Vedant Fashions Limited (MANYAVAR) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Vedant Fashion Q2 FY '23 Earnings Conference Call hosted by Axis Securities. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Gaurav Jogani. Thank you, and over to you, sir.

So thank you. Good afternoon, everyone. On behalf of Axis Capital, it's my pleasure to welcome you all and the Vedant Fashions management for today's conference call. We have with us today Mr. Vedant Modi, Chief Marketing Officer; and Mr. Rahul Murarka, Chief Financial Officer. The management will start the call with a brief about the quarter, and we will then be available for the Q&A. Thank you, and over to you.

Thank you, Gaurav. Good afternoon, and a warm welcome to all the participants. I'm Vedant Modi, Chief Marketing Officer of the company. Thank you for joining us today to discuss the Vedant Fashions Limited Quarter 2 and H1 2023 results. I'm joined by Mr. Rahul Murarka, the Chief Financial Officer of our company. I hope everyone got an opportunity to go through our financial results and investor presentation, which have been uploaded on the stock exchange as well as the company's website. Let me take you through the quarter ended and half yearly performance. We delivered another good quarter. In this quarter, we increased the number of EBOs, which is the dominant channel for the company. As of September 2022, VFL's EBO area stands at 1.34 million square feet, spanning 626 stores in 244 cities and towns globally. The national EBO footprint tally is at 612 stores spread across 235 cities and towns. In quarter 2, we opened net square feet area of around 62,000 square feet and 23 exclusive brand outlets in India. We have also opened 1 new international store in the U.S. in Chicago, and we now have 14 international stores spanning across 3 countries. We are also happy to share that we have a strong and healthy pipeline for new rollouts planned for the remaining part of the financial year. Our overall customer sales growth stands at 73.1% over quarter 2 of financial year 2020 and 20% over quarter 2 of financial year 2022. The SSSG growth has been 35.1% over quarter 2 of financial year 2020, which was pre-COVID levels. If we exclude the stores under renovation, we saw SSSG growth, which stood at about 4.1%, which is including the stores under renovation and at about 6.7% if we exclude the renovations, which is in comparison to quarter 2 FY '22. In addition to the network expansion, I would like to highlight our marketing and branding campaigns with Mr. Ranveer Singh during the quarter. The Taiyaar Ho Ke Aaiye campaign was built around saving the true essence of our wedding in your favorite Indian attire. The campaign was targeted to connect with the wedding attendees and close family members of bride and groom. The overall idea is to drive a behavioral shift in Indian men to dress up for Indian weddings. In this quarter, we also ran a 360-degree rakhi campaign, which targeted the non-wedding occasions and the festive wear market. We received a positive response from the market, and this was a good step towards reinforcing Manyavar as a celebration wear brand. Overall, we can see that the fundamentals of the business have been sound, robust, and the company has been encompassing growth. With this, I would now hand over to Mr. Rahul Murarka to take you through the financial performance of our company. Thank you.

Thank you, Vedant. [Foreign Language], and good afternoon, everyone. I would now like to highlight the key financial performance for the quarter and half year ended 30th September 2022, based upon the consolidated financial statements. The company has continued to demonstrate strong financial metrics and returns during this period. Starting from H1 of FY '23 update. The company's reported revenue from operation of INR 572 crores during H1 of FY '23, delivering a strong growth of 59% compared to H1 FY '22. The company continues to report industry-leading gross margin of 67.8% during H1 of FY '23 as compared to 66.1% in H1 of FY '22. The EBITDA margin was around 49%, and the EBITDA stood at INR 21 crores during H1 of FY '23 with growth around 60% compared to H1 of FY '22. The reported PBT during H1 of FY '23 is INR 228 crores, which has significantly increased by 72% compared to H1 FY '22. The company continued to report best-in-class PAT margin of around 30%, and the profit after tax stood at INR 170 crores during H1 of FY '23 with a significant growth of 73% compared to H1 of FY '22. The company has a track of generating significant cash driven by a healthy cash conversion ratio. [indiscernible] September '22 the company continued to generate high cash conversion ratio of across 85%. This has been computed based upon operating cash flow over PAT. This optimization in working capital, we have been able to achieve industry-leading trailing 12-month ROCE of across 84% during 12 months period ended September '22. Sale of our customer was around INR 793 crores during H1 of FY '23 with a significant growth of around 68% over H1 FY '22 along with equity growth of around 54%. Due to COVID, FY '22 was an abnormal year, having impact on performance across all the quarters. Hence it is relevant to compare our performance, this pre-COVID level figure for FY '20, this is internal management in mind. Our revenue from operations significantly grew by across 70% and we witnessed significant growth in PAT by across 140% in H1 of FY '23 over H1 of FY '20. Sale of our customer also significantly grew by around 65% along with a strong SSSG growth of around 28% over H1 of FY '20. Now coming to Q2 FY '23 performance update. The company has reported revenue from operation of INR 247 crores in Q2 of FY '23, delivering a very strong growth of around 23.5% compared to Q2 of FY '22. The company continued to report industry-leading gross margin of around 66.5% during Q2 FY '23 against 65.9% in Q2 of FY '22. The EBITDA margin was around 47%, and the EBITDA stood at INR 116 crores during Q2 of FY '23, with a growth of around 21% compared to Q2 of FY '22. The reported PBT during Q2 of FY '23 is INR 92.5 crores, which has increased by around 30% compared to Q2 of FY '22. The company reported best-in-class PAT margin of 28% and the profit after tax stood at INR 69 crores during Q2 of FY '23 with a strong growth of 30% compared to Q2 of FY '22. Sale of our customers was around INR 294 crores during Q2 of FY '23 with a growth of over 20% over Q2 of FY '22, allowed with SSSG growth of around 4.1%. The SSSG growth excluding impact of certain stores under renovation during the period was around 6.7%. Net EBO of store area of 62,000 square feet was added in Q2 of FY '23 with total cadence of 1.34 million as of 30 September 2022. Now on comparing our Q2 FY '23 performance with pre-COVID level of Q2 FY '20, Whose figure have been considered central management. Our revenue from operations significantly grew by around 89%, and we witnessed significant growth impact by approx 359% over Q2 of FY '20. Our payer of customers also significantly grew by across 73%, with a strong SSSG growth of around 35.1% over Q2 of FY '20. Thank you, and [Foreign Language] everyone. We can now move to the Q&A session.

[Operator Instructions] We take the first question from the line of Mr. Nihal from Nuvama.

Yes, sir, congratulations on the growth performance. I had 3 questions. First was on the quarter, just on the gross margin improvement, I know it is 60 bps versus Y-o-Y. Just wanted to understand, is that a mix-driven improvement or some price rise may have taken in the quarter versus the last one?

For our Q2 FY '23 gross margin of 66.5% compared to 65.9%, of which was done in Q2 of FY '22. So if you see our historical trend of gross margin, we have seen improvement in gross margin due to the efficiencies we have been able to build over the model. So that is the main reason. Efficiency is not only in 1 aspect. But in various aspects, there have been improved efficiencies. And as a result of this, we are seeing improvement in gross margin. But on a quarter level, it can vary. So it is always better to look at the annual level, which is around [ 60%, 67% ] historical which we saw.

So comparing your [indiscernible] of [ 35% ] versus [ 34% ] that's on a Y-o-Y, can give us a sense and it was known also that last year, there was a bunch up in Reading, which would have seen a strong Q2 of last quarter. So is it that the last Q3 also saw a significant bunch up, or, I'd say, the festive period, which could potentially have an impact on the Y-o-Y growth as we're looking at this quarter, just to understand that better.

So Nihal, just to answer your question, the relevant way of looking at this would be that when we compare the numbers to FY '20, quarter 2, we were able to see SSSG growth of almost 25%. And that on a CAGR basis also at 10.5%. So if you look at it that way, the health of the business seems very, very right. And looking at how Q3 goes given that wedding started 22nd November, once we start seeing the trend, we will be in a much better position to answer this question in the next earnings call. And for now, all we can say is that quarter 2s performance has been very encouraging for us, given the kind of CAGR numbers, we've been able to witness based on a pre-COVID level as well.

Absolutely, Vedant. So if I could ask for Q2 also, the 35% was to a CAGR or say ballpark 10%, 11% kind of basis. And last year was 4%, even if you say not consider the stores which are under renovation. It basically says that Q2 of last year has been a very strong performance, and now we are seeing a reasonable performance. That's what I just want to understand that is that inference right when I'm comparing these numbers that you've highlighted? Or if there is something that we wanted to know there.

No, no. Sure, sure. I mean that's 1 way to look at it. That last one was really good, and that's why we see numbers like these this year. On the other hand, I would also just like to mention that because we have come out of COVID, there's a large fleet that was under renovation in quarter 2. And that's why we also mentioned that if we exclude the stores that were under renovation, the actual SSSG numbers comes to be 6.7%.

Got that. I guess 1 last question, if it's possible to give any qualitative or quantitative commentary on Mohey, how it has performed in any metrics in terms of how the business is progressing?

So in terms of Mohey, the SSSG again has been beating the company level, and we've been seeing very good positive feedback from the customers on the store level. Each and every metric that we track from a retail point of view has been improving, be it conversions, be it productivity. So we are very, very excited about the brand. And the Manyavar Mohey concept, which is of having Mohey in the flagship Manyavar stores has to win to be success, and we continue to roll that out. While on the other front, like we discussed in the last earnings call as well, we are also working out on the stand-alone Mohey concept, which we plan to roll out very, very soon in the coming quarters. And yes, you will start to see this store going live in the coming quarters, and we are excited about witnessing the results of those and then taking a call on how fast we want to scale the stand-alone model from that point.

Just quickly financing the SIS count for Mohey and the EBOs, if possible to share that.

So from Mohey, there would be no SIS. That is not something that we do. In terms of overall store count, we would be in the range of 100-plus stores. It would be somewhat about 103-odd stores.

We take the next question from the line of Percy Panthaki from IIFL.

Sir, my question was also on Mohey. So just wanted to understand the optimism that you're having in the brand is when Mohey is selling inside your Manyavar store, I mean, side-by-side or whatever you call it. Do you have any test or a pilot where Mohey is a separate, stand-alone store? And what kind of -- sort of experience you have or what kind of KPIs does that store generate, do you have that yet or not?

So Percy, we do have what we call an exclusive brand outlet store of Mohey in Kolkata. However, the catch there is that it's next to a Manyavar store. That's why from a metric point of view, what you're requesting, I don't find it correct to refer to the store. This particular store would only happen once the stand-alone stores open starting quarter 4 of the current financial year. So this is what we are working on currently in the pipeline, and you would start to see the stores coming up in quarter 4. And that is what we intend to study and how scalable that as a model would be once we have actual data of those stores coming in.

And what are the parameters you would track for these stand-alone Mohey stores to decide whether they are ramping up properly or not?

So the important measures for the stand-alone stores would be the most important one which kind of talks about the scalability of the business will be productivity. While there are a lot of other supply chain measures which you would take into account such as inventory turnover ratio and what kind of conversion levels you're able to see at the store level, which all leads to a better productivity in some sense in the other. The idea is to make sure that our franchisees are getting a good ROI. And that the business is also profitable if we have good supply chain efficiencies built in. So these would be the kind of ratios we would monitor and track.

And what has changed in the Mohey brand over the last 12 or 18 months to give you more confidence that now we are getting it right?

See as a business, we've always been confident. And it is just a result of improved merchandising mix and improved conversion rate at the store level, which has just been a result of better data efficiency and better data management that leads us to having better merchandising at the store level. As we've been explaining across the IPO process and across earnings call that our entire supply chain is very tech-driven and that basically results in the more data we have, the better we can perform at a brand level, which is what we are able to replace with the Mohey brand as well.

Okay. Second question on your overall store roll out, can you give me some idea in terms of square footage, what is the percentage addition that you would target every year for the next 2, 3 years?

So the way we look at it in the past that we've been able to grow our retail footprint at a CAGR of 16-odd percent. We are quite confident that we will continue scaling our retail footprint at a similar kind of growth levels. When we look at it at CAGR level, so 16% CAGR is what we expect to see over the next 2 to 3 years.

And what stops you from sort of taking an accelerated path here that for the next 2, 3 years, you accelerate your store rollout, and there after, you sort of ratcheted down. Why not front end it?

Well sure. See, it's a matter of both planning the demand and planning the supply chain. So we have to be very kind of -- as a business have to look at all sides of things and only grow stores at the level we're able to supply, number one. And number two, it's also a matter of being very controlled from a cost point of view also. So we want to open stores that are very profitable. And that can only happen when we understand areas better. That is why we are comfortable seeing 16%, sure, if we can grow faster, we'll try to do that as well.

Right. And last quick question, if I might. Any comments on the competitive landscape? Any changes in the competitive landscape that you're witnessing with some of the large players sort of having big ambitions in the ethnic wear space or wedding space?

So we have access to our own data. And that shows us that the business health is extremely positive. We've been able to grow very well, both from a SSSG and from an overall fleet perspective. And given the kind of industry we operate in, so the overall Indian ethnic market is about INR 1.8 lakh crores where there is room for definitely more than 1 player. And the way we see it is that there's a lot of modes in our industry, given that Indian wear takes a lot of time to produce, so demand planning has to be done 6 months in advance. And given the kind of data we've collected over the past 2 decades, we have an advantage on understanding consumer preferences of India, which varies every 50 kilometers given the dynamic cultural nature of our country. And these are the kind of modes that our company enjoys. Furthermore, with the Manyavar brand, it's a brand that has almost become synonymous with the category, given the kind of branding initiatives we've taken over the past decade. So with all of these things said. Sure, there is room for more than a player, but we're very confident about our brand continuing to scale up.

We take the next question from the line of Priyanka Trivedi from Antique Stock Broking.

My first question would be on our international business if you could give a sense on that, how the demand has been in that market and it could be the proposition of this business to [indiscernible].

Sure. Our international business has been doing really well and has been growing fantastically. The growth has been almost triple digit when you talk about quarter 2 compared to FY '20. So we've been growing about 128% is the growth level compared to financial year '20 quarter 2. And so all of these metrics are very positive in terms of international business. While at an overall level, the contribution from our international business is still pretty low, we are still working out on different strategies. How do we convert into the omni business and take the international business forward from that point on. And multiple new stores are in the pipeline and soon to be rolled out, and franchisees continue to enjoy very high ROI from an international perspective as well. So yes, we are very confident of the international business and see it growing quite rapidly.

I'm sorry to interrupt, your line is breaking up.

Yes. Can you hear me now?

Yes.

Am I audible? My second question would be on what has been the price like growth and the volume like growth over the pre-COVID and on year-end basis also?

Sure. So, when we see from pre-COVID, so we were able to achieve 35% SSSG level. Obviously, there was a fair balanced mix between volume and ASP, so that is the kind of growth we saw at the company level. That is how the SSSG was [indiscernible].

Okay. Okay. And lastly, on just the online share, what has been the share of online business?

So from a share perspective, our online business directly contributes about 3-plus odd percent to our total revenue. And there are multiple strategies that are in play with our online business. With our new digital initiative project still in the pipeline, we plan to launch it in quarter 4. We have partnered with the best of tech companies to create one of its kind omnichannel digital experience. And what we are trying to achieve is that both our online business take off from this digital project; and secondly, we're able to provide a very different experience towards our physical consumers as well by planning a phygital journey for them, which connects the digital world with the physical world. And we plan to roll out the new experience which we will use for design some time in quarter 4.

We'll take the next question from the line of Ankit Kedia from PhillipCapital.

Sir, a couple of questions from my side. First is on the new advertising campaign. With the Taiyaar Ho Ke Aaiye campaign, how do you see the inventory in the store changing? And how has been the initial response? Are we increasing the non-groom head of the inventory at the store level? And how is the shelf area in the store changing because of that?

Sure, Ankit. So to answer the first part of the question, so with Taiyaar Ho Ke Aaiye is a long-term play for us. So what we are trying to do is drive a behavioral shift in Indian men so that they dress up to Indian weddings and the overall per capita consumption of Indian wear increases as a whole. However, that said, it's not something that could happen in the short term. So we have to keep nudging the consumers with Taiyaar Ho Ke Aaiye to actually be able to drive such a shift, which is a long-term play for us. On the other part, which is how does inventory move in the store, the benefit to that is that products like Kurka and jackets, they don't actually require so much of a shelf space because they can be stacked. Rather, wedding inventory like a Sherwani, needs hanging space. So they end up occupying slightly more areas. And given the kind of inventory replenishment system we have, given our current fleet we are able to manage stock very beautifully where big stores are almost replenished 3 to 4 times in a week and smaller stores are replenished 1 to 3 times in a week.

And for kurtas, are you increasing the lower age per kurta, say normal rate of INR 1,000 to INR 1,500 range as well or you're playing the INR 2,000 to INR 3,000, INR 4,000 range?

So when we talk about the INR 1,000 to INR 1,500 kurtas, the main brand that would cater for that demand would be Manthan. In the Manyavar brand, we aspire for the pricing to start at INR 2,000, while there are some casual kurtas available below that as well. However, as you mentioned, the range would be INR 2,000 plus in Manyavar, but Manthan would continue to cater the INR 800 to INR 1,500 kurta bucket, which also contributes to our online business.

Sure. And my last question is on Twamev, we were expected to launch 2 EBOs this year. What is the status on that? And how is the pricing strategy differential between Manyavar and even for demand for premium share on event and groom is high at the moment. So how do you plan to capture that?

So number one, with Twamev, we are absolutely in the pipeline, the stores -- the 2 stores have been signed. We are about to kind of -- we are planning how to launch it. The design work has also been done. We were able to bring in a French design agency to design the entire retail experience for Twamev. So everything has come out beautifully. We are super excited about the brand being launched sometime in quarter 4. However, given that one of the stores is in Delhi, there are some construction prohibitions by the Delhi government. We will have to see how that store -- if we are able to manage to launch it in quarter 4, that will spill over to quarter 1. So that is still a question based on the guidelines of the government. Rest everything is aligned. From a pricing strategy perspective, the company believes in the aspect of perceived value. So we price our products based on how a consumer would perceive it. So from an overall gross margin level, even though it would be slightly lower than Manyavar. We are still very confident of scaling it up to Manyavar levels in the future and at the company level in the future. And yes, overall demand from a survey point of view and the conversion rate that we see in the Manyavar store gives us a lot of confidence for the brand.

And 1 last thing, what is the shop-in-shop number overall for the company for this quarter?

The total shop-in-shop number that we opened this quarter in total?

In total, we have 100-plus shop-in-shops as on 30 September 2022.

And this number was 77 end of quarter 4, right?

It was around -- yes, it was around 77.

So a bulk of the store opened in this half is shop-in-shop, right? Is that a good assumption to make?

So we opened about 17 shop-in-shops, actually 16 shop-in-shops, while we opened 7 exclusive brand outlets in this quarter.

[Operator Instructions] We take the next question from the line of Mr. Santosh Kumar from [ Sivans ] Holdings.

Hello. Am I audible?

Yes.

I just have a small question. I just want to understand that. For example, if you see quarter-on-quarter numbers, there is a slight decline. I just want to understand that, for example, in general, when there's a quarter-on-quarter improve -- increment or how there's a decrease, what are the main reasons which you attribute for? Or taking this quarter as an example also.

So if I had to explain our business, right, it's not a business to be looked at quarter-on-quarter. Given that our primary market is the wedding wear market currently. So our business moves as the wedding calendar moves in a typical year. So to just give you an example, if we look at historical averages of how our quarterly business moves, so quarter 1 typically would give us 24% of our business; quarter 2, 13%; quarter 3, 37%; and quarter 4, 26%, 27%. So that is a typical way our business moves and progresses. So quarter-on-quarter would not be a right metric to judge our business by, and that is why what we tend to do as a business is look at it from a Y-o-Y perspective. And because last year was still we were coming out of the shadows of COVID and we were still in shadows of COVID, we are also comparing it with FY '20 quarterly numbers.

And furthermore, what Vedant mentioned, like, if we were at approximate range numbers. It's not your specific that this will be 24% or 13%. There can be 2%, 3% plus/minus within quarters, but we have broad ranges, which Vedant mentioned.

Okay. Okay. Got it. And my last question is on the Mebaz brand, so it is mainly a concentrated in South India. So what is going on with the brand? Can you just give some light on that?

Sure. So Mebaz is a brand we acquired in 2017, and the brand has been doing very, very well. It has a very strong heritage background and a very strong cultural connect with the consumers of AP and Telangana. And so yes, we've been able to witness very good SSSG growth in the brand this quarter, and we continue to kind of build that brand in those markets. So the strategy is to remain in AP and Telangana with Mebaz and continue its growth in those markets.

We take the next question from the line of Anush Mokashi from Yadnya Academy Private Limited.

My question is about this franchisee model we have. So essentially, I understand that we operate on 18% and 29% channel margins. So just wanted to understand from you, are you indifferent in giving franchisee at 18% or 29%? Or is it that it is more beneficial to you?

So no, actually, to -- you're right, we have 2 models 18% and 29.5%. So it's not any one model is more beneficial than another, okay? In 18% model, we are paying the lease rent. And generally, it happens wherever we have a strategic location where we want to take the lease. So that is 1 difference and 29.5% franchisees having both -- is paying the lease as well -- lease cost as well. So we have derived the model in such a way that the differential margin between with or without lease cost easily takes care of the incremental cost. So it's not about who is getting more benefited with a different franchise model. It is equally, I would say, computed. So that it is beneficial for both the franchisee as well as the franchisor.

Okay. So none of it is like margin accretive. That is what I'm trying to get on to.

Yes, yes. So it doesn't have any impact on the PL or until that. It has been an neutral enough to build upon our historical trend and experience.

Okay. Great. And so my next question was about the margins. So the margins are pretty healthy. And just wanted to understand from like what is causing them to be maybe that high? Is it that the pricing which we are -- is it a cost advantage? And if you can just explain us what is the cost advantage you're having?

Sure. So to put it correctly, it's neither price nor cost to an exact definition. So what we've been able to or what is the company's biggest USP is, it's supply chain technology. So we're able to plan our demand correctly, and we are able to supply just enough. That allows us to never have sold a single product on discount in the Manyavar brand. So from a pricing point of view, we price our products very similar -- on a similar multiple on cost as other players and other peers of the industry, yet because we never sell a product on discount and there's high demand and there's high demand-planning efficiencies. We're able to do away with discount, and that is what leads us to such good margins. So that's the main reason, if I have to put it that way.

Okay, okay. Great. And so just last question about the international business. So in terms of like the internationally, if you're expanding, the per capita, internationally is higher. So are you able to price the products higher outside as compared to domestic prices?

Yes. So given the kind of cost we -- the franchisees have to bear outside India, we do a pricing strategy model for each of the country we open and the pricing changes for the country based on the kind of costs the franchise going to incur in the country. They are definitely higher than Indian prices. And as a result, we are able to maintain franchisee ROI across different countries because Indian wear as a segment is a one-on-one shopping experience. So even in the U.S., you will find that 1 fashion advisor would be dealing with 1 customer. And to deal with those reasons, the price hike is taken, so given that employee expenses are a lot more than in India.

We take the next question from the line of Mr. Abhishek from Mirae Asset. I think we lost his line. We take the next question from the line of Mr. from Gaurav Jogani from Axis Capital.

Sir, my question is with regards to -- is it better to look at the current quarter performance more on sales per square feet metric? Because when we do it on a sales per square feet basis, it seems that your sales per square feet has increased 8% Y-o-Y despite the fact that we had a high base. And also the fact that we had a large number of store openings, which would have not contributed to. So do you think that would be a right metric that sheds to look at the overall performance?

Sure. So absolutely point taken that rent, so revenue per square feet, which we call productivity internally is one of the most important metrics from a retail point of view, and that is what leads to a good profit for the franchisee and for the company over-all, and thus, those numbers have been very encouraging for us. So we -- our current productivity stands at about [ 13,200 ] which have significantly grown over the years. And in fact, it's even grown from the FY '22 numbers we gone at about 12,700. So yes, those numbers are very encouraging for us. And hopefully, the idea is that we continue to kind of grow this from here on.

Sure. And sir, my next question is with regards to your employee costs. So if we see the employee cost, it has remained kind of flattish in absolute level on a Q-o-Q basis. So if you can help us out, how we should look at it given the context in the first quarter, there was also some management regulation as well that we took. So if you can guide us how we should look at this number going ahead, what is the guideline here.

So because the company does not hire employees from the front end, which is on the retail stores, majority of the employee cost you see is all the employees that's at the head office and that work at a corporate level. So the major reason, like you mentioned, is because of a lowering in director remuneration, which we took in quarter 1. In terms of guidance, we don't want to give any particular guidance. However, as the company is moving forward from being a 1 brand -- majorly led by 1 brand, which is Manyavar to being a house of brands with 5 brands internally, we are building up our verticals in a similar sense now. And yes, we will start to see some of the HR costs from that aspect in the long term. But I don't want to give any particular guidance. And as you know, efficiency is in the DNA, so we'll do as much as we can to keep building on efficiencies in the business.

Sure. And 1 last question from my end is, we have seen that you have also added 5 new cities more including this quarter. And even the city addition has been robust. So if you can just give us some sense on how you are looking to open the stores across the tiers of India? And how -- if you can give some example how the metros funding versus the Tier 3, Tier 2 kind of performance, so if you can highlight on that point.

Sure. So overall, like you said, yes, it was -- we saw very robust openings in terms of new cities. We entered some Tier 2 cities like [ Baratar and Puducherry ] while the remaining were all Tier 3 cities and these continue to do really well for us. So over-all metro versus non-metro growth perspective, when we compare the number of FY '20, we see that all tiers have grown very well, pretty much equally, metros being at a slight advantage when compared to FY '20. However, when we compare it to COVID-impacted years, then we see that the growth from Tier 2 and 3 was very high in the COVID impacted years when people were staying back in their town of cities and purchasing in those areas. However, as COVID has normalized, and we are out of it, we're seeing that trend of good share coming out of metros has returned.

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

Thank you very much for all the encouraging words, and it's always a pleasure interacting with all the analysts. I'm looking forward to the next quarter and a very happy Thanksgiving to all of you. Thank you very much and [Foreign Language].

Thanks.

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