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We retain ADD on ABFRL, while reducing our DCF-based TP by ~14% to Rs60 (from Rs70; Exhibit 1), including ~6% cut to FY28/29E earnings and rest via a cut in the multiple due to the ongoing volatility in business and overall macros. We cut our earnings mainly due to challenges in TCNS (500-600bps lower LTL vs Pantaloons) and weaker margin performance across formats. Topline growth was low in 2Q at 2.4% yoy, impacted by festive/wedding calendar shift and Pantaloons store closures. ABFRL highlighted that like-to-like festive trends stood at a mid-to-high single digit, with ABFRL targeting early double-digit growth for Pantaloons in FY28, helped by 30-40 annual store additions (vs flat count in FY27). On inflation, Pantaloons’s margin may stay under pressure in rest of FY27, with ~100bps gross-margin impact expected (part of the impact realized in 2Q). ABFRL has consumed Rs7.75bn of balance sheet cash in 1H (including lease payments) but expects to end the year at a lower cash burn, with better cash flows and liquidation of seasonal inventory in 2H. While TMRW and other ethnic subsidiaries may raise further capital on their own, ABFRL (standalone) does not require more than Rs1.5-2.5bn in FY28.

Revenue in-line; festive shift/operating de-leverage impact margins

Consolidated revenue at Rs20.3bn grew ~2% yoy (in-line). Topline growth was impacted by lower growth in the Pantaloons and Ethnic portfolio due to festive shift and store closures. While TMRW/ Luxury saw healthy growth at 10%/11% yoy, respectively. Ethnic business growth was lower at ~2% yoy; ex-TCNS, though, the ethnic portfolio grew ~12% yoy. Pantaloons growth was flat yoy, impacted by the festive shift, particularly in the eastern markets (Pujo shift to 3Q). It reported -7% LTL, though the non-East markets delivered a 2% LTL. Adjusted for the festive shift, topline growth stood at ~10% yoy. Encouragingly, OWND continued its momentum and grew ~58% yoy in 2Q. 12 net stores closed in Pantaloons, while 2 new OWND stores were added. Luxury segment reported a healthy 11% yoy growth, led by scale-up of Galleries Lafayette. TMRW, including WROGN, reported ~19% yoy growth with profitability improving for the 4 th consecutive quarter. Pantaloons EBITDA margin at 13.7% was down by ~320bps, largely due to operating deleverage, while consolidated EBITDA margin at 0.7% was down by ~280bps yoy. APAT loss at Rs3.4bn was largely in line with our expectations of Rs3.2bn loss.

Pantaloons off to a healthy festive start; expects net store additions in FY28

Pantaloons delivered ~6% yoy growth in 2Q after adjusting for the festive calendar shift and 16 store closures, while the segment reported 10% growth on a festive-adjusted basis. On a festive-to-festive basis, Onam and Pujo recorded strong double-digit LFL growth, with Pujo also witnessing double-digit growth in customer entries, while the rest of the country delivered a mid-to-high single-digit LFL growth. The sharper merchandise assortment, greater freshness, and enhanced customer experience, supported by RFIDled improvements in replenishment timelines, are yielding encouraging results. With the major part of network rationalization complete, Management expects to step up expansion from FY28, targeting 30–40 store additions annually.

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