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Baazar Style Retail Ltd Management Discussions

260.1
(8.05%)
Apr 1, 2025|12:00:00 AM

Baazar Style Retail Ltd Share Price Management Discussions

OPERATIONS

The following discussion of our financial condition and results of operations should be read in conjunction with our Restated Financial Information on page 265. Unless the context requires otherwise, the financial information in this Draft Red Herring Prospectus is derived from our restated consolidated statement of assets and liabilities as at December 31, 2023 and the restated standalone statement of assets and liabilities as at December 31, 2022, March 31, 2023, March 31, 2022, and March 31, 2021; the restated consolidated statement of profit and loss (including other comprehensive income), the restated consolidated statement of changes in equity, the restated consolidated statement of cash flows for the nine months period ended December 31, 2023 and the restated standalone statement of profit and loss (including comprehensive income), the restated standalone statement of changes in equity, the restated standalone statement of cash flows for the nine months ended December 31, 2022 and for the fiscals ended March, 31, 2023, March 31, 2022, and March 31, 2021 of our Company together with the summary statement of significant accounting policies or statement of material accounting policies, and other explanatory information thereon, derived from the special purpose audited financial statements prepared in accordance with the Ind AS, as at and for the nine months ended December 31, 2023, December 31, 2022 and for the fiscals ended March 31, 2023, March 31, 2022 and March 31, 2021, restated in accordance with the SEBI ICDR Regulations, Section 26 of Part I of Chapter III of the Companies Act, 2013 and the Guidance Note on “Reports in Company Prospectuses (Revised 2019) ” issued by ICAI. For further information, see “Financial Statements” on page 261.

Until Fiscal 2023, our Company did not have any subsidiary and accordingly, no consolidated financial statements were prepared. In Fiscal 2024, we incorporated a wholly owned subsidiary, Konnect Style Retail Private Limited. Accordingly, the consolidated financial information and the restated consolidated financial information for the nine months ended December 31, 2023 are not directly comparable with the standalone financial information and the restated standalone financial information for the nine months ended December 31,

2022, Fiscals 2023, 2022 and 2021, respectively.

Unless the context otherwise requires, in this section, references to “our Company”, “the Company”, “we”, “us” and “our” refer to our Company together with its Subsidiary.

Unless otherwise indicated, the industry-related information contained in this Draft Red Herring Prospectus is derived from the report titled “Indian Value Retail Market including Lifestyle and Home” dated March 13, 2024 (the “Technopak Report”) which has been commissioned and paid for by our Company for an agreed fee for the purposes of confirming our understanding of the industry exclusively in connection with the Offer for usage in this Draft Red Herring Prospectus. We engaged Technopak in connection with the preparation of the Technopak Report on December 29, 2022. The Technopak Report includes information derived from market research information provided by Technopak. See “Risk Factors - Internal Risk Factors - Other Internal Risks - This Draft Red Herring Prospectus contains information from industry sources including the commissioned industry report from Technopak. ” and “Industry Overview ” on pages 54 and 134, respectively. Also see, “Certain Conventions, Use of Financial Information and Market Data and Currency of Presentation - Industry and Market Data” on page 19.

OVERVIEW

We are a value fashion retailer with leadership position in terms of scale in the states of West Bengal and Odisha respectively in organized value retail market. (Source: The Technopak Report) Our Company was the fastest growing value retailer between 2017 to 2023, in terms of both store count and revenue from operations, when compared to V2 Retail Limited and V-Mart Retail Limited (“Listed Value Retailers”). (Source: The Technopak Report) We have the largest retail footprint in Eastern India when compared to the Listed Value Retailers in Fiscal

2023. (Source: The Technopak Report) As on December 31, 2023, we operated 153 stores spread across over 1.39 million square feet located in 140 cities. A majority of our stores are operated under the brand name ‘ Style Bazaar. We have developed our brand ‘ Style Bazaar over the years, through a wide range of products, which we believe has resulted in strong customer loyalty and recognition.

Our offerings are bifurcated under the apparels and general merchandise verticals. Within the apparels vertical, we offer garments for men, women, boys, girls and infants, whereas our general merchandise offerings include both non-apparels and home furnishing products. Our target customer segment is the aspiring middle class comprising of households with an average annual income of less than 5,000 USD, comprising of fashion conscious, value and quality seeking youth and young families, which forms the bulk of purchasing power of the

Indian population. (Source: The Technopak Report) We focus on providing a family-oriented shopping experience, offering quality products and strive to offer every Indian stylish merchandise at an affordable price. By providing a family-oriented shopping experience, we are a one-stop shop catering to the requirements of the entire family by providing a quality product portfolio at an affordable price. (Source: The Technopak Report) Owing to our product portfolio, our Average Transaction Value was Rs1,044.70, Rs1,063.79, Rs1,040.88, Rs1,026.17 and Rs984.34 for the nine months period ended December 31, 2023, December 31, 2022, Fiscals 2023, 2022 and 2021, respectively, with our Average Transaction Value for Fiscal 2023 being the highest when compared to that of the Listed Value Retailers in India. (Source: The Technopak Report) Our merchandise sales has increased consistently, registering sales equivalent to 25.93 million units, 19.26 million units, 24.95 million units, 17.58 million units and 14.27 million units in the nine months period ended December 31, 2023, December 31, 2022, Fiscals 2023, 2022, and 2021, respectively. We venture into untapped markets with high potential by offering multiplicity of brands, wide range of apparels and general merchandise, customised product range catering to the local preferences, brand specific counters highlighting specific products and brands, such as K-Lounge where we offer branded products for the Killer and Sparky brands. Our private label brands, where we have a greater control over quality and product assortment, have contributed 36.78%, 31.64%, 31.43%, 24.72% and 16.29% of our total revenue from operations for the nine months period ended December 31, 2023, December 31, 2022, Fiscals 2023, 2022 and 2021, respectively.

We believe that our strategically located stores with their attractive layout coupled with our diverse and affordable product offerings allow us to successfully cater to the demands of this growing segment of our population. Our stores are operated on a cluster-based expansion model in which a new store is opened and operated within the same or nearby districts in which we operate our existing stores. This enables us to increase efficiencies in supply chain and inventory management processes, strengthen our brand visibility in local markets, optimize our marketing expenditure, efficient utilization of our human resources and provides us with an incisive understanding of customer preferences at a micro market level. Our EBITDA margin percentage for Fiscal 2023 was the highest when compared to that of the Listed Value Retailers. (Source: The Technopak Report) We believe we are able to attract high footfall of customers to our stores by virtue of our stores being located predominantly in high street areas and endowed with an appeal equivalent to shopping malls. Pictures pertaining to stores located in high street areas are set out below.

We provide a modern shopping experience to our target customers with all our stores being air conditioned and having an appealing store layout, trial rooms, wide range of quality products, ambience and merchandising, quality assurance, which we believe, enhances the shopping experience for our customers and our ability to offer quality products at affordable prices under an upscale retail environment. As of December 31, 2023, our stores had an average size of 9,114 square feet with trained staff to enhance customer experience. Our Sales Per Square Feet for the Fiscal 2023 was Rs7,445.

Our sourcing capability is backed by our logistics network with real time delivery, supported by systems, processes and a robust information technology infrastructure, which allow us to deliver on our Value Retailing promise. At our centralised warehouse, we have adopted technology and modern equipment extensively, which we believe has led to process efficiencies and optimisation of costs. As a result, we are able to procure our merchandise optimally and manage our inventory levels efficiently to better respond to our customers changing preferences and needs while also ensuring that prices are kept affordable.

Our Company is backed by our Promoters, board members and the Senior Management Personnel. Our shareholders include investors such as Rekha Rakesh Jhunjhunwala, the wife of Late Rakesh Jhunjhunwala, Kewal Kiran Clothing Limited, Manohar Lal Agarwal, promoter of Haldiram Snacks, Boon-family office of Supreme Industries, Intensive Softshare Private Limited, D.K. Surana, Ajay Kumar Jain and Sanjay Kumar Jain, partners of J.K. Jain Sparky (India) LLP and we believe we have benefited significantly from their experience and leadership, and they along with our Senior Management Personnel, have been instrumental in formulating and executing the strategies of our Company.

SIGNIFICANT FACTORS AFFECTING OUR RESULTS OF OPERATIONS AND FINANCIAL CONDITION

Our results of operations have been, and will continue to be, affected by a number of events and actions, some of which are beyond our control. However, there are some specific items that we believe have impacted our results of operations and, in some cases, will continue to impact our results. We believe that the following factors, amongst others, have, or could have, an impact on these results, the manner in which we generate income and incur the expenses associated with generating this income.

Availability of commercial real estate

Our ability to increase our sales and our profitability is directly affected by the total number of stores we operate. Our ability to continue to expand our presence is dependent on certain key factors such as our ability to secure commercial real estate at densely populated residential neighbourhood locations with proximity to our existing stores pursuant to cluster-based expansion model. As on the date of this Draft Red Herring Prospectus, we own five of our stores located in West Bengal and own a portion of our store located in Chinsurah, West Bengal. All the other stores and our warehouse located in Hooghly, West Bengal are operated on a leasehold basis or leave and license basis. Further, we are currently in the process of acquiring a commercial property for the purpose of setting up a new store in Suri, West Bengal. Furthermore, when our current leases expire, we will need to renegotiate these leases with the relevant lessors, who may seek to impose higher costs or more onerous conditions on us.

We have no control over rise in real estate prices in the future. If real estate prices rise in the future, we will have to employ greater capital to buy land or incur higher operational costs due to higher leasing or rental costs. If there is limited availability of real estate in the future, competition for such real estate may increase which may consequently result in a further increase in prices. This may lead to delays and cost overruns in opening new stores and impact our cluster- based expansion model.

Expansion of our store network

Our store count has grown from two stores since our incorporation Fiscal 2014 to 135 stores as of March 31, 2023, registering a CAGR of 59.68%. We have opened 23, 34, 18 and 9 stores in the nine months ended December 31, 2023, Fiscal 2023, Fiscal 2022 and Fiscal 2021, respectively. As on December 31, 2023, we have 153 stores spread across 140 cities and nine states. Our strategy is to continue expanding our network by opening stores in new locations through a cluster-based approach. An important factor in our growth has been the continued expansion of our store network.

Furthermore, the growth of our stores can vary according to their level of maturity as the revenue a store generates depends on its stage of operation. Generally, revenue generated by a new store is lower at its initial stage of operation and tends to increase year on year as the store gains customer loyalty and market recognition. Following this initial stage, growth in the revenue of a store will also depend on various factors such as the level of customer traffic, quality of store management, extent of redecoration and renovation required, rate of growth in the local economy, expansion of our footprints in tier II and III cities and towns and brand recognition.

Sales volume

Our sales volume is an important factor driving our results of operations. Our sales per square feet for the Fiscal 2023 was Rs7,445 per square feet. Increased sales volume favourably affects our results of operations as it enables us to benefit from economies of scale in procurement and improves our operating margin through our ability to leverage our fixed cost base.

Operational expenses and costs

As on the date of this Draft Red Herring Prospectus, we own five of our stores located in West Bengal and own a portion of our store located in Chinsurah, West Bengal. All other stores and our warehouse located in Hooghly, West Bengal are operated on a leasehold basis or leave and license basis. Further, we are in the process of acquiring a commercial property for the purpose of setting up a new store in Suri, West Bengal. We also own three residential properties in West Bengal. Furthermore, when our current leases expire, we will need to renegotiate these leases with the relevant lessors, who may seek to impose higher costs or more onerous conditions on us. Our store operating costs include, among others, human resource costs, utilities, power and fuel, housekeeping, security and transportation. These costs and expenses can fluctuate and also differ from store to store depending on a variety of factors. For example, power tariffs vary from state to state in India. Furthermore, regulations affecting manpower costs such as rules relating to minimum wages, may also vary from state to state. Inflation increases our operating costs.

Fixed operating costs increase as we open new stores. In general, we expect our operational expenses as a percentage of sales to be higher for new stores than for mature stores. However, in absolute terms, our older stores tend to have higher operational costs as these costs also include repairs which are not capitalised. In addition, we

carry out periodic renovations of our stores, which we believe is important in maintaining and enhancing the image of our stores and in attracting customers. During renovations, we will incur expenses and experience temporary disruptions to our normal operations which may affect our revenues.

Customer Preferences

We operate under two business verticals namely, apparels and general merchandise. Within the apparels vertical, we offer garments for men, women, boys, girls and infants. The products offered under our general merchandise segment includes both non-apparels and home furnishing products. Our general merchandise offerings include footwear, imitation jewellery, toys, bags, luggage, gifts, novelties, cosmetics, skin care items and grooming products. Our home furnishing products include, household items, home furnishing products, kitchen utensils and crockery. Our success depends upon our ability to forecast, anticipate and respond to the changing customer preferences and trends in a timely manner. Any failure by us to understand prevailing trends or to forecast changes could result in merchandise obsolescence, thereby increasing the dead inventory and loss of our brand image amongst our customers, which could have a material adverse effect on our business and results of operations.

Inventory

Our inventory management is an important factor in relation to our results of operations. If we are unable to anticipate, gauge and respond to changing customer preferences or fashion trends, or if we are unable to adapt to such changes on a timely basis, we may lose, or fail to attract customers, our inventory may become obsolete, and we may be subject to pricing pressure to sell our inventory at a discount. Therefore, we strive to keep optimum inventory at our stores in order to control our working capital requirements. As inefficient supply chain management may lead to unavailability of right or adequate merchandise, unavailability of range of apparels resulting in a mismatch between customer requirements and products available at our stores. An optimal level of inventory is important to our business as it allows us to respond to customer demand effectively and to maintain a full range of products at our stores.

Competition

The Indian value retail market is intensely competitive and characterized by a large number of organized players. Due to the encompassing nature of our offerings, we face competition from various kinds of fashion players including, players operating in retail, wholesale and e-commerce space. Further, we compete with national and local department stores and independent retail stores that market similar lines of merchandise as us. We believe that the principal competitive factors include breadth of capabilities, solutioning expertise, service quality, reliability, price, scope, scale, technological capabilities and the ability to understand evolving industry trends and domain expertise in customer industries. For more details, see “Business - Competition” on page 212.

Increased competition may lead to a decrease in footfall in our stores followed by a decline in sales which would lead to a consequent increase in the ageing of our inventory and increase in discounts leading to a subsequent decline in our margins. Our competitors in the organised retail space have an established presence in the national markets and they may open additional stores in the same cities where we have opened or intend to open our stores in the future. This may require us to change our strategy, delay expansion plans or be more selective in opening of new stores.

Significant Accounting Policies / Material Accounting Policies

Basis of preparation

The Restated Financial Information of our Company comprises of the restated consolidated statement of assets and liabilities as at December 31, 2023, and the restated standalone statement of assets and liabilities as at December 31, 2022, March 31, 2023, March 31, 2022 and March 31, 2021, the restated consolidated statement of profit and loss (including other comprehensive income), the restated consolidated statement of changes in equity and the restated consolidated statement of cash flows for the nine months ended December 31, 2023 and restated standalone statement of profit and loss (including comprehensive income), the restated standalone statement of changes in equity and the restated standalone statement of cash flows for the nine months ended December 31, 2022 and for the years ended March 31, 2023, March 31, 2022 and March 31, 2021, and the statement of significant accounting policies or statement of material accounting policies, and other explanatory information relating to such financial periods (together referred to as ‘Restated Financial Information).

The Restated Financial Information has been prepared by our Company for inclusion in this Draft Red Herring Prospectus in connection with the Offer, in accordance with the requirements of:

i. Section 26 of part I of Chapter III of the Act;

ii. The Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018 as amended; and

iii. The Guidance Note on Reports in Company Prospectuses (Revised 2019) issued by the Institute of Chartered Accountants of India (“ICAI”), as amended from time to time (the “Guidance Note”).

The Restated Financial Information have been compiled from:

i. Audited Special Purpose Consolidated Interim financial statements of the Company as at and for the nine months period ended December 31, 2023, and Audited Special Purpose Interim Financial Statements of the Company as at and for the nine months period ended December 31, 2022, prepared in accordance with the Indian Accounting Standard 34 “Interim Financial Reporting” as prescribed under Section 133 of the Act read with Companies (Indian Accounting Standards) Rules 2015, as amended and other accounting principles generally accepted in India; and

ii. Audited financial statements of the company as at and for year ended March 31, 2023, March 31, 2022, and March 31, 2021, prepared in accordance with Ind AS, as prescribed under Section 133 of the Act read with Companies (Indian Accounting Standards) Rules 2015, as amended and other accounting principles generally accepted in India.

Summary of significant accounting policies / material accounting policies

A summary of the significant accounting policies / material accounting policies applied in the preparation of the Restated Financial Information are as given below. These accounting policies have been applied consistently to all the periods presented in the Restated Financial Information.

Current versus non-current classification

We present assets and liabilities in the statement of assets and liabilities based on current/non-current classification. An asset is treated as current when it is:

• Expected to be realised or intended to be sold or consumed in normal operating cycle;

• Held primarily for the purpose of trading;

• Expected to be realised within twelve months after the reporting period; or

• Cash or cash equivalents unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.

All other assets are classified as non-current.

A liability is treated as current when:

• It is expected to be settled in normal operating cycle;

• It is held primarily for the purpose of trading;

• It is due to be settled within twelve months after the reporting period; or

• There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period.

All other liabilities are classified as non-current. Deferred tax assets and liabilities are classified as non-current assets and liabilities respectively.

The operating cycle is the time between the acquisition of assets for processing and their realisation in cash and cash equivalents. We have identified twelve months as our operating cycle.

Segment information

Segments are identified based on the manner in which the Chief Operating Decision Maker (‘ CODM) decides about resource allocation and reviews performance. Segment results that are reported to the CODM include items directly attributable to a segment as well as those that can be allocated on a reasonable basis.

Fair value measurements and hierarchy

We measure financial instruments, at fair value at the end of each reporting period. The fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. It is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:

i. In the principal market for the asset or liability; or

ii. In the absence of a principal market, in the most advantageous market for the asset or liability.

The principal or the most advantageous market must be accessible by our Company and the fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their best economic interest.

A fair value measurement of a non-financial asset takes into account a market participants ability to generate economic benefits by using the asset in its highest and best use, or by selling it to another market participant that would use the asset in its highest and best use. Our Company uses valuation techniques that are appropriate in the circumstances, and for which sufficient data are available to measure the fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.

All assets and liabilities for which fair value is measured or disclosed in the Restated Financial Information are categorised within the fair value hierarchy based on its nature, characteristics and risks:

i. Level 1 - inputs are quoted (unadjusted) market prices in active markets for identical assets or liabilities that the entity can access at the measurement date;

ii. Level 2 - valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable; and

iii. Level 3 - valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.

For assets and liabilities that are recognised in the Restated Financial Information on a recurring basis, we determine whether transfers have occurred between levels in the hierarchy by reassessing categorization (based on the lowest level of input that is significant to the fair value measurement as a whole) at the end of each reporting period.

The carrying amounts of trade payables, capital creditors, and cash and cash equivalents are considered to be the same as their fair values, due to their short-term nature.

Fair value for measurement and/ or disclosure purposes in this financial information is determined on such a basis, except for leasing transactions that are within the scope of Ind AS 116 and measurements that have some similarities to the fair value, but are not fair value, such as net realisable value in Ind AS 2 or value in use in Ind

AS 36.

Financial Instruments

A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.

Financial assets

We classify our financial assets in the following measurement categories:

i. Those to be measured subsequently at fair value (either through other comprehensive income, or through profit or loss); and

ii. Those measured at amortized cost.

Initial Recognition and Measurement

All financial assets are recognized initially at fair value plus, in the case of financial assets not recorded at fair value through profit or loss, transaction costs that are attributable to the acquisition of the financial asset.

Subsequent Measurement

For purposes of subsequent measurement, financial assets are classified in four categories:

• Debt instruments at amortized cost

• Debt instruments at fair value through other comprehensive income

• Debt instruments, derivatives and equity instruments at fair value through profit or loss

• Equity instruments measured at fair value through other comprehensive income.

Where assets are measured at fair value, gains and losses are either recognized entirely in the statement of profit and loss (i.e. fair value through profit or loss) or recognized in other comprehensive income (i.e., fair value through other comprehensive income).

Debt instrument at amortized cost

A debt instrument is measured at the amortised cost if both the following conditions are met:

i. The asset is held within a business model whose objective is to hold assets for collecting contractual cash flows, and

ii. Contractual terms of the asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

Cash flow characteristics test:

The contractual terms of the debt instrument give rise on specific dates to cash flows that are solely payments of principal and interest on principal amount outstanding. After initial measurement, financial assets are subsequently measured at amortized cost using the effective interest rate (“EIR”) method. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of EIR. The EIR amortisation is included in finance income in the profit or loss. The losses arising from impairment are recognised in the profit or loss. This category generally applies to trade and other receivables.

Debt instruments at fair value through other comprehensive income (“FVTOCT)

A debt instrument is classified as at the FVTOCI, if both of the following criteria are met:

i. The objective of the business model is achieved both by collecting contractual cash flows and selling the financial assets, and

ii. The assets contractual cash flows represent solely payments of principal and interest.

Debt instruments included within the FVTOCI category are measured initially as well as at each reporting date at fair value. Fair value movements are recognized in the other comprehensive income. However, our Company recognizes interest income, impairment losses & reversals and foreign exchange gain or loss in the profit and loss. On derecognition of the asset, cumulative gain or loss previously recognised in other comprehensive income is reclassified from the equity to profit and loss. Interest earned whilst holding FVTOCI debt instrument is reported as interest income using the EIR method.

Debt instruments, derivatives and equity instruments at fair value through profit or loss (“FVTPL”)

FVTPL is a residual category for debt instruments. Any debt instrument, which does not meet the criteria for categorization as at amortized cost or as FVTOCI, is classified as at FVTPL. In addition, our Company may elect to designate a debt instrument, which otherwise meets amortized cost or FVTOCI criteria, as at FVTPL. However, such election is allowed only if doing so reduces or eliminates a measurement or recognition inconsistency (referred to as ‘accounting mismatch). Our Company has not designated any debt instrument as at FVTPL. Debt instruments included within the FVTPL category are measured at fair value with all changes recognized in the profit and loss.

De-recognition

A financial asset, (or, where applicable, a part of a financial asset or part of a Company of similar financials assets) is primarily derecognised (i.e., removed from the Companys statement of assets and liabilities) when:

i. The right to receive cash flows from the assets have expired; or

ii. The Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a pass through arrangement; and either a) the Company has transferred substantially all the risks and rewards of the asset, or (b) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

Where our Company has transferred an asset, we evaluate whether it has transferred substantially all the risks and rewards of the ownership of the financial assets. In such cases, the financial asset is derecognised. Where the entity has not transferred substantially all the risks and rewards of the ownership of the financial assets, the financial asset is not derecognised.

Where our Company has neither transferred a financial asset nor retains substantially all risks and rewards of ownership of the financial asset, the financial asset is derecognised if we have not retained control of the financial asset. Where our Company retains control of the financial asset, the asset is continued to be recognized to the extent of continuing involvement in the financial asset.

Financial Liabilities

Initial recognition and measurement

Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss. All financial liabilities are recognized initially at fair value and, in the case of payables, net of directly attributable transaction costs.

All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs. Our Companys financial liabilities include trade and other payables, loans and borrowings including bank overdrafts.

Subsequent measurement

The measurement of financial liabilities depends on their classification, as described below:

Financial liabilities at fair value through profit or loss financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss. Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in the near term.

Gains or losses on liabilities held for trading are recognised in the profit or loss

Financial liabilities designated upon initial recognition at fair value through profit or loss are designated as such at the initial date of recognition, and only if the criteria in Ind AS 109 are satisfied. For liabilities designated as FVTPL, fair value gains/ losses attributable to changes in own credit risk are recognized in other comprehensive income. These gains/ losses are not subsequently transferred to profit or loss. However, the Company may transfer the cumulative gain or loss within equity. All other changes in fair value of such liability are recognised in the statement of profit or loss. The Company has not designated any financial liability as at fair value through profit and loss.

De-recognition

A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the statement of profit or loss.

Foreign currencies

Translations and balances:

Transactions in foreign currency are recorded applying the exchange rate at the date of transaction. Monetary assets and liabilities denominated in foreign currency, remaining unsettled at the end of the year, are translated at the closing exchange rates prevailing as at the end of the reporting period. Exchange differences arising on settlement of monetary items are recognised in the Statement of Profit and Loss. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated. The gain or loss arising on translation of non-monetary items measured at fair value is treated in line with the recognition of the gain or loss on the change in fair value of the item (i.e. translation differences on items whose fair value gain or loss is recognised in other comprehensive income or the statement of profit and loss are also reclassified in other comprehensive income or the statement of profit and loss, respectively).

Revenue Recognition

Revenue from contracts with customer is recognised upon transfer of control of promised goods/services to customers at an amount that reflects the consideration to which our Company expects to be entitled for those goods/ services.

To recognize revenues, our Company applies the following five-step approach:

• Identify the contract with a customer;

• Identify the performance obligations in the contract;

• Determine the transaction price;

• Allocate the transaction price to the performance obligations in the contract; and

• Recognise revenues when a performance obligation is satisfied.

Revenue is measured at the fair value of the consideration received or receivable net of returns and allowances, trade discounts and volume rebates, taking into account contractually defined terms of payment excluding taxes or duties collected on behalf of the Government. Goods and Service Tax (“GST”) is not received by our Company in its own account. Rather, it is tax collected on value added to the commodity by the seller on behalf of the Government and accordingly, it is excluded from revenue.

The property in the merchandise of third-party concession stores located within the main departmental store of our Company passes to our Company once a customer decides to purchase an item from the concession store. Company, in turn, sells the item to the customer and is accordingly included under Retail sales. Gift voucher sales are recognised when the vouchers are redeemed and the goods are sold to the customer.

Income from services are recognised as they are rendered based on agreements/ arrangements with the concerned parties, and recognised net of goods and services tax/ applicable taxes. Interest income on all debt instruments is measured either at amortised cost or at fair value through other comprehensive income. Interest income is recorded using the effective interest rate, which is the rate that exactly discounts the estimated future cash payments or receipts over the expected life of the financial instrument or a shorter period, where appropriate, to the gross carrying amount of the financial asset or to the amortised cost of a financial liability. When calculating the effective interest rate, we estimate the expected cash flows by considering all the contractual terms of the financial instrument (for example: prepayment, extension, call and similar options), but do not consider the expected credit losses. Interest income is included in other income in the statement of profit and loss.

Dividend is recognised when our Companys right to receive the payment is established, which is generally when shareholders approve the dividend.

Government Grants

Government grants are recognised where there is a reasonable assurance that the grant will be received and all attached conditions will be complied with:

• When the grant relates to an expense item, it is recognised as income on a systematic basis over the periods that the related costs, for which it is intended to compensate, are expensed;

• When the grant relates to an asset, it is recognised as income in equal amounts over the expected useful life of the related asset.

When loans or similar assistance are provided by governments or related institutions, at a below market rate of interest, the effect of this favourable interest is treated as a government grant. The loan or assistance is initially recognised and measured at fair value, and the government grant is measured as the difference between the proceeds received and the initial carrying value of the loan. The loan is subsequently measured as per the accounting policies applicable to financial liabilities.

Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use are capitalised as part of the cost of the respective asset. All other borrowing costs are expensed in the period they occur in the Statement of Profit and Loss. Borrowing cost includes interest and other costs incurred in connection with the arrangement of borrowings. Borrowing cost also includes exchange differences to the extent regarded as an adjustment to the interest costs.

Income Taxes

Current Tax

The Income tax expense or credit for the period is the tax payable on the current periods taxable income based on the applicable income tax rate adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses. Income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities.

The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted at the reporting date in India. The management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation and establishes provisions where appropriate.

Deferred Tax

Deferred tax is recognised on temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date. Deferred tax liabilities are recognised for all taxable temporary differences, except when the deferred tax liability arises from the initial recognition of goodwill or an asset or a liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor the taxable profit or loss.

Deferred tax assets are recognised for all deductible temporary differences, the carry forward of unused tax credits and any unused tax losses. Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and the carry forward of unused tax credits and unused tax losses can be utilised, except when the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or a liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor the taxable profit or loss.

The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are re-assessed at each reporting date and are recognised to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realised or the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted at the reporting date.

Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority. Tax benefits acquired as a part of business combination, but not satisfying the criteria for separate recognition at that date, are recognised subsequently if new information is received or circumstances change.

Acquired deferred tax benefits recognised within the measurement period reduce goodwill related to that acquisition, if they result from new information obtained about facts and circumstances existing at the acquisition date.

Current tax and deferred tax relating to items recognised outside the Statement of Profit and Loss are recognised outside the Statement of Profit and Loss (either in other comprehensive income or in equity). Current tax and deferred tax items are recognised in correlation to the underlying transaction either in other comprehensive income or directly in equity.

Property, plant and equipment

Property, plant and equipment is stated at cost net of accumulated depreciation and accumulated impairment losses, if any. Cost comprises of cost of acquisition or construction inclusive of duties (net of tax) incidental expenses, interest and erection/commissioning expenses incurred up to the date asset is ready for its intended use. Administrative and other general overhead expenses that are specifically attributable to construction or acquisition of property, plant and equipment or bringing the property, plant and equipment to working condition are allocated and capitalized as a part of cost of property, plant and equipment. When significant parts of plant and equipment are required to be replaced at intervals, our Company depreciates them separately based on their specific useful lives.

Capital work-in-progress is stated at cost net of accumulated impairment losses, if any. Cost includes borrowing costs for long-term construction projects, if the recognition criteria is met.

Subsequent costs are included in the assets carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to us, and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognised when replaced. All other repairs and maintenance are charged to the Statement of Profit and Loss, during the reporting period in which they are incurred.

The residual values, useful lives and methods of depreciation of property, plant and equipment are reviewed at each end of the fiscal and adjusted prospectively, if appropriate.

Deemed cost on transition to Ind AS

On transition to Ind AS, our Company has elected to continue with the carrying value of all its property, plant and equipment recognised as at April 1, 2019 measured as per previous GAAP and use that carrying value as the deemed cost of the property, plant and equipment.

Depreciation methods, estimated useful lives and residual value

Depreciation on property, plant and equipment is calculated on a straight-line basis using the rates arrived at, based on the useful lives estimated by the management.

We have used the following rates to provide depreciation on its tangible fixed assets:

Assets Category

Useful life estimated by the management based on technical assessment (years) Useful life as per Schedule II (years)

Furniture & Fixtures

10 10

Office Equipment

5 5

Motor Vehicles

8 8

Computer & Accessories

3 3

Air-conditioner

10 5

CCTV Camera

3 3

Servers & Networks

6 6

Office Building

60 60

Plant & Machinery

15 15

Electrical Installations and Equipment

10 10

Lease hold Improvements

As per lease term

Our Company, based on technical assessment made by technical expert and management estimate, depreciates certain items of plant and equipment over estimated useful lives which are different from the useful life prescribed in Schedule II to the Companies Act, 2013. The management believes that these estimated useful lives are realistic and reflect fair approximation of the period over which the assets are likely to be used. Cost of the leasehold improvements are amortised over the period of the lease.

Intangible assets

Intangible assets are stated at cost less accumulated amortisation and impairment. The cost of intangible assets acquired in a business combination is their fair value at the date of acquisition. Internally generated intangibles, excluding capitalised development costs, are not capitalised and the related expenditure is reflected in the Statement of Profit and Loss, in the period in which the expenditure is incurred.

Intangible assets with finite life are amortised over the useful economic life and assessed for impairment, whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at the end of each reporting period and changes if any, made on prospective basis. The amortisation expense on intangible assets with finite lives is recognised in the Statement of Profit and Loss.

Gains or losses arising from de-recognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the Statement of Profit and Loss when the asset is de-recognised.

Transition to Ind AS

On transition to Ind AS, our Company has elected to continue with the carrying value of all intangible assets recognised as at April 1, 2019 measured as per previous GAAP and use that carrying value as the deemed cost of intangible assets.

Amortisation methods and periods

In relation to the amortisation policies applied to our Companys intangible assets, the useful life estimated by the management based on technical assessment (years) for asset category being, computer software is three years.

Impairment of non-financial assets

At the end of each reporting period, our Company reviews the carrying amounts of its assets to determine whether there is any indication of impairment based on internal/ external factors. An impairment loss, if any, is charged to the Statement of Profit and Loss in the year in which an asset is identified as impaired. An assets recoverable amount is higher of an assets or cash-generating units (“CGUs”) fair value less costs of disposal and its value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pretax discount rates, that reflects current market assessment of the time value of money and the risks specific to the asset for which estimates of future cash flows have not been adjusted. Recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. When the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. Impairment losses of continuing operations, including impairment on inventories, are recognised in the Statement of Profit and Loss.

A cash-generating unit to which goodwill has been allocated is tested for impairment annually as at reporting date. If the recoverable amount of the cash-generating unit is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata based on the carrying amount of each asset in the unit. Any impairment loss for goodwill is recognised directly in the Statement of Profit and Loss.

Reversal of impairment losses except on goodwill is recorded when there is an indication that the impairment losses recognised for the assets no longer exist or have decreased. An impairment loss recognised for goodwill is not reversed in subsequent periods.

Leases

Our Company assesses at contract inception whether a contract is, or contains, a lease. That is, if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, our Company assesses whether:

i. the contract involves the use of an identified asset,

ii. the Company has substantially all of the economic benefits from use of the asset through the period of the lease and

iii. the Company has the right to direct the use of the asset.

Company as a lessee

Our Companys lease asset classes primarily comprise of lease for stores, warehouse, office premises and plant and machinery and office equipment. Our Company applies a single recognition and measurement approach for all leases, except for short-term leases and leases of low-value assets. Our Company recognises lease liabilities to make lease payments and right-of-use assets representing the right to use the underlying assets. As practical expedient of Ind AS 116 “Leases”, our Company has considered COVID-19 related rent concessions not to be lease modification, hence the income towards rent concession is recognised in “Other Income” in the statement of profit and loss account.

Right-of-use assets

Our Company recognises right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset is available for use) except for leases existing as on the date of transition to Ind AS 116 i.e., 1st April 2019. Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognised, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. Right-of-use assets are depreciated on a straight-line basis over the shorter of the lease term and the estimated useful. Right-of-use assets are depreciated on a straight-line basis over the shorter of the lease term and the estimated useful lives of the assets, as follows:

i. Stores, warehouse and office premises 3 to 20 years;

ii. Plant and Machinery/ Office equipment 3 years.

If ownership of the leased asset transfers to the Company at the end of the lease term or the cost reflects the exercise of a purchase option, depreciation is calculated using the estimated useful life of the asset. The right-of- use assets are also subject to impairment.

Lease liabilities

Our Company recognises lease liabilities at the present value of lease payments that are not paid at the commencement date of the lease. The lease payments include fixed payments less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by our Company and payments of penalties for terminating the lease, if the lease term reflects our Company exercising the option to terminate. In calculating the present value of lease payments, our Company uses its incremental borrowing rate because the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the lease payments (e.g., changes to future payments resulting from a change in an index or rate used to determine such lease payments) or a change in the assessment of an option to purchase the underlying asset.

Short-term leases and leases of low-value assets

Our Company applies the short-term lease recognition exemption to its short-term leases of rented premises, plant and machinery and office equipment (i.e., those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). It also applies the lease of low-value assets recognition

exemption to leases of office equipment that are considered to be low value and lease payments on short-term leases and leases of low-value assets are recognised as expense on a straight-line basis over the lease term.

Inventories

This is bifurcated into the following:

Traded goods: At lower of cost and net realisable value. Cost of inventories comprises all costs of purchase price and other incidental costs incurred in bringing the inventories to their present location and condition. Cost is determined based on first in first out method. Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and to make the sale; and

Packing and accessories: At lower of cost and net realisable value. Cost represents purchase price and other direct costs and is determined on a “first in, first out” basis.

Retirement and other employee benefits

Retirement benefit in the form of provident fund is a defined contribution scheme. Our Company has no obligation, other than the contribution payable to the provident fund. Our Company recognizes contribution payable to the provident fund scheme as an expense when an employee renders the related service. If the contribution payable to the scheme for service received before the last day of the reporting period exceeds the contribution already paid, the deficit payable to the scheme is recognized as a liability after deducting the contribution already paid. If the contribution already paid exceeds the contribution due for services received before the last day of the reporting period, then excess is recognized as an asset to the extent that the pre-payment will lead to, for example, a reduction in future payment or a cash refund.

Gratuity liability is defined benefit plan and is provided for on the basis of an actuarial valuation on projected unit credit (PUC) method made at the end of each year. Actuarial gain and loss for defined plan benefit plan is recognized in full in the year in which occur in the statement of profit and loss. The cost of providing benefits under the defined benefit plan is determined using the projected unit credit method.

Accumulated leave, which are expected to be utilized within the next twelve months are treated as short-term employee benefit. Our Company measures the expected cost of such absences as the additional amount that it expects to pay as a result of unused entitlement that has accumulated at that reporting date. Our Company treats accumulated leave expected to be carried forward beyond twelve months, as long-term employee benefit for measurement purposes. Such long-term compensated absences are provided for based on the actuarial valuation using the projected unit credit method at the year-end. Actuarial gains/losses are immediately taken to the statement of profit and loss and are not deferred. Our Company presents the leave as a current liability in the statement of assets and liabilities, to the extent it does not have an unconditional right to defer its settlement for twelve months after the reporting date. Where we have the unconditional legal and contractual right to defer the settlement for a period beyond twelve months, the same is presented as non-current liability.

Remeasurement, comprising of actuarial gains and losses, the effect of the asset ceiling, excluding amounts included in net interest on the net defined benefit liability and the return on plan assets (excluding amounts included in net interest on the net defined benefit liability), are recognized immediately in the statement of assets and liabilities with a corresponding debit or credit to retained earnings through other comprehensive income in the period in which they occur. Remeasurements are not reclassified to profit or loss in subsequent periods.

Past service costs are recognized in profit or loss on the earlier of:

1. The date of the plan amendment or curtailment; and

2. The date that our Company recognizes related restructuring costs.

Net interest is calculated by applying the discount rate to the net defined benefit liability or asset. Our Company recognizes the following changes in the net defined benefit obligation as an expense in the statement of profit and loss:

• Service costs comprising current service costs, past-service costs, gains and losses on curtailments and non-routine settlements; and

• Net interest expense or income.

Earnings per share

Basic earnings per share are calculated by dividing the net profit or loss for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period. Earnings considered in ascertaining our Companys earnings per share is the net profit for the period after deducting preference dividends and any attributable tax thereto for the period. The weighted average number of equity shares outstanding during the period and for all periods presented is adjusted for events, such as bonus shares that have changed the number of equity shares outstanding, without a corresponding change in resources. For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period is adjusted for the effects of all dilutive potential equity shares.

Cash and cash equivalents

Cash and cash equivalent in the statement of assets and liabilities comprise cash at banks and on hand, cheques on hand and short-term deposits with an original maturity of three months or less, which are subject to an insignificant risk of changes in value. For the purpose of the statement of cash flows, cash and cash equivalents consist of cash and short-term deposits, as defined above.

Investments

Investments that are readily realisable and intended to be held for not more than a year are classified as current investments. All other investments are classified as non-current investments. All investments are carried at fair value.

Dividend

Dividend declared is recognised as a liability only after it is approved by the Shareholders in the general meeting. Our Company recognises a liability to make cash or non-cash distributions to equity holders of the parent when the distribution is authorised and the distribution is no longer at the discretion of our Company. As per the corporate laws in India, a distribution is authorised when it is approved by the shareholders. A corresponding amount is recognised directly in equity.

Dividend is recognised when our Companys right to receive the payment is established, which is generally when shareholders approve the dividend.

Provisions and contingent liabilities

Provisions

Provisions are recognized when our Company has a present obligation (legal or constructive) as a result of past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. When our Company expects some or all of a provision to be reimbursed, for example, under an insurance contract, the reimbursement is recognized as a separate asset, but only when the reimbursement is virtually certain. The expense relating to a provision is presented in the statement of profit and loss net of any reimbursement.

If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognized as a finance cost.

Provisions are reviewed at the end of each reporting period and adjusted to reflect the current best estimate. If it is no longer probable that an outflow of resources would be required to settle the obligations, the provision is reversed.

Contingent liabilities

A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of our Company or a present obligation that is not recognised because it is not probable that an outflow of resources will be required

to settle the obligation. A contingent liability also arises in extremely rare cases where there is a liability that cannot be recognised because it cannot be measured reliably. Our Company does not recognise a contingent liability but discloses its existence in the Restated Financial Information. Contingent assets are only disclosed when it is probable that the economic benefits will flow to the entity.

Significant accounting judgments, estimates and assumptions

The preparation of Restated Financial Information requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the accompanying disclosures, and the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods.

In particular, our Company has identified the following areas where significant judgements, estimates and assumptions are required. Further information on each of these areas and how they impact the various accounting policies are described below and also in the relevant notes to the Restated Financial Information. Changes in estimates are accounted for prospectively.

Judgments

In the process of applying our Companys accounting policies, management has made the following judgements, which have the most significant effect on the amounts recognised in the Restated Financial Information:

Leases

Ind AS 116 requires lessees to determine the lease term as the non-cancellable period of a lease adjusted with any option to extend or terminate the lease, if the use of such option is reasonably certain. Our Company makes an assessment on the expected lease term on a lease-by-lease basis and thereby assesses whether it is reasonably certain that any options to extend or terminate the contract will be exercised.

In evaluating the lease term, our Company considers factors such as any significant leasehold improvements undertaken over the lease term, costs relating to the termination of the lease, and the importance of the underlying asset to our Companys operations taking into account the location of the underlying asset and the availability of suitable alternatives. The lease term in future periods is reassessed to ensure that it reflects the current economic circumstances.

For leases which are expired and under discussion for renewal, our Company considers such leases as short term leases since, our Company is not certain that option to extend the lease will be exercised as lessor has right to terminate the lease. Further, our Company has exercised its judgement in using a single discount rate to a portfolio of leases with reasonably similar characteristics.

Contingencies

Contingent liabilities may arise from the ordinary course of business in relation to claims against our Company, including legal, contractor, land access and other claims. By their nature, contingencies will be resolved only when one or more uncertain future events occur or fail to occur. The assessment of the existence, and potential quantum, of contingencies inherently involves the exercise of significant judgments and the use of estimates regarding the outcome of future events.

Recognition of deferred tax

The extent to which deferred tax asset to be recognized is based on the assessment of the probability of the future taxable income against which the deferred tax asset can be utilized.

Estimates and assumptions

The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next fiscal, are described below. Our Company based its assumptions and estimates on parameters available

when the Restated Financial Information were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising that are beyond the control of our Company. Such changes are reflected in the assumptions when they occur.

Useful lives of depreciable assets

Our Company reviews its estimate of the useful lives of depreciable assets at each reporting date, based on the expected utility of the assets.

Defined benefit obligation

The cost of the defined benefit plan and other post-employment benefits and the present value of such obligation are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, future trends salary increases, mortality rates and future pension increases. In view of the complexities involved in the valuation and its long-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.

Impairment of assets

In assessing impairment, our Company estimates the recoverable amount of each asset or cash-generating units based on expected future cash flows and uses an interest rate to discount them. Estimation uncertainty relates to assumptions about future operating results and the determination of a suitable discount rate.

Fair value measurement of financial instruments

When the fair values of financial assets and financial liabilities recorded in the statement of assets and liabilities cannot be measured based on quoted prices in active markets, their fair value is measured using valuation techniques including the DCF model. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgement is required in establishing fair values. Judgements include considerations of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions about these factors could affect the reported fair value of financial instruments.

Assessment of potential markdown inventory

Our Company, at each reporting date makes an assessment of potential markdown due to aged inventory. In doing so, it estimates the net realisable value of aged inventory based on historic trend of sale of such/ similar aged inventory. Further, it also estimates the provision for shrink based on past trends which it believes is more than or near to actual shrink to be booked as and when stores are counted annually.

Incremental borrowing rate for leases

Our Company cannot readily determine the interest rate implicit in the lease, therefore, it uses its incremental borrowing rate to measure lease liabilities. The incremental borrowing rate is the rate of interest that our Company would have to pay to borrow over a similar term, and with a similar security, the funds necessary to obtain an asset of a similar value to the right-of-use asset in a similar economic environment. The incremental borrowing rate therefore reflects what our Company ‘would have to pay, which requires estimation when no observable rates are available or when they need to be adjusted to reflect the terms and conditions of the lease. Our Company estimates the incremental borrowing rate using observable inputs (such as market interest rates) when available and is required to make certain entity-specific estimates.

Recent accounting pronouncements

Ministry of Corporate Affairs (“MCA”) notifies new standard or amendments to the existing standards under Companies (Indian Accounting Standards) Rules, as amended from time to time. There are no such recently issued standards or amendments to the existing standards for which the impact on the Restated Financial Information is required to be disclosed.

PRINCIPAL COMPONENTS OF INCOME AND EXPENDITURE

Income

Our total income comprises of (i) revenue from operations; and (ii) other income.

Revenue from Operations

Revenue from operations comprise of (i) sales of goods including sale of apparels and non - apparels; and (ii) other operating revenue including commission income, business exhibition income and discount received.

Other Income

Other income comprises of (i) interest income including interest on term deposits, fair value of security deposits, income tax and others; (ii) maintenance charges; (iii) scrap sales; (iv) insurance claims; (v) liabilities written back to the extent no longer required (net); (vi) rent concession on lease rentals; (vii) profit on modification of leases (net); and (viii) miscellaneous income.

Expenses

Our expenses comprise (i) purchase of stock-in-trade; (ii) changes in inventories; (iii) employee benefit expense;

(iv) finance costs; (v) depreciation and amortization of expenses; and (vi) other expenses.

Purchase of stock-in-trade

Purchase of stock-in-trade comprise of purchase of apparels and non-apparels in a particular fiscal.

Changes in inventories

Changes in inventories consists of opening inventories (inventories at the beginning of the period/year + traded goods + packaging materials) - closing inventories (inventories at the end of the period/year + traded goods + packaging materials).

Employee Benefits Expense

Employee benefits expense primarily comprises (i) salaries, wages and bonus; (ii) gratuity expenses; (iii) managerial renumeration; (iv) contribution to provident and other funds; and (v) staff welfare expenses.

Finance costs

Finance costs comprise of (i) interest expenses on working capital facilities, term loan from bank, lease liabilities, unsecured loan and others including interest paid to creditors; and (ii) other borrowing cost which includes loan processing charge.

Depreciation and amortization of expenses

Depreciation and amortization of expenses comprises of (i) depreciation on property, plant and equipment; (ii) depreciation of right-of-use assets; and (iii) amortization of intangible assets.

Other Expenses

Other expenses comprises of: (i) rent; (ii) power and fuel; (iii) advertisement; (iv) security and housekeeping charges; (v) freight and forwarding expenses; (vi) repairs and maintenance (including, building and others); (vii) packing and consumable charges; (viii) travelling and conveyance expenses; (ix) credit card and cash collection charges; (x) sitting fees; (xi) legal and professional fees; (xii) business promotion; (xiii) subscription; (xiv) rates and taxes; (xv) printing and postage; (xvi) communication expenses; (xvii) insurance charges; (xviii) corporate social responsibility expenditure; (xix) commission; (xx) loss on disposal of property plant and equipment (net); (xxi) loss allowance on financial assets; (xxii) payment to auditors and (xxii) miscellaneous expenses.

RESULTS OF OPERATIONS

Nine months ended December 31,

Fiscal

2023

2022

2023

2022

2021

(Consolidated)

(Standalone)

(Standi ilone)

Particulars

(Rs

million)

Percent age of Total Income (%) (Rs

million)

Percent age of Total Income (%) (Rs

million)

Percent age of Total Income (%) (Rs

million)

Percent age of Total Income (%) (Rs million) Percent age of Total Income (%)

Revenue

Revenue from operations

7,493.62 98.86 6,280.57 99.26 7,879.03 99.18 5,511.18 98.21 4,267.62 96.51

Other income

86.20 1.14 46.54 0.74 64.86 0.82 100.21 1.79 154.16 3.49

Total Income

7,579.82 100.00 6,327.11 100.00 7,943.89 100.00 5,611.39 100.00 4,421.78 100.00

Expenses

Purchase of stock- in-trade

5,013.04 66.14 4,470.11 70.65 5,704.21 71.81 4,545.52 81.01 2,721.34 61.54

Changes in Inventories

(54.05) (0.71) (305.77) (4.83) (365.35) (4.60) (787.28) (14.03) 296.27 6.70

Employee benefits expense

605.48 7.99 511.76 8.09 684.92 8.62 464.03 8.27 308.70 6.98

Finance costs

355.03 4.67 298.92 4.72 413.77 5.21 353.76 6.30 341.95 7.73

Depreciation and

amortization

expense

537.07 7.09 448.81 7.09 611.86 7.70 530.46 9.45 482.41 10.91

Other expenses

743.39 9.81 644.83 10.19 840.41 10.58 605.39 10.79 475.39 10.75

Total expenses

7,199.96 94.99 6,068.56 95.91 7,889.82 99.32 5,711.88 101.79 4,626.06 104.62

Profit/ (loss) before tax

379.86 5.01 258.55 4.09 54.07 0.68 (100.49) (179) (204.28) (4.62)

Tax expense

Current tax

110.57 1.46 73.45 1.16 32.41 0.41

-

0.00

-

0.00

Tax expenses of earlier year

0.02 0.00 0.02 0.00 0.02 0.00 0.05 0.00 22.66 0.51

Deferred tax charge/(credit)

(14.49) (0.19) (19.08) (0.30) (29.38) (0.37) (20.47) (0.36) (44.23) (1.00)

Total tax expense

96.10 1.27 54.39 0.86 3.05 0.04 (20.42) (0.36) (21.57) (0.49)

Profit/ (loss) for the period / year from operations

283.76 3.74 204.16 3.23 51.02 0.64 (80.07) (143) (182.71) (4.13)

Other comprehensive income

Items that will not be reclassified to profit or (loss)

Re-measurement gain/ (loss) on defined benefit plans

(3.35) (0.04) (0.40) 0.01 (0.98) (0.01) 0.34 (0.01) 3.19 0.08

Income tax relating to item above

0.84 0.01 0.10 0.00 0.25 0.00 (0.08) (0.01) (0.73) (0.02)

Total other comprehensive income/ (loss) for the period/ year (net of tax)

(2.51) (0.03) (0.30) 0.00 (0.73) (0.01) 0.26 0.00 2.46 0.06

Total

comprehensive income/ (loss) for the period/ year

281.25 3.71 203.86 3.22 50.29 0.63 (79.81) (142) (180.25) (4.08)

NINE MONTHS ENDED DECEMBER 31, 2023 COMPARED TO NINE MONTHS ENDED DECEMBER 31, 2022

Until Fiscal 2023, our Company did not have any subsidiary and accordingly, no consolidated financial statements were prepared. In Fiscal 2024, we incorporated a wholly owned subsidiary, Konnect Style Retail Private Limited. Accordingly, the consolidated financial information and the restated consolidated financial information for the nine months ended December 31, 2023 are not directly comparable with the standalone financial information and the restated standalone financial information for the nine months ended December 31, 2022, Fiscals 2023, 2022 and 2021, respectively.

Income

Total income increased by 19.80% from Rs6,327.11 million in the nine months ended December 31, 2022 to Rs7,579.82 million in nine months ended December 31, 2023. This was primarily attributable to the following:

Revenue from Operations

Revenue from operations increased by 19.31% from Rs6,280.57 million in nine months ended December 31, 2022 to Rs7,493.62 million in nine months ended December 31, 2023, which included an increase in the sale of apparel by 16.03% from Rs5,429.64 million in nine months ended December 31, 2022 to Rs6,299.83 million in nine months ended December 31, 2023 and the sale of non-apparels increased by 40.36% from Rs844.48 million in nine months ended December 31, 2022 to Rs1,185.32 million in nine months ended December 31, 2023. This was on account of expansion of retail stores and growth in same store sales.

Other Income

Other income increased by 85.23% from Rs46.54 million in nine months ended December 31, 2022 to Rs86.20 million in nine months ended December 31, 2023. This increase was on account of increase in the profit on modification of leases (net) from Rs20.72 million in the nine months ended December 31, 2022 to Rs64.24 million in the in nine months ended December 31, 2023 which was partially offset by a decrease in miscellaneous income from Rs8.79 million in nine months ended December 31, 2022 to Rs0.88 million in nine months ended December 31, 2023.

Expenses

Total expenses increased by 18.64% from Rs6,068.56 million in nine months ended December 31, 2022 to Rs7,199.96 million in nine months ended December 31, 2023. This increase was primarily attributable to the following:

Purchase of stock-in-trade

Purchase of stock-in-trade increased by 12.15% from Rs4,470.11 million in nine months ended December 31, 2022 to Rs5,013.04 million in nine months ended December 31, 2023. This increase was on account of increase in the purchase of apparels from Rs3,713.95 million in nine months ended December 31, 2022 to Rs3,962.24 million in nine months ended December 31, 2023 and non-apparels from Rs756.16 million in nine months ended December 31, 2022 to Rs1,050.80 million in nine months ended December 31, 2023.

Changes in inventories

Changes in inventories decreased by 82.32% from Rs(305.77) million in nine months ended December 31, 2022 to Rs(54.05) million in nine months ended December 31, 2023. This increase was on account of an increase in the opening inventory for stock in trade.

Employee benefits expense

Employee benefits expense increased by 18.31% from Rs511.76 million in nine months ended December 31, 2022 to Rs605.48 million in nine months ended December 31, 2023. This was attributable to an increase in the number of employees at the store level as well as at the entity level on account of an increase in the number of store openings along with salary increments for the employees.

Finance Costs

Finance Costs increased by 18.81% from Rs298.82 million in nine months ended December 31, 2022 to Rs355.03 million in nine months ended December 31, 2023, which was on account of an increase in working capital facilities availed by our Company and lease liabilities.

Depreciation and amortization expenses

Depreciation and amortization expense increased by 19.66% from Rs448.81 million in nine months ended December 31, 2022 to Rs537.07 million in nine months ended December 31, 2023 on account of depreciation on right of use of assets and depreciation on property, plant and equipment.

Other expenses

Other expenses increased by 15.28% from Rs644.83 million in nine months ended December 31, 2022 to Rs743.39 million in nine months ended December 31, 2023, which was on account of increase in the power and fuel cost, advertisement expenses, security and housekeeping expenses and an increase in freight and forwarding expenses on account of an increase in purchase of traded goods and new store openings.

Profit/ (loss) before tax

For the reasons discussed above, profit before tax was Rs258.55 million in nine months ended December 31, 2022, as compared to Rs379.86 million in nine months ended December 31, 2023.

Tax Expenses

Current tax expenses were Rs73.45 million in nine months ended December 31, 2022 and ^110.57 in nine months ended December 31, 2023, while deferred tax expenses were Rs(19.08) million in nine months ended December 31, 2022, as compared to Rs(14.49) million in nine months ended December 31, 2023. Total tax expense amounted to Rs54.39 million in nine months ended December 31, 2022, as compared to Rs96.10 million in nine months ended December 31, 2023.

Profit/ (Loss) for the year/period from operations

For the reasons discussed above, our profit for the year from operations was Rs204.16 million in nine months ended December 31, 2022, as compared to a profit of Rs283.76 million in nine months ended December 31, 2023.

Other Comprehensive Income (OCI)

OCI increased by 729.15% from Rs(0.30) million nine months ended December 31, 2022 to Rs(2.51) million in nine months ended December 31, 2023 in nine months ended December 31, 2023.

Total Comprehensive Income/(Loss) for the Period

The total comprehensive income for the period was Rs281.25 million in nine months ended December 31, 2023, as compared to Rs203.86 million in nine months ended December 31, 2022.

FISCAL 2023 COMPARED TO FISCAL 2022

Income

Total income increased by 41.57% from Rs5,611.39 million in Fiscal 2022 to Rs7,943.89 million in Fiscal 2023. This was primarily attributable to the following:

Revenue from Operations

Revenue from operations increased by 42.96% from ^5,511.18 million in Fiscal 2022 to Rs7,879.03 million in Fiscal 2023, which included an increase in the sale of apparel by 40.77% from Rs4,791.57 million in Fiscal 2022 to Rs6,745.15 million in Fiscal 2023 and the sale of non-apparels increased by 58.01% from Rs712.74 million in

Fiscal 2022 to Rs1,126.19 million in Fiscal 2023. This was on account of expansion of the retail store network, growth in same store sales during the economic revival post Covid-19 pandemic.

Other Income

Other income decreased by 35.28% from Rs100.21 million in Fiscal 2022 to Rs64.86 million in Fiscal 2023. This decrease was on account of concession on rental payments provided by the lessors during the Covid-19 pandemic.

Expenses

Total expenses increased by 38.13% from Rs5,711.88 million in Fiscal 2022 to Rs7,889.82 million in Fiscal 2023. This increase was primarily attributable to the following:

Purchase of stock-in-trade

Purchase of stock-in-trade increased by 25.49% from Rs4,545.52 million in Fiscal 2022 to Rs5,704.21 million in Fiscal 2023. This was on account of an increase in the purchase of trading goods as a result of an increase in our sales during this Fiscal.

Changes in inventories

Changes in inventories decreased by 53.59% from Rs(787.28) million in Fiscal 2022 to Rs(365.35) million in Fiscal 2023. This decrease was on account of an increase in closing inventory for stock in trade.

Employee benefits expense

Employee benefits expense increased by 47.60% from Rs464.03 million in Fiscal 2022 to Rs684.92 million in Fiscal 2023. This was attributable to an increase in the number of employees on account of an increase in the number of store openings along with salary increments for the employees.

Finance Costs

Finance Costs increased by 16.96% from Rs353.76 million in Fiscal 2022 to Rs413.77 million in Fiscal 2023, which was on account of an increase in working capital facilities and lease liabilities.

Depreciation and amortization expenses

Depreciation and amortization expense increased by 15.34% from Rs530.46 million in Fiscal 2022 to Rs611.86 million in Fiscal 2023 on account of depreciation on right of use of assets and depreciation on property, plant and equipment.

Other expenses

Other expenses increased by 38.82% from Rs605.39 million in Fiscal 2022 to Rs840.41 million in Fiscal 2023, which was on account of increase in the power and fuel cost, advertisement expenses, security and housekeeping expenses and an increase in freight and forwarding expenses on account of an increase in purchase of traded goods and new store openings.

Profit/ (loss) before tax

For the reasons discussed above, profit before tax was Rs54.07 million in Fiscal 2023, as compared to a loss of Rs100.49 million in Fiscal 2022.

Tax Expenses

Current tax expenses were Rs32.41 million Fiscal 2023 whereas it was nil in Fiscal 2022, while deferred tax expenses were Rs(29.38) million in Fiscal 2023, as compared to Rs(20.47) million in Fiscal 2022. Total tax expense amounted to Rs3.05 million in Fiscal 2023, as compared to Rs(20.42) million in Fiscal 2022.

Profit/ (Loss) for the year/period from operations

For the reasons discussed above, our profit for the year from operations was Rs51.02 million in Fiscal 2023, as compared to a loss of Rs80.07 million in Fiscal 2022.

Other Comprehensive Income (OCI)

OCI decreased 381.33% to Rs(0.73) million in Fiscal 2023 as compared to Rs0.26 million in Fiscal 2022.

Total Comprehensive Income/(Loss) for the Period

The total comprehensive income for the period was Rs50.29 million in Fiscal 2023, as compared to a loss of Rs79.81 million in Fiscal 2022.

FISCAL 2022 COMPARED TO FISCAL 2021 Income

Total income increased by 26.90% from Rs4,421.78 million in Fiscal 2021 to ^5,611.39 million in Fiscal 2022. This was primarily attributable to the following:

Revenue from Operations

Revenue from operations increased by 29.14% from Rs4,267.62 million in Fiscal 2021 to ^5,511.18 million in Fiscal 2022, where the sale of apparel increased by 28.33% from Rs3,773.70 million in Fiscal 2021 to Rs4,791.57 million in Fiscal 2022 and the sale of non-apparel increased by 35.78% from Rs524.93 million in Fiscal 2021 to Rs712.74 million in Fiscal 2022. This was on account of the fact that our stores resumed its operations in Fiscal 2022 in their full capacity after being closed in Fiscal 2021 due to restrictions imposed pursuant to COVID-19. Further, this increase was also attributable to opening of 18 new stores in Fiscal 2022.

Other Income

Other income decreased by 35% from Rs154.16 million in Fiscal 2021 to Rs100.21 million in Fiscal 2022. This decrease is primarily attributable to reduction in rent concessions on lease rentals during this period pursuant to lifting of the restrictions imposed due to COVID-19.

Expenses

Total expenses increased by 23.47% from Rs4,626.06 million in Fiscal 2021 to Rs5,711.88 million in Fiscal 2022. This increase was primarily attributable to the following:

Purchase of stock-in-trade

Purchase of stock-in-trade increased by 67.03% from Rs2,721.34 million in Fiscal 2021 to Rs4,545.52 million in Fiscal 2022. This was on account of an increase in the purchase of trading goods as a result of an increase in our sales during this Fiscal.

Changes in inventories

Changes in inventories decreased by 365.73% from Rs296.27 million in Fiscal 2021 to Rs(787.28) million in Fiscal 2022. This decrease was on account of an increase in closing inventory for stock in trade.

Employee benefits expense

Employee benefits expense increased by 50.32% from Rs308.70 million in Fiscal 2021 to Rs464.03 million in Fiscal 2022. This was attributable to an increase in the number of employees on account of an increase in the number of store openings along with salary increments for the employees.

Finance Costs

Finance Costs increased by 3.45% from Rs341.95 million in Fiscal 2021 to Rs353.76 million in Fiscal 2022, which was on account of an increase in the term loans availed and an increase in the lease liabilities.

Depreciation and amortization expenses

Depreciation and amortization expense increased by 9.96% from Rs482.41 million in Fiscal 2021 to Rs530.46 million in Fiscal 2022 on account of depreciation on right of use assets and depreciation on property, plant and equipment.

Other expenses

Other expenses increased by 27.35% from Rs475.39 million in Fiscal 2021 to Rs605.39 million in Fiscal 2022, which was on account of increase in the power and fuel cost, advertisement expenses and an increase in freight and forwarding expenses due to an increase in purchase of traded goods and new store openings.

Profit/ (loss) before tax

For the reasons discussed above, loss before tax was Rs100.49 million in Fiscal 2022, as compared to Rs204.28 million in Fiscal 2021.

Tax Expenses

Current tax expenses were nil in both Fiscal 2022 and Fiscal 2021, while deferred tax expenses were Rs(20.47) million in Fiscal 2022, as compared to Rs(44.23) million in Fiscal 2021. Total tax expense amounted to Rs(20.42) million in Fiscal 2022, as compared to Rs(21.57) million in Fiscal 2021.

Profit/ (Loss) for the year/period from operations

For the reasons discussed above, our loss for the year from operations was Rs80.07 million in Fiscal 2022, as compared to Rs182.71 million in Fiscal 2021.

Other Comprehensive Income (OCI)

OCI decreased 89.42% to Rs0.26 million in Fiscal 2022 as compared to Rs2.46 million in Fiscal 2021.

Total Comprehensive Income/(Loss) for the Period

The total comprehensive loss for the period was Rs79.81 million in Fiscal 2022, as compared to Rs180.25 million in Fiscal 2021.

LIQUIDITY AND CAPITAL RESOURCES

We have historically financed the expansion of our business and operations primarily through equity funding, debt financing and funds generated from our operations. From time to time, we have availed loan facilities to finance our short-term working capital requirements.

CASH FLOWS

The following table sets forth certain information relating to our cash flows in the periods indicated:

Nine months ended December 31,

Fiscal

Particulars

2023 2022 2023 2022 2021
(Consolidated) (Standalone)

(Standalone)

(Rs million)

Net cash flow from operating activities

853.77 282.27 329.07 155.86 521.63

Net cash (used in)/from investing activities

(393.68) (361.22) (430.23) (265.25) (87.92)

 

Nine months ended December 31,

Fiscal

Particulars

2023 2022 2023 2022 2021
(Consolidated) (Standalone)

(Standalone)

(Rs million)

Net cash (used in)/from financing activities

(453.17) (109.76) (77.17) 285.25 (416.40)

Cash and cash equivalents at the end of the period / year

58.31 41.01 51.39 229.72 53.86

Operating Activities

For the nine months period ended December 31, 2023

In nine months ended December 31, 2023, net cash flows from operating activities was Rs853.77 million. Profit before tax was Rs379.86 million in nine months ended December 31, 2023, which was adjusted for depreciation and amortization expenses of Rs537.07 million and finance costs of Rs355.03 million, loss on disposal of property, plants and equipment of Rs9.87 million, interest on income tax refund of Rs1.04 million, interest income on term deposits of Rs0.66 million, interest income on fair valuation on security deposits Rs6.08 million, loss on lease modifications of Rs64.24 million and reclassification of actuarial gain/loss of Rs3.35 million.

As a result, the operating profit before working capital changes was Rs1,206.46 million in nine months ended December 31, 2023. The changes in working capital in nine months ended December 31, 2023, primarily included an increase in inventories of Rs54.05 million; decrease in trade payables of Rs149.14 million; increase in financial assets of Rs55.40 million; increase in other assets of Rs36.58 million and decrease in other financial liabilities of Rs55.54 million.

Fiscal 2023

In Fiscal 2023, net cash flows from operating activities was Rs329.07 million. Profit before tax was Rs54.07 million in Fiscal 2023, which was adjusted for depreciation and amortization expenses of ^611.86 million and finance costs of Rs413.77 million, loss on disposal of property, plants and equipment of Rs14.16 million, interest on income tax refund of Rs0.17 million, interest income on term deposits Rs0.88 million, interest income on fair valuation on security deposits Rs6.73 million, loss on lease modifications of Rs26.85 million and reclassification of actuarial gain/loss of Rs0.98 million.

As a result, the operating profit before working capital changes was Rs1,058.25 million in Fiscal 2023. The changes in working capital in Fiscal 2023, primarily included an increase in inventories of Rs365.35 million; decrease in trade payables of Rs141.64 million, increase in other assets of Rs54.40 million and decrease in other financial liabilities of Rs73.46 million, along with an adjustment for taxes paid (net of refund) being Rs54.35 million.

Fiscal 2022

In the Fiscal 2022, net cash flows from operating activities was Rs155.86 million. Loss before tax was Rs100.49 million in Fiscal 2022, which was adjusted for depreciation and amortization expenses of Rs530.46 million and finance costs of Rs353.76 million, loss on disposal of property, plants and equipment of Rs8.68 million, amortization of prepaid lease rental Rs0.47 million, interest on income tax refund Rs1.57 million, interest income on term deposits Rs0.92 million, interest income on fair valuation on security deposits Rs5.78 million, rent concession on lease rentals Rs52.04 million, loss on lease modifications Rs25.66 million and reclassification of actuarial gain/loss of Rs0.34 million.

As a result, the operating profit before working capital changes was Rs706.31 million in Fiscal 2022. The changes in working capital in Fiscal 2022, primarily included an increase in inventories of Rs787.28 million; increase in trade payables of Rs321.22 million, increase in other assets of Rs84.95 million and increase in other financial liabilities of Rs19.53 million, along with an adjustment for taxes paid (net of refund) being Rs16.77 million.

Fiscal 2021

In the Fiscal 2021, net cash flows from operating activities was Rs521.63 million. Loss before tax was Rs204.28 million in Fiscal 2021, which was adjusted for depreciation and amortization expenses of Rs482.41 million and finance costs of Rs341.95 million, loss on disposal of property, plants and equipment of Rs7.18 million, loss of trading goods of Rs2.95 million, amortization of prepaid lease rental Rs6.11 million, interest income on term deposits

Rs0.93 million, interest income on fair valuation on security deposits Rs4.79 million, rent concession on lease rentals Rs108.04 million, reclassification of actuarial gain/loss of Rs3.19 million and excess liabilities written back of Rs1.32 million.

As a result, the operating profit before working capital changes was Rs524.43 million in Fiscal 2021. The changes in working capital in Fiscal 2021, primarily included a decrease in inventories of Rs293.33 million; decrease in trade payables of Rs237.64 million, decrease in other assets of Rs18.62 million and decrease in other financial liabilities of Rs74.85 million, along with an adjustment for taxes paid (net of refund) being Rs1.47 million.

Investing Activities

Nine months period ended December 31, 2023

Net cash used in investing activities was Rs393.68 million in nine months ended December 31, 2023, primarily on account of purchase of property, plant and equipment including capital work in progress and intangible assets of Rs394.61 million; proceeds from sale of property, which was partially offset by proceeds from sale of property, plant and equipment of Rs0.27 million and interest received on term deposits of Rs0.66 million.

Fiscal 2023

Net cash used in investing activities was Rs430.23 million in Fiscal 2023, primarily on account of purchase of property, plant and equipment including capital work in progress and intangible assets of Rs434.14 million; proceeds from sale of property, which was offset as plant and equipment of Rs3.03 million and interest received of Rs0.88 million.

Fiscal 2022

Net cash used in investing activities was Rs265.25 million in Fiscal 2022, primarily on account of purchase of property, plant and equipment including capital work in progress and intangible assets of Rs269.11 million; proceeds from sale of property, which was offset as plant and equipment of Rs2.94 million and interest received of Rs0.92 million.

Fiscal 2021

Net cash used in investing activities was Rs87.92 million in Fiscal 2021, primarily on account of purchase of property, plant and equipment including capital work in progress and intangible assets of Rs88.94 million; proceeds from sale of property, which was offset as plant and equipment of Rs0.09 million and interest received of Rs0.93 million.

Financing Activities

Nine months ended December 31, 2023

Net cash flows used in financing activities was Rs453.17 million in nine months ended December 31, 2023, which primarily comprised of proceeds of short-term borrowing (net) of Rs155.60 million, finance charges paid of Rs75.34 million, lease payments, net off lease concession of Rs508.81 million; proceeds from long-term borrowing (net) of Rs50.70 million and repayments of long-term borrowings of Rs75.32 million.

Fiscal 2023

Net cash flows used in financing activities was Rs77.17 million in Fiscal 2023, which primarily comprised of proceeds from issue of equity shares including securities premium, net of share issue expenses of Rs447.82 million, proceeds of short-term borrowing (net) of Rs102.60 million, finance charges paid of Rs90.49 million, lease payments, net off lease concession of Rs570.89 million, proceeds from long-term borrowing (net) of ^113.60 million and repayment of long-term borrowings of Rs79.81 million.

Fiscal 2022

Net cash flows from financing activities were Rs285.25 million in Fiscal 2022, which primarily comprised of proceeds from issue of equity shares including securities premium, net of share issue expenses of Rs622.22 million,

proceeds of short-term borrowing (net) of t201.38 million, finance charges paid of tl4.ll million, lease payments, net off lease concession of t460.11 million, proceeds from long-term borrowing (net) of t58.68 million and repayments of long-term borrowings of t62.15 million.

Fiscal 2021

Net cash flows used in financing activities was t416.40 million in Fiscal 2021, which primarily comprised of finance charges paid of t80.21 million, lease payments, net off lease concession of t332.82 million, proceeds of short-term borrowings (net) of t36.63 million, proceeds from long-term borrowing (net) of t110.20 million and repayments of long-term borrowings of t150.20 million.

INDEBTEDNESS

We have historically financed the expansion of our business and operations primarily through debt financing, equity funding and funds generated from our operations. From time to time, we avail loan facilities to finance our short term working capital requirements.

As of December 31, 2023, we had total borrowings of t1,283.16 million. Our total debt to equity ratio was 0.55 as of December 31, 2023.

CONTINGENT LIABILITIES AND OFF-BALANCE SHEET ARRANGEMENTS

As of December 31, 2023, our contingent liabilities as per Ind AS 3l derived from Restated Financial Information were as follows:

Particulars

As of December 31, 2023 (in t million)

VAT liability order (pertaining to fiscal 2016-2011)

10.51

Income Tax (TDS) (pertaining to fiscal 2013-2014 to 2022-2023)

0.09

Total

10.66

For further information on our contingent liabilities, see “Financial Statements - Restated Summary Statements - Note 34" on page 302.

Except as disclosed in the Restated Financial Information or elsewhere in this Draft Red Herring Prospectus, there are no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that we believe are material to investors.

CONTRACTUAL OBLIGATIONS AND COMMITMENTS

We do not have any long-term commitments or material non-cancellable contractual commitments/contracts, including derivative contracts for which there were any material foreseeable losses.

CAPITAL EXPENDITURES

In the nine months ended December 31, 2023, Fiscals 2023, 2022 and 2021, our capital expenditure towards additions to fixed assets (property, plant and equipments and intangible assets) were t394.61 million, t434.14 million, t269.11 million and t88.94 million, respectively.

RELATED PARTY TRANSACTIONS

We have engaged in the past, and may engage in the future, in transactions with related parties. For details of our related party transactions, see “Summary of the Offer Document - Summary of Related Party Transactions"" and “Financial Statements - Restated Financial Information - Note 36 Related Party Disclosures under Ind AS-24" on pages 28 and 303, respectively.

AUDITORS OBSERVATIONS

Our Statutory Auditors have not included any qualifications, adverse remarks or emphasis of matters in their examination report:

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our activities expose us to market risk, liquidity risk and credit risk. Our Board has overall responsibility for the establishment and oversight of our risk management framework.

Credit Risk

Credit risk is the risk of financial loss to our Company if a counterparty to a financial instrument or customer contract fails to meet its contractual obligations. Our Company is exposed to credit risk from its financing activities including deposits with banks and financial institutions.

Liquidity Risk

Liquidity risk is the risk that our Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. Our approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to our reputation.

Our Company typically ensures that it has sufficient cash on demand to meet expected short term operational expenses as our objective is to maintain a balance between continuity of funding and flexibility through the use of bank loans / internal accruals.

Market Risk

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. It comprises of - (i) interest rate risk and (ii) product price risk.

Interest Rate Risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Our exposure to the risk of changes in market interest rates relates primarily to our Companys long-term debt obligations with floating interest rates. Such borrowings are based on fixed as well as floating interest rate. Interest rate risk is determined by current market interest rates, projected debt servicing capability and view on future interest rate. Such interest rate risk is actively evaluated and is managed through portfolio diversification and exercise of prepayment/refinancing options were considered necessary.

Product Price Risk

In a potentially inflationary economy, our Company expects periodical price increases across its retail product lines. Product price increases which are not in line with the levels of customers discretionary spends, may affect the business/retail sales volumes. In such a scenario, the risk is managed by offering judicious product discounts to retail customers to sustain volumes. Our Company negotiates with its vendors for purchase price rebates such that the rebates substantially absorb the product discounts offered to the retail customers. This helps our Company protect itself from significant product margin losses. This mechanism also works in case of a downturn in the retail sector, although overall volumes would get affected.

Our income is not dependent on a single customer or supplier, who is either Indian or otherwise.

CHANGES IN ACCOUNTING POLICIES

Other than as required for the preparation of our Restated Financial Information, there have been no changes in our accounting policies during Fiscals 2021, 2022 and 2023, and the nine months period ended December 31, 2023.

UNUSUAL OR INFREQUENT EVENTS OR TRANSACTIONS

Except as described in this Draft Red Herring Prospectus, to our knowledge, there have been no unusual or infrequent events or transactions including unusual trends on account of business activity, unusual items of income, change of accounting policies and discretionary reduction of expenses that have in the past or may in the future affect our business operations or future financial performance.

SIGNIFICANT ECONOMIC CHANGES THAT MATERIALLY AFFECT OR ARE LIKELY TO AFFECT INCOME FROM CONTINUING OPERATIONS

Our business has been subject, and we expect it to continue to be subject, to significant economic changes that materially affect or are likely to affect income from continuing operations identified above in “Managements Discussion and Analysis of Financial Condition and Results of Operations - Significant Factors Affecting our Results of Operations and the uncertainties described in “Risk Factors” on pages 330 and 36, respectively.

KNOWN TRENDS OR UNCERTAINTIES

Our business has been subject, and we expect it to continue to be subject, to significant economic changes arising from the trends identified above in “Managements Discussion and Analysis of Financial Condition and Results of Operations - Significant Factors Affecting our Results of Operations” and the uncertainties described in “Risk Factors” on pages 330 and 36, respectively. To our knowledge, except as discussed in this Draft Red Herring Prospectus, there are no known trends or uncertainties that have or had or are expected to have a material adverse impact on revenues or income of our Company from continuing operations.

FUTURE RELATIONSHIP BETWEEN COST AND REVENUE

Other than as described in “Risk Factors"Our Business” and “Managements Discussion and Analysis of Financial Condition and Results of Operations” on pages 36, 184 and 329, respectively, to our knowledge there are no known factors that may adversely affect the future relationship between our costs and revenue.

NEW PRODUCTS OR BUSINESS SEGMENTS

Except as set out in this Draft Red Herring Prospectus, we have not announced and do not expect to announce in the near future any new business segments.

COMPETITIVE CONDITIONS

We operate in a competitive environment. See “Our Business”, “Industry Overview and “Risk Factors” on pages 184, 134 and 36, respectively, for further information on competitive conditions that we face across our various business verticals.

EXTENT TO WHICH MATERIAL INCREASES IN NET SALES OR REVENUE ARE DUE TO INCREASED SALES VOLUME, INTRODUCTION OF NEW PRODUCTS OR SERVICES OR INCREASED SALES PRICES

Changes in revenue in the last three Fiscals and in the nine months period ended December 31, 2023, are as described in “Managements Discussion and Analysis of Financial Condition and Results of Operations - Nine Months Ended December 31, 2023 compared to Nine Months Ended December 31, 2022”, “Managements Discussion and Analysis of Financial Condition and Results of Operations - Fiscal 2023 compared to Fiscal 2022” and “Managements Discussion and Analysis of Financial Condition and Results of Operations - Fiscal 2022 compared to Fiscal 2021” above on pages 348, 349 and 351, respectively.

SEASONALITY AND CYCLICALITY OF BUSINESS

Certain products offered at our stores are impacted by seasonal variations in sales volumes, which may cause our revenues to vary significantly between different quarters in a fiscal. Typically, in our apparels segment, we see an increase in demand for casual wears, T-shirts, shorts etc. during the summer season whereas, we generally witness an increased demand for woollen clothes, jackets, sweatshirts etc. during the winter season. Our success is dependent on our ability to meet such requirements in a timely manner and therefore, our results of operations and cash flows across quarters in a fiscal may not be comparable and any such comparisons may not be indicative of our annual financial results or our results in any future quarters or periods. See “Risk Factors - Some of our products are subject to seasonal customer demands.” on page 41.

SUPPLIER CONCENTRATION

Our top five suppliers contributed over 9.68% to our overall supply in the last Fiscal and we are heavily reliant on our relationships with these suppliers. See “Risk Factors - We do not have definitive agreements with any of our Suppliers and we rely on few of our Suppliers to fulfil our procurement needs. Failure to successfully leverage our Supplier relationships and network or to identify new suppliers could adversely affect us.” on page 41.

SEGMENT REPORTING

Our Company is engaged in the business of retail sales which in the context of the Ind AS 108 “Operating Segment" is considered to constitute one single reporting segment.

For further information, see “Financial Statements - Note 37" on page 309.

SIGNIFICANT DEVELOPMENTS AFTER DECEMBER 31, 2023, THAT MAY AFFECT OUR FUTURE RESULTS OF OPERATIONS

Except as disclosed above and elsewhere in this Draft Red Herring Prospectus, to our knowledge no circumstances have arisen since December 31, 2023, that could materially and adversely affect or are likely to affect, our operations, trading or profitability, or the value of our assets or our ability to pay our material liabilities within the next 12 months.

CAPITALISATION STATEMENT

The following table sets forth our capitalisation as at December 31, 2023, on the basis of our Restated Financial Information, and as adjusted for the Offer. This table should be read in conjunction with “Managements Discussion and Analysis of Financial Condition and Results of Operations", “Financial Statements" and “Risk Factors” beginning on pages 329, 261, and 36, respectively.

(in Rs million, except ratio)

Particulars

Pre-Offer as at December 31, 2023 Post-Offer

Total borrowings

Current borrowings

1,106.21 [•]

Non-current borrowings (A)

176.95 [•]

Total borrowings (B)

1,283.16 [•]

Total equity

Equity share capital

349.27 [•]

Other equity#

1,867.83 [•]

Total equity (C)

2,217.10 [•]

Total Capital (B+C)

3,500.26 [•]

Ratio: Non-current borrowings (A) / Total equity (C)

0.08 [•]

Ratio: Total borrowings (B) / Total equity (C)

0.58 [•]

# "Other equity " shall carry the meaning as per Schedule III of the Companies Act 2013 (as amended) excluding Revaluation Reserve.

Notes:

1. The above statement has been prepared for the purpose of disclosing in the Draft Red Herring Prospectus to be filed in connection with the Offer, in accordance with the requirements prescribed under Schedule VI of the SEBIICDR Regulations.

2. The above statement has been computed on the basis of the Restated Financial Information for the period ended December 31, 2023.

3. These terms shall carry the meaning as per Schedule III of the Companies Act, 2013, as amended.

4. The corresponding Post-Offer capitalization data given in the table is not determinable at this stage pending the completion of the Book Building process and hence the same has not been provided in the above statement.

FINANCIAL INDEBTEDNESS

Our Company avails loans and financing facilities in the ordinary course of our business for meeting our working capital and business requirements. For details of the borrowing powers of our Board, see “Our Management - Borrowing Powers" on page 234.

We have obtained the necessary consents from the lenders of our Company as required under the relevant financing documentation for undertaking activities in relation to the Offer, inter alia, including consequent actions, such as effecting a change in our capital structure, change in our shareholding pattern, change in our constitutional documents and change in our management or control.

The details of the indebtedness of the Company as on February 29, 2024 is provided below:

(in Rs millions)

Category of borrowing

Credit limit as per sanction letter Outstanding amount (as at February 29, 2024 )*

Secured

Term loan financing

Fund-based

317.56 272.40

Covid 19 emergency credit line

168.90 107.30

Working capital financing

Fund-based (working capital and working capital demand loan)

1,060.00 1,003.24

Total borrowings

1,546.46 1,382.94

*As certified by Singhi & Co., Chartered Accountants pursuant to their certificate dated March 15, 2024.

The details of the indebtedness of the Subsidiary as on February 29, 2024 is provided below:

(in Rs millions)

Category of borrowing

Sanctioned amount Outstanding amount (as at February 29, 2024)*

Unsecured

Inter corporate unsecured loan

1.50 0.75

Total borrowings

1.50 0.75

*As certified by M K Jalan & Associates, Chartered Accountants pursuant to their certificate dated March 15, 2024.

Principal terms of the borrowings availed by us:

The details provided below are indicative and there may be additional terms, conditions and requirements under the various financing documentation executed by us in relation to our indebtedness.

1. Interest: In terms of the facilities availed by us, the interest rate is typically the base rate of a specified lender and spread per annum. The spreads are different for different facilities.

The interest rates for the term loans and working capital facilities availed by our Company typically range from 7.95% to 10.85% per annum.

2. Penal interest. The terms of certain financing facilities availed by us prescribe penalties for non-compliance of certain obligations by us. These include, inter alia, breach of non-payment of instalments, our Company becoming bankrupt or committing any act of insolvency, breaching any provisions as set forth in the loan documentation entered into with the respective lenders or default in the performance of the obligations set forth in such loan documentation, etc. Further, the default interest payable on the facilities availed by us is typically 2.00% to 4.00% per annum over and above the applicable interest rate.

3. Pre-payment penalty: The terms of facilities availed by us typically have prepayment provisions which may be subject to pre-payment penalties in terms of the norms of such loan documentations entered into with the respective lenders as may be prescribed. These pre-payment penalties typically range from 2.00% to 5.00% per annum of the principal amount or of the outstanding amount, as applicable.

4. Validity/tenor: The tenor of the term loans availed by us typically range from three (3) to ten (10) years. Additionally, the working capital facilities availed by us are payable on demand.

5. Security: In terms of our loan facilities, we are required to, inter alia.

(a) Create a hypothecation over the equipment, current assets and moveable assets, as applicable;

(b) Create equity mortgage over immovable property and fixed deposits; and

(c) Furnish personal guarantees from our Promoters and certain other persons.

6. Repayment: The term loans are typically repayable in structured instalments, in accordance with the loan documentation, as applicable. The working capital loans are typically repayable on demand in accordance with the sanction letters and loan documentations executed.

7. Key covenants: Certain of our borrowing arrangements provide for covenants restricting certain corporate actions, and we are required to take the prior approval of the relevant lender before undertaking such corporate actions, inter alia the following:

(a) effecting changes in the ownership or control or make any material change in the management set-up including resignation of promoter directors and key managerial personnel;

(b) effecting any change in the capital structure where the shareholding/controlling stake of the existing promoters gets diluted below current levels;

(c) making any amendments to the Memorandum of Association or Articles of Association or undertaking or permitting any merger, demerger, amalgamation, consolidation, restructuring, reorganisation; and

(d) declare or pay any dividend if any instalment towards principal or interest remains unpaid.

8. Events of default: Borrowing arrangements entered into by us, contain standard events of default, including:

(a) default in payment of interest or instalment amount due;

(b) any interest remaining unpaid and in arrears for a period of 3 (three) months after the same shall have become due whether demanded or not;

(c) being adjudicated as insolvent or a receiver being appointed in respect of the whole or any part of the property;

(d) breach or default of any covenant or other terms and conditions under one loan documentation will be cross defaulted all the loan documentations contracted with the lender; and

(e) occurrence of any circumstances which in prejudicial to or impairs or imperils or like to prejudice, impair, imperil the security given.

9. Consequences of occurrence of events of default: In terms of our borrowing arrangements, the following, among others, are the consequences of occurrence of events of default, whereby the lenders may:

(a) recall to repay the entire amount under facilities together with interests, costs, and charges and/ or declare that the dues and all obligations shall immediately become due and payable;

(b) novate and/or assign the assets comprised within the security;

(c) appointment of nominee on the Board of Directors;

(d) conversion of outstanding loan obligations into equity or other capital; and

(e) exercise such remedies as may be permitted or available with them under law, including RBI guidelines.

This is an indicative list and there may be additional terms that may amount to an event of default under the various borrowing arrangements entered into by us. For risks in relation to additional financing which we may be required to avail, see “Risk Factors - We have incurred indebtedness and are required to comply with certain covenants based on documentation entered into with the lenders. Our inability to meet our obligations, including financial and other covenants, under our financing arrangements could adversely affect our business, results of operations, financial condition and cash flows. Further, the terms of our financing arrangements contain various covenants that may limit our business activities.” on page 48.

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