Lenskart Solutions Limited (LENSKART) Q2 2027 Earnings Call Transcript

Ladies and gentlemen, good evening and welcome to Lenskart Q2 FY27 Earnings Conference Call. To present the results, we have with us Mr. Piyush Bansal, Co-Founder and Chief Executive Officer, Mr. Abhishek Gupta, Chief Financial Officer, and Mr. Vaibhav Sajdeva, Investor Relations. Please note that this call is being hosted on Zoom with a presentation on display. For participants who would like to view the presentation alongside the discussion, please join via the Zoom link shared in advance. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, you may use the chat option to interact with the moderator. Please note that this conference is being recorded. I now hand the conference over to Mr. Vaibhav Sajdeva, Investor Relations from Lenskart. Thank you, and over to you.

Thank you. Good evening, everyone, and thank you for joining Lenskart's earning call for the second quarter of fiscal year 2027. Before we begin, I would like to remind you that some of the statements we make today may be forward-looking in nature and are subject to risk and uncertainties. The conference call may contain forward-looking statements about the company, which are based on the belief, opinion, and expectations of the company as on date of this call. These statements are not a guarantee of future performance and involve risk and uncertainties that are difficult to predict. We have uploaded our Q2 results and a detailed shareholder letter on our website and to stock exchanges. Please note that consistent with our IPO prospectus, the numbers we present today are on a Performa basis for like-to-like comparison unless stated otherwise. Performa Financiers consider Dealscard, Mellor, and GeoIQ as if they had always been part of the company, whereas Reported Financials include them only from the requisition dates. From Q3 Fiscal 26 onwards, the two are identical. The difference exists only in the prior-year comparatives Q2 Fiscal 26 and H1 Fiscal 26. We will begin today's session with opening remarks from Piyush and Abhishek. During this time, everyone will be on mute. Following the presentation, we will open up for Q&A. With that, I would like to hand over to Piyush.

Good evening, everyone, and thank you for joining us. As always, we are grateful for the trust you place in us, with your capital and with your eyes. The size and depth of the vision care problem are far greater than we can imagine. Last quarter, I touched upon this, and numbers this quarter only reinforce our belief in the scale of the problem and opportunity. To begin with, let me take you through the key financial highlights of the quarter. Revenue grew 32.5% year-on-year to Rs 2,845 crores. EBITDA grew to Rs 624 crores, a 46.6% jump year-on-year. EBITDA pre-Indias grew 65%, twice as fast as revenue, with margin expanding from 11.1% to 13.8%. Pat, more than doubled to 232 crores. For the half-year, revenue of Rs. 5,559 crores increased 1.3x year-on-year. EBITDA pre-indice increased 1.8x year-on-year to 753 crores. Pat of 461 crores is already 87% of the whole of FY26. And on a trailing 12-month basis, we have now crossed 10,000 crores of revenue, 2,200 crores of Emitter, 1,300 crores of pre-Indias Emitter, and close to 800 crores of Pat on 40 million highway units. Like I always say, measure us over years, not quarters. Behind the financials, this quarter, we conducted 80 lakh ITES globally, up 40% year-on-year. In India, around 70 lakh, that is 78,000 Indians a day. Units grew 27.1% year-on-year. We added 165 net new stores globally. Taking the network now to 3,624 stores. In quarter two, India delivered same store sales growth of 20.8%, with same pink coat growth of 27.1%. We have said too little about Hustler Club, a face scan on the app, and a complete pair, frame, lenses, and warranty, all for Rs.500. Lats joined this quarter, many owning glasses for first time. It is one of the ways how we hope the next 100 million Indians find us. Also, this quarter, Lenscut Gold crossed 1 crore active members in India. Up 39% year on year. With 73 crores of gold fees collected in the quarter. Up 55% from last year. It is the quietest and most powerful thing we are building. Our brands are also learning to speak the culture. This quarter, we have launched John Jacobs with Masaba. We also launched Shunya, which brings Indian classical music into a frame. A beautiful collection. Right down to details inspired by the sitar and flute, we brought it to life with sounds of Shunya, ten artists across five evenings, including classical vocalists, sitarists, and popular musician duo, the Backstage Siblings. In Singapore, we launched a Game of Thrones collection from the iconic emblems of the Great Houses. Temples shaped by swords and armor. To the three words every fan knows, winter is coming. Every detail of that world is captured on the frame. And this week only, we have launched John Jacobs with designers Shantanu and Nikhit. If you look closely, you will see the intricate details, the SNN mark on the frame, a thin metal line along the temples. And their signature navy and cherry red colors tucked into the hinges. This is the kind of craft we are building into our frames. And Mellor's unique take on Diwali is launching today. And now the number we watch most closely, our net promoter scope. Opening a store a day while building our standard is hard. India NPS, as you are aware, dipped to 77.6 in June. But we assured you that we have been working hard to get back to our NPS levels. I am happy to share with you that in this quarter, it is back at 79.6. That recovery on a ship this size is what we are proudest of this quarter. Last quarter, we told you India has not bought its glasses yet. By 2030, 94 crore Indians will require glasses. And this is the goal. It is why we say India needs at least 10,000 plus lens car stoves. It is only fair that we tell you what kind of company it will take to change that, and show you where we are on building it. We believe it needs four things this industry never had. First, it will be an engineering company. The hardest problem in eyewear, the eye test above all, will not be solved by hiring more or spending more. 100 million pairs a year needs 80 million eye tests. So we are engineering the eye test, remote optometry, now in 934 stores, and also Drish, the AI-assisted eye test, is in pilot. Similarly, one needs engineering for myopia-controlled lenses, just-in-time manufacturing, supply chain, and more. Second, it will own its supply chain end-to-end. That is why that is the only way to make a Rs. 500 pair profitably and give it the experience of a Rs. 50,001. A complete pair at that price is only possible when the frame, the lens, the fitting, and the store are all ours. And I believe in time, the same will be true for smart glasses too. Third, it will build brands people want to bear. Brands that speak the culture for everyone at every price. The same platform that gives India a hustler also gives it John Jacobs, Mellor, and Own Days. That range is not a side effect of the model. It is what makes it work. The hustler brings the volume that keeps the factories running at scale, and that scale lets us make a designer pair to the same standard at a compelling price. And fourth, it will never believe its customers are satisfied enough. It will keep innovating and keep surprising them. That is the company we are trying to build. It is easier said than done. It has to push harder, think like founders and builders, and change as fast as the world. If one word holds all four, it is Evolve. We named our new concept store, Lenskart Evolve for that reason. It opened in Utopia City, Wurley, Mumbai, on a belief that the future of eyewear will be shaped not just by the products we create, but by how people discover and experience them. It brings design, culture, and technology into one immersive space, the first expression of what an eyewear destination and the Lenskart brand can aspire to. Walk in, spend an hour, and you will get a flavor of the culture we are building and the bar we hold ourselves to. Raising the standard, refusing the status quo, thinking from first principles. With that, let me hand over to Abhishek for the segment results.

Thank you, Piyush. Good evening, everyone. Let me first talk about the India business. India revenue grew 35.3% year-on-year to 1,668 crores. First half revenue grew 33% to 3,199 crores. And as we keep saying, in our business, growth and profitability are positively correlated. EBITDA pre-India S116 reached 267 crores, up 61.5% from last year, which translates to a margin of 16%, up to 0.6% points from 13.4% that we did last year. Product margin was 64% against 63.4% last year, and most of the gains from in-house manufacturing were actually consumed by the rupee's depreciation against this quarter. In terms of operational highlights, India ITUS grew 44% to 70 lakhs, with remote optometry now live in 934 stores, up from 303 a year ago, powering the volume-led growth. Either units, up 26.5% to 86 lakhs. The same store sales growth was 20.8%, up from 14.8% a year ago, broad-based across the tiers. St. Pincode sales growth of 27.1% ran 6 percentage points ahead of the SSG. Nensification continues to add demand, not divided. We added 143 net new stores, 94 interior plus towns, entering 61 new cities, taking us to 2868 stores as of 30th September. Now coming to the international business, International revenue grew 29.5% to 1,201 crores and about 23% growth in constant currency terms, growth across all our markets. EBITDA pre-India's 116 reached 127 crores, up 87% from last year, which translates to a margin of 10.6% up from 7.3% last year. Product margin expanded to 77.1% versus 75.5% last year on deeper supply chain integration of HomeDays and Mellor and higher sunglasses mix. Growth was volume-led and largely same-store-led. Either units grew 29.7% and transacting customers were up 22.7% with 22 net new stores added during the quarter. Sunglasses grew strongly, led by Miller, and a flat sequential revenue after Q1 seasonal peak is the normal shape of the year. Now, coming to cash flow. Operating cash flow cost 388 crores for the first half of the year after the working capital build-up as inventory was rebuilt ahead of the festive season, like we had indicated in our quarterly earnings before. This funded the store capex of 187 crores for the 297 net new stores that we added, and after including the 108 crores of other income and inflows, covered the plant and other capex of 297 crores, leaving net cash inflow of 12 crores before M&A. Return on capital employed was 22.5% for H1 of the year versus 19% last year, and 14.6% for full year F126. Improving profitability and disciplined capital allocation is evident in the numbers. With that, let me hand back to you, Pesh.

Thank you, Vishay. One, in our investor conversations lately, more often than any other, why we believe a 25% EBITDA pre-India's margin is possible in the long term. This quarter, we have added a note on this in our letter. Let me also take you through it here. A margin comes from one thing above all, how much of the chain we own. Seven things decide the profit on a pair of glasses. Who owns the brand? Who makes the frame? Who makes the lens? Who edges and fits the pair? Who sells it? Who does the R&D on materials? And how the whole operation is run. Lenscart chose to own all seven. From factory to face. We did it so that one party answers to the customer for the gold pair, a single throat to choke. And each of these seven also becomes a pool of profit. With Vincent Chase, John Jacobs, Ondes, and Bellum, we own the name on the pair and the margin behind it. Licensed collections are also exclusive to our markets. Part of this quarter's rise in India ASP came from customers choosing old-age premium lenses. We will keep expanding our brand's portfolio. Second, we mold the frame ourselves in our factories in India, China, and now also in Thailand. In-house frames went from 44 lakh units in FY23 to 78 lakh units in FY26, a 20% gag. And growth has now stepped up to a different pace. This quarter, we manufactured 72% more frames from last year. Every frame molded in India no longer moves with the dog. And every step we bring in-house is one less margin we pay outside. Owning the mold and the process was the first layer. Tooling and plating comes next. More of it in-house and more of it in India. And the mold cost per piece keeps falling with scale. Similarly, lens manufacturing. Progressives, complex powers, premium coatings, including Goundé's premium lenses, we now make more and more of them in India. In-house lenses went from 21 lakh units in FY23 to 56 lakh units in FY26, and 52% more this quarter than a year ago. Some of these India-made lenses already reach our international markets. Making more of lenses in-house, sending more of them to our international markets, manufacturing sun lenses, and more are big opportunities here. Similarly, a pair has to be made to measure. It does not have to be made by hand in a shop. Nearly every pair, every India pair is made centrally in Biwadi or Manesan, and Biwadi runs at 75% automation. Fitting, quality control, and packaging are still largely manual, and that is the headroom. Scale is the biggest lever. On top of it sit automation, robotics, and pre-making, the most common pairs in bulk. Data tells us what will be ordered. Hyderabad, built for 50 million pairs a year under one roof, and around 12 months from commissioning, takes all of this to the next level. Beyond the store and the customer relationship, the retail margin is ours, and so is every eye test on record. That record trains our technology. Since store steam and rent are largely fixed, large part of the same store growth flows through. India rent fell to 5.7% of revenue from 6.1%. With same-store growth of 20.8%, running well ahead of roughly 5% annual cost escalations. Add better conversion and more efficient marketing, and more of that growth becomes profit. And now, we do not just make a pair cheaper, we make it better. Airframes weigh almost nothing and do not break, and customers pay a premium for that comfort. Night drive lenses went from lab to store in months. Myopia management lenses for children are a category we are building. Because we are direct to customer, each of these is designed to what customers actually need. We have only just started here, but we believe R&D will become one of the largest generators of both value and profit in the long term. And seventh, we are building a company that can make 100 million pairs a year and run 10,000 stores, increasingly through systems and automation. Being an engineering company at heart, we build the entire operating system ourselves. Our stores run on our own point of sale. Our ITS machines on our own software. Our factories on our own software, Nexus. Replenishment on Argus. Site selection on GeoIQ. This year, CRN, call handling, and talent acquisition, outsourced for years, also came in-house. Anondaze and International are moving on to the same platform. The more runs on one system, the more powerful it gets. AI is not a separate project here. It is how we run the business. That is the path to 25%. There is still more to build in every pool, and every pool we deepen makes the others worth more. But to be clear, we have a small percentage of the global highway market. Growth always comes first. Profitability is running ahead of where we expected it to be, and we intend to use that room. More marketing in the right places, more of Bharat, and scaling international while the unit economics play out. We will not put a time frame on 25%, read our margins over years, not quarters. The quarterly numbers might move, the direction will not. Before I close, a thank you. Last quarter, I invited you to walk with us. You walked 800 million steps, 15 times around the earth, and 30,000 underprivileged people got glasses from Lenskart. It is still day zero. Wishing you and your families a very happy Diwali. With that, we will open the floor for questions.

Thank you very much. Ladies and gentlemen, we will now begin the question and answer session. Participants connected on Zoom may please use the raise hand option. Participants connected through audio may please press star and 1 on their phone now. We will wait for a moment while the question queue assembles. We'll take our first question from Devanshu Bansal. Devanshu, please introduce your company name and go ahead with your question, please.

Yes, sir. Hi. Good evening. I'm Devanshu from MK Global. Thanks for the opportunity, and congrats on a very good set of numbers. Piyush, I just wanted to better understand your margin trajectory. So you have indicated the focus is on growth, which will require strategic marketing investments, while the long-term margin potential is pretty healthy at 25%. So I wanted to better understand if we will continue to see margin gains on an annual basis in the near term or the gains will be more back-ended if we could just throw some light here.

So I think, hi, Diranshu, thanks for asking the question. See, if you have seen that, and as Abhishek said, in our business, revenue and profits are quite positively correlated. And from that perspective, the more volumes we grow, in the long term, the margins will continue to grow. However, you know, we need to make investments ongoingly, quarter on quarter, like we have so far in creating, opening up the market for Bharat, also in creating a brand that can outlast. You know, the campaign, because we at Lenscard have not necessarily believed in transactional level marketing. We always believe that we need to do marketing, just like we did Lenscard Evolve, you know, which can build the brand for a very long term and create that pull. That is the reason why we have seen so much leverage come over time. So year-on-year margins should expand, but I would urge people to look at 12-month training versus quarter-on-quarter.

Fair enough, sir. That's pretty clear. Secondly, just a bookkeeping thing. So, there was a GST cut last year, which may have led to some shift of demand to Q3. So, wanted to check if the base is sort of high for H2 and whether we should take a note of this while we are sort of estimating for current H2.

Yeah, great. Thanks. So, overall, look, my view is that quarters will always move with the campaigns, product mix, and base effects. The number, at least, we work on internally is of the volume growth. If you look at our volume growth over the last 12 months, it is about 26%. And this quarter also we did 26.5%. That is unit growth, right? And that is the number that we work towards most importantly. The second number that is very important is the quality of that growth and are we really opening the market? The 44% gain in ITES in India. This is another number that tells us that we are opening the market. And the SSG of 20% shows the quality of this growth. So, I would say that look at a trailing 12-month volume number as how we build the business. Rest, you know, premiumization happens. We are opening Bharat. So, quarterly numbers fluctuate.

Thank you. Ladies and gentlemen, kindly restrict your questions to one at a time, please. Take our next question from the line of Nihal Mahesh-Sham from HSBC. Please go ahead.

Yes, hi, Abhishek. Good evening and congratulations on the strong performance. Two questions. One is, you know, your ASP has obviously been discussed and you've always focused on the fact that you want to obviously keep introducing value options and despite that, you know, we've seen a good uptick if we compare versus last quarter or last year. So just wanted to understand, is it a case of premiumization that is outstripping, you know, the value launches?

Yeah, hi. Hi, Nihal. See, overall, you know, we are working on both ends of the spectrum. The ASP increase comes at the back of people choosing more progressives and premium lenses at Lenskart. We do not manage the ASP. You know, one of the, our top goal right now is to build the next 100 million Indians into the Lenskart ecosystem. So, you know, ASP is coming increased because of introduction of products like John Jacobs with Masaba, Shantanu Nikhil, and customers really actually welcoming the Onde's lenses that we have launched. But, you know, we do not, you know, manage the ASP. Of course, there are quarters where, you know, volumes can take over the ASP. But that I think will change with every quarter.

Thank you.

Understood.

Next question is from Mihir Shah. Mihir, kindly introduce your company name and go ahead with your question, please.

Hi, team. Good evening. This is Mihi Shah from Nomura. Thank you for taking my question, and congrats on a good set of numbers, especially on sustaining margins despite the high volatility in currency and raw materials. So, two questions here. One, how should one think about the realization per piece going forward in the last year, in the second half? It was higher, and of course, I understand that more designer products and Progressive is driving that up, but I think it was also a function of the freelance offer that was offered that time, which had some kind of influence as well on the second half of last year. So on that higher base, how should one think about realizations going forward? And will the workaround premiumization help you tide over that? So that's one. Second thing I wanted to check was on the international business. On the international, the volume growth also, since 3Q of last year, volume growth has actually materially stepped up. Can this growth sustain over the time? And even that 8% margin on international, will it be the new normal going forward? So these are my two questions.

Yeah, I mean, thanks for asking the... Great question. So firstly, on the realization, I would say again, we continue to stay focused on the volume number. Progressives, we have invested a lot in improving the eye test experience of our customers. We have been digitizing measurement, and that has caused it. And of course, when you run a campaign like New Lens Replacement, it would normalize. But we are also running Hustler. Which is a 500 rupees glasses in a massive way right now. And we would see more and more coming from there. So it's very difficult for me to guide on that. I would say that our core priority definitely remains on volume, and it comes on both ends of the spectrum. I'm not saying that we are only looking at volume. At the sub-2,000 price point, they're also looking at making sure that our existing customers continue to buy more and more. If you see, there is an interesting data that our units per customer has actually grown this quarter from 1.8 to 1.9. That shows us that the customers that we acquired through new lens replacement were actually high-quality customers. And it is very important for us to keep balancing the two. On one hand, we acquire customers, whether it's through New Lens Replacement or now, you know, increasingly from Hasla Club. These customers repeat in the cohort, and we need to manage that, and just like we want to manage people at both ends of the spectrum. I would just say, at the stage where LensCart is right now, particularly in India, it is a market to build. It is not a market to just capture right now, and we clearly feel this is the time. This is too early in our journey in India, and that's what we tried to communicate in the last shareholder. That the opportunity is so large, and we are seeing the depth with every quarter that goes by. We should right now be figuring out more and more, and that is why so much more focus on widening the funnel, which creates the biggest opportunity for us as we improve conversion. It gives us the opportunity to scale. That remains the top priority. Coming to the second question on international. Look, I think the market that we are operating in, this problem in myopia is not just in nuclear. There are two things that are happening globally. One is, particularly in Southeast Asia, myopia rates are right now growing very rapidly. Second, people are looking at alternate D2C brands. Globally, you can check. So I think the volume growth there is coming as a result of primarily that because people are looking at me, you know, we are not playing the game there again to raise the ASP. In fact, ASP has largely been flattish there. And we have not even started our journey for market creation there. We are still slowly and steadily building the model there. I think margins, product margins, we had anyway said that as we integrate. More and more, the India supply chain with the international supply chains, we would see margin, product margin expansion, and we obviously continue to see a lot more opportunity there. And so the more growth will happen and product margin getting streamlined, the EBITDA should come in line, but it is difficult to guide, you know, to a particular number at this stage. It's too early, even more early than India and international.

Fair point, Piyush. We completely understand that, and we take that. Thank you, and wishing you all the way best.

Thank you. Next question is from Amit. Amit, kindly unmute your company. Thank God your question, please. Kindly unmute.

Yeah, hi. Thank you for the opportunity, and congratulations.

Amit, can you introduce your company?

Yeah. Hello. Am I audible? Yes. Yes. Yes. Yeah. Yeah. So Amit Pluit here from Ilara Securities. Thank you for the opportunity and congrats on good numbers. I just wanted to understand more on this lens card evolve. I know it's a new thing, but if you could provide some more insights in terms of how do you think about it over the next one or two years, what the rational, I understand that it would be a differentiated experience from the consumer perspective. But from a store economics or how do we think about that? And even the kind of ASPs in this kind of a store would be on an average. If you could highlight this and just one added to it is just insights on you talked about this quarter own days also helping into the realization increase in the India business. But how has been meller and progressive lenses qualitatively? If you could Provide some insights that will be helpful. Thanks.

Yeah, thank you. Thanks for asking the question. So, the first question Amit you asked was on the evolve. So, see, I think overall, I think if I look at the global ecosystem in consumer experience and retail, both things need to… Yvonne, no pun intended, you know, the product and also the buying experience. And this is a pattern you would see globally, everywhere. And globally, I have seen especially the kind of brand that we are trying to build at Lenskart. Most of people just know Lenskart as a great place to buy high quality specs, you know, at affordable prices and good customer experience. I think our idea was to take this to a completely different level with the consumers. And raise the brand aspiration. So it is a pilot. It was a pilot in many sense. I would say it has got a very positive response in the first month we have launched, although it is too soon. We haven't really, you know, haven't really planned that we will open these many wall stores yet at this stage. But one thing is for sure that as a Lenskart brand, we do want to keep raising the bar on customer experience. If I look at the last decade of journey, that is what has always worked for us, to not stay static at any level. Because we are, in some ways, in this category, trying to compete with ourselves and with other categories. Because, you know, in most of the categories, you go to a Nike town in London, and you go to all other lifestyle categories, the experience is far ahead. We have unfortunately, never seen eyewear in the same, you know, in the same way. And our job at Lenskart from the very beginning earlier when we did buy one, get one, or when we made eyewear fashionable, and We brought these concepts of I wear for Diwali, I wear for fashion, and now we want to do the same in experience. I think that is all we are trying to do right now and create that experience. And to be honest, we are very, very happy with the response that we are getting. It is not an initiative right now to say, okay, let's build a store with higher ASP. That is not the goal here. The idea is to innovate on the customer experience. And there's a lot of learning to take here, which you will see us adopting in all our other stores. And maybe we will open more of such stores also. But it is too early to comment on that. What I would definitely take from Evolve is the overall mindset. That we want to build and start on, not just here, because to build a global consumer brand out of India will require doing things in raising the bar beyond the status quo. And I think that is what I would take away from it.

The second question was, It was around progressive lenses. You indicated on days it has been one of the driver for ASP increased this call.

Yeah, so I think overall we have shared in the last quarterly report that we have seen a large number of consumers adopting our premium lenses and in progressive increases because we have been spending a lot of time in bringing consistency in our buying experience. And in our ITest experience, we have been digitizing the whole buying journey for Progressive, which conventionally and traditionally has been very manual, where you put two dots on a frame and somebody takes the measurement. And so we have been, we have moved a lot, large part of that digitally already. And as you go into the lens card stores, you will see more and more. We have also been using a lot of AI to streamline our overall eye test accuracy in the ecosystem. So, that is why Progressive is growing.

Thank you. Happy Diwali. Happy Diwali. Thank you.

Next question is from Arnab Mitra. Arnab, kindly introduce your company and go ahead with your question, please.

Yeah, hi. This is Agna from Goldman Sachs. Thanks, Piyush and Abhishek for taking the question. Congratulations on a very strong quarter. I had actually two questions. First was, if you could just help us appreciate the AI eye test, how big of an unlock will this be versus, let's say, remote optometry, which has, of course, been a big unlock for increasing eye tests. And as you go forward, does remote optometry and AI-assisted eye testing go together or the AI-assisted thing can fill the gap because there is still a large number of stores where the remote optometry doesn't operate? That was my first question. And the second was just on international store expansion. Do you think the capacity addition in Hyderabad is a critical level requirement for significantly upping the store expansion in international? Or are there other things that you are waiting for?

So firstly, see if you look at the problem we have at hand here is that there are just way too many people who need eye test. And there is possibly no other way but to engineer this in my view. You know, we are not creating more optometrists. We need to make sure that our optometrists have the tools to do a lot more eye tests per optometrist. And that is the belief that we are working with. Definitely remote optometry unlocked this for us. And that is the reason why we have been able to open almost a store per day this quarter in Tier 2+. This was not possible a year ago. What Drish does, which is take it to the next level, because if an optometrist could do 2x more eye tests... With the current model, with this odd model, possibly they could do 20 times more eye test. So from that perspective, is it going to be a big breakthrough? Yes. And are we seeing very positive outcome? Yes. It is already live and piloted in a few stores. We have customers doing this eye test. We are constantly measuring. Of course, we are dealing with a very sensitive area. We have optometrists that log on to the call while this is happening. We are putting more data into the SLM, which is training it further to higher levels of accuracy. We are using our optometrists more and more for complex cases. So yes, in my view, this is going to be a big breakthrough. But there is still time before we perfect it. But I don't think... We have a choice. I mean, you have a billion people who will need to learn and grow, and we will have to figure out ways to do that.

Thank you.

And the second question was on international store expansion and the capacity. So, look, we are increasing our capacity in our existing plants also every quarter that passes by to meet the demand. Ahmedabad, we showed the video during the presentation. It's coming up well. I think we are trying to accelerate that as much as possible, but we will be able to manage the growth. And on international store expansion, we have been slowly and steadily accelerating it, if you see. Overall, we have opened in H-138 new stores versus 22 last year. And as unit economics are playing out, the playbook remains the same. And like we did in India, we are slowly and steadily selecting it. We don't want to get Russian to be on the point.

Thank you. Ladies and gentlemen, I request you to rest in to one question at a time, please. Next question is from the line of Varun Kapoor from Investec. Please go ahead.

Yeah, hi, good evening. So I just had one question. Even when I look at your gross margins, both in India and international, you've seen expansion across both. And obviously, you've mentioned several factors here, whether it's the back-end sourcing improvements or, in your case, this time in India, even a higher ASP. I know you're not working towards that, but that's how it's played out. I just wanted to understand what have been the negative factors on the gross margin this time, especially on the cost side. You know, you've seen a significant cost inflation overall in, you know, in different elements. Just wanted to, you know, get either, you know, quantify or qualitatively give a sense of what would have been the down elevator, if any, to the gross margin.

Thank you, Anit, for asking this question. This is a major focus that we have here at Landskart. So if you see last 2-3 years, we've been increasing our product margins both in India and international. In international, we have added from 75% to now to 77% product margin. And in India, 63.4% has gone to 64%. So there are two or three tailwinds as we work towards this product margin line, and then there are a couple of headwinds, right? The tailwinds in this are more and more in sourcing of backward integration, which means producing more frames in-house, whether it is in India or in our factories in China and Thailand, and producing more lenses in-house. And then the other thing is making more and more in India. And finally, the volume and scale economics, as we are doing, let's say, double of what we were doing four years ago, then we are able to negotiate better costs with our vendors. So all of that are the productivity benefits that come with scale and backward integration. The challenge that we've been grappling with is largely around FX. The raw material on this is largely important, right? So, if you see the INR versus RMB. If you look a few quarters back, it used to be around Rs.11 or Rs.12, now it is Rs.14.2 as of today. So that is one challenge that we have been working with our vendors in scale to offset it. And we have done some structural solutions to it. We have invested more in our capacities in Thailand, long-term investments that we have made by increasing our stake in our joint venture in China. And then finally, more and more of it which gets made in India will ultimately offset the volatility that comes with imported input. At a group level, I want to be very clear that at a consolidated business level, we have a natural hedge in our business because we also have almost 40% of our revenues coming from non-INR countries. So, overall, the P&L has a natural hedge and currency protection, but from an India product margin line, currency continues to be one thing that we solve for structurally and long-term orientation basis. The other effects that we see, whether it is on packaging, on logistics, on oil price-led input cost inflation. That effect is very minimal because our products are third-order derivatives of oil, and therefore there is less impact on cost from that side. But currency remains the major factor.

Thank you.

Great. Thank you. Wish you all the best. Thank you.

Next question is from Ashish Kanunia. Ashish kindly introduced your company name, and go ahead with your questions.

Yeah, thank you. This is Ashish Kanodia from Citi. My questions were firstly on Hustler in terms of how big currently it is in terms of volume in India and what kind of opportunity you have seen it opening in terms of maybe, you know, getting customers from a much deeper, smaller markets or, you know, maybe getting more frames per customers. So just trying to understand how hustlers experience has been in terms of new customer acquisition or in terms of getting more payers per person. And also on the international part, the question is around, are you also looking to enter into any other larger markets, such as maybe US, Europe, etc. And also given the kind of, you know, cash rich balance sheet you have plus the operating cash flow you are generating. If you have to get into any larger markets, will the thought process be more organic or inorganic? Thank you.

Yeah, thank you. Thank you, Ashish. Yeah, right now is our most exciting project, I would say. It is still very early in the journey. I would say it's nascent. It has taken us many years to crack. A pair of high-quality glasses affordably at 500 rupees. It's been an easy journey. But now that we have worked on it for so many years, I think we have to give it a little bit of time for it to show the impact it can create. And I think, yes, so far, I would say lakhs of people are coming. They have started their journey online. They scan their face, and then they can go collect a pair of glasses at a store, they can change the size, they can add a prescription lens, and we are learning every day more and more. And we are also innovating on more colors. We are now manufacturing a lot more of hustlers in India. But I would see this more as an initiative directionally of what... We will do more and more of, you know, whether it is Hustler or whether it is something else. It is one of our ways. We are quite obsessed about taking our 30 million, you know, 200 million, you know, and we want to get to get there because we are serving. You know, the ambition is to give vision to a billion people. So those step jumps need to be taken. And I think Hustler, so far, I would say we have been happy with. That being said, we have a lot of work to do in it, to manage this kind of scale, to manage logistics for it to reach tier two, tier three cities, to make all of it work profitably, to manufacture such large volumes. Of frames as well as lenses, because what we are dealing with is a prescription business. So yeah, I would say it's an early start, but a lot of work to do. On international, so far, you know, yes, we are sitting on a healthy balance sheet right now. We continue to keep our priority as investing in, you know. Hyderabad right now, accelerating our store opening slowly and steadily in international, which we have done so far in H1. In India, we are now almost opened in the last period. We have opened 1.8 stores a day right now, if you put it behind global. And we want to make sure we do this with an experience, you know, which is long term and lasting. And that is the part we want to continue to balance. Cash definitely gives us the room, but it is the execution that is slowly earning us the right to use it judiciously. We have a lot of opportunities, I have said. We are adding more and more to our brand portfolio also right now. So, yeah, too early. Sure, thank you.

Thank you. Next question is from Latika Chopra from JPMorgan. Please go ahead.

Thank you for the opportunity. You know, questions that I have closely is on the Tier 2 plus cities. You know, this is being aggressive scale-up coming from you. Wanted to get some flavor on, you know, what are you observing in these markets in terms of consumer purchase behavior, in terms of repeat purchases, propensity for number of pairs, and of course, are the unit economics still at par with what you see in metro cities? And the second bit would be helpful if you could share some qualitative colors on how same-store sales growth trends are behaving in your key international markets. Thank you.

Thanks, Lithika. You know, you're 2 plus so far, you know. The fact that we have been scaling that aggressively is because we are seeing very positive outcome. I think, largely, whether it is international, when we entered, we entered with the belief that what kind of value creation we are doing. I mean, to enter a market like Singapore wasn't an easy decision. But when you look at the gap, the problem of myopia there, the price which customers pay, you know, that told us that we will be creating 10x value for customers, so it will become sustainable. I think in tier two, what we still continue to observe is that the value creation we do for our customers is more than what we do in metro and tier one, in some sense, because the optionality of eyewear that we are able to give them. I mean, you are even able to give a nine drive lenses, we are able to give our old days lenses, we are able to give progressives. And, you know, we have been investing so much in our logistics to reach these people faster and faster without compromising on customer experience. You can visit any of our tier 2 cities. It's not like you will see a different store than a tier 1 city. We are not differentiating in that customers, and I don't think customers are differentiating in how they buy from Lenska. At the end of the day, we are quite affordable, I would say, at a certain segment. We are becoming more and more affordable, not just for Tier 2, but for Tier 1 and metros also, to open up the Bharat. And then there is the premium segment. We are still, although only... Two years into the journey of scaling this up, maybe we will begin to see certain trends, which will keep you posted with. Right now, I would say we see similar same store growth, a lot more opportunity and value creation in these. And in international, I think the question on SSG, because the store addition is very, while accelerating, it is still 22 on a base of 700 stores. So, from that perspective, almost all of the growth is existing at this stage. But we are very clear on our strategy on international. We will continue to play the playbook of volume expansion because I think that is our USP comes by offering the largest variety at the best possible price with, you know, at a 79, 80 NPS and even more. And that is the playbook we continue to run. And we haven't even started expanding marketing international through all of these other initiatives we are doing in India.

Thank you. Next question is from the line of Aditya Soman from CLSA. Please go ahead.

Hi, thanks for the opportunity. So firstly, can you give us some sense of on when you sort of plan a launch of smart glasses? Now, one of the things I was noticing on a lot of e-commerce sites right now is very aggressive push across spice points. So I was wondering what sort of the weight was in launching at this point. And second, from a perspective of store additions, any change to store addition guidance in India.

Yeah. So, you know, we're on smart glasses. Aditya, thanks for asking the question. So we, as we have been guiding, we have been taking a very slow and steady approach in it in terms of getting capability, getting feedback. We first launched the glasses around April this year with a sign-up list. We got it to a few hundred thousands people. They gave us a lot of feedback on what they're looking for. Then we have been making software and firmware releases almost, I would say, every two weeks or so to optimize the experience. We have been, there's a lot of stuff customer has been asking, nutrition tracking, daily reminders, calendar integration, health integration were some of the most asked features. We have been rolling them out. People have also been requesting, you know, they want more battery life. So we are constantly, you know, optimizing the algorithm to update is a better case for batteries also on the way we just made and we got a slightly higher demand than what we anticipated. So then we had to go back and increase our production. We have just now managed to put this in 500 of our stores, maybe just a week or two bags, it started, you know, being available in all the stores, trainings are going on. What we are noticing so far is that about 90% of people are buying it with prescription. Okay. And with an eye test. And I think that is being our thesis that at the end of the day, smart glasses are going to be glasses. And that is the vote that Lenscart brings in in terms of distribution and making sure it is prescription and post-order service is going to be. I think just like phones, you will see a flood in the market. There are all different levels. We are taking our approach to make sure that we play at a certain quality level of what we want to build and we want to own the ecosystem. We have been building our capabilities on both software, firmware, hardware, and there is a lot more pilots that you will see coming along the way. But yeah, we are beginning to see adoption in the product. Every day that passes by, and soon it will be available in more and more stores. On the FY27, we can hold the same that we will try and deliver what we delivered last year. We want to make sure that a new store expands access but does not dilute the experience at any level, and we need to keep managing that. At any point, we feel that the experience is even becoming better from an NPS perspective, and we can manage, we'll keep you posted in the process. But you're definitely seeing that we're expanding more and more in tier two.

Thank you. Very clear. Thanks, Bhush. Maybe if I can just follow up on the sort of smart glasses one, just a quick one. Unlike the rest of your range, here you don't seem to be undercutting majority of the players. Would that be the right idea? Price point undercutting other players or not in smart glasses.

No, that's not what we are. You know, we are so early. We totally believe this is, you know, we are so early in the journey and it is a multi-year journey. So we are not in a rush here to undercut on pricing, etc. Our goal right now is to just keep learning about the form factor, keep building our software layer, making sure that, you know, we build that fast, iterative route where we can make changes and understand. And then use the opportunity to launch features that people will love us for, and then we can give an experience and access which is unmatched with prescription. We are not right now trying to over-accelerate this at all.

Thank you. Ladies and gentlemen, that's the last question for today. I now hand over the call to Mr. Vaibhul Sajdeva for closing comments. Over to you.

Thank you, everyone, for joining the call today. If you have any further questions, please feel to reach out to our Investor Relations team at investor.relations.n and we look forward to seeing you next quarter. Thank you.

Thank you, members of the management. On behalf of Nescar, that concludes today's conference call. We thank you for your participation. By now, it's a delight.