Risks associated with leasing real estate

We sell our products through exclusive brand outlets (“EBO”) including franchise stores, large format stores.
(“LFS”), multi-brand outlets (“MBO”), and online channels such as online retailers and our websites. As of
March 31, 2019, 2020 and 2021 and as of June 30, 2020 and June 30, 2021, we had a network of 333, 448, 449,
452 and 446 EBOs (including franchise stores) while as of September 30, 2021, we operated 459 EBOs (including
franchise stores). As our EBOs operate on leased properties, we are exposed to the market conditions of the retail
rental market. We generally enter into lease agreements with initial terms varying between 11 months to nine
years. Most of our lease agreements contain an early termination clause that permits us to terminate the lease
agreement early for the reasons specified therein. While we have renewal options for all of our leases, we typically
need to renegotiate the terms of renewal with the lessor, who may insist on a significant modification to the terms
and conditions of the lease agreement.

The rent under the majority of our current store lease agreements is generally payable in one of three ways: (i)
fixed rent; (ii) the higher of a fixed base rent or a percentage of the store’s monthly sales revenue; or (iii) a
percentage of the store’s monthly sales revenue. In addition to increases in rent resulting from fluctuations in
annual sales revenue, certain of our lease agreements include provisions specifying fixed increases in rental
payments over the respective terms of the lease agreements. While these provisions have been negotiated and are
specified in the lease agreement, they will increase our costs of operation and therefore may materially and
adversely affect our results of operation if we are not able to pass on the increased costs to our customers.

 

Where we do not have an option to renew a lease agreement, we must negotiate the terms of renewal with the
lessor, who may insist on a significant modification to the terms and conditions of the lease agreement. If a lease
agreement is renewed at a rate substantially higher than the existing rate, or if any existing favorable terms granted
by the lessor are not extended, we must determine whether it is desirable to renew on such modified terms. If we
are unable to renew leases for our stores on acceptable terms or at all, we will have to close or relocate the relevant
stores, which would eliminate the sales that those stores would have contributed to our revenues during the period
of closure, and could subject us to renovation and other costs and risks. For instance, we have permanently closed
6 stores and relocated 28 stores in the last three Fiscals, primarily due to termination or non-renewal of leases.
and other commercial reasons, including closure of under-performing stores.

As part of our store roll out process, we enter into letters of intent or term sheets and submit deposits to the relevant
owners of the properties where a new store will be located once we have identified a site to develop. The letters of
intent or term sheets are typically subject to a definitive lease agreement in the form of a lease deed or leave and
license agreement being entered into between the parties within a specified time or they terminate unless extended.
We may be delayed or be unable to enter a definitive lease agreement with respect to a specific site for various
reasons, some of which are beyond our control, which may result in us not being able to recover deposits placed
with relevant owners. Further, in the event such letters of intent lapse or are terminated, we may have to identify
alternate store locations for which we expend significant time and resources. We may also be subject to disputes
with landlords of our stores, or in the event our stores are jointly owned, our operations may be adversely affected
in case of any disputes by the owners of such property. In addition, lease agreements are required to be duly
registered and adequately stamped under Indian law and if any of our lease agreements are not duly registered and
adequately stamped, we may face challenges in enforcing them and they may be inadmissible as evidence in a
court in India subject to penalties along with the requisite stamp duty prescribed under applicable Indian law being
paid.

Concentration of exclusive brand outlets located in Southern and Western India

We have a pan-India network of EBOs across 23 states and union territories in India as of September 30, 2021,
and a significant number of our stores are located in Southern and Western India. As of September 30, 2021, we
operated 315 stores in Southern and Western India, which comprised 68.63% of our total network of stores.
Further, we generated revenues of 2 1,459.10 million, = 2,020.99 million, = 1,257.39 million, 764.05 million and 2
174.10 million, or 78.48%, 75.77%, 72.78%,76.73% and 71.79% of our revenue from operations from these
regions in Fiscal 2019, 2020 and 2021 and in the three months ended June 30, 2020 and June 30, 2021,
respectively.

The table below sets forth details of our EBOs, LFSs and MBOs across various regions as of the dates indicated:

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