FSN E-Commerce Ventures Limited analyst Q&A

I now request Aditya Vikhram to please accept the prompt on the screen. Aditya, please turn on your webcam, unmute yourself, introduce your organization name and go ahead with your questions, please.

Good numbers overall. But just a quick question. With Shein coming in, what would be the impact on the fashion brand considering it seems like there would be very high competition?

I think I'll just take the question and then I'll pass it on to Abhijeet. I think we must understand that fashion is a very wide business with women's western wear, women's Indian wear, menswear, sportswear as well as kids and home. And Shein is only in one category. And I think one has to see we have 4,000+ brands and more and more international brands also coming into the country, We've always had revolve and others. So, I think the market is very wide, and no one brand can dominate it. So, I think that's what I do believe that it should not have a much of an impact. With that, I would like Abhijeet to comment.

Thanks, Falguni ma'am. So, I'll just add on to that. I think women's western wear, which is the category where a brand like Shein typically plays is one of the fastest evolving. I think these are also categories which are style first and maybe not as much brand first as a category like sports, where you find very few brands for many years taking lion's share of the business of that category. The reason is that trend changes very quickly, fashion changes very quickly. On our side, we've also seen a proliferation of what we call D2C brands come to the fore in specifically categories like women's western wear. So, I think as a platform, we will continue to be at the forefront of bringing the best fashion to customers. The category will still continue to be very fragmented. And in saying that, there will still be a multitude of brands. And again, demand is very wide. The number of brands supplying that demand is also very wide. So, I think it's still a very large playing ground. So, we don't see such a massive impact.

Then a follow -up question. Your Beauty business is clearly doing well. You have high gross margins, and you are making good profit. It seems like the EBITDA as well as the bottom line is not growing as fast, right? Or it is growing fast in comparison to your Y -o-Y numbers. And this primarily looks like that most of the expense are going on the marketing side to grow the other business, right? When do you see normalized marketing expense? Or do you see marketing expense continue to go up as you ramp up other businesses? And that would be all.

I think if I just wanted to highlight is that if you look at the Beauty marketing and ad expense, it's come out at 10.1% for this quarter against 9.5% a year ago. And this is for a Beauty vertical and consists of all the businesses together. So yes, there is some additional marketing money being spent, and we highlighted most of that as new customer acquisition has been at its fastest pace over last year, and we think that it's a worthwhile investment to make. And similarly, we've done a lot of upper funnel what you call is educating and bringing consumers interest into the category through events like Nykaaland and Nykaa Wali Shaadi, many of those are also part of this spend. And we do believe that our marketing spend has been accelerated because we believe in the category, we believe in our domination of the category and want to continue to maintain that. But yes, I think it is something that can easily be controlled. It's a marketing expenses considered available expense and totally controllable. So, it's more in line with -- for that year, what strategy we would like to follow. With that, I'd also like to request Anchit, if he wants to come in and add something to this.

No, I think you covered most of it. Again, as we've said in the past few quarters, the Beauty businesses has quite a healthy profitability, but because the penetration of the category and the per capita consumption for the category is so low, there is a lot of category expansion work that needs to be done. And ultimately, the benefit of a larger TAM will accrue to us because ultimately, we are the largest player in the space. So, we see it as an investment for the future and investment in customer acquisiti on is one of the larger buckets of our marketing expense. And you're seeing the benefits of that play out, right? The investment in customer acquisition over the past few quarters has been one of the major drivers for the the revenue growth, which we've seen in the Beauty business in this Q3 numbers. So, our hypothesis seems to have been correct that there is a lot of growth yet to be had, and we continue to want that growth. So, I think we'll continue to invest in the Beauty business. It's a business that has the profitability to support its customer growth plans. And in terms of supporting other businesses within Ny kaa, as Ganesh said, we continue to fund all of our expansion in new businesses through the cash accruals of the Beauty business. So that will continue. But I think the good news is, as we've said before, we believe that -- and as you can see from our numbers, the losses in B2B are reducing significantly as that business starts to reach -- as it starts to mature a bit. It's still a very, very young busines s. And Fashion as well, you're seeing significant improvements in profitability despite there being subdued growth. So, if I look at B2B, the numbers here are quite self-explanatory, but contribution margin improvement of 500 basis points. So, we believe that trend will continue. So, losses will reduce in B2B. And in Fashion, I think as growth picks up once again for the overall Fashion industry, you'll see a lot of operating leverage in that business, too. So, we're quite optimistic that we'll continue to fund growth for all of our businesses, new and old, but that the losses should be reducing even more from here for both fashion and B2B, which should be good news for the overall profitability as well.

Just to add to what Anchit mentioned, as we can see from the numbers, while given the focus on new customer acquisition, et c, there is higher investment in marketing, in spite of that, the EBITDA margin for the Beauty vertical has actually gone up.

We'll take our next question from Sheela Rathi from Morgan Stanley.

My first question was just to understand wha t is the revenue profile of LBB? I mean, I wanted to understand, I believe it's supporting the Fashion revenues also. And at the same time, it's enabling marketing income for us, supporting the Beauty business also. So just wanted to get more details about how LBB is driving the growth for us?

I think LBB business when we acquired it about a year ago was a content business that creates content for a lot of brands, including non- beauty brands that they always had in their portfolio. And obviously, their skill set lies in creating events and activities and content at scale. And that is what we are leveraging LBB for Nykaaland, Nykaa Wali Shaadi. We used to do Nykaa Femina Beauty Awards that has been now taken in-house. It's called Nykaa Beauty Awards, which was again an in -house event. So, acquisition of LBB has allowed us to do a lot of content and event activity all in- house. We've accelerated the number of events that we do, be it Beauty Bars or be it we do a lot of fashion events where we take -- it's like a trunk show, which we take it to various events where customers come in and experience that. We recently did an event which was called the New at Nykaa, which was new launches of the Beauty private labels, obviously, Foot Locker events. So many such events have all been done by the team, and that is what this team was in -sourced. And obviously, wi th the kind of focus that they get in terms of accessing all of the Nykaa's Beauty and Fashion brand partners has led to acceleration in their ability to earn revenues, and that is what is reflected in the numbers.

Falguni, what would be the revenue profile of LBB today?

Profile is all event activity. They charge clients for various event activity, which is all costed individual event based on estimation of the costs.

So, this will get captured in the Fashion revenues? Or does it get captured anywhere else?

Understood. So just to understand the 21% revenues growth, which we have seen for Fashion, what -- if we ex out LBB, how would be the fashion revenue growth for us?

It's very difficult for us to say because we also have had a huge improvement in GMV to NSV ratio by controlling what we call as leakages and it's a combination. So, revenue growth momentum has been higher than the GMV growth momentum. And what we disclose is basically vertical level reporting, and this is what the number is at the vertical level.

Understood. And my second and final question is with respect to the gross margins for the Beauty business. Just want to understand how are the marketing income doing for us on a year- on-year basis? And if there are any trends in terms of brands enabling more marketing spends in this quarter will be helpful?

In this quarter, it has done well, but I'll ask Anchit to answer it.

Yes. I think headline, it's done well. There were a couple of quarters of softness in marketing as brands were deploying more of their A&P budgets towards promos versus advertising. I think it's something we've discussed in the past as well, Sheela. But that trend has finally seems to be reversing and brands realize that they cannot -- there is significant brand awareness work to be done in a market -- in a nascent market like India. So, a lot of the money that was being deployed for promo is now being redeployed into advertising, and that's a plus for us. So, we're optimistic. We're seeing early shoots of it improving, and we don't think it's a Q3 phenomenon. We think it should continue into coming quarters as well. Also, we at Nykaa are also offering a lot more advertising opportunities for brand partners and something we've spoken about in the past is allowing brands to now advertise not only top of funnel in terms of on our homepage, but also allowing lower funnel advertising opportunities like PLAs and other such ad capabilities have been built and are now quite widely used by our brand partners. So that is also a net positive for the services income that we generate. And finally, also, of course, we've created quite significant capabilities in terms of events and experiences and content creation, some of which we covered in terms of what LBB is contributing to our brand partners. And that is also an additional revenue stream for us, which was not as monetized in the past that I think will be a net positive in the future. So, I think we're quite optimistic. But again, I think no one has a crystal ball. No one knows what's going to happen with discounts in coming quarter s. But at this point in time, it looks like things are improving and brands are looking to invest a lot more into marketing than they have in the past few quarters.

And sorry, just one follow-up here, Anchit. Will it be across the board or just the large brands? Or will it include the D2C brands also?

You can't paint all the D2C brands with one brush stroke, right? So even within D2C brands there are different types. And so, I think even the D2C brands, especially the ones that are doing well, continue to want to reinforce that leadership position. A lot of the D2C brands want to break out - get the velocity that they need to become a critical brand. And so, they're investing behind that. So yes, there are some D2C brands that are struggling, and I think there's an opportunity for consolidation on that front. But I think they're not all the same. There are some which are doing really well, and those continue to want to invest behind building brand because that's ultimately what leads to sustainable revenue growth for them in the long term.

I now request Sachin Dixit from JM Financial to please accept the prompt on the screen.

This is Sachin from JM. My first question is largely a comparison between what is happening for Nykaa between BPC and Fashion. Largely, BPC is growing well. Fashion has been muted, while obviously, it's gaining market share compared to other online fashion players, but still muted. However, I mean, my understanding is the customer base would roughly be similar strata in terms of income bracket and all. So how do you see the differentiated customer behavior on your two different platforms? Can you break down that for us?

I think we have always said that we have a more premium customer in fashion. And we do not think that the fashion customer had issues about spending. I think I've repeatedly said that our Fashion business is young. People forget that. It's just a 5-year-old business, and we continue to do assortment expansion that makes the assortment more complete and that will allow us to grow the platform faster going forward. So, it's a work in process. Over the last 2 years, we've done a lot of focus on assortment building, completing certain L3 assortment that we used to not have in the past, bringing certain exciting brands onto our platform, which again, we didn't have in the past. Like Libas was a ne w brand that came in last year. Obviously, Foot Locker is very interesting. They're seeing a lot of new D2C brands in fashion are coming up who are doing extremely well, like The So uled Store, The Pant Project, Snitch, Fablestreet, Freakins. They're all choosing to do business with Nykaa. So, I think there is a lot going on. It's in such a wide space. And we do believe that we have one of the top 3 platforms of choice like Myntra, Nykaa, Ajio are the 3 big platforms of choice. We are a very large platform. And we remain in customer consideration. So, I think we remain very positive about the business. I think some of the growth near term got affected due to a marketing strategy that was followed, which was a little bit narrower. And I think some of those tend to be experiments in early days that set you back by a quarter or so, but we don't think this is a long- term issue. Yes, it does have to be seen in the light of our overall industry, Fashion industry not being at its strongest over last one year, and it needs to be seen in that light. But I think it can't be long-term issue. And we do believe that consumer is going to c ontinue to spend on the base of certain exciting brands that we and we will be bringing into the country or exciting brands that will get created in the country that will be available on Nykaa platform. I think with this, I would also like Adwaita to add if she'd like to add something.

No, I think you covered it.

Yes. Maybe just one additional thing. I think it's a huge strength for the Nykaa ecosystem to actually have Beauty and Fashion offered as, in a way, complementary categories. And I think given that Fashion is a much newer business like has been mentioned several times, we are also incrementally getting better every year and every quarter at how to cross -leverage both categories and how to understand our customers better. So, if anything, we have seen a lot of positive goodness because of that across both businesses and more Fashion because it's the newer business. And we'll continue to keep getting better at it. But yes, that's the only thing I will add.

Understood. My second question would be a follow-up on the part that Abhijeet mentioned. Do you see a lot of cross-sell that is happening between the 2 platforms? Are you seeing -- because I remember when -- at the time of IPO, a few quarters post IPO, we did talk about that the Fashion user base is slightly different to the Beauty user base that we have on the platform. Are we seeing that change? Is there more cross-sell that we are seeing?

I think we had given in the past that about 50% of our new customer acquisition has been part of Nykaa ecosystem earlier, but 50% is new to Nykaa. And the fact that Fashion e -commerce was 5x larger than BPC e-commerce made us believe that there would be customers who would be Fashion first. But over time, beauty and fashion are lifestyle choices and customers tend to have overlap. So, I think overall beauty consumption in the country is on the rise, and many fashion first customers also are becoming beauty customers. Nykaa's own customer acquisition is far accelerated in Beauty now. And also, in Fashion to a certain extent, but a lot more accelerated in Beauty. So finally, it's the same kind of consumer, but they either approach through their fashion first outlook or their beauty first outlook. And we benefit in either scenario. But we do believe in vertical commerce, and the consumers' choice and journey being very vertical-oriented. But with today's digital possibilities that everything is one click away, that according to us, it's not a deterrent. And in fact, having 2 separate vertical focus asset allows us to do more for both sets of customers.

Which is fair. I was just asking on the 50% number that you mentioned, right? Have you seen that trend upwards or downwards?

It's gone. I mean we have a lot more cross pollination going on through better digital frameworks and the number has slightly gone up.

Yes. But just to add, I think it's not something which we have done very aggressively, proactively. So that opportunity always remains. Cross -sell is one, but I think as was just mentioned, cross-pollination. So, getting existing beauty consumers on the nykaa.com app to download and to buy on the Nykaa Fashion app, that hasn't been done at scale, but that is something which we can always do. I think we're just waiting to, as Abhijeet said, continue to strengthen the assortment and then we'll start to do a lot more work there.

I now request Harit Kapoor from Investec to please accept the prompt on the screen.

Yes, please go ahead.

So, I just had 2 questions. One was on Fashion. So, this increase in the marketing spend, how do we read this? Do we read this has increase in customer acquisition cost because the transacting customer and visits haven't increased to that extent? Or is it just an accounting adjustment because LBB is in rev enue as well as an expense. So just wanted a little bit of clarification on that.

It's a bit of both. So LBB has a higher percentage of marketing expense because that's the only expense they have in their revenue. And also, there is a certain small amount of adversity in customer acquisition costs for the Fashion business.

Got it. And the second was just two number related.

I'm sorry, this adversity was also for only 1 to 2 quarters and since corrected. So, it's a mixed number. Sorry, go ahead.

My second was on just number related questions. One was on working capital. Ganesh, do we expect that this reduction in working capital days is representative of full year? Or do we see some adjustments happening at the end of the year, et cetera?

So directionally, as you would see over the last few quarters, the working capital days have been consistently coming down. So, in that sense, the reduction which you are seeing, you can take it as a representative of an ongoing basis.

And also, just one last thing on the margins. Is there anything to call out in terms of Y -o-Y impact in GCC in terms of basis points? Because I remember, the same time last year, you had called it out, but if it's not -- is it relevant to call out this time around?

We have not specifically called it out this time because last year was the first time that had come in and it was not really there in the base, whereas now consistently 4 quarters, we have had GCC come into the base, although the current quarter would be a little higher given that we have now opened the second store, et cetera. But given that GCC is in the base, that's the reason we are not calling it out anyway.

I think on GCC, we remain quite optimistic about the market and the fact that it's a high consumption market with a lot of opportunity to do profitable business. However, the rollout of the stores has been slower than expected and e -com rollout is also pen ding adoption of the technology stack over time. So, I think in that sense, in the GCC right now, the level of activity is not very high to be needing to call it out. But yes, there's been some investment in GCC over last 1 year.

Just a couple of questions. One Falguni, I just wanted to understand how one should think about the steady state EBITDA margin on the BPC business? For last few quarters, we have seen the margin hovering in the range of, let's say, 7.5% at the low end to 9% at the high end. Are we actually at that level? Or do we see room to improve? And how far are we from a steady -state margin? That's question number one.

I think the Beauty EBITDA is a combination of beauty.com, which enjoys a very good EBITDA number. There is a certain percentage now we have been disclosing that about 8% of the business comes from retail, which is also a profitable business for us, but lower profitability than dot com. It can be positively impacted by the profitability of the Beauty private label, which is on the uptick. And we talked about it that we've seen very good growth in our private label business, both in terms of le vel of revenue and profitability improvements have happened, some profitability improvement and there could be more going forward. And lastly, it also is a combination of the weight of the superstore business, which tends to have a negative profitability. So, I think we have given some idea of how each of those change every quarter. So, we tend to report retail as a percentage of omni -channel revenue every quarter and Beauty owned brand also, we are getting the -- at least the GMV and how it is changing every quarter. And finally, on the eB2B business, also similarly, I think some investors have been asking, and we said that we can give the composition of the eB2B GMV as a percentage of our total Beauty GMV. And I think that has been reasonably constant over the last 1 year. So, it's not really breaking out of the weightage zone. But yes, I think there is some amount of adverse effect on EBITDA margin coming from the investment that we make in eB2B business.

Got it. Clear on that.

We have a positive momentum because we think that the EBITDA loss in eB2B will go down over time.

Second question is on Fashion. Clearly, we are seeing slowdown in the industry slightly at more on the prolonged basis versus the original expectations. And of late, we are seeing some increase in marketing expense and plus a sort of a Shein launch, which directionally might keep at least in certain pockets, competitive intensity higher. Any general thoughts of breakeven in the Fashion business potentially getting pushed back? Or you're comfortable with the breakeven next year?

Well, we remain comfortable because if you look at it, like if our marketing expense, which became adverse from 24.6% to 30.5%, if that had stayed under control, we could have possibly had EBITDA margin breakeven this quarter. So, I think the main thing here to balance, and that is what it is for all e-commerce businesses is to balance between growth and profitability and all customer acquisition costs us and typically, the customer that you acquire breaks even on second or third order. So that's the investment we make ahead of becoming profitable on that customer. So, I think we remain reasonably confident that as the ratio of new to repeat customer keeps improving in the Fashion business, we should be in a better place. So, I think today, Fashion businesses where we have acquired about 7 million customers, I'm giving rough numbers, ever acquired 7 million, of which about 3 million are annual transacting users. So, I think we continue to want to create engagement level in fashion customers. And I think I'm a big believer that e-commerce is all about assortment first, and we are really working very hard to continue to improve our assortment. And I think because fifth year of a business is not too long a life, but because most of it has happened since being publicly listed, there's a lot of attention on to it. But I think as our assortment keeps improving and we are really excited about what we've been able to do so far and what lies ahead. And I think the long and short of it is the way the industry is emerging with so many players, such a large market, I think e-commerce has a role to play. So, we remain confident, and we will try to keep working on marketing expenses in a zone that we feel long term comfortable.

And last question, I just wanted to understand directionally on eB2B. How many cities do you further want to expand, i.e. how many more years could we see further expansion in the eB2B business before it comes at a meaningful scale and the incremental investment should not be as high?

I think we are not focusing from a city perspective level. I think the way we are looking at it is that we have a certain revenue growth target and certain amount of revenue growth happens through improvement in productivity of the existing network and some amount happens through investment in newer geographies. I don't think we are covering all over the country. So, I think the new geography is not like going to a totally new geography. I think like we already cover 1,100 cities, which is very wide. And like you saw last year, we increased by 250 cities. So, I don't think overnight is going to change to like covering 3,000 cities or anything like that. So, I think we'll keep adding to the coverage in a way that the overall unit economics of the business doesn't get worse.

I now request Videesha from Ambit to please accept the prompt on the screen. Since there is no response, I'll now request Vijit Jain from Citi to please accept the prompt on the screen.

My first question is now you have had same-day, next-day delivery for about a little more than 2 quarters, I believe, now. Could you talk a little bit about what kind of customer behavior changes are you seeing in the cohorts where you've been able to deliver within that time frame? Has it led to better retention metrics in a quantifiable way? And if you can talk a little bit about whether other metrics in the business like RTOs and returns metrics are different meaningfully when you and where you offer SDD, NDD versus the existing offerings? That's my first question.

Yes, sure. So, I think, look, on as we say for us, as for any e-commerce or any retail business, convenience is one of the 3 main pillars of really building a consumer value proposition. And we've always worked on improving our speed, and that reflects in the fact that our, O2D, order to delivery timelines have reduced from over 4 days to less than 2 days over the past 2- 3 years. And today, as we've said before, 70% plus of orders across 110 cities are sitting at same day or next day delivery. So, our speed is getting a lot better. But it's not that we are doing this at the platform level. We're doing this across the assortment and across a majority of our demand in terms of, as I said, top 110 cities are 70%, SDD, NDD. So, there is no real difference in the KPIs for consumers who are receiving orders same day or next day versus those for whom it is taking slightly longer, whether it be on average order value or anything like that. So again, it's because we're trying to solve for pan -India rollout here of SDD, NDD, and it's available on the entire assortment. So, it's not like there's some limited assortment, etcetera. So, anything that we can, if you live in a particular pin code in a particular city, then a large part of that assortment is now available. So, I would say there's not too much of a difference in some of the KPIs we track.

Got it, Anchit. Because I asked in general, for a lot of e -commerce platforms, generally, when you've seen spread up fulfillment for whatever reasons, RTOs, tend to move down and those kind of metrics we. So, I was wondering. But your answers were helpful. My second question is on Fashion business. I just wanted to get a broad sense on about a year or so back at one point of time, you guys had mentioned that when you're launching new products, either through your own brand or through others, the journey from concept to retail is like 6 months to 1 year for most of the goods on the platform, right? Has that shrunk meaningfully since? Do you think that is one of the major vectors of competition that you will see as Shein comes on board into India? That's my second question.

We think our own brands on our platform is not a very large contributor. I mean we've always announced it that it's about 10% to 12%, but that was always -- we had said the GMV of our own brands to a GMV of our fashion omni -channel business. And within that, it had also the fashion private label that we sell on third-party platform. So, I think I just want to remind you that really, yes, I do understand that fast fashion is what Shein will bring in and fast fashion is what is prevailing in the industry now. So, to that extent, own labels would have to do that. But I think if you are asking for a role of dot com. Dot com is going to get that kind of speed of new launches through a lot of D 2C and other brands that are also coming on to our platform, international brands, D2C brands like Cider is a very similar model to Shein. So, there are other players from China, which have a similar model that are operating. So, there are a number of players who will cater to that need for speed of launch. And our own labels may also participate in that. With that, I think if Adwaita wants to come in.

Yes. No, I think we are not trying to launch at an interval quicker than 6 months. We don't really think that is the problem to be solved with the need of the consumer. I think the consumer does want constant freshness with new drops every month. So, our own brands are obviously dropping product every single month to provide them the newness. But yes, that cycle does begin 6 months in advance. That being said, we do retail a lot of other fast fashion brands and folks who are able to bring trends to the market very, very quickly. And so, we're being able to leverage that sort of fast fashion trendy behavior via our third-party brands, of which we struck a couple of very interesting arrangements where we have a lot of exclusive merchandise coming from those brands and players.

I think at a strategic level, if I may say at this point, we want our fashion labels to be enablers to our dot-com business and, they are being built as brands with the journey, which is independent of just our platform and beyond that also. But I don't think the ambition is to build a very big fashion brand with the aggression of trying to match some of the fastest, largest fashion brands in the country. So, we are not coming from that. We really are retailers - I always say that for even Beauty that we are a retailer first, and we want to continue to build strong retail platforms. I think on beauty.com, now we are so large that, that is also giving us opportunity to build our beauty brands in a much stronger way because we are a very large distributor. But again, when we are building those brands, we are building them both on platform and off platform. So, we have a brand approach to building brands, but distribution strength is also important, and that is what is the unique source that Nykaa has.

I now request that Siddhartha Bera from Nomura to please accept the prompt on the screen.

The first question is on this growth on the BPC side in the NSV. So, we have seen now for quite some time that the NSV growth has lagged the GMV growth in the BPC segment. So, what is really driving this? Will this converge at some point or? There are some fundamental changes in the business, which will continue to drive this? Some thoughts here?

It has converted this time. This time, the NSV growth is slightly faster than the GMV growth.

Okay. Okay.

Sorry, I think NSV and revenue from operation is similar. I think, yes, the GMV is still slightly higher at 32%.

Yes. So, anything particular which we should look at, which has changed because it's like for the last few quarters, we have seen consistently NSV underperforming the GMV. So, any thoughts here will be helpful.

No. I think what we were telling you earlier was that basically, this is reflective of all the brands who sell on our platform. And discounts in the industry had been going up over the last 5- 6 quarters because of competitiveness amongst all the brands. A lot of international brands are coming into the country, a lot of domestic brands, which already have been there for a long time are competing with each other and a lot of D2C brands are also jumping into the picture. So that had led to additional competition. And as a result, the brands were discounting to compete with each other. So, there is some amount of that reflection in there.

Understood. And second is on this BPC business. Again, I mean, if I look at the profitability, at least at the EBITDA level, it's been stuck at a certain range for quite some time now with offsetting factors always coming from a bigger push towards growth. Do you think at some point or at a certain scale, we should start touching that double-digit type of profitability in the near - - next few years?

Yes. I think like what I've been trying to say is that most of the investment, we have done a lot of improvement in many of the direct cost items. And I think marketing, which is also a direct cost item, we have chosen to invest a little bit more than, say , a year ago when it was at 9.5% for Beauty and now it's at 10.1%. We don't see this as something getting adverse. We see a conscious strategy and decision to invest more in marketing to accelerate our growth and that you can see in terms of acceleration in our customer acquisition and in our growth, and we do believe that, that's been very valuable. I think the next line that we need to really work on is other expenses, which have been 12.6% a year ago and only 12.5% now. There could be some improvement in controlling those expenses and we would like to do that. And yes, so I think net-net, we do believe that over time, we'd like to control both marketing expenses, bring them down and control other expenses, bring them down, and those 2 can lead to improvement in EBITDA margin for Beauty vertical.

Got it. Lastly, on the gross profitability side for the BPC. Do you think there are further levers where we can look to sort of improve that from where we are already like higher growth in the house of brands or some other areas where you can think that we'll continue to improve our gross profitability? Or this is largely probably at a level where you need to look at more other costs to sort of improve the overall profitability?

No. I think while gross profit margin is quite healthy, yes, I think -- I wouldn't say that there are no drivers at all available to e-commerce businesses. I mean, advertising is one such driver, charging for maybe faster delivery in some at a future date or a whole bunch of stuff. But I think we have a very large business. So, what all will move the needle is a key question mark rather than are there ways in which we are improving our gross profit margin. We are, of course, improving. We showed earlier that even in B2B business, we've had improvement in gross profit margin. We have had some improvement in gross profit margin in overall in Beauty business, like it's moved up from 42.2% a year ago to 43.4% now. So, I wouldn't say that it's a very healthy number, and I don't want you to believe that, oh, it's going to go up soon, but I also would not like to admit that there is no ability to improve that. And yes, as a company, we keep trying to improve our gross profit margin. But because it's a very large number on a large business, you have to do a lot of initiatives so that it can move the needle.

Yes. Maybe I can add. I would say that each of the individual businesses that sit within the Beauty vertical have certain opportunities to improve gross margin. For example, for the multi- brand retail business, if the premiumization of the category plays o ut nicely, then that is also margin accretive. If ad income, as I spoke about earlier, if that revives it continues to revive and if we continue to create more opportunities for brands to advertise on our platform, that could be gross margin positive. And for B2B as well, there are things the team is working on to improve gross margin, as you said, house of brands. But I think where it gets very complex is that this vertical is a combination of those businesses. So sometimes even if each business is independently improving their cost structure, improving their margins, if one business that is smaller than the other grows faster, naturally off of a smaller base and becomes a larger percentage of the total mix, at a consolidated level, that can look like it's staying flat. So, I hope you understand that complexity also. But what I can assure you is that each of the underlying businesses have improved their respective margin profiles over the past several quarters and years for that matter.

That was the last question we can take today. You may reach out to Nykaa's Investor Relations team for any additional queries. I would now like to hand the conference over to management for closing comments.

Thank you very much. We've really enjoyed this participation from all of you. I hope we've been able to answer most of your questions. And I also want to thank my team on this side who have participated in this call and provided you access to that thought process. So, thank you very much, everyone, who have participated in this call. And with that, I look forward to connecting with you in the future.

Thank you.

Thank you.

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Thank you.