Sai Silks (Kalamandir) Limited Q3 2026 Earnings Call Transcript

Operator

Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the touchtone telephone. If you wish to remove yourself from the question queue, you may press star N2 participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Ankit Gupta from Bamboo Capital. Please go ahead.

Ankit Gupta

Yeah, thanks for the opportunity, sir. On the store expansion front, if you can talk about, you know, what are our plans for next financial year? Are we looking to expand in the existing geographies the four states we are currently present in the south India. So if you can expand upon that a bit.

R. Bharadwaj

Okay. So first and foremost, currently for this financial year we targeted around close to 60 to 65,000 square feet. As of today we are at 54,500 and we will comfortably meet the desired target of 65,000 square feet. And there's a possibility to open beyond, beyond the targeted area this year. For the next year we want to go a little bit more aggressively compared to this year. We have a very strong store expansion plan and we wanted to extend the current target from 65,000 to almost like about close to 80 to 85,000 square feet as well.

So the market where we wanted to look at is both on the current four states as well as into the newer territories. As we speak we are existing exploring newer markets in terms of Maharashtra and Kerala as well. Very soon we will start expanding our store presence across the other areas as well. The format that we choose to expand is basically going to be majorly driven through a Varamahalakshmi led expansion strategy supported by the Valley format.

Ankit Gupta

So majorly it will be like Varma Lashmi and Valley will primarily happen in the existing states we are present in. Right.

R. Bharadwaj

Hello.

Ankit Gupta

Hello.

R. Bharadwaj

Yeah, I'm sorry.

Ankit Gupta

Yeah. So. So basically Varma Lakshmi expansion will happen in the new states that will be entering and Valley will happen in the existing state that we are present. That's the right understanding.

R. Bharadwaj

You're right. Yes, you're right. Correct.

Ankit Gupta

So the second question was on, you know, how is the outlook looking for Q4 and FY27? How are the wedding dates for next financial year? If you can talk about how is the demand in the current quarter. So if you can talk about that a bit.

R. Bharadwaj

Sure. So I just want to quickly take a moment to just recap our conversations. If you look at my earnings call as well as my news that I was participating in that. What I've also mentioned is after seeing a healthy pipeline of wedding dates in half year, I have told that there will be some amount of correction because of shifting wedding dates and festive calendar in the Q3. That is the kind of traction is what we are currently seeing right now for the full year for the quarter four, the desired plan of being able to meet the 15% of revenue target still stands intact.

However, on the wedding date side, as you rightly asked for, Q4 is having similar dates compared to last year of Q4 and after that also in the next financial year. Generally we get one round of calendars in the month of Jan and we have one more round of iteration that we do in terms of preparing of the wedding calendar again during the Ugadi period, which is around March, mid March or in the month of March and April. So from where we initially got our market research as well as the wedding dates, we do have a healthy pipeline in the next year as well.

Compared to this financial year. Next financial year wedding dates are more by 10 more percent of waiting dates. So last year to this year it's already increased and compared to this year to next financial year it's even more than the current year. So it is looking, it's looking very decent. And the good part again which is going to continue is that all these dates are not clustered or not confirmatory to just any particular month or quarter. It seems to have a distributed month and especially during the next financial year from, from all the way to April to July there is non stop, there's, there's no break in terms of the vending rates.

It does have a healthy pipeline.

Ankit Gupta

And on the KLN side, if you can share the numbers for Q3 of this year and nine months as well and the comparative numbers for the last financial year and how has been the performance of that, have we seen some improvement in you know, till in the first half we did see that, you know, there was some moderate growth in the, in the KLM sales. So how is the performance in Q3 and for overall nine months if you can share the numbers for this year and last year as well.

R. Bharadwaj

Okay. So on the performance side, I think half yearly KLM as we rightly spoke about because of Dashra and all moving to Q2, we did see a very healthy SSSG growth for KLM as a format. There are no new stores added on the KLM front. But on the quarter three side there has been some degrowth coming in from majorly the men's and the kids wear category. Sarees as a category seems to still be strong. I think that's what I've also mentioned in the opening remarks as well because this particular category is the one which is men's and kids is the one category which has been affected in the KLM business as well.

And that is what has caused the major degrowth in this particular quarter. But YTD KLM is still positive, marginally positive compared to last year. And the way we think the remaining quarter for Q4 also goes, we should be able to end with a low single digit positive SSG growth for KLM as a business. One headwind that we are facing majorly is with the menswear and the kids wear category. The good news is sarees as a category. Menswear, kidswear on the overall component today stands to be around 12% overall compared to the overall structure which is 15% last year.

So that piece is a little bit shrinking because the KLM as a business majority of it still being sarit should not be a problem. I think we should be able to recover whatever we have lost in Q3 with a marginally slight single digit SSG growth by the end of Q4. That should be possible.

Ankit Gupta

Sure, sure. And this one last question on the other expenses front. So we have seen a significant decline in other expenses in Q3 compared to the Q3 of last year and primarily maybe due to the share getting the is getting, you know, repone and but overall on a nine month basis also if you look at the numbers, you know, we have hardly grown on the other expenses front. So if I look at the breakup of that now there are major, you know, rent related expenses and you know, other fixed costs which are there. But there are some, sorry, the variable costs which are there and but there are some, you know, business and advertising expenses also.

So have we reduced on that from business and business promotion and advertising expenses for this, you know, quarter. And even on bioni y number there is hardly growth of 14 or 4% in this number compared to 16% growth in the top line that we have seen for nine months. So if you can talk about this and elaborate on the same.

R. Bharadwaj

Sure. One of the major reasons what we have consciously taken a decision upon is because the festivity moved to Q2, we have pushed the aggressive expenditure to Q2 and have controlled expenditure in the Q3 and therefore you see a reduced expenditure on the overall front. If you also look at the this year YTD as a number, majority of our stores are varamahalakshmi. Varamahalakshmi silk stores generally have lesser advertisement compared to any other format that we currently operate in. So the nature of the business when we do realize that, you know, the festivity calendar has shifted and therefore we have taken a conscious decision of limiting the advertisement and business promotion expenditure.

That is one of the major reasons why we are still able to like, you know, show decent EBIT margin of about 17% this year and still be able to not affect the profitability aspect. That's again something that I mentioned in my opening remarks as well during the softer quarters. We are aware of what kind of demands will pan out and therefore we have taken conscious decision to not overspend on advertisement expenditure. So what you're seeing today in the advertisement and business promotion expenditure saving is the actual saving that we will happen and Q4 compared to last quarter and this quarter should pretty much be in the same lines on the advertisement spend.

Apart from the business promotion and advertisement spends remaining, all the other expenditure are pretty much similar. It is as per the normal norms of how the expansion has happened. This is one area that where we were able to reduce the advertisement and business promotion expenditure and therefore the entire margin flew down to EBIT and pattern.

Ankit Gupta

Just last question on this one. So how should we look at this number going forward? Like as a percentage of sales or you know, with the expansion that we are planning in the next financial year?

R. Bharadwaj

Sure. See on the absolute advertisement expenditure, our internal goal is 2 and a half percent. That's, that's where our goal is on the ADVT and business promotion expenditure both put together, we should be able to be under 4, 4 and a half percent on the maximum side. But the way things are happening, we are aggressively taking a stand to keep it well under 4%.

Ankit Gupta

And that should continue when we expand to new states.

R. Bharadwaj

Absolutely it should continue.

Ankit Gupta

Okay, thank you.

R. Bharadwaj

As we expand in states and new formats as well. Whatever comes on that, that will still be the goal and the KPI that we will be targeting.

Ankit Gupta

Thank you.

R. Bharadwaj

Thank you.

Operator

Thank you. Ladies and gentlemen. In order to ensure that the management will be able to address questions from all the participants in the conference, kindly limit your questions to two per participant. Should you have a follow up question, please rejoin the queue. The next question is from the line of Akhil Parekh from BNK Securities. Please go ahead.

Akhil Parekh

Hi. Thanks for the opportunity. My question is on the growth front, right? I understand the festive has shifted this year versus last year. But if I combined two Q and three Q numbers the growth rate is still at 6,7% on a top line basis which is relatively weak given that we were expecting FY26 to be very strong marriage season. So that is one. And second, I think you lowered your sales guidance for full year because last quarter if I look at it as per the concord, you're riding for 18 to 20% top line growth. We are saying now we are comfortable at 15% of framework.

That's my first question on the growth.

R. Bharadwaj

See on the growth side I think nine months till now, I think we are still positive by 16. 16 and a half percent is the overall growth on an absolute SSG level. Also I think we are close to around 6 and 6% more or less on the SSG side. On the full year side what we have initially guided is around 15 to 18% while 18% is still the target. I think after seeing a quarter three performance we wanted to be giving you a conservative approach of being able to achieve the 15% kind of a number that we wanted to achieve.

So the way things are in quarter four also there is like you know, February and March and all April. These three months are heavily motivated by the festival and the wedding calendar that is there. And therefore we believe that this is a number that should be possible. We've just hardly completed like 15, 20 days of business in Q4 from where things are. The business should be able to pick up and once we start moving down the quarter we should be able to give you a realistic guidance on it. But at this point of time I feel like achieving a 15% growth would be realistic right now.

Yeah, please. I mean that's what I wanted to mention. I think what we have also mentioned is I did highlight in my earlier conference call also that you know, quarter three should be a little weaker quarter when you look at. Because last year in H1 it was pretty negligible year for us in terms of the wedding and festivity calendar. The entire business moved from H1 and fell into Q3 and Q4. So Q3 was a quarter that has taken major heavy lifting in the last year business. This year what happened is one, it's a heavy base when you compare to last year Q3 to this year Q3 plus the season has moved from Q3 to Q2 is the reason why we are Seeing this sort of a degrowth in the Q3 numbers.

But when you pan this out and when you spread this out to a full year, 15% should be possible for us. That's what I wanted to mention.

Akhil Parekh

Got it. My second and last question on the growth and margin front for FY27. So first nine months this year we did around 16.1% of EBITA margin. Given that we are going to expand further in Varamala, should we anticipate some improvement on the margins for FY27 and second should we pencil in 12 to 15% of Europe for 27? That's my last question. Thank you.

R. Bharadwaj

So on the, on the margin front I think I wanted to mention you is like see even with respect to profitability aspect, right? I mean we're talking about EBITDA margins. I'll come to that. Also this year in, in the third three quarters last year we have done a total profitability of about 7172 crores. This year already we have surpassed the last year's full number of 105 crores profit by already right now we've reached 108.2 crores or somewhere in that range. Now what I'm trying to tell you is the operation leverages and the EBIT percentage margins are already kicking in and that is what is causing us give a healthy margin.

So this should be able to continue in the Q4 as well and we should be able to post a comfortable margins overall. But on the overall front, the gross margin side I think achieving a 42 to 43% in the next full year should be achievable. And on the EBITDA margin side as well, 17 to 18% is something that we are targeting for the next year. This is majorly driven by varamahalakshmi format and change in the product mix is the two fundamental reasons that I wanted to put out there. Even if you look at the overall full year this year projection, even if you are able to achieve a 15 to 18% kind of a number on the profitability side I think what I wanted to mention is Operation Leverage will kick in and almost we are expecting a 35% jump in terms of profitability compared to last year profit.

So both on the margin gross margin expansion is also is possible and EBIT margin is definitely possible on the pat margin I think we are clearly able to see that the jump is already there and we have surpassed last year Q3 and we have one full quarter of the entire profit being added to the overall full year profitability aspect. This is taking into consideration of the one time tax provision that we have given last year. Otherwise the reported profit last year was only 85 crores.

Akhil Parekh

Sure, this is clear. Just one clarity thing is that 35% pad work for full year, right? On a yy basis over 25. Thanks a lot and best wishes for coming.

R. Bharadwaj

Thanks.

Operator

Thank you. The next question is from the line of Rahul Jain from Credence Wealth. Please go ahead.

Rahul Jain

Thanks for the opportunity. So with regards to the growth next year you mentioned we have better wedding date which are much more spread out compared to this year. And also you are targeting a much higher square feet addition which you mentioned in your initial comments. So when we look at next year on overall top line growth should we expect at least 15 or maybe in the range of 18 20% given the square feet addition and the wedding dates being better than this year. So can we expect on a current 15% growth? So this year we end up around 1700 crores of sales.

On that can we expect somewhere around 18 20% growth?

R. Bharadwaj

The goal sir is to actually have a 5% SSG and a 15% kind of a new store rollout addition both put together. It's going to be 20%. That's the goal that we internally have working with. But to answer your question in short, yes we should be able to target anything between 15 and 20.

Rahul Jain

Sure. And coming to the next year store edition which you spoke about and also you spoke about Maharashtra being there. So typically what kind of. Since the number of stores being added and the square creation is quite aggressive. So as the more details in terms of what this, what kind of addition in which states we are looking at and Maharashtra any typically are we trying to get some stores in Maharashtra also in next one year?

R. Bharadwaj

As a matter of fact I think from the last quarter we have been actively scouting for locations. It's just that the rental costs are much much higher than the average rental that we pay down in any of these four states. We are actively exploring the negotiating with the landlords to ensure that it fits into our ecosystem of rent to revenue ratios. The way things are currently is that the rentals are much much higher in Mumbai. But I think we are in advanced stages of negotiation and we are actively pursuing opportunities in Nagpur, Mumbai and Pune as well.

We don't anticipate at this point of time we should be able to see a huge number of stores in one year. But we should definitely be able to see a few couple stores and us entering into this market. Trying to understand once next Year we start like probably in one or two quarters we should be able to sign a couple of stores. Once those stores come into full operational existence and once it completes like about a quarter or two quarters, probably that's when we'll start adding additional new stores. But at this point of time, to answer your question, in short, by next year you should be able to see stores in Maharashtra.

Rahul Jain

And last thing with regards to Valley, so we are already at 11 stores and almost more than six months since the first store opened. So if you could share the unit economics with regards to this format that. Would be quite helpful.

R. Bharadwaj

Sir, I think I wanted to again put that, you know, first quarter of Wally operations was Q2 and the next another valley. The quarter three was a lower quarter overall. So it still wouldn't make sense to give a number. But broadly if I have to put Valley into perspective and give you numbers, it will be in the same range of how Kalam Mandir formats are currently working with reduced capex and reduced inventory levels. I mean what I would request is if you could give me another quarter by the end of March it would at least complete like about six to nine months of complete operations and probably I'll be able to give you.

And in these three, in this next quarter four we don't have any new Valley stores planned. So what we wanted to do is like we wanted to have a proper model built in terms of how we wanted to take it forward and only then we will add new Valley stores. These 11 Valley stores should remain in the same count by the end of March and we should be able to build a model out of this and be able to provide it to you and post that we should start looking at a one day expansion in the next financial year.

Whatever source that we will be adding in this particular quarter in Q4 will be Varamahalakshmi 6 major.

Rahul Jain

So, so sum it up only economics currently are almost somewhere near your Kalamandir format. Is that the right assumption?

R. Bharadwaj

Yes, you're right. Absolutely.

Rahul Jain

Sure. Thank you so much sir and all the best. Thank you.

Operator

Thank you. The next question is from the line of Paramboda from three netrat managers. Please go ahead.

Param Vora

Hello. Thank you for giving me this opportunity. So my question is regarding the margins. So are there any margin differences between. Online and offline sales?

R. Bharadwaj

Yes. Good morning Karam. So yes there are margin differences between the online offline on the Varamahalakshmi and on the Mandir. These are the two formats that we are having the online business slightly lesser. On the online business we have like 10% lower cost compared to the offline stores. But on the Kalamandir front, again, there's a difference. But online business in the overall aspect, if you see it's probably 1, 1.5% of the overall business currently. So it's still relatively a smaller pie compared to the offline section. But there's a, there's a slight lower margin, I mean, on the online business compared to the offline business side.

And any plans to, you know, partner with third party online channels like Myntra, Jio, etc. On that front, I don't think as a company we would want to aggressively go onto the third party channels. I think on the marketplaces, as you wanted to mention, I think we have tried this out in the last two financial years and what we've understood is like, you know, huge marketplace commissions eats up and there's a heavy advertisement commission that eats up. And the worst of all, it's like, you know, when you get the returns, the product doesn't come intact, in shape.

There's a lot of business loss that we are incurring as a sari, as a business. So we thought like, you know, whatever business we try to do it, we will try to pull it away from the, the marketplace channels and try to do everything on our websites only. And it's working well. The good part is that, you know, we were able to, the typical ASP for these marketplaces that you were mentioning about ranges around 700 to 900, 950. But for us, if you look at the Mangar and Varamalakshmi, we are still being able to like, you know, operate everything ASP of about 8000 rupees or so.

So that's something which is encouraging. And we don't want to actually go into the marketplace as we speak. We are comfortable in this place and it attracts a lot more. You need to jack up your, increase your margins aggressively and then provide deep discounting. That's a model that we don't want to operate in.

Param Vora

Okay, thank you.

Operator

Thank you. The next question is from the line of Dhuvanil Desai from Turtle Capital. Please go ahead.

Dhwanil Desai

Hi. Good morning everyone. So first clarification. I think you guided for 15% growth on overall entire year. So that comes out to be 12, 13% growth for the Q4, right? So is that a fair understanding?

R. Bharadwaj

Yes, that's right.

Dhwanil Desai

Okay. Okay, got it. Sir, one question on this expansion thing. So I think whenever we last interacted, the idea was that there is enough room in the existing state to go deeper and try out newer formats. So we were opening some stores of Varma Lakshmi in Karnataka. There was some space there, same thing in Andhra also. So if you can elaborate your thought process on you know, idea behind entering a state like Maharashtra which is quite different maybe in terms of taste and kind of merchandising that you need to keep. And also if you enter in a city like Mumbai, wouldn't it make sense to have multiple stores rather than have one or you know, one or two stores there? So it can talk about your strategy why we are going into a state like Maharashtra which is kind of away from what we have been doing so far.

R. Bharadwaj

Okay, so on the overall strategy wise, yes, there are pockets of areas in the current existing territories where we are not present in. I mean I've given examples in my previous conversations as well. Which is in Telangana apart from Hyderabad and this one small city called Kamam, there is no other store present. There's a lot of opportunity in this Telangana as well as in Andhra. While we are adding up new stores in the existing core markets, we also wanted to start slowly pivoting into newer territories. See when we go to a new state, what we have already followed when we were only present in Hyderabad, then we've experimented with Karnataka, then we moved to Tamil Nadu.

The way we wanted to do is that open like one or two stores max and understand what the consumer behavior and consumer pattern is. The good part is our ecosystem is there where if we wanted to change the product mix, there's always an opportunity for us to like sell it in different stores. Even as of today, the procurement that what we do for our existing stores in these 80 stores that we have are not just sourced from one city like you know, we. We source from pretty much any sari weaving cluster that is out there in the market.

We source from different points like north, south, east, west. Wherever it is. I think more than hundred places is where we source our products from. So the consumer point of view would not vary too much. We would still be able to operate in the wedding space, I mean which is the sari space but slightly be able to add the value with Kurta Kurtis and Lehenga's aspect to that. But overall our still our USP and primary point of focus will still be sarees. So when we move into a new territory like Maharashtra, be it Mumbai, be it Pune, wherever it is, we will start off with one single store.

Understand what the consumers and customers are asking for, make the necessary changes before aggressively expanding. Once we crack that part of what exactly the Customers want, then we start aggressively going to expand two, three, four stores. And the reason behind that will be to give you some leverage with respect to backend operations like warehousing could be or administration. This is that cluster model that we have been following for the last two decades. That is what has worked for us and we will continue to operate in the same aspect. So this logic applies to new cities, new new territories and new states.

Anything that we do. This is the kind of logic that we will try to apply for.

Operator

Please rejoin.

Dhwanil Desai

I just had one question. Right. I had just one question.

R. Bharadwaj

Please, please. Yes.

Dhwanil Desai

Yeah. So the second question is, you know, on the Verma Lakshmi. So I think we were clocking around 25 to 30,000, uh, you know, kind of a number for the Tamil Nadu stores and idea was that it will eventually mature to 45 to 50,000 range. So where are we in that journey? Are we moving towards that number? Do we expect that to hit that number in Q4 Q1 next year? Any thoughts on that?

R. Bharadwaj

Currently is delivering on an average around 37,000 to 37,500 per square feet. There is a potential for it to go up to 45,000 by the end of 27. So on a staggered basis this will deliver another 7,000 to 7,500 in the next four, five quarters to come.

Dhwanil Desai

Got it. And that will help improve our margin, right? Because.

R. Bharadwaj

Correct. That is that will substantially improve the margin because the store level costs are already met at the current time.

Dhwanil Desai

Got it. Got it. Thank you. Thank you and wish you all the best. Thank you.

Operator

Thank you. The next question is from the line of Rasham Mehta from Green Edge Wealth. Please go ahead.

Glenna Rasham Mehta

Yes. Hi. So the first question is, you know, on the store expansion plans. So while you know, it's around, you've guided for around 80, 85,000 square feet. Can you give the breakup between Var Mahalakshmi and Vali broadly, what is it, you know, that we are thinking and also you know, in terms of Var Maha Lakshmi. So you know, at around 37 stores or maybe if you want to put it in square footage terms, where do you see that you know, kind of saturating in the exist markets of doubt.

R. Bharadwaj

Okay, ma'. Am. So for the next year, target more than 50% will be Varamahalakshmi and the remaining 50% will come from a Kalamandir format and a valley format. As I did mention in quarter 4, we are holding off onto expanding into valley format because we want to build a model and reduce as much like, you know, bring in more Efficiencies in the current model. Build that model and start scaling into the other tier 2 and tier 3 stores. The vision that we have for VALI is eventually, if not this year or maybe within the next 12 to 15 months, we should be able to make this model attractive so that if at all in future we are able to build in investor friendly franchisee model.

Valley as a format will be able to help us build that. That's the vision plan for Valley for the next 12 to 15 months. But for the next financial year, because we already have a capable steady format which is Vara Mahalakshmi, which is better in terms of capital allocation and better margin profile, everything, we wanted to at least have 50% of the overall expansion coming from Varamalakshmi format. In the location strategy perspective, while we are scouting for newer territories, which is Maharashtra and Kerala, the emphasis at least in the next six months will be in the core markets.

It is just that we are trying to finalize and freeze these locations. Not many locations are ready to occupy for us to begin with. But by the end of next, this 2627 financial year, you should be able to see stores where we are able to open beyond the four territories and in the existing markets. If you ask, are there any scope for expanding into new markets with respect to Varama Lakshmi and Kalamandir? Yes. In tier 2 cities we are not at all present of. Not at all present. In terms of Telangana market as well as in Andhra market, to a certain extent, we are currently in the active pursuit of closing a few locations.

But again in Karnataka in the last year and this financial year, I think we have closed a few locations in Karnataka and there are still opportunities in Karnataka. With respect to Tamil Nadu, what we will do is that we will pause with the varamahalakshmi format in Tamil Nadu because we are having the Varama Lakshmi spread out pretty much every two hours or three hours in Tier two locations, we have our Varamalakshmi stores present. There is maybe two or three new Varamalakshmi stores that could come in Tamil Nadu. But what we will do is that with the Varama Lakshmi stores already being present, we will now support that existing store network with a newer format.

This could either be a Kalamandra or a Valley format and that is what will help us bring in the cluster expansion strategy and be able to get that advantage in terms of administration and back end warehousing. So this is broadly the structure that we have for this financial and the next financial year.

Glenna Rasham Mehta

Sorry, so just two clarifications here. So when you say 50% store expansion for the next financial year you are being led by Varam Mahalakshmi. So you say 50% in terms of the store count or in terms of the square footage.

R. Bharadwaj

I think what we are currently tracking is with respect to store square footage itself. I think the store count, the averages are moving a little bit here and there. 5,000, 6,000, 7,000 is the kind of average that we're going. I think from the last, I think 3, 4/4 only we started communicating and the way we are tracking is with respect to the store square itself. So the metric that we should be able to assess is the store square footage itself.

Glenna Rasham Mehta

Okay, so 50 store square footage from Varmahalakshmi. And the second clarification was on. So basically what you're trying to say is that Var. Mahalakshmi will still, I mean you will continue to expand the stores in tier 2 cities of Telangana and Karnataka while Andhra and Tamil Nadu will be kind of in a pause mode. Is that understanding? Right?

R. Bharadwaj

Okay, more or less, yes. There are still 3,4 locations in Tamil Nadu and 3,4 locations in Andhra that we are currently going to complete expansion in Andhra. I think by quarter four we should be able to add two or three locations in Andhra. After that bit completes then there are like you know, three, four stores. But majorly in tier two of Telangana and Karnataka you should be able to see stores coming in.

Glenna Rasham Mehta

Understood. The second and the last question is you know basically on funding this expansion and the working capital. So you know, with this 80,000 square footage, you know and if I assume like around 4 crore capex per store on an average. Right. However we don't have the stored ground per se. So how you know, and also you know, let's say if we do around, based on your guidance, 2000 crore kind of a revenue in the next financial year and half of our, you know, working capital is half of our sales. So thousand crore working capital requirement and to fund the store expansion.

So when do you see, you know, how do we, you know, when will we need fresh funds etc? I do understand that you know there's still some bit of unutilized IPO money is left. Right? But where do you see the funding. Requirement again coming in?

R. Bharadwaj

Yeah, this IPO money we will be. Getting exhausted by this month end at this year end, FY26. So by that time out of IPO money we would have completed about 1 lakh 90 thousand square feet of expansion. But however during the current year and some part of the last year we have internal generations accrued which we are holding on in cash right now after liquidating the entire working capital borrowings. So broadly, if you take the store expansion along with the working capital, if you are implementing say around 80,000, 75,000 square feet, if we are implementing, then for that we would be requiring at the rate of 4,000 for the capex and about 8 to 9,000 for working capital.

We should be requiring in the range of 12 to 15,000 per square feet, including working capital which entail approximately 100 crores plus or minus for the year. So right now our current year internal generations, since the entire internal generations are free for us because the entire expansion was funded by IPO funds and working capital was already brought to zero by the beginning of the year end, we will have the entire current year generations available for us for expansion in the next year. So that will be fully adequate for that. And then it is a cycle going ahead next year.

Also. So broadly, if you take say we are holding an inventory of 770 to 800 crores at this point of time where working capital borrowings are zero. So then when we are deploying, when we are expanding and along with expansion, our working capital is also met through internal resources only. So the expansion for the next year would be easily funded by the internal generations that we are holding at this point of time and the funds that will accrue in the Q4 as well. This will be a cycle till we may undertake a larger expansion. And wherever required, if there is any shortfall of funds at any point of time, we would go in for working capital borrowings.

But as I foresee, we will not be requiring any borrowings for working capital until the second half of the of 528.

Glenna Rasham Mehta

Understood, very clear. And you know we have some 22 crore unutilized money. Just the last question, data question.

R. Bharadwaj

Can we let ma' am explain? Yes, please go ahead ma'.

Glenna Rasham Mehta

Am. Thank you so much. So you know, we have this unutilized 22 crores for two warehouses. So you know, do we plan to, you know, utilize this for the two warehouses?

R. Bharadwaj

Yeah, we would. We have a plan to put up the identify and put up the warehouse also because Tamil Nadu expansion is almost complete, but for about three to four possible stores. Henceforth we would be implementing the warehousing implementation also. Maybe there may be a slight delay of two or three months, but the identification transaction will be closed before 30.

Glenna Rasham Mehta

Understood. Thank you so much and all the best.

R. Bharadwaj

But on the overall front, I think, ma', am, what I wanted to Tell is the unutilized funds that are currently there in the monitoring account more or less. I think we should be able to have the utilization completed by 31st of March.

Operator

Thank you. The next question is from the line of Amish Kanani from JM Financial. Please go ahead.

Amish Kanani

Hi sir, on on a very good control on working capital and you know profitability controlling the cost. Sir, you know quite a bit also is asked about the growth which was slightly softer on Q3. If you can just give us some sense. You mentioned the men's and kids wet category probably were the reason. Is this the way things will pan out because of our expansion strategy or you know the category can come. I understand the growth of 10 to 20% is you know probably will come from there. So one if you can give us the sense that for reaching 20%, 10% store count growth and you know 5% SSG you know where that extra 5% if at all we have to grow at a higher rate.

How will we kind of you know achieve and give us some sense and that will be helpful.

R. Bharadwaj

On the this year performance overall. I think in quarter three if you take pretty much all the formats did see de growth and the reason why I mentioned men's and kids supported by KLM Fashion Mall is that those were the sections that took a that took a bigger impact in terms of the degrowth aspect. But if you look at YTD sarees still continue to dominate the and show resilient performance overall. So we will still continue to operate in that particular space as we keep adding new stores. The impact of men's and kids as a category itself will slowly come down and will not increase in the overall contribution to the revenue.

With that being said, there are efforts I think in the last couple of quarters also what I have been mentioning is men's and kids wear is undergoing a lot of changes and the changes include changing of the overall product mix in the men's and kids wear category, renew the entire purchasing style that what we have been capturing. Those are some efforts that we are taking and we will continue to do so. But for the next financial year I think we will still be able to plan and build a model around where the SSG contribution to the overall growth will be 4 to 5% and remaining growth whatever be it aggressive or less aggressive will entirely come from the new store addition that we plan to add.

So to answer your question, the remaining gap in terms of the overall growth will come from the new store addition that we will plan.

K.V.L.N. Sarma

If I may add a little on this the growth comes from three quarters. One is store edition, the second is SSG beyond 3% it will add to some margins. And the third the stores which have already come into existence getting matured and giving higher productivity. So the higher productivity in the stores that I was already established will give a better margin, a higher margin going ahead. So the growth in the viable profitability aspect will come from all these three aspects.

Amish Kanani

Yes. And in that question sir, in that same light you know how is the store count addition that we had for last year and this year, year to date, how is the productivity there? Is it shaping up the way we like it and scaling up to the normal mature state economics?

K.V.L.N. Sarma

That's what for the last question I remember to have answered this that the new stores that have come in last year they are averaging around 37,000 to 37,500 with a potential of 45,000. So there is a potential of another 7,500 square feet. 7,500 rupees per square feet on approximately one lakh square feet that would come over the next four to five quarters.

Amish Kanani

So I have a couple of more but I'll go and get back in the queue. Thanks.

Operator

Thank you. The next question is from the line of Hitendra Pradhan from Maximal Capital. Please go ahead. Hitendra, your line is unmuted. Please go ahead.

Hitendra Pradhan

Yeah so first question is on the store expansion for FY27. So if I heard it correctly you said 15% it is additional which I think translates to almost 1.2 lakh square feet or is it 10%?

K.V.L.N. Sarma

Hello, store edition is 10% approximately 75,000 square feet.

Hitendra Pradhan

Okay, okay so the question here was you know see last year the June quarter was basically a washout quarter. So on the base of last quarter you know these, this 9 month 15% is looking nice. But if I look at 2 year CAGR for 9 month to 9 month which takes in to care the wedding day dips in dip in the June quarter last year your sales CAGR is around 10 odd can say and your square footage addition itself is 9 10% in these two years. So now we are talking about even more aggressive expansion.

But you know somehow the data which is available to us is not reflecting you know any sort of a meaningful SSLG which you are getting from the stores. So given that and also you mentioned about the consumer behavior which is becoming more value oriented and we are more especially sales driven. So given this what is giving you. The confidence to become more aggressive in the store expansion?

R. Bharadwaj

Okay so on the see SSG wise I think last year was that disrupted year and the previous year also a little bit in terms of the Q3 Q4 there has been effect in the overall the demand perspective. This these changes what we have been seeing in the last couple of previous year and the last year was majorly with respect to retail as a category on the whole those are reasons I would probably attribute to the macroeconomic trends which I probably don't want to comment today upon. But in this particular financial year, if you look at this is that one year where if you remove the quarterly highs and lows on a full year basis we are able to showcase that ideal year where SSG level contribution is still there plus we are still be able to showcase the overall growth as well.

So so what I would want to.

Hitendra Pradhan

Point that is a disconnect because see if you remove last year Q1 which was basically a washout then as an another analyst also pointed out for Q2 Q3 combined it was looking at 6,7% growth only which is not more than your square footage addition. So that is where the disconnect is coming. The data which is available to us is not showing any meaningful store wise growth.

R. Bharadwaj

Okay, so what I was trying to communicate is when a continues a format by format, if you are able to clock a positive SSG growth that gives us confidence for us to start executing expanding beyond the current levels. While the last year and the previous year all are disrupted because of other factors. With Varama Lakshmi format and the Valley Silks format taking into shape, we believe like you know, the store expansion should be able to help us balance out and maintain a positive level growth. But still the goal for us still will be to ensure a positive SSG that we should be able to achieve.

Which is, which is what is happening in this financial year. So because we know that by the end of March we will be able to clock a positive ssg this gives us confidence to start expanding beyond the current territories to newer territories and start making a mark for us and start expanding further beyond this market. Because even when we go beyond the current territories, go into newer territories, there is still a possibility for ethnic retailer like us because in those markets majorly these are dominated by the Kurta Kurti Lehenga categories. Sari as a category there are still no a trusted brand or a trusted player pan India and we feel like there's a gap in the market and we will fit that gap properly.

Hitendra Pradhan

Sir, it would be good if you can help us with you know, format wise SSH because see we are not able if you look at the overall company picture, we are not able to understand what is giving you the optimism to become, you know, more aggressive about store expansion because maybe your, you know, enthusiasm is coming because you are seeing maybe VML and Valley as having good sssd. But overall at the company level we are not able to see SSL from the financials which are there if we take out the Q1 of last year. So that is one that was the feedback sir.

And second is on the other expenses now you know there has been a major so so last year I think we had some short term rents and ads which were sort of major heads inside that. So if you can give some numbers on what has contributed to only 4% other expenses growth for 9M and how do we see that in the coming years?

R. Bharadwaj

I think on the other expenditure front, I think I made this explanation earlier as well. This year we have reduced the overall advertisement expenditure on the whole and especially majorly this was. This has come into effect in the quarter three which is the current, which is the last October to December quarter is what had a major impact in the reduced expenditure. So last year and the previous year what we have also done is business promotion expenditure also was something that we were carefully aggressively promoting because half year we had a negative half on the overall degree growth.

We started operating majorly on business promotion to give some kind of rewards to the customers to come and continuously shop with us. This was again driven majorly with the KLM format. As such this year we do understand that, you know, business has the seasonality aspect and wedding dates are evenly spread out. We reduce the overall dependency on the business promotion aspect as well. And therefore the additional new stores that came in this year, which is Varah Mahalakshmi stores in general only requires lesser advertisement expenditure. So therefore these both are the two factors why the advertisement expenditures for nine months seem to be much lower than compared to last year.

Now again one other aspect to this is last year in quarter two onwards we started aggressively expanding and spending in digital media and digital marketing. While the offline advertisement still was important in the last year, this year on the offline market marketing which is newspapers which is like TV shows, that expenditures also came down and whatever we are trying to spend is majorly on the digital front and social media channels. So these are the changes that has caused us to have a reduced advertisement expenditure. On the overall broader perspective, the ad expenditure alone we will be able to keep it under two and a half percent.

But advertisement along with business promotional expenditures we will be able to keep it under 4%. This number should start coming down as we move along.

Hitendra Pradhan

Understood sir. Thank you. And all the best.

Operator

Thank you. Ladies and gentlemen, due to time constraint. That was the last question for today. Anna had the conference over to Mr. Bharadwaj for closing comments. Over to you sir.

R. Bharadwaj

Thank you everyone for joining. Before we close, I just want to mention that despite the seasonality aspect of quarterly changes that are happening, one good thing and the signs that the company is continuously showing is that the growth in terms of the overall revenue versus the EBIT and the pat margins are growing much in a much more in a healthier fashion. And that's something that we were able to showcase in this quarter. Despite having a negative SSG growth, the profitability aspect seems to still be marginally intact. What we also consider when we keep on expanding is this sort of an operational leverages will still kick in and by the end of Q4 we should be able to target a much aggressive profitability compared to the top line growth that we will continue.

This is a trend that we should be able to see in the next and upcoming quarters and the years to come. Again, looking forward to connecting you again in the next quarterly update. Thank you for connecting today. Have a nice day. Thank you.

Operator

Thank you on behalf of Saisields Kalamindir Ltd. That concludes this conference. Thank you all for joining us today and you may now disconnect your lines.