V-Mart Retail Limited (VMART) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q2 FY '21 Earnings Conference Call of V-Mart Retail hosted by Edelweiss Broking Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Praveen Sahay from Edelweiss Broking Limited. Thank you, and over to you, sir.

Thank you, Rutuja. Good morning, everyone, and thank you for joining to Q2 FY '21 earnings call of V-Mart Retail Limited. On behalf of Edelweiss Broking, I would like to welcome the management team of V-Mart Retail to discuss the results and the outlook. Today, we have with us Mr. Lalit Agarwal, Chairman and Managing Director of the company; Mr. Anand Agarwal, CFO. I would now request Lalit ji for his opening remarks, post which we can open the floor for Q&A. Over to you, sir.

Hi. Good morning, everyone. Welcome back to the conference. Good time that we are going through. This has been really a wonderful journey in this particular quarter, and also the journey continues in this quarter. So the post-pandemic world has been really different in all respect for the entire world. And I hope everyone listening the call, they and their families are safe and are in good health. So there has been the pandemic situation -- improvement in the pandemic situation across the globe, even in India. There are some numbers which are looking down. But yes, the rate of growth what we are witnessing is also coming up, at least in the northern part in Delhi and NCR. So we don't know how is it going to shape up. But yes, definitely, things have bettered from before. And there has been a continuous upliftment in the position or the environment or the betterment in the environment as far as business is concerned and even as far as the pandemic is concerned. So we did start the quarter with a very, very low number of cases in our markets. And as the quarter went up, the penetration of cases increased in the Hindi heartland and even the deeper part of India. And July, August, we saw a very high number of cases coming in. There are a series of lockdowns which were announced by the government, by the local administration, by the state authorities in different times for different days and number of days. So there were stores which were closed for 2 months in a row. There were stores which were closed for 1 month in a row, and there were states which had alternate days of operation. So there were all kind of closures and openings in the market and all kind of communications in the market. So we went through all that in the quarter 2. The entire industry went through all that. And -- but yes, overall, what we are seeing is there has been a slowness in the economy. But in the rural economy, at least, what we have seen is there is a need-based economy, and this is largely driven also by agri income. So definitely, agriculture has been a very good source of income for people and agriculture has been -- because of the monsoon, agriculture has been very good. The agri income continues to be better because also of the MSP prices which are coming up. So we are seeing healthy economic signs in the smaller towns and rural areas. But yes, there has been a constraint in all the business or the self-employed people who normally run their businesses, either they are retailers or they are contractors or they are manufacturers who are smaller ones, they have got some impact, and they have got impacted because large amount of people who could not report to work or who could not come to the shop or come to consume. So there has been a lot of series of such disturbances affecting the economies of people. So overall, what we see, there has been a month-on-month improvement, which is going on. In the entire industry, when we keep talking, there has been improvement seen in the entire industry. There has been various kinds of news that we have got on the retail industry. There has been some players who have been not able to manage it very well and who have bowed down to the pressure. And there have been certain retailers who have been doing very, very good. And they have been planning it well, and they have been handling it very well, so that they are able to bounce back. We -- at V-Mart, we have also seen all such kind of results. With our -- within the 17 states of operations that we've got, we have seen all kinds of things happening in the states. There have been certain states who have been very, very proactive in terms of economic revival. And there have been states because of their political drama or because of their ways of their thoughts of their leaders, they had a very, very conservative approach. States like Bihar, because of the elections, they had a very, very safety-oriented mindset, where they closed down the entire retailers in the state for almost 1 -- or 45 days after the lockdown and -- in the quarter 2. And there has been state like Uttar Pradesh, which has been -- which had alternate days of operation and then weekends off and then they came up to -- so they were the best one learning and understanding the business need, and they came up in favor of the businesses very early. So we've seen this effect also boiling it down because projection forecasting became a difficult subject. And how do you forecast your future? How do you forecast your next season's planning? So that was one of the dilemma which every retailer had faced and every industry must have faced. So that is what we also went through. But we kept it very, very simple, that we will do it in a more agile manner. We'll react -- we'll be on the reaction mode rather than a prediction mode. So we did not predict a lot. We reacted a lot, and we reacted in an agile manner. The entire V-Mart team did a great job in being agile, being on their toes. Working from whatever environment they had got working regularly on that, even working on work-from-home or also in the front end going ahead and countering and handling the customers or handling the market, in the way that it was -- had to be. So the team has done a great job, and we handled the pandemic in a very, very good way is what I would say. A lot of appreciation for the entire team and the entire ecosystem who helped us to come out of this pandemic. Still the pandemic is on, but the major thrust of the pandemic and then lows of the pandemic, I hope we are away -- over with it. And now we could see a better side of this. There has been few changes in the organization. The earlier COO, Samir has departed because of his personal reasons. We've got a new COO on the Board, Mr. Vineet Jain, who has joined us in this particular month. Vineet comes from a Future Retail background. He has a 17-year experience. He was handling INR 6,000 crore business in the northern zone. So very good resource that we've got. And I think it will add tremendous strength in the operations and the business functions of V-Mart. Apart from that, we have been very, very mindful of our team, our organization structure, our people's health and people's mental status also. So we have been regularly interacting with our team, giving them motivation and coordinating and collaborating with entire team wherever they are. So a lot of work has happened on that. And even digitalization and acceptance of digitalization has also gone in a lot. We have really learned the hard way because today was a need, the people have adopted digitalization in a much better way than we could have had. So I think that the journey continues. Digitalization is something that we need to adopt and accelerate the adoption rate because our customers are also accelerating that adoption rate. We have seen the adoption going up even from the customer side. So that is where we are. We continue to focus on our journey of omni also, wherein we believe that omni is not something where we are very good at. So we are starting to learn. We are learning still, and we are trying to do the internal housekeepings and process management and stuff, so that we can take better -- bigger bets on that. Till now, we continue to do our operation at a sizable quantity. But yes, we definitely anticipate a better outcome going forward. There has been a very good management on the inventory side, I think -- and on controlling expenses, I think Anand can take forward on all these areas. Anand, if you can give the investors the understanding on our inventory and also on our expense management side? Over to you, Anand. Thank you.

Thank you so much, Lalit, and good morning, everybody. With the lockdowns behind us and the business picking up week on week, let's welcome the festive period with some cheer and optimism. But before that, let me first take you all through some of the highlights from the last quarter, including expenses and inventory, and then we can open the house for questions. While the quarter 2 began with continued lockdown in parts of the markets, particularly UP, which continued with its weekend close policy and Bihar, which was completely shut till almost 10th of September, but with unlock 5, almost 95% of the stores across India became operational. And as a result, the quarter witnessed a total of 79% operational days, which is a significant improvement over 34% of quarter 1. In any case, quarter 2, typically, is the smallest quarter in the year, marred with rains and also floods in northern parts of Bihar and also Shradh which has very, very little festive occasions. This year was even more impacted due to Adhik Maas which is an extended inauspicious period in most parts of North India. As a result, Durga Puja and the entire festive calendar was shifted by almost 20 days this year. While Durga Puja was celebrated on 8th of October last year, this year, it fell on 26th of October, further impacting the run-up to the festive sales in quarter 2, at least for the east and the northeast markets. So while the sales achievement was 56% of last year, the good part was the relatively high conversion rate seen across towns and in particular, in the Puja belt apart from also the core markets of North India and U.P. Despite the surge of COVID in the key U.P. markets and parts of North India, we witnessed 42% footfalls versus last year with a 60% conversion rate, a 19% increase in average bill size. There was also a good show in operations across the market, which was marred only by the lower footfalls due to general fear psychosis of COVID. With no festivals in the quarter, Adhik Maas and consumers largely remaining confined to homes, the down-trading of purchases continued with more demand for athleisure and loungewear products in place of denims or marriage wear or occasion wear, which impacted ASPs negatively, which came down by 15% for the quarter. If one looks at the margin and the inventory situation, August also is the time for end of season sales. And since the follow-on period of September was Adhik Maas and Shradh, the company continued the USS for slightly more extended period this year, significantly helping in clearing out of old inventory with a marginal impact on gross margins. But this cleanout not only helped convert a large amount of blocked working capital into cash, but will also pave the way for very fresh inventory in the months to come as it also reduces the risk to working capital from any resurgence of COVID in the future. In any case, we had completely stopped all purchases since March and focus was more towards liquidation of summer inventory. And from a level of INR 430 crores in March, the inventory now stands reduced to INR 370 crores in September, a reduction of INR 60 crores in quarter 2 alone and INR 110 crores in the last 6 months, with a very marginal impact on margins for the quarter at 29%. This significant correction in inventory will go a long way in maintaining the leadership position of V-Mart in terms of fresh fashion inventory for the festive period in quarter 3 as we resume purchases for replenishment of stores with latest and relevant winter merchandise. The inventory is at our healthiest levels ever. And despite that, we have decided to continue with the existing conservative provisioning against COVID for some time till there is some -- still some apprehensions around the impact of the pandemic. Despite this, we remain very, very comfortable on the overall inventory and the working capital cycle. And I'm also very happy to share that we also currently have one of our lowest payables outstanding ever as a result of very, very efficient inventory and working capital management. We not only paid all our vendors very regularly during the early lockdown period, but also ensured that 95% of all our outstanding vendor dues were cleared off by August. And as a result, we were able to get and gain preferential supplies for the winter purchases as we continue to remain one of the best paymasters in the industry. With almost 0 purchases till August, we made sure that the majority of the cash flow was utilized to service the vendor ecosystem, and this has helped us gain trust and confidence of the critical vendors in uncertain times. The cash position continues to remain very comfortable as throughout the last 6 months, we never utilized more than 25% of our working capital limits and through a very efficient mix of cost controls, payment rationalizations and credit management, we have been able to run a very tight ship so far, with interest cost outgo also at very similar levels as last year despite the 55% of roughly reduction in the sales. On the expense side, we continue to rationalize all discretionary costs while we prepare for the festive quarter 3 and also normalization in the operations going forward. The overall cost reduction for the quarter is at 41% despite full restoration of salary cuts from September and improvements in operating days across stores, leading to higher operational cost. This was largely possible due to reductions in marketing spend, savings in rentals, electricity, travel and all other discretionary costs. On the rental side, we have been able to secure a savings of INR 19 crores so far for the full year, roughly 20% of our total rentals for the full year. Out of which INR 2.5 crores was recognized in quarter 1, and the balance is getting accounted for in this quarter, INR 15 crores through other income and roughly INR 2 crores, INR 2.5 crores against rent for the quarter. There will be a little more savings on this front as some remaining documentation gets in place in quarter 3. At a YTD level, the cost reduction stands at 52% versus last year. And with upcoming festive period and as we prepare for the most busy part of the year, we will now look at returning back to normal cost structures as we strive for business to come back to pre-COVID levels. As such, we will be fastening the pedal on marketing and other operational costs with a controlled objective of achieving these festive sales numbers. On the CapEx side and new store side, we closed 2 stores during the quarter, keeping the store count at 264. There are no further plans of any more planned closures for the rest of the year. There may be 1 or 2 minus here or there, but otherwise, there are no planned closures pending. And we continue to believe in the overall strong opportunity available in the market and we'll keep striving for growth through opening of new stores. In the last 1 month, we have opened 7 new stores in time for the festive period, and we will continue to look at attractive markets and locations moving forward to expand our reach, keeping the same disciplined approach of controlled growth. Lastly, on the omni side, we continue to strengthen our omni presence through our website, vmartretail.com and apps on both Google Play Store and Apple App Store. There are operational betterment and fine-tuning of processes which are being currently done, and we will continue to strongly prioritize our online foray. It continues to be less than 1% of our total business right now, but we have a vision to scale this in the times to come at a reasonable cost. So that's all from my side. And I now request the moderator to open the house for questions. Thank you.

[Operator Instructions] The first question is from the line of Himanshu Nayyar from YES Securities.

Congrats on a resilient performance in a difficult time. So just firstly, on the balance sheet side, given that you have been cautious with regards to inventory buying and your focus on liquidation and a very strong start to the festive season, I mean do you think that there is a risk of we losing out on some sales in case the season turns out better than our expectations with pent-up demand also coming in?

Himanshu, you're always right, man. And this is [Foreign Language] So we all know that. I mean this is something which is always on. Yes, definitely. So that is what I said. That we were -- we did not predict, but we won't -- we went agile. And we've worked on very high or very low mind-to-market process, wherein we planned very late and we acted very fast. And we got our inventory at the right time. And right now, as we speak, we have got -- because this is early arrival of winter in the northern part of India and we see good demand on winter products from the customer side, so V-Mart has stocked up all those products in our store. And we have -- our team has very -- in a very agile manner, they have brought in the inventory, and it is there. So we are better than the competitor in these terms.

Understood, sir. Understood. And secondly, sir, on the payable side, I'm sure we would have supported our vendors with making them payments on time, maybe to get discounts and maybe help them with liquidity, but would this be a new normal going forward? Or we'll go back to our normal payable cycles going forward? Or we would want to continue with a lower payable cycle to get better procurement pricing?

Himanshu, Anand this side. So this is not a onetime adjustment that we have done. In fact, this is a program that we had been running even pre-COVID. It's just that we have now fast scaled or more scaled up this program to give more benefit to all our vendors, and we will definitely want to keep this at a scaled-up level only.

Understood. And just final question, sir, on the competition side, if you would want to comment on the intensity you are seeing right now on the ground from both regional as well as the national players separately. That's it from my side.

So Himanshu, I mean, we believe that everyone is very active, and everyone is doing their best and we are able to see everyone doing a great job and sustaining. So I don't really want to comment. There will be pressure from some of the retailers who have low liquidity and have higher stress. So there will be pressure on them. And there are retailers who are doing good, within regional, within national, so there are retailers who are really doing very good. They have managed their inventory very well. They have managed their vendor payments and vendor development very well. So it's a mixed bag. But yes, partially, I would say, some of the retailers, largely all the retailers are doing good.

The next question is from the line of Tejash Shah from Spark Capital.

Sir, if I compare your sales number versus peers, recovery has been on the results announced, so far the best. So how would you size up the current consumer sentiment sequentially in your catchment area?

Tejash, I mean, how do I size up my current -- I think people are trying to forget corona, and people are coming out of it. I have traveled extensively during the last 1, 2 months. And so I've seen markets are -- people are going out, people are coming out in huge numbers. So we are not seeing a strong -- a big fear in them. And that is a good sign of recovery, and that's a great sign of coming in back. So people want to work and then they want to come out. And people know if they get corona, they will get treated. So I think it's coming back slowly and gradually. It will take some more time because we are waiting for the expectation of -- in Diwali period, people may get more affected and there can be a tsunami of cases. We don't know. If it all -- if those things doesn't happen, I think economy will come back to normalcy very, very fast. And we are seeing a good growth coming in even this quarter.

Okay. And sir, are you seeing any material divergence in demand bounce back in your Tier 3, Tier 4 stores versus Tier 1 stores?

Yes, there is definitely higher demand in our core markets and -- which is Tier 3 and Tier 2. And we are seeing little stress in the Tier 1s. For us, we have realized that. And especially the northern and the western markets are a little stressed out compared to the Hindi heartland.

Sure. And Anand, you spoke about to look at brighter things ahead. So do you see recovery in the second half good enough to go back to pre-COVID level in FY '20 in itself? Or will it take some time on that count? Or perhaps too difficult to predict at this point?

Yes, yes. So Tejash, I think while we remain, I would still want to use the word cautiously optimistic, I think this is a festive period, and we are seeing good traction, as Lalit was just mentioning, but very difficult to predict and very difficult to forecast that whether we will attain full normalcy in this financial year itself, very, very difficult.

Sure. I have a couple of follow-ups. I will get back in the queue.

The next question is from the line of Nihal Jham from Edelweiss.

A few questions from my side. First, you mentioned that the network operational and the store days for this quarter was 79%. Could you just give us a sense that as of now, what is that number like?

So as of now, it would be significantly higher because quarter 2, as I mentioned in my remarks also, quarter 2 was marred by lockdowns -- continued lockdowns in U.P. and Bihar. Quarter 3 has definitely been pretty much out of the lockdown. So it would be trending at 95% plus.

That's helpful. The other thing is you mentioned about the phenomenon of Pujo season where most of the sales were recognized last year possibly because it was around 8th October. So just to get a sense that in October of this year, especially during the 11 days of Navaratri, how has been our sales recovery and for the month of October, what was the recovery rate like?

So there were divergent trends. So Pujo markets, we saw reasonably good traction. But the full recovery did not happen as was also anticipated by us. There was still weakness in the market. And October being a slightly early month, we did not see full recovery in most of the markets. The markets where we are strong in definitely performed better. East India and Northeast India where Pujo is largely celebrated is not our stronghold area also. And it also contributes very little or very less to our overall mix of shares. But conversely, I think post Pujo, with the start of the festive season in the Hindi heartland, we are seeing much better recovery and much better growth.

Sure. Last question from my side. I think you made a comment that on the store closure side, we are more or less done at least for this year, unless there is an exigency. So would it be fair to assume that, say, post this quarter, starting Q4, we can get back to a trajectory of adding, say, 10 to 12 stores on a quarterly basis or just your thoughts on that?

So we continue to look at locations. We don't derive or decide on a number that we will definitely add 10 stores or 15 stores. We open stores as and when as we get lucrative opportunities, and we keep look -- keep on the lookout. Having said that, yes, we are in an investment phase. We will not any good opportunity let by.

The next question is from the line of Jignesh Kamani from GMO.

I just want to know about the winter and marriage-related demand. When you compare with last year, how is the recovery in the winter marriage demand? And with regard to that, how is the inventory and collection for us and industry when we compare with last year? That is 1 question.

Okay. So 2 questions, Jignesh. One is on the winter sales and the inventory position. So winter has been a bit early this year. And as Lalit was also mentioning in his opening remarks, we've been strong enough and very agile enough to stock up on winter inventory early on. And that is definitely benefiting us in most of the markets. And as we are, in any case, very strong with the North and the Central India heartlands, where the impact of winter is also higher, we are getting very positive response of the adequately provided or adequately stocked up winter merchandise. And that is resulting in good traction on sales on the winter part, definitely. As far as inventory is concerned, we remain at a very, very healthy level of inventory. We had gone into a major liquidation drive in quarter 2, which has helped us in ensuring that we have enough space for the fresh merchandise and as a result, all our stores are stocked up with very, very fresh and good winter fashion wear, which is being lapped up by customers quite encouragingly.

Any color on the marriage-related demand compared to last year?

Sorry, can you repeat that question?

Marriage season? Yes, marriage season, he is asking.

Yes.

Yes, marriages, I think we will see some marriages for a very small window in November and December -- end of November and some part of December, there are only 6 marriage dates. So we expect this to really drive because see, marriages are a very important festival in our consumer base. And -- but this year, marriages are not going to be happening the same normal way of marriages. So it is going to happen with much, much lesser people. So the attendees of the marriage function who are typically our customer, the attendee -- the number of attendees are reducing. So it is going down by almost 50%, 60%. So where there were 500 people attending the marriage, there are now going to be 100 or 150 people attending the marriage. So that is going to affect it. But definitely, marriages did not happen in the last summer. So there are going to be more number of marriages happening in this particular winter. So we expect marriages sales to also come in this later part of the month.

Understood. And in stores which are operational for the full, you can say, entire season...

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

Sir, you mentioned we have rolled back the employee cost, which we had cut before. And also we'll pedal up on the A&P expenses. So should we model employee costs back and other expenses back to pre-COVID levels? Or there is still some in certain areas where we can save on the other expenses?

So I think we are going the full hog at least on quarter 3, and we will not want to unnecessarily cut expenses at the cost of operations or sales. So at least for the near term, we would want to model the full cost structures.

Sure. And sir, in winter season, typically, our ASP increases because there are high ASP items. So are you seeing even now late October, early November that the basket size continues to be higher, people are continuing to buy more products on the basket, or that has come back to the near pre-COVID levels?

Yes. So there is -- the basket value is increasing, but yes, the quantity per bill has got rationalized. Because earlier people used to buy very number of comfort wear and basic wear. And the mentality of the people was also that once they come out, they will buy more, and they want to buy. So that is what we saw in our numbers. The basket size in terms of quantity as well as value went up, but the average sales price of the product went down. But compared to that, in winter, the average sales price of the product goes up and the basket size in quantity goes down.

Sure. And sir, my last question is on the fundraising plans. Given that we are going all hog on the expenses side and revenue, you said from quarter 4, back to pre-COVID levels is still uncertain. So when will we decide on the fundraising? And if you can throw some color on that?

Ankit, we're expecting we don't need to raise the fund. We're expecting that. So if the business comes back very normally, we may not do it. But yes, still, there is also a series of opportunity which are available that we would want to capture. And we would want to capture the best digitalization processes and even better the analytical skills in the company. So we will -- we are still on the review path. We have not taken any decision. We'll wait and take the decision later.

[Operator Instructions] The next question is from the line of Ritesh Badjatya from Asian Markets.

So sir, just 1 question on the reverse migration side. Since most of our customer base is also helping to their home by diverting the funds from another state to their home state. So how the situation now being most of the levers are migrated to their home space?

I think this situation of migration or reverse migration was more relevant in the early parts of the quarter. I think in all parts of the economy, we are increasingly seeing almost normalization in production levels, which thereby signifies that most of the labor is where they were pre-COVID. And this clearly does not impact too much now on the spends or the consumer behavior across our markets any longer.

The next question is from the line of Sanjaya Satapathy from Ampersand.

Sir, the 2 things. One is that your strategy of fund raising still looks very defensive in the sense you want to raise fund, if things -- business is going downhill or cash burn is increasing. Is that the right way to approach this whole fund raising plan?

No, Sanjaya, you're absolutely right. That's not the right way. But with our policies that we have had and with the belief system that we have, that we want to grow with our internal accruals and our profitability. And we need to ensure that business brings up the -- or raises the money by itself to grow and expand. So that's our fundamental belief. But yes, you're absolutely right. We are still not looking at the burn and that. But we're looking at the capability to generate enough liquidity within internally so that we can meet our expansion plans. So we are trying to look at in that manner. We are not trying to take that approach. But yes, definitely, we are in no hurry, as you said. This was just a resolution that the -- enabling resolution that we have had. So we never decided that we are going ahead with the fund raise.

Considering that you are in festival season, which probably is a bit of a positive surprise compared to what you had thought at the time of taking that enabling resolution, are you feeling more comfortable about your own balance sheet or not?

I don't want to comment on that. So I think we are trying to look at the opportunities side of it, and we are trying to look at what could be done going ahead, what are the areas of development, what are the areas of investment, where can we plow the fund, where can we really go out and do better because our markets are doing good. Economy is bound to do good. People's per capita incomes are going to grow up. The aspiration levels are coming up. Digitalization is acceptable more and more. So we may try to understand the opportunity side of it and then take a call. So we don't want to really hurry up into this. We are right now first trying to bring the business back on track, and then we can think on those lines.

Understood. And on that last part that bringing the business back on track, when -- or we'll not really come out and say clearly that things are back on track till this COVID is around?

I can't answer this question. I would request if anyone else could answer this question. This is not something that I also know.

No, what I'm saying is that even though things are improving, you are continuing to really worry about COVID. That is the only thing that you're continuing to worry.

There's no worries. Absolutely, there is no worry. We are all in good state. We are all happy, and we are all definitely dealing with the situation the way it comes up. But certainly, the business needs to come back to its own -- the way we were operating pre-COVID. That's what we're waiting for, and that's what we're anticipating.

The next question is from the line of Shakir from Motilal Oswal Services Limited.

This is Ali. I had a question on your payables. Anand ji mentioned that you guys are now working on a much lower payable cycle. I think it's reduced now to somewhere close to about -- hardly about 25 days if I benchmark it to the Q2 FY '20 revenue numbers versus what you were, I think, close to 65, 70 days. So it's quite a significant drop. What I just wanted to understand is, I mean, how do you see the benefits of this in terms of your, I mean, cost structure? I mean do you expect this to help you get better pricing, should that improve your margin or you'll pass it on to your customers? Or should it help you drive better productivity? If you can just throw some color about the benefits of this reduced payables?

So Ali, I can answer that question. Definitely, there are -- there may be some financial benefit which has come in or not come in. But what V-Mart believes is always taking care of its ecosystem. And we know that the small size entrepreneurs, the manufacturers, the business people, who are our suppliers, they definitely had a tough time dealing with the situation. So we wanted to come out and support them. We wanted them not to get destabilized because they are the backbone of our supplies. And we want to create a bigger bonding and bigger trust with them. So that bonding definitely may not bring in a quarterly benefit in the result. But yes, we are looking at a very long-term result thought process. So we don't want to be very, very minute on our thoughts. We want to be very strategic on our thoughts. So that is why we have done -- we have supported with whatever that we had and in whatever way we could. We have supported them to try and give them as soon as possible, so that they continue to do their operations in full swing.

Okay. Got it, sir. This is very helpful. I was also thinking from the point of view that -- I mean while you've helped them in this quarter when it was required, but sustainably, if you try to keep this at lower level then maybe I thought that probably the requirement would not be there from their end as much as you know, some benefit that we could see on a sustainable basis.

Great. We may continue to do that because we always want to be the priority within the retailer base, so that people can definitely work more with us and give us the best of the services.

The next question is from the line of Sabyasachi Mukerji from Centrum PMS.

I just had 1 question on the inventory side. So basically, if I look at your inventory on September and that is roughly around INR 360 crores and majorly, I assume that it would be most of the summer inventory. Now at the onset of early winter, you have been able to replace those, I mean, with winter inventories and come up with fresh inventories. My concern is whenever we enter the next summer season, how much of your old summer inventory will be available for use and how much you have to probably take a write-off or do something about it. So what is your thought plan on that?

So thank you, Sabyasachi. The fundamental assumption is slightly incorrect. I think we -- as of September end, we have one of the lowest levels of summer inventory ever as a mix of total inventory that we are now carrying. And the inventory on books is largely more of core and winter category, which is what is required for selling in this season. And as a result, we do not anticipate any forced liquidations or deep discounting as we move forward.

Great to hear, sir. Related to that, a question on the shrinkage, we look at shrinkage as a percentage of sales a bit higher Y-o-Y. Is this because of the lower base or anything other to read on to it?

It's purely because of lower base. Actually, the number of shrinkage that we report consists of 2 parts. One is a small part of pilferage that is reported or stock corrections, which happen on a day-to-day basis at the stores. And second is the provisioning or the conservative provisioning that we carry because of old-age or out-of-season stock. And because that is a continuing process, that will remain where it is. And as a percentage of sales or percentage of inventory, it might look higher because of the base impact.

I want to add here, Sabyasachi. We at V-Mart believe that the crisper -- the fresher the inventory, the crispier the sales are. So we would definitely want to be extra cautious of our inventory. And that is the approach that we have taken and our Board has taken to try and provide the -- for a larger amount of inventory, so that all this inventory, which might have got little delayed in this whole COVID phenomena, so the aging part, we don't take a surprise in that hit. So that is why we have taken extra cautious approach in this whole thing.

And Anand, that provision is passed through P&L? Is it correct?

Yes, correct.

Ladies and gentlemen, due to time constraints, that was the last question for today. I would now like to hand the conference over to the management for closing comments.

Thank you, everyone, for being there and patiently getting in the questions. I know this is a market time, and this is a busy time even for us. So we may not be able to be here a long. You also want us to keep working with our operations and our stores. So that's what we are continuing to do. And we are definitely seeing a better response in this festival because of early arrival of winter. So we definitely think life should come back to normalcy as fast as possible. We expect things to come up more from the government side, and we expect things to come up more from the research side so that the vaccine comes in early and life becomes easy for everyone around. Thank you. Stay safe. Be healthy. Thank you.

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