Aditya Vision Limited (540205) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q4 and FY '25 Earnings Conference Call of Aditya Vision Limited, hosted by IIFL Capital Services Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Percy Panthaki from IIFL Capital Services Limited. Thank you, and over to you, sir.

Hi, everyone. Good evening. We are pleased to host the management of Aditya Vision Limited for their Q4 conference call. I have with me on the line, Mr. Yashovardhan Sinha, Chairman and Managing Director; and Mr. Yosham Vardhan, Whole-Time Director. I'll hand over the call to the management now and then we will have a Q&A session. Over to you, sir.

Well, thank you, Percy. Good evening, ladies and gentlemen. Thank you for joining us for our Q4 FY '25 earnings conference call. Today, we'll walk you through the key highlights of our financial performance, strategic initiatives and business outlook. Our investor presentation has been shared on the stock exchange, and we hope you had the opportunity to review it. It gives me great pleasure to share that Q4 has been an exceptional quarter for us, in fact, best Q4 in AVL's entire history. We recorded a strong 30% growth in revenues, surpassing our guidance despite all macro challenges. While January saw a brief slowdown, February and March witnessed a sharp rebound with a strong consumer demand driving remarkable growth. The early onset of summer further supported the momentum, helping us close the quarter on a high note. For the full year, we have achieved a resounding 30% revenue growth, continuing our consistent track record of maintaining a 30% CAGR revenue growth for the past 10 years. This speaks volumes about the strength of our business model and execution. On the expansion front, we opened 30 stores in FY '25, where most of our new stores came in Uttar Pradesh. With that, we have now reached a total of 175 stores, a significant milestone as we continue to scale its purpose. Out of our 175 stores, 112 stores in Bihar across all 38 districts, 29 stores in Jharkhand covering 21 out of 24 districts and 34 stores in UP covering 20 out of 75 districts. We have recently expanded to Central UP, where we have opened about 10 stores, including 6 stores in Lucknow in the later part of FY '25. With this expansion, we are present in the 3 state capitals of 3 states where we are currently operating. We are proud to share that our strong and consistent performance has continued into FY '25, delivering robust growth across all key financial indicators. Our revenue surged by 30%, reaching INR 2,260 crores in FY '25, up from INR 1,743 crores in FY '24. In this fast growth period also, we maintained EBITDA margins at 9%. Profit after tax grew by 37% to INR 105 crores compared to INR 77 crores in the previous year, a clear reflection of our deep understanding of the market we serve and relentless focus on driving sustainable yet profitable growth. In Q4 FY '25, we continued to deliver strong performance with revenues growing from INR 376 crores in Q4 FY '24 to INR 487 crores, reflecting a solid year-on-year growth of 30%. Our profit after tax also saw a healthy increase of 104% over the same period, rising to INR 16 crores from INR 8 crores. As you are aware, our business experiences a clear seasonality with Q1 traditionally seasonal being the strongest quarter driven by heightened demand for air conditioner, refrigerators, air coolers and related cooling products. To stay ahead of the seasonal demand curve, we follow a strategic approach of building inventory proactively, particularly starting in Q4. This year, in addition to our usual planning, we took a more cautious approach and built up more inventory due to uncertainties surrounding compressor supply. As a result, we accelerated inventory accumulation to safeguard against any potential disruptions and stock-out situation and ensure readiness for a strong start in ensuing Q1. Moreover, the end of the financial year typically presents favorable buying opportunities from OEMs, which we leverage to secure products at attractive terms. We are confident that these high velocity items will be liquidated quickly as Q1 demand kicks in. Consequently, our inventory peaked at INR 698 crores as of March end. However, when viewed across the year, the average inventory level for FY '25 stood at less than INR 500 crores, that is INR 494 crores on a quarterly basis, offering a more accurate and normalized reflection of our inventory position throughout FY '25. This strategic buildup of inventory ahead of the season resulted into negative cash flow, which historically gets into positive territory at the end of the summer season when strategic high inventory gets liquidated. Moreover, as highlighted in my several earnings calls in our electronic retail, upfront payment carry a substantial discounts, which is important for achieving higher trading margins and avoid stock-out situation. As such, payable days are kept less to boost profitability. In Q4 FY '25, Bihar remained our largest revenue contributor at 77%, followed by Jharkhand at 13% and Uttar Pradesh at 10%. For the full year FY '25, Bihar accounted for 80% of our total revenue with Jharkhand and Uttar Pradesh contributing 12% and 8%, respectively. Our same-store sales growth stood at 19% for Q4 FY '25 and 15% for the entire full year, reflecting continued strength in core markets and solid customer traction. Looking forward, we are committed to our growth strategy and are confident in our ability to sustain momentum. We plan to add 25, 30 stores annually with a sharp focus on expanding our presence in Uttar Pradesh, where we see significant potential. At the same time, we will continue to deepen our reach across Bihar and Jharkhand, further strengthening our leadership in the region and fortifying it. With these efforts, we are well positioned to achieve significant growth over the medium term, driven by our disciplined execution, strong regional insights and customer-centric approach. I will now hand over the floor to Mrs. Yosham Vardhan to provide an overview of the financial highlights for the quarter. Over to you, Yosham.

Thank you, sir. Good evening, ladies and gentlemen. We are pleased to present the robust financial performance for Q4 FY '25 and FY '25. Here is a summary of our key financial achievements. In FY '25, revenue surged by 30%, reaching INR 2,260 crores. Gross margin stood at 15.7%. EBITDA reached INR 204 crores with EBITDA margin at 9%. PAT exhibited a growth of 37%, totaling to INR 105 crores. SSSG for FY '25 stood impressive at 15%. In Q4 FY '25, revenue marked a 30% Y-o-Y increase, reaching INR 487 crores. Gross margin stood at 17%. EBITDA for the quarter stood at INR 42 crores with EBITDA margin at 8.7%. PAT for the quarter stood at INR 16 crores, up 104% Y-o-Y. Our store count stands at 175 stores with 112 stores in Bihar, 29 stores in Jharkhand and 34 stores in Uttar Pradesh. SSSG for quarter 4 FY '25 stood at 19%. We can now open the floor for questions.

[Operator Instructions] The first question is from the line of Devanshu Bansal from Emkay Global.

Congratulations on good numbers. Sir, there are reports of unseasonal rains around the country, and we have a high base to beat as well this time around. How do you see growth trends for the current quarter so far as this quarter has relatively high salience in our overall annual numbers as you also sort of covered in your initial remarks? Operator, am I audible?

Yes sir, you are. Management, are you able to listen the question? Ladies and gentlemen, the line for the Chairperson seems to have disconnected. Please hold while we reconnect. [Technical Difficulty] Hello, participants, we have the management on line. Please go ahead, ma'am.

Congratulations on good execution. Sir, I wanted to check that there are reports of unseasonal rains across various parts of the country. And last year, Q1 base is also specifically on a higher side. So I wanted to check what's your outlook for growth in the current quarter? As this quarter is critical because of higher salience in our overall annual numbers. So I wanted to check your thoughts on that.

Yes, you're very right, Devanshu. There has been unseasonal rain in this so far. But market has been slow, but despite that, we are in growth. And a major part of the quarter is still around there. And we hope that we are going to recover whatever the growth which company is looking forward to.

Fair enough, sir. I also wanted to better understand this increase in working capital. So last year on a per store level, year-end inventory was about INR 3 crores per store. And now this has inched up to INR 4 crores per store, right? So last year also, there must have been some pent-up stocking ahead of the season. Now this 35% increase in inventory per store, so are you also sort of expecting similar kind of a growth on a same-store level this year around -- this time around because just to sort of maintain stock turns that were there last year.

There was one more -- there is one more thing was there in this Q4. Actually, we were -- in fact, manufacture was sort of compressors and there were some restrictions for compressors from the government as well as there was definitely -- industry was facing a shortage ahead of it. So we were slightly more proactive in acquiring inventories, which, as you know, we'll be selling it out in Q1. So this has been the reason for slightly increase in inventory. And this increase in inventory is very temporary in nature, as you know. It is -- it does reflect on our books on 31st March. But later on, within a month or so, it becomes very reasonable.

Okay. So what I understand is, sir, your inventory position vis-a-vis competition is in a much better shape this time around, which should help you gain relatively better traction, right? So in the ongoing summer season. Is this the right understanding?

Absolutely, Devanshu, you can in fact see from behind also from past also, that we have been doing well in Q1 just because we have been better placed in the inventory level.

Understood. Sir, last question from my end. This is on gross margin. Last couple of quarters, there has been a dip. In Q3, there was 100 basis points dip and this time around, it is 50 basis points. I wanted to check because UP contributes only about 10% of your revenue, right? So that should -- that particular state should not lead to this quantum of gross margin decline for you. So I wanted to check if this is entirely related to that particular state or there are some other reasons also for the drop in gross margin?

I've always been talking that we do not talk about any region or any state as such. Actually, we believe in a basket way of gross margin. And gross margin in this financial year has gone down by 22 bps. And we think that this -- and for the quarter, it has come down by slightly more. But please do understand that most of our, in fact, around about -- I'll tell you the exact, 14 out of 30 stores has been opened in Q4. So entire 14 -- almost 50% of our new stores has started in Q4. So most of the expenses -- operating expenses have come for these stores. However, it has been -- these stores have started in this quarter itself. So it has come down. And -- but still, we will maintain that our EBITDA margin will be something between 8% and 10%.

We will take our next question from the line of Aniruddha Joshi from ICICI Securities.

Sir, in terms of staff cost, it has materially gone up in this quarter to 4.3%. And in fact, it is highest in multiple quarters. So any particular reason, any additional investment that we would have done, let's say, for UP or anything there? How should we read this number? Point number one. Yes. So that is one. And secondly, the tax rate in every Q4 seems to be on the materially higher side, even if I look at FY '23, FY '24, FY '25 also. So any reason for such a sharp increase in tax rate, let's say, in FY -- in the fourth quarter itself, when the -- logically, the tax rate should remain around 25% and it is around 25% in the 9 months in earlier years also. So why the tax rate is so high in Q4 quarter?

Earlier years, we have already given our explanation. But this year, there is no material change in the tax rate. It is similar. And above all, Q4 figures are always balancing figures when you get your accounts audited and then these are balancing figures. So this year, there is no material changes, I suppose. And coming to your first question, staff costs going up, as I told you just now that almost 50% of our store addition was in Q4. So obviously, operating costs, employee costs, every -- all the costs were coming in quarter 4. So that was the reason for rise in staff cost.

Okay. Sure, sir. And last question from my side in terms of store addition guidance. So we will stick to around 25-odd stores in '26?

No, no. Our guidance will be definitely from 25 to 30 stores, but looking into the very bright picture around, we may like to increase with later on in later quarters, we'll update you.

Okay. So we may increase the guidance upwards? Around 30, 35 sites.

Yes, it can go upward, but we'll keep you updated after another quarter or so.

The next question is from the line of Swati Jhunjhunwala from JM Financial.

My first question is more on the demand side.

Swati, can you speak louder, please?

Is it audible now?

Yes.

Yes. So the first question is on demand overall. Many consumer durable players are saying that April has not gone so well because of -- because of a bad summer -- because of a delayed summer rather should I say, and plus monsoons. So how do you see April? How has April gone? How do you see May and June performing?

I've already told that demand has been slow, but despite that, Aditya Vision is in growth, our company. And we are seeing that, yes, this thing happens once in a while, most of the years, in fact, past year. When summer starts slowly, it again builds up later in the quarter. So we are quite bullish about this second half of May and full next month.

Okay. And second is on the guidance that you've given 2025 revenue CAGR. Now just two things I want to understand in this. Number one, what states are you targeting apart from Uttar Pradesh? And number two, what categories are you more focusing on?

As far as the state is concerned, right now, we are focusing in Uttar Pradesh only. And we'll keep you updated, as I told you in another quarter or so, maybe end of H1, I'll update you -- further update you on what other territories we are looking at. And in categories as far as categories are concerned. In fact, right now, we are focusing on compressor products in this quarter.

We'll take our next question from the line of Percy Panthaki from IIFL Securities.

My question is on the inventory. So you did mention that in anticipation of good summer and because of deals, we have done some advanced purchase, and that is the reason why the inventory has gone up. If I recollect correctly, the same thing has happened in last year Q4 also. So having already done that last year with the base being reset upwards, if we do the same thing this year, that should not result in a disproportionate increase, but the number of days of inventory has gone up for 2 years in a row. So just wanted to understand the reason for that?

In fact, both the years, you will find that there was some, in fact, confusion regarding supply side. And this year, if you remember, there was even more supply side issues were coming -- being reported by manufacturers. There were restrictions from government for -- and tariff position was also being discussed. So, so many -- in fact, exports were diverted to U.S.A. from China. So our manufacturers, yes, they were anticipating that they will get less number of compressors. So there were so many -- it was rather more uncertain. In fact, you know entire world is so uncertain due to U.S.A. tariff and all that. So this year, in Q1, it was even more uncertainty we were facing. I don't think it is going to go up again in disproportionately in the future. But this year was definitely an exceptional one.

Got it. Got it. Sir, second question is on UP. If you can give some idea what is the average sales per store for the entire number of stores that you have in UP?

We may not give you the store sale -- average store sale. But we can only say that we have given you the hard figures that this is the contribution from -- coming from -- in Q4, this is the contribution coming from UP entire Q4 sales.

Got it. Got it. Just from a point of view of some investors, they might want to just evaluate whether you are getting a similar kind of response to the UP expansion as you get normally in your hometown?

Bihar, if you are referring to Bihar, then Bihar, we have already -- in fact, we are present at almost all locations. So if we go out of Bihar, then UP is just like same, just like in Jharkhand. There's no difference. We have been telling this in every earnings call.

So the throughput in UP versus Jharkhand, is it similar? I mean on a per store basis, the kind of throughput that you generate or per square feet, whatever way you measure, is it similar in UP and Jharkhand?

It's almost similar. It's not very significantly different.

We will take our next question from the line of Varun Singh from AlfAccurate Advisors.

My question is typically between April, May and June. April would be how much percentage of the total revenue for the quarter? That's my first question.

It depends. It's not the same for year-on-year. So your question, in fact, sometimes April is slightly cooler and less sale will come in April, more sale will come in May and June. Similarly, sometimes with early onset of summer is there. So April is very high compared to May. So it will not give you an accurate picture, Varun.

Understood. But still, I mean, a ballpark, what is the typical range, considering the fluctuations which is fine?

Typical range is slightly -- of course, it peaks out in May and June, of course, and April, it gains momentum, I'll say.

Sorry, you said in April, momentum is high...

I said that in April, it gains momentum. It takes momentum, summer sales, which, in fact, peaks out in May and throughout June. So it's safely in that 25% of entire quarter sales, you can think about that, but it's not strictly that. So 25% of sales will come from April.

Understood. Understood. Understood. And sir, secondly, in the first quarter, typically room AC in what percentage of overall revenue? That's my second question.

It's about we're now around 45% to 50%.

Understood. Understood, sir. And like given your all past experience of like April being relatively moderate and then our growth picking up in May and June, I mean, if you can help us understand that historically, this kind of fluctuation in weather because of sporadic rain, et cetera, I mean, how frequently you would have observed that despite April being moderate, May and June has picked up significantly? That's my last question, sir.

This is so difficult for me to answer your question, but still, it happens and it happens a lot. I -- just in my earnings call, I told you that January was very, very bad in Q3, Q4. But then February and March picked up and that brought us to 30% growth. So these are -- it's just a matter of summer kicking in, full summer kicking in. And I think people have -- already they make their mind how much money they are going to spend on air conditioner or coolers or compressor products. And it's only -- that season only happens. This is what is our observation.

Sure. Sure, sir, understood. And, sir, one last question, if I may squeeze in.

Are you getting my point because you are asking a very important question. [Foreign Language], but when actually hard summer kicks in, then the sale becomes -- gets closed at that time. But people make their budget that this summer, we are going to get this room air-conditioned also. We are going to get this air conditioner changed. So it's only when it is not very hot, people just postponed it for a few days. And the moment it comes, you just have to have, let's say, 15 days, 20 days, 25 days of good summer. And I think that's all and they will -- everybody will like to -- just come to your store to buy air conditioner or cooling products.

Right, right, sir, right. And sir, one last question, if I may. As you called out that despite April being soft, we have been in growth which is quite positive. But still, when we say that we are in growth, so compared to expectation, for example, if we would have expected maybe 20% growth, is it fair to say that against the expectation of 20%, in our case, growth would be maybe 10% to 12%, which is still significantly better?

That will be not proper for me to say exactly what type of growth we have got in April, because we have not disclosed it. So only thing I can tell you is that, yes, growth is there, of course, in single-digits. Growth is in single digits.

We will take our next question from the line of Vijay Chauhan from Right Horizons PMS.

So I would like to understand what will be the sustainable SSSG going ahead or let's say, if you are looking from next 3- to 4-year perspective?

I think our SSSG will be in double-digits. This is all I can say, Vijay, very firmly that SSSG will be in double-digits because what we have seen in the past and what we are -- in fact, what is happening right now is that we are having a high double-digit SSSG. So I'll -- if you will ask me, then I'll tell you that it will definitely in double-digits.

And my second question would be on the total potential in terms of store counts for UP. So is there any like guess or analysis you have done, like, let's say, we are recently -- recently we have entered in the UP side. So is there any rough range or number of stores do you think that, this is the number like the -- this is where the maturity will hit in UP or any analysis you would have done? So any broad light will be good on UP market.

If Bihar can accommodate 112 stores, Vijay, so we can fairly well assume that in next, let us say, 2 to 3 years, it can -- we can have 200 stores in UP. The size and the kind of population it is, we will definitely aim to have double our store count in UP compared to Bihar because that's the potential for UP.

Right, right. And any marketing plan like when we enter to the new geography. Is there any change or we are mainly focusing on regional marketing? Or we are also trying to become or projects us a national brand? Is there any like -- if you can shed some light on the marketing side? That will be fine.

Vijay, we'll not like to spend our money in vain, stakeholders' money that way. In fact, right now, if national, there is no need for any national marketing strategy. We are in Bihar, Jharkhand and UP, as I have been telling all the time that culturally, these are almost same in nature. So our marketing strategy also remains regional in nature. As you know, it is very expensive going national campaign for marketing. And I don't think there is any need right now to spend that kind of money on marketing.

The next question comes from the line of Devanshu Bansal from Emkay Global.

Sir, in the PPT, there is some increase in our expectations for CapEx, working capital as well as payback period, right? So is it largely due to cost inflation or there are some new category additions that we are planning to introduce in stores?

There are so many factors, Devanshu. In fact, what you said that the biggest contributor is we are opening larger format stores. So stores are now -- average store size has become 4,500, which was 4,000 previously. So obviously, more CapEx is required, more products on displays is required. So working capital is also required in that. So this is the reason for that rise. And of course, inflation is there, of course. So these are all because of which we are -- but the major reason will be that our format of store has increased.

Yes, sir, this was my second or a follow-up part. So in this year that we noticed that the average store size of new stores that what we have opened is like 5,500. That has taken the overall company level to 4,500. So -- and most of these stores have happened in UP, right? So what is the strategic thought process for opening larger stores in the new area which we are entering. So about -- is it like we are offering much better assortment? Or -- so what different are we trying to do strategically in this new state versus our earlier operations?

This is our, in fact, optimism rather, Devanshu that these places are going to do very well because of the population. And again, when we are going to a new state, we are going to a new city, we want to give that experience to our customer which no other showroom is able to give. So this is our primary strategy.

Understood. Sir, why I was sort of stressing upon this was because in UP, earlier we had indicated that at least we are sort of leaving some margins just to gain good traction with new consumers, right? And now on the capital investment perspective, we are investing higher. So I wanted to check, will the unit metrics be broadly similar versus our earlier operation? That can happen naturally because as the stores mature, we may hit a relatively higher revenue per stores, et cetera. But -- so the purpose of asking that question was that because margins are lower and then invested capital is higher. So...

So you got an assumption, Devanshu, that margins are lower. I told you that's very strategic. These are something which I cannot discuss on earnings call. But this is what I can say that this is not the, in fact, norm that margins are less. It's not about that. It's about so many other things which customers they want to see on the floor of the showroom and everything included, we believe that experience or what is our competition, we see the competition around. Of course, we believe that there is a lot of room is there to co-exist with big competitions also. But then you will have to have the same type of experience what others are seeing or may see in future. It is for future also. But above all, all included, these are very high-density population areas where we must have bigger stores.

Fair enough. Fair enough, sir. Lastly, I wanted to also check on increase in payables, right? So over time, we have always maintained that the model pursued is cash and carry model. But this time around, there is some INR 90 crores increase in payables as well. So is it -- was it like a timing thing? Or how should we read that?

No, you can read it very straightforward, Devanshu, that, as I have told you before also, that even when you are on cash-and-carry basis, you get the sufficient time from the manufacturers to get the products delivered to your stores. So that is the gap which reflects on the date of balance sheet. It's not about going up, because we were high on inventory. So high was -- higher was the sundry creditor. But these are reflected only because since now GST is there, so most of the products, we are in fact buying from manufacturers on IGST basis. So these products are billed from the company, and it takes some time to reach our stores. And our payable time kicks-in from the time we receive our product.

Ladies and gentlemen, due to time constraints, we will take this as our last question. I would now like to hand the conference over to the management for closing comments.

We trust that we have addressed all your inquiries to your satisfaction. If you have any remaining unanswered questions, please don't hesitate to contact our Investor Relations agency, Go India Advisors. They will be more than happy to assist you further. Thank you so very much, and goodbye.

Thank you. On behalf of IIFL Capital Services Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.

Thank you.

Thank you.