Spencers Retail Ltd Management Discussions

Prelude

Spencers Retail Limited (also referred to as Spencers, SRL, or The Company), shines as a paragon of modern retail excellence in India under the illustrious umbrella of the RP - Sanjiv Goenka Group (also referred to as RPSG Group). This vibrant retail powerhouse and its subsidiaries encompass a vast range of economically significant retail segments. These include the ever- dynamic, fast-moving consumer goods (FMCG) segment, a variety of staples, and an eclectic mix of non-food treasures, such as fashion, general merchandise, personal care, home essentials and electronics. The FMCG spectrum offers a delightfully diverse assortment comprising tantalising processed food & beverage, fresh fruits, vegetables, fish, and meat. Spencers has carved a niche in the hearts of its patrons with its distinct brand persona. Its vast retail stores comprise exquisite specialty sections such as Spencers Gourmet, Patisserie, and an inviting selection of wines and liquors.

In a bold stride towards inclusively and increased diversity, Spencers has introduced Wholesale Bazaar store format designed to cater the Kirana market. This initiative, alongside its wholly owned subsidiary Natures Basket Limited (Natures Basket or NBL), positions the Company as a sanctuary for all. Be it the connoisseur of premium gourmet experiences or the aspirational and budget-conscious shopper; all customers find something that fits their needs.

SRL has embraced the digital era with grace through its e-commerce arm, Omnipresent Retail India Private Limited (ORIPL), which seamlessly weaves the digital with the physical. The Company offers an OMNI-Channel experience that ensures impeccable customer service irrespective of whether customers are shopping online or in-store. In the process, Spencers seamlessly blends heritage and forward-thinking. This approach shows the Companys dedication to nurturing comprehensive and vibrant development in the retail industry, extending a warm welcome to all customers coming into its fold.

Global Economy

The global economy exhibited remarkable resilience in CY2023, rebounding from the persistent effects of the Covid-19 pandemic despite prevailing geopolitical tensions and cost-of-living challenges. Inflation, which peaked in 2022, is currently receding faster than expected, resulting in a milder impact on employment and economic activity. This positive trend can be credited to favourable supply-side developments and proactive measures by central banks to stabilise inflation expectations.

Global growth, which was at 3.2% in 2023, is projected to maintain the same growth rate in 2024 and in 2025. Driving this growth will be the resilience of the US and key emerging markets and effective fiscal support from China. For advanced economies, the growth rate is forecasted to rise slightly from 1.6% in 2023 to 1.7% in 2024 before rebounding to 1.8% in 2025, primarily driven by the recovery of the Euro Zone. Emerging markets and developing economies are expected to witness stable growth at 4.2% during 2024 and 2025.

Outlook

The global economic scenario faces balanced risks, accompanied by persistent uncertainties. Geopolitical tensions, exemplified by conflicts in Ukraine and Gaza, pose the threat of price spikes, potentially heightening interest rate expectations and weakening asset values. Moreover, the varied rates of disinflation among major economies may induce currency fluctuations, thereby impacting financial sectors. The confluence of high interest rates, household debt levels, and fixed-rate mortgage adjustments could strain financial stability.

In China, economic growth is at risk owing to the lack of comprehensive solutions for the countrys property sector issues, which could also affect its trading partners. The high levels of Government debt in several economies could necessitate disruptive fiscal adjustments, eroding investor confidence and impeding climate change mitigation efforts. Geo-economic fragmentation may further impede supply-side dynamics. Conversely, the loosening of fiscal policies could transiently boost economic activity but might require more significant adjustments later on. Unexpectedly, the rapid decline in inflation, driven by increased participation from the labour force, could lead central banks to consider easing policies sooner. Advances in artificial intelligence and structural reforms hold the potential to enhance productivity.

Central banks are likely to play a crucial role as the global economy transitions towards a soft landing, necessitating careful management of inflation. Moreover, there is a pressing need for a renewed focus on medium-term fiscal consolidation to rebuild fiscal space for vital investments and ensure debt sustainability. Tailored policy responses, coupled with supply- enhancing reforms, are vital for addressing inflation, reducing debt levels, fostering higher growth rates, and narrowing income disparities. Additionally, multilateral cooperation is essential to address challenges such as geo-economic fragmentation, climate change, and debt restructuring. It would ultimately help foster a sustainable and inclusive economic recovery, promising a brighter future.

(Source: https://www.imf.org/en/Blogs/Articles/2024/04/16/global-economy-remains-resilient-despite-uneven-growth-challenges-ahead)

Indian Economy

Indias economy has shown remarkable resilience and sustained growth over the past three years, defying global economic challenges. This remarkable trajectory has been supported by a combination of stringent policy and regulatory measures, alongside the gradual resurgence of the private sector. The nation is on the cusp of further economic flourishment. The driving forces behind this anticipated growth include substantial investments in emerging sectors, continued government spending, and efficiency gains driven by advancements in digitalisation and infrastructure.

In the current fiscal year, Indias economic growth narrative has been one of robust expansion, achieving an impressive 8.2% growth rate and surpassing prior forecasts. However, the next fiscal years GDP growth is expected to moderate to 7.2%, signalling the need for cautionary measures. This anticipated slowdown is due to the impact of elevated interest rates and a constrained fiscal policy aimed at reducing the deficit to 5.1% of the GDP. Despite these headwinds, the Indian economy remains vibrant, which is underpinned by several factors. These include strengthening consumer purchasing power through disinflation, anticipated robust agricultural outputs, and a revitalisation in private capital expenditure. Furthermore, Governmental initiatives aimed at bolstering rural incomes and enhancing infrastructure spending will likely further solidify Indias status as the fastest-growing major economy.

Outlook

As we peer into the horizon, India is primed for a decade of dynamic and transformative growth. Between the fiscal years 2025 and 2031, the Indian economy is anticipated to near the US$ 7 Trillion mark, which is likely to position the country as the worlds third-largest economy. This ambitious journey transcends mere economic achievements; it signifies a leap in enhancing the quality of life for the countrys citizens. In fact, it is likely to result in a surge in per capita income, transitioning India into the upper-middle income strata.

This growth will be powered by capital and productivity enhancements, achieved through a holistic integration of digital and physical connectivity. India is poised to excel in both the manufacturing and services sectors, leveraging the combined strength of competitiveness, effective investments, policy incentives, and a commitment to the green transition. Specifically, the manufacturing sector is anticipated to experience a revival. It will benefit from global opportunities, domestic policy support, and the imperative to transition to green energy.

The years ahead promise robust annual capital expenditure growth of 9-11%, driven by a synergistic mix of industrial and infrastructure development. This momentum is buoyed by factors such as the sound financial health of Indian corporates, consistent revenue growth, and an optimistic commodity price outlook. Additionally, emerging sectors, including electric vehicles, semiconductors, and electronics, are set to receive significant investments. All these developments are likely to play a critical role in redefining Indias industrial landscape.

The industrial renaissance is central to the Governments Production Linked Incentive (PLI) scheme. Offering incentives across 14 sectors totalling 1.82 Lakh Crores, this scheme aims to elevate Indias manufacturing capabilities on the global stage. Furthermore, a robust banking sector and innovative financing avenues are likely to make India well-equipped. This possible development is expected to ensure a vibrant inflow of capital, especially into burgeoning sectors.

Navigating the intricacies of global geopolitics, economic disparities, and environmental challenges, Indias economic journey has been fortified by three primary developmental trends. These include domestic reforms, competitive advancements on a global scale, and a dedication to value-added growth.

(Source: https://www.crisil.com/en/home/our-analysis/reports/2024/03/india-outlook-2024-report/growth-marathon.html)

Indian Retail Industry

Indias retail industry is witnessing a significant transformation due to evolving consumer preferences and advancements on the digital forefront. With recent challenges, such as a sales slowdown and a shift towards experience-driven spending, the sector remains robust, contributing around 10% to the countrys GDP. According to the Household Consumption expenditure survey, Indians spend less on staples and more on discretionary items and durables. This trend in consumer behaviour signals a significant move towards premiumisation of consumer products. Notably, this shift presents both challenges and opportunities for retailers.

Retailers are adopting OMNI-Channel strategies, blending online and offline channels for a seamless shopping experience. Traditional retailers are enhancing their digital presence, while e-commerce players are exploring brick-and-mortar stores. Government initiatives like Make in India and Digital India are influencing the retail sector by promoting domestic manufacturing and enhancing digital infrastructure.

Outlook

The Indian retail market is poised for significant growth, projected to reach US$ 2 Trillion over the next decade.

This expansion is driven by steady disposable income growth, increased urbanisation, and a growing demand for luxury and premium brands. Retailers are focussed on driving growth and profitability by offering superior- quality products, enhancing consumer experiences, and catering to a wider audience. Meanwhile, there have been challenges posed by the shift towards experience-oriented spending and increased savings. However, the industry is expected to leverage these trends to its advantage, unlocking new revenue streams and creating lasting value for consumers.

(Source: https://www.thehindubusinessline.com/economy/indian-retail-has-the-potential-to-reach-2-trillion-in-the-next-decade/article67896350.ece

https://economictimes.indiatimes.com/industry/services/retail/the-experience-turn-a-good-news-and-a-bad-news-for-indian-retailers/articleshow/108202584.cmsRsfrom=mdr)

Spencers Approach

Spencers has 79% of its total sales stemming from large format stores and the remaining 21% originating from small format stores, including Natures Basket. OMNI-Channel business approach is likely to generate significant growth for the Company.

In fact, such a strategy is becoming increasingly relevant with evolving consumer behaviours. There is an increasing preference for a blend of online and offline shopping experiences. The shift towards digital platforms has been rapid, with the Company responding swiftly by enhancing its digital infrastructure to cater to the growing demand for doorstep delivery services.

Spencers adept digital team has been instrumental in boosting online sales through an intuitive mobile app and user-friendly website. Such strategies have helped provide a smooth shopping experience for its customers. The Companys commitment to an OMNI-Channel strategy is evident in its efforts to integrate digital channels with its physical stores, alongside offering phone ordering services to broaden its out-of-store sales channels. This strategic blend of the Companys online presence and brick-and-mortar locations showcases Spencers commitment to meeting the evolving needs of its customers. Natures Basket has launched Artisan Pantry, a novel format aimed at redefining luxury grocery shopping in India. This holistic approach has enabled Spencers to navigate challenges successfully in 2023-24.

Indian Retail Industry: Opportunities & Challenges

The retail landscape in 2024 is likely to undergo a remarkable transformation driven by technological advancements. Retailers are leveraging innovative tools such as AI, machine learning, and cloud systems to streamline operations and enhance customer experiences. Deloitte India has predicted that the online retail market could reach US$ 325 Billion by 2030, driven by the digitalisation momentum in smaller cities and rural areas. With diversifying consumer demand, efficient supply chain management is becoming more crucial to meet evolving customer needs.

Opportunities

The integration of online and offline channels presents a promising opportunity for retailers. By catering to consumers who prefer both physical stores and online platforms, retailers can offer a seamless shopping experience, thereby enhancing customer engagement and satisfaction.

Spencers Take

Spencers is strengthening its position as a fully-integrated OMNI-Channel retailer. The Company has adopted a hyper- local strategy, directly communicating with clients and providing contactless delivery through its Out-of-Store channels. Spencers is also expanding into new markets, and servicing other locations to capitalise on e-commerce opportunities.

With consumers seeking value, convenience, and quality above all, consumer behaviour has undergone a significant shift. They expect a unified brand experience across all channels, leading to a multi-dimensional consumer journey that demands consistency and integration.

Spencers Take

Spencers is adapting to dynamic consumer preferences with differentiated offerings and private brands. The Company provides an efficient in-store experience with well-lit stores, a standardised store design, and pricing competitiveness. These efforts help ensure higher cross-selling and exceptional offers.

The Quick-Commerce (QC) market in India has experienced rapid growth, driven by the increasing requirement for on-demand delivery services. This growth is supported by Indias growing middle class, rising disposable income, and Government initiatives for digitalisation.

Spencers Take

Spencers is currently offering Express Delivery services from the nearest store to the doorstep. Spencers operates under both Slotted delivery & Express delivery as per customers convenience. Spencers proposition is not just to deliver within minutes but to offer consumers a choice of products that can be delivered on time.

Embracing technologies such as AI, IoT, and analytics can enhance operational efficiency, personalise customer experiences, and optimise inventory management. Such investments in technology can position retailers among forward-thinking industry leaders.

Spencers Take

Spencers leverages advanced technology to offer personalised shopping experiences to its customers. Through its digital platform and CRM tools, the Company provides customised basket options and efficient customer service through call centres and online channels. Additionally, the Company harnesses technology in order to manage its replenishment of inventory and manage them in the most optimal way.

With the continued growth of the retail sector, job opportunities are continuing to grow across various skill sets. These opportunities, in turn, are fuelling economic growth and addressing the issue of unemployment.

Spencers Take

Spencers is providing newer employment opportunities for the community at its new stores/outlets, thereby contributing to economic growth.

Challenges

The Dominance of the Unorganised Sector: Competition from the unorganised sector poses a challenge to organised retail. As such, organised retailers like Spencers need to utilise the advantages of traditional retailing, such as its low-cost structure and customer familiarity.

Supply Chain Limitations: Inefficient supply chains hinder the flow of goods and lead to increased operational costs. As such, addressing such limitations is crucial for ensuring the availability of quality products and reducing waste. Spencers focusses on operational excellence to manage these challenges effectively.

Competition: Price wars and promotional schemes make it challenging to retain customers and build loyalty. Spencers differentiates itself through its product offerings, in-store experiences, and customer service to maintain a competitive edge over other organised retail chains.

Regulatory Framewc : Complex regulations in India often pose challenges for retailers. As such, simplifying the regulatory framework can create a more conducive environment for retailers to thrive and innovate. Spencers navigates these regulations on regular basis to ensure effective compliance and business continuity.

Real Estate Challenge:: Finding affordable and prime retail spaces continues to be a major challenge for the sector.

By exploring innovative solutions like shared retail spaces and strategic partnerships, Spencers seeks to overcome these challenges and enhance the overall shopping experience.

Indian Organised Retail Market

The organised retail sector in India has been on a steady growth trajectory for the past few years. It accounted for 18.5% of the total retail market in 2022, a figure predicted to increase to 25% by 2025. This growth can be attributed to several key factors, including the urbanisation rate, which is projected to reach 50% by 2030. Urban consumers with higher disposable incomes are more inclined to shop in organised retail outlets. Additionally, the rapid expansion of the middle class in India presents a significant demographic for organised retailers, further fuelling growth in this retail sector. Apart from this, the booming e-commerce sector offers another avenue for organised retailers to expand their market reach. The supportive stance of the Indian Government is also evident through policies like Foreign Direct Investment (FDI), the introduction of the Goods and Services Tax (GST), and initiatives to improve infrastructure. These initiatives have provided a conducive environment for the growth of the organised retail sector, which is segmented into various categories. Notably, the food and grocery segment is the largest among these, accounting for about 60% of the organised retail market. Other categories include apparel and footwear, consumer electronics, home improvement, jewellery, books, and home appliances, among others.

Outlook

The Indian organised retail sector is headed towards continued growth in the coming years. This trend is likely to be propelled by policy reforms and the ongoing trend of urbanisation. Furthermore, it would be supported by a surge in consumption, leading to higher disposable incomes, a heightened focus on hygiene, changing lifestyles, and the increased adoption of multiple models.

Indias vibrant consumer culture is significantly impacted by these powerful factors. In addition, the availability of secure and convenient financial transactions enhances consumer trust and promotes the use of e-commerce platforms and services. As retail activities gradually return to pre-pandemic levels and demand rebounds, numerous international brands in the retail and F&B sectors are showing interest in the Indian retail market. This trend is expected to drive growth further across these sectors in the near future.

(Source:https://www.linkedin.com/pulse/organised-retail-sector-india-parimal-ade#:~:text=The%20organised%20retail%20sector%20in%20India%20 is%20dominated%20by%20a,a%20dynamic%20and%20growing%20sector.

https://retail.economictimes.indiatimes.com/files/cp/1294/cdoc-1661333692-ECOM_july_7_5in%20x%208in_Correction.pdf)

Spencers Approach

Spencers holds a commanding ~72% of the business segment in Indias organised retail market. The Company encompasses a wide array of segments, including Food and Grocery, Apparels, General Merchandise, Consumer Durables, Mobile and IT, Furniture and Household Items, and Footwear. Despite this strong foothold, the grocery industry, with ~5% penetration by modern trade, presents a substantial growth avenue for the Company. By leveraging its expertise, market insights, and diverse product portfolio, Spencers is well-positioned to capitalise on these opportunities.

SRL is adept at identifying and adapting to industry trends continuously. To that end, the Company optimises its stores for efficiency, expands its customer base, and initiates new store launches. Committed to a hybrid brick-and-mortar store model and an OMN 1-Channel distribution strategy, Spencers takes strategic steps geared towards further market expansion and enhancing customer engagement.

Indian E-Commerce Market

The Indian e-commerce market is on the path towards achieving remarkable growth, projected to expand from US$ 112.93 Billion in 2024 to US$ 299.01 Billion by 2029. This growth translates to a noteworthy CAGR of 21.5%.

The surge in growth is expected to be fuelled by rapid urbanisation, increased internet and smartphone penetration, and favourable government policies. The diverse range of schemes implemented include 100% FDI in B2B e-commerce and digitalisation initiatives like the Digital India campaign to bolster the sector. Such changes have not only streamlined business operations by reducing the necessity for physical infrastructures but also significantly enhanced market reach and efficiency. The Governments support through policies and the introduction of platforms such as the Open Network for Digital Commerce underscores a clear strategy to transition India into a leading digital economy. The bigger aim behind these steps is to democratise the e-commerce landscape and foster equitable growth among online and offline retailers.

Outlook

The Indian e-commerce market reflects a bright outlook, driven by an expanding internet user base expected to reach 220 Million online shoppers by 2025. Furthermore, it is likely to be influenced by an increase in e-commerce penetration across various retail segments. Despite the potential for anti-competitive behaviour in this rapidly evolving digital marketplace, the overall sentiment remains positive. The Covid-19 pandemic significantly accelerated e-commerce adoption for traditional shoppers. It has converted them into online consumers, and introduced a plethora of small businesses to digital platforms. This shift is not merely a temporary response to the Covid-19 pandemics constraints but marks a fundamental change in consumer behaviour and business models. The observed changes suggest that the Indian e-commerce sector will continue to experience sustained growth and innovation in the coming years.

(Source: https://www.mordorintelligence.com/industry-reports/india- ecommerce-market)

Spencers Approach

Spencers started its journey as an OMNI-Channel player, serving clients through its shops, e-commerce websites, and mobile application. Over the years, the Company has improved its online platform to provide seamless customer service delivery. Capitalising on the boost in opportunities during the Covid-19 pandemic, Spencers started pushing its efforts towards its e-commerce subsidiary, ORIPL. In 2023- 24, ORIPL was marginally positive in its Operating Profit with a Gross Merchandise Value (GMV) of 312.83 Crores.

Shifting Dynamics in Indian E-Commerce

The landscape of e-commerce in India is experiencing nuanced shifts in consumer behaviour. These changes are particularly associated with purchasing patterns across various product categories. Heres a breakdown of the trends observed:

Big-Ticket Items

Theres a notable plateau in e-commerce penetration for large electronics and mobiles, with over 70% of surveyed participants already shopping for these items online. However, despite their high current penetration levels, a reluctance to increase online wallet share for these categories is also evident.

Long-Tail Products

Conversely, categories like food, grocery, and home merchandise reflect a different trend. Despite having similar penetration levels to mobiles and large electronics, consumers are more inclined to increase their online wallet share for these items. The convenience of accessing a wide range of products on a single platform seems to be a significant driver behind this trend.

Platform Favourites

Indian consumers clearly prefer specific platforms, depending on the product category. This preference is so strong that many dont bother comparing prices across platforms, challenging the stereotype of Indian consumers as predominantly value seekers.

Rising Platform and Delivery Fees

As Indias e-commerce market matures gradually, retailers are increasingly leaning towards increasing platform and delivery fees. This shift is partly due to the monopolistic or oligopolistic positions of certain platforms. While consumers are aware of these rising costs, the convenience factor and the lack of alternatives have led to a reluctant acceptance.

Consolidation and Oligopoly

The e-commerce market is increasingly dominated by a few key players in each category, leading to oligopolistic market dynamics. Due to this consolidation, certain platforms have enhanced profitability by raising fees, reducing discounts, and sometimes compromising user satisfaction.

Consumer Adaptation

Despite grievances regarding increased fees and reduced discounts, consumers continue to prefer these platforms as they have gotten into the habit and enjoy the convenience offered. Theres a noteworthy shift in the market dynamics in favour of incumbents, who are trying to optimise bottom lines but putting consumer experience at stake.

Spencers Approach

There are enough loyal customers of Spencers and they resonate with the overall brand proposition. Spencers caters to both set of customers who wants to purchase from the physical stores and experience the overall shopping environment. Also, Spencers wants to cater to the quick need of the customers by providing them with a wide range of assortments delivered at their doorstep timely.

Indian Quick-Commerce Market

Indias retail market is predominantly unorganised, with around 80% falling under this category. Thus, brands face the challenge of fully understanding consumer behaviour once their products leave the distributors network. Quick-Commerce platforms offer a digital alternative to traditional Kiranas. These platforms allow companies to leverage data analytics to gain insights into consumption patterns and address gaps in their understanding. As a result, FMCG brands are not only at an advantage but also enable direct-to-consumer (D2C) companies to target specific consumer segments or geographical areas more effectively. D2C platforms have proven lucrative for brands, as they can yield high returns on investment (RoI) from advertising.

Expanding Quick-Commerce Categories: Quick- Commerce categories are gradually diversifying beyond fresh products, with key players leveraging evolved planning models that offer more data. Replenishment cycles are based on a safety stock setup at a geo-location level. For instance, in Beauty and Personal Care, users are comfortable shopping for cosmetic and grooming products like kajals. On the other hand, when it comes to electronics and allied products, consumers readily order items like phone holders and chargers. This is because faster delivery offsets the discounts offered by horizontal e-commerce platforms.

Balancing Stickiness and Margins with Category Mix:

Experts suggest that launching a private label is beneficial only for product categories that dont offer high take rates. Large FMCG brands have realised the potential of Quick- Commerce and are now focussing on targeted campaigns, search optimisation, and more effective ad management. However, achieving the right assortment mix remains crucial for retaining consumers on a platform.

Combating User Retention Challenges and Implementing Strategies

Making users try a new platform is not difficult, though converting trials into regular use requires strategic planning. Platforms often offer free deliveries, coupons, and other incentives to attract users. But the key lies in building a journey for consumers to make them transact repeatedly. Providing an assortment of products, ensuring the right pricing, and capturing high-repeat categories are essential for retaining new users.

Moving Towards Positive Unit Economics

Achieving profitability in Quick-Commerce relies on factors like the average order value, margins, and an ideal category mix. As such, companies negotiate with brands that they associate with to improve margins and discounts. Operational efficiencies, such as densification at the store level, can help reduce costs considerably. Some strategies for increasing density and profitability include launching more stores and viewing dark stores as retail outlets.

(Source: Deeper insights on Quick com: Momentum strong in the rapidly evolving space, BofA GLOBAL RESEARCH)

Key Performance Highlights

• Witnessed a 30% Y-o-Y growth for the express delivery proposition for its online business in Kolkata.

• Launched the Express Delivery proposition in Lucknow and Varanasi in February.

• Unveiled Artisan Pantry at Natures Basket, a gourmet haven in Palladium Mall, Mumbai, covering more than 11,000 sq. ft.

• Unveiled Aritsan Pantry at Natures Basket in Kolkata, a luxury grocery format having more than 5,000 sq.ft.

• Added 9 stores during the year, with a trading area of 64k sq. ft., four in Spencers and five in Natures Basket in their existing geographies.

• Refurbished the entire store in Kolkatas Quest Mall & South City Mall to international standards, enhancing the shopping experience and offerings for customers.

Operational Review

Operational Metrics	2023-24	2022-23
Revenue from Operations	2,345.03	2,452.58
(Rs in Crores)
Gross Margin (%)	20.15	20.10
ORIPL (GMV Rs in Crores)	313	302
ORIPL Operating Profit (Rs in Crores)	0.06	1.25

Financial Review

Financial Metrics	Standalone for the Year Ended March 31		Consolidated for the Year Ended March 31
	2023-24	2022-23	2023-24	2022-23
Turnover (in Rs Crores)	2,067.77	2,210.16	2,370.63	2,485.16
Return on Equity (%)	N.A*	(150.48)	N.A*	(139.83)
Net Asset Value per Share (Rs)	(12.12)	11.30	(46.14)	(16.69)
Earnings per Share (Rs)	(23.50)	(17.00)	(29.53)	(23.34)

*As the net-worth is negative as of March 31,2023 and March 31,2024

Standalone Ratio Shifts

Particulars	2023-24	2022-23	% Change
Interest Coverage Ratio	(1.69)	(1.98)	(15)
Operating Profit Margin (%)	(4.51)	(2.87)	57
Net Profit Margin (%)	(10.34)	(7.03)	47
Earnings per Share (Rs)	(23.50)	(17.00)	38
Return on Net Worth (%)	N.A*	(150.48)	N.A*
Debt Equity Ratio	N.A*	4.32	N.A*
Debtors Turnover (Days)	3.86	3.79	2
Inventory Turnover (Days)	40.18	38.31	5
Current Ratio	0.37	0.43	(14)

*As the net-worth is negative as of March 31,2023 and March 31,2024

Consolidated Ratio Shifts

Particulars	2023-24	2022-23	% Change
Interest Coverage Ratio	(1.79)	(2.42)	(26)
Operating Profit Margin (%)	(5.04)	(3.90)	29
Net Profit Margin (%)	(11.35)	(8.58)	32
Earnings per Share (Rs)	(29.53)	(23.34)	27
Return on Net Worth (%)	N.A*	(139.83)	N.A*
Debt Equity Ratio	N.A*	(3.60)	N.A*
Debtors Turnover (Days)	3.52	3.45	2
Inventory Turnover (Days)	41.39	39.06	6
Current Ratio	0.38	0.42	(9)

*As the net-worth is negative as of March 31,2023 and March 31,2024

Risk Management

Risk Domains	Briefs	Mitigation Strategies
Inventory Risk	Spencers faces the risk of customer dissatisfaction and reduced loyalty during times when inventory is unavailable.	- Spencers store operations and supply chain teams continuously monitor inventory levels t- ensure adequate stock availability
		- The Company conducts flexible inventory procedures t- enable real- time reporting
		- SRL analyses essential data points for inventory level forecasting t- promote timely reordering and maintain stock levels
Inflationary Risk	Spencers business may be affected due to price fluctuations, leading to accumulation of stock and reduced demand.	- Spencers conducts regular inventory analyses for prompt stock clearance
		- The Company uses in-store offers, coupons, and customised discounts for quick stock clearance
Competitive Risk	Spencers faces the risk of intense competition in the retail store chain industry.	- Spencers ensures brand visibility and differentiation through private brand campaigns and strategic initiatives
		- SRL applies customer retention and acquisition strategies, such as acquiring Natures Basket for product range expansion and broadening its customer base
		- The Company offers specialty segments like Spencers Gourmet, Patisserie, Wine and Liquor, and Epicuisine that offer valuable differentiation
Supply Chain Risk	Spencers faces the risk of potential losses due to supply-side delays caused by logistical interruptions.	- The Company utilises distribution centres and third-party supply chain management for logistical support
		- It maintains strong relationships with suppliers t- mitigate the risks associated with supply delays
Quality Risk	Spencers also faces the risk of losing customer trust due to compromised product quality and services.	- Spencers deploys a trained service team adept at handling customer issues and complaints t- ensure speedy and effective redressal
		- The Company performs regular and stringent quality and safety checks conducted by the quality team t- uphold quality standards

Human Capital

Spencers regards its employees as invaluable assets essential for ensuring seamless business continuity. The Company strongly emphasises striking a balance between personal growth and professional development, providing a safe, conducive, and productive work environment. All in all, SRL holds its skilled and professional management team in high esteem, recognising it as a key driver for the SRLs growth and success.

Talent Pool and Diversity

Spencers relies on its experienced and talented employee pool to enhance business efficiency, devise prudent strategies, and adapt to evolving industry requirements. The Company also conducts regular skill development and training sessions to improve efficiency and maintain high employee morale. In the foundation of all its endeavours lies, SRLs belief in providing equal opportunities and nurturing diversity in the workplace, while ensuring equitable remuneration for all employees. The Company hires individuals from diverse backgrounds and geographies, demonstrating its commitment to being a non-discriminatory employer that values diversity in the workplace. The Company also hires people with disabilities for roles that align with their working conditions.

Employee Training and Development

Spencers strongly emphasises employee training and development, offering functional and customer-first training programmes such as Pragati 2.0 aimed at preparing employees for customer interaction. Further, the Company provides effective opportunities for career development through initiatives like Utthaan.

Positive Work Environment

Spencers is dedicated to fostering a positive and healthy work environment for all its employees. To that end, the Company empowers employees in a manner that encourages positive behaviour and enhances performance, ultimately adding value for customers. It also evaluates and recognises top talent through R&R events such as Umang and Utsav. Overall, SRL believes that a motivated and happy workforce, aligned with organisational objectives, can propel the Company to the next level of growth.

Empowering Women Employees

Spencers focusses significantly on womens empowerment, encouraging female employees to participate in training programmes such as Saheli and Naari Shakti to nurture their growth and development. The Company has proudly opened its first all-women stores in the Eastern & Southern India region. These stores, located at Mahamayatala in Kolkata, are entirely operated and managed by women employees. The stores teams consist of 8 female employees, including the store operations team, riders, and security staff, who are all dedicated to providing the best shopping experience to customers.

This milestone showcases the Companys diverse and inclusive culture, empowering women employees to take on leadership roles and contribute significantly to the business. More than 24% of Spencers workforce comprises fearless women who effortlessly handle the Companys stores every single day while also managing their homes effectively. Owing to such attributes, these women embody the modern, aspirational woman of India.

Internal Control Systems and their Adequacy

Spencers has instituted a comprehensive internal control framework to safeguard the Companys interests. This approach aligns with the scale and complexity of its financial reporting and operational data. The Company ensures that all its processes comply with established policies, procedures, and statutory requirements. It has developed well-documented guidelines and procedures for authorisations and approvals, with regular audits in place.

The internal audit system at Spencers covers all financial and operational controls across divisions, functions, and departments. The team handling these functions regularly reviews the Companys various operations, identifying opportunities for improvement. The Company is committed to conducting business ethically and responsibly through its internal control system. To integrate these values into its operations, the Company conducts regular knowledge-sharing and training sessions for its employees. At the same time, SRL provides e-learning courses to enhance its employees awareness of the Code of Conduct and other essential policies.

Such a comprehensive approach ensures that employees are well-informed and up-to-date regarding the Companys business affairs. It also enables them to uphold the Companys values and principles in their daily activities.

Cautionary Statement

The statements in the Management Discussion and Analysis section describing Spencers objectives, projections, estimates, and predictions may be considered forward-looking statements. All statements that address expectations or projections about the future, including, but not limited to, statements about the Companys growth strategy, product development, market positioning, expenditures, and financial results, are based on certain assumptions and expectations of future events.

The Company cannot guarantee that these assumptions and expectations are accurate or will be realised. The Companys actual results, performance, or achievements may differ materially from those projected in such forward-looking statements. The Company assumes no responsibility to publicly amend, modify, or revise any forward-looking statement based on any subsequent developments, information, or events. To avoid duplication and repetition, certain information required to be disclosed in the Management Discussion and Analysis has been included in the Boards Report.