Feb, March, which will take the store count of new addition in FY '25 to around 42, 43 stores. So that is a total number, out of which Delhi NCR this whole year would end up around 32 stores, more or less. And the addition for the next year would be around the 35 stores, which we've already signed up. Definitely yes, once we have more stores coming up because we have a whole year left for us, so we will keep on adding up more stores in the existing cluster. And out of the 35 stores, again, you would see around 5 to 6 stores coming up in the Delhi NCR region and then the rest of the stores is equally split between Andhra and Telangana.

Okay. So next in FY '26, you said 35, only 5 to 6 stores are in Delhi NCR, right?

That is what we signed up now. But definitely yes, because we are already searching for new stores in the peripheries as well. So as we progress because we have almost 4 quarters in the whole year left with us, right? So as we keep on progressing, we'll add up stores. And Delhi is going to be the major market that we'll be looking into, but it's not easy to find a property in Delhi NCR, right? So because the major markets have already been covered, and it takes a little more longer time to secure a property up there compared to down South because down South is more like a newer market that we're opening stores in Tier 3, 4 towns. So it's much easier to get a property at your price or your our rental cost for longer lease, whereas compared to Delhi NCR. So right now, at 32 plus another 6, 7 stores getting ready. So we would look at Delhi NCR shaping up at least 50 stores by FY '27. That is the plan.

Okay. And in this FY '25, how many store additions were done in Hyderabad? So I mean when you are saying this 42, 43 stores will get added overall, how many stores would have been added in Hyderabad market?

There are exclusive brand outlets, multibrand out, all formats put together on the 5 stores is what we added up in Hyderabad City, Sir.

In 9 months.

Yes.

And any plans to add any more in Q4?

[Foreign Language] 3 stores that are getting ready, especially if we have all the periphery markets of Hyderabad City, which are like 30, 40 kilometers away from the city center, where now population has increased. So we are planning to open stores in those geographies also.

Okay. So broadly from this 42, 43 so you think 7, 8 would be in Hyderabad in FY '25?

For '26.

No, no. I'm talking about FY '25. You said in FY...

Yes, 5 plus another 2, around 7 stores. Correct.

7 stores. Okay. And lastly, can you give some light on how Q4 demand trends have shaped up so far? Is there an acceleration in revenue growth versus what you have seen in Q3? I mean, are we in double digits in Jan and Feb so far?

So that is too early for me to comment on that. But I can tell you one thing that summer has settled a little early, but is looking great for us as the season to start off with. So nothing disappointing right now, but in that said, it is only the Hyderabad City that has become a little warmer during the day, whereas other clusters for us, especially North and other clusters upcountry is not -- the weather has not changed drastically. So we do see a great jump in numbers right now. But the revenue -- daily revenue that we look at what was a little sluggish for the last few quarters, it's been a little more on the positive side, I would say that.

The next question is from the line of Shrinarayan Mishra from Baroda BNP Paribas.

Am I audible?

Yes, sir.

So we are already halfway through the quarter. And I wanted to know the level of discounts and interest subvention, which you are giving. Is it similar to 4Q? Or hasn't improved?

So that -- discount subvention more or less remains the same. There's not much of a difference there. So that would remain the same. So -- but in terms of the productivity that we see across categories that has been positive. So what was a little sluggish for the last few quarters. I would just like to comment on that. That has been seen a positive sign there. So I would not say that jumped drastically, but yes, it is much better than what was happening in a few previous quarters.

So the gross margins, we should expect for 4Q to be not that great?

Sorry, sorry I didn't hear your question.

Gross margins, gross margin for 4Q. Will it be impacted because of business promotion and discounts?

Not really. So that is in line. So that is always in line that is accounted for. So gross margins are always accounted for the sales promotion and the cost of credit card or NBFC that we bear. So there is not much of a change there and that is -- so the overall value might look higher or lower, depending on the revenue that we generate because directly proportion to revenue that we generate. But in terms of percentage, it is in line with what we have been doing in the previous quarters as well.

Okay. And much of this will be in South cluster, right? North, we won't be giving much of the discount.

So the discounts across the country more or less remains the same. So depending on what product category or what is the demand in the market for that particular season, is what is discounted or increase or decrease. But across the country, it remains the same. So not much of a difference there. And definitely, yes, because South cluster is the largest cluster. So whatever small change positive or negative you see in the South cluster would impact the whole balance sheet because the contribution from the North cluster is highly negligible.

Okay. And lastly, second question. So do you see some behavioral -- I mean, are the NBFCs willing to lend now? Or they are still on the back seat and we see pressure in lending?

So sir, actually, if you see the lending in our industry has always been very mature compared to a lot of other lending asset lending classes that they have across the industry, whereas here the CIBIL Scores have to be higher, the documentation is much more stringent, though it is a net value is much smaller than a lot of other loans that they disburse. But we've never seen a direct impact on lending per se. And then because we have almost 4 to 5 major NBFCs that we play around with. So the only thing that you would see is that earlier, I think that would impact the minority of the approvals that come by way, but majority of them should not have a problem because we definitely have a huge cluster base in Hyderabad. But whereas in Telangana upcountry market or Andhra upcountry market, you would see a little impact due to the credit scores or the credit approval rate being a little different there.

The next question is from the line of Rajiv Bharati from Nuvama.

So with regard to your Hyderabad market, can you just -- can you specify the number you [ plot ] in Hyderabad and also the Ind-AS EBITDA?

Sorry, the EBITDA number for Hyderabad city?

Yes, yes. And the revenue number also for the quarter.

Okay. So the revenue number for the quarter stood at -- so the EBITDA number [indiscernible] the EBITDA numbers like [indiscernible]. The EBITDA margin, go down, yes. So sir, the revenue number from Hyderabad City was INR 1,079 crores for FY '23, Q3 versus INR 1,095 crores last year. And Telangana upcountry market was INR 272 crores, Andhra was INR 247 crores and Delhi NCR was around INR 128 crores for the last quarter.

Yes. Can you just provide the EBITDA pre Ind-AS for the Hyderabad?

So these are EBITDA pre Ind-AS and I'll tell you that number as well. So the EBITDA number [indiscernible] Yes. So the EBITDA number would be around 7%, 7.4% for the cluster down here and Delhi would be around 0.5%, 0.2% and that kind of a number.

And the 7.4%, is there an expansion on Y-o-Y basis or not?

So Hyderabad, if you again break that down into Hyderabad, you would see a little decline there to be frank. And whereas Telangana upcountry market, Andhra would be on the higher side compared to the last quarter -- last year, sorry. The highest EBITDA that we would generate would be in the Telangana upcountry market, which would be around 8%, 8.2% approximately, whereas it will be a little lower in Andhra and then the lowest in the Hyderabad City market.

So let's say, a year back, the 7.4% number you specified...

It would be up by 0.2, 0.3 basis.

In Hyderabad, it will be down by 0.2%, is it?

Yes, yes.

Yes. And just one question was asked regarding this incentive income. So last year, on a full year basis, you clocked INR 250 crores incentive income, right? So what is the number, for example, for the 9 months? And has it grown for the 9 months?

9 months, you would see a little lower number this year is because for the last couple of years, incentive income now most of them -- so incentives basically your sell-in, sell-out support, your marketing support or other heads that you get around 12, 13 heads that you would receive this money in. So that number from last -- say, last year, it would be for the first 9 months, it would be INR 199 crores has reduced by, say, INR 5 crores or INR 6 crores because that number has now been embedded in the invoice itself. So a lot of companies like cash discounts or wherever they can, they're trying to invest that in the invoice itself rather than the over and above sell-out support that we need to give out earlier. So though the margins overall number remains the same, but the accountability part of it, which is supposed to come in the incentive now has been embedded in the invoice itself.

Yes. But then the percentage margin should increase, right?

Technically, it should, but it's not a difference of INR 5 crores. So there's not much of a difference there. [Foreign Language]

The next question is from the line of Deep Shah from Equirus Securities.

Sir, just wanted some clarification. So you mentioned that you have maintained 15% top line guidance for FY '25. So it means that you will be growing by roughly 25-odd percent in the fourth quarter. Am I right or am I missing something?

So you're absolutely right. So we are optimistic on that number. But see, end of the day, it all matters. Depends on the summer setting up a little early or the supporting. So March, second week we can start pouring in Hyderabad, I can't have a control over it. But what is going on right now, we're looking at a trajectory of at least 21%, 22% right now of growth coming in with that category at least. So that is the number that we're looking at for February coming forward. So I think we're quite optimistic on that. And then depending on how the summer sets in, becomes a little hotter during March, second week, third week, starts pouring, that is when we'll have to look into that number because summer product category majorly drives through the weather as well. So -- but right now, things look good. So definitely, it has to be on a higher average than what we've done in the quarter 4 than last year so that we achieved that overall number of 15% Y-o-Y.

Okay. And secondly, sir, you mentioned about the 10 to 12-odd stores in fourth quarter -- store opening in fourth quarter and roughly 35 stores in FY '26. So all the stores will be MBO or should we expect any EBOs also opening up?

All MBOs.

Thank you. Ladies and gentlemen, that was the last question. I now hand the floor over to the management for closing comments.

Thank you, everyone, for joining the call, and I hope that you were able to answer all your questions. And for any other further queries, you may get in touch with Mr. Deven Dhruva from SGA and we'll be happy to address all your queries. Thank you once again.

Thank you very much. On behalf of Electronics Mart India Limited, that concludes this conference call. Thank you all for joining us, and you may now disconnect your lines. Thank you.