V.I.P. Industries Limited (507880) Earnings Call Transcript & Summary

My name is [ Abhishek ], shareholder of the company. My DPID is [ IN30167 ] and client ID is [ 41359155 ]. First of all, I congratulate the management on the eve of Annual General Meeting.

Please, speak a bit slowly, [ Mr. Kalra ]. You're speaking very fast. Speak slowly.

Yes, yes, yes. I will be slow. I will be slow. I hope everything is fine with your family in this challenging situation. [indiscernible]

I'm sorry, your voice is not coming through.

Respective industry segment...

Now this is better.

Why is it -- now is it okay?

This is better, yes, yes. Please speak in this position.

Is it better?

Yes.

So we are long-term shareholders of the company. My entire family is shareholder of the company. And we need some following clarifications and details. Like what is the real impact of COVID-19 in percentage terms? How your supply chain is affected? Where you see the light in the end of the tunnel? What [indiscernible] in the first half and second half? And then please provide us the production capacity utilization and figures and percentage for the month of April, May 2020. What was the capacity utilization of last year and last 5 years on moving [ our ] business? The coronavirus [indiscernible] lockdown [indiscernible] after the COVID. So how many employees we have sacked or salary cut in percentage [ is made ]? What are the new innovations [indiscernible] product launches [indiscernible]? What's the response [indiscernible]? Was the cost-cutting initiative [ enacted ]? And how much salary cut was being taken by the management of the company [indiscernible] ? And what is the view of the management going forward in sustaining profit, volume growth [indiscernible] in the coming quarters? And what are the management's approach to [indiscernible] EBITDA and [indiscernible]? So then I would like to know -- I'll give you 1 suggestion that why can't our management put some efforts on [indiscernible] investor relations, please?

Can you just repeat that last one, Mr. Kalra? Overall, your voice is coming through very thin, but the last sentence, I think you...

The last thing, I just wanted to improve your company image through investor relation exercise like on call, quarterly presentation and meeting global investors, so that the consistency with the investor fraternity will grow in the company and our reputation will [ increase ] in the market. And these were the details of the [ parties ] in other current and noncurrent liabilities, contingent liabilities. So please let me know about the details, and our [indiscernible] can very well arrange a video call with our legal head to learn the perspective in detail. And what are the management efforts to reduce other expenses and legal professional charges and auditor fees, et cetera? So then what are the credentials new and existing directors are bringing on the table to take the company to the next phase of growth or to guide the new generation? And what is our policy related to dividend. I thank the management for giving a very good dividend this year. And then, in Page #4, we can see that we have provided only our auditor's name. We've not provided the statutory auditor and [ cross ] auditor. Can we provide full address and contact details, so that Annual Report looks more transparent? And Page #4, we can see that factory -- we have put 5, 6 plant locations, at least, details are being provided. So why can't you arrange [indiscernible]

Sorry. Again you cut off. Your...

Mr. Abhishek, we can't hear you, actually.

Neetu, it's okay. I will -- Mr. Kalra, we cannot hear you for the last -- we have not heard you for the last 2 minutes. I suggest now please -- even otherwise, your voice was coming in very...

I will do one thing, sir. Whichever questions you've heard, please reply. Remaining inquiries, I will send it through e-mail, sir.

Yes. You send an e-mail. That will be better because [indiscernible] detailed also. And okay, now Mr. [ Krishnan ].

Yes. I just wanted to confirm can you hear me.

Your voice is very clear.

Okay. Excellent. I just want to get understanding on a couple of areas. One, given that the government of India are looking at Make in India [ route ] as well as decreasing import duties on certain imported products. What's the likely impact on VIP Industries given that the bunch of these factories are expected to contribute to the bulk of the production? And any potential import duty levy is expected to impact our top line and margins? That's one. The second query, which I have is, what's the current liquidity cash position as of Q1 FY '21? And third query, which I have is, I think last year, we saw a bit of a deceleration in our exports revenues, even though I did read it in the Annual Report that there is going to be a strong emphasis and focus on exports, especially the APAC and Middle East region. So what's your aspiration for the international business over a 2- to 3-year period? And my fourth query is, where do you see potential opportunities for revenue expansion for VIP Industries over the next 2, 3 years? And my last query is, what percentage of our revenues are from e-commerce channels? And what are our plans to step up e-commerce channel sales?

Thank you. And Mr. [ Chirag Lahoti ] was not there. We could not hear him.

We could not hear him, sir. I can try again.

Let's make one more attempt. I don't want anyone to feel that they are not [indiscernible]. No, I think...

I think line is a problem.

There is some problem in the audio. So please send us an e-mail, and we will answer your questions. And finally, there is [ Mr. Keerthi Shah ]. You have sent a long list of some 110 questions. Obviously, we cannot have them now. I request you that we will reply to all your emails. But if you want to speak for 2 minutes, we can have you. Now [ Mr. Keerthi Shah ], please speak for 2 minutes.

He is not there, sir.

Okay. So I will now try and answer the questions. I will go from the last speaker because all that is fresh in my mind. Mr. Krishnan asked what is the position of the imported products and the imports from China? The way things are that we have already diversified quite a lot of our manufacturing in Bangladesh. And I think now virtually, our imports from China will cease. There might be a few items, but it will be very little. And the good part is that there is no import duty from Bangladesh, and Bangladesh is -- government wants to encourage, SAFTA, the South Asian, SAARC countries. The SAFTA, I think, excludes Pakistan, I'm not too sure. But anyway, we have a good arrangement with Bangladesh. Indian government wants to increase trade in the regional area. So Bangladesh is a very good source of supply. We also increased our manufacturing in India, both in our in-house as well as outsourced from India. And we are getting quite Atmanirbhar including Bangladesh. But the problem today is not so much the supply, but it is a demand. The demand has absolutely collapsed, and it is going to remain like that for this whole '19 -- the 2020 year is going to be a very tough year. And hopefully, the demand will start around Diwali time in the third and fourth quarters. But it is going to be a very difficult period because we are like -- the travel industry is very badly affected, and the luggage industry is a very small part of the travel industry, but it's absolutely connected with travel. So we are going to be badly effected, and -- but the good part is that we are financially very, very sound. Our liquidity position is very good. Even today, we have -- we don't have any net bank borrowings. We have created good limits of about INR 300 crores, and we've also borrowed it. And we've invested that money in the banks and in other securities, very liquid and safe securities. So that even after 6 months, it should not happen that the banks, who have given us the credit limits, go back on their word, things -- when things go bad. So it does cost us about 1% arbitrage of interest cost, but it is worth the risk we are taking. So our financial position is very strong. Our balance sheet is very strong that is coming to our help in this very severe crisis. Exports are also very badly affected because the whole world travel has been affected. So for 6 months, there will hardly be any demand, and -- but because we are quite competitive internationally, we hope that exports will increase. I'm not able to give any figures right now, whether it is for domestic or what is our EBITDA going to be, what is the savings we are making because it's a very fluid situation. We are trying to cut our costs. We have been -- we have done well in the first 4 months. We have reduced our fixed overheads by about 35%, or in some cases, even by 40%. Like advertising, we have more or less stopped. We'll be -- let's say, advertising will be stopped by about 80%. We'll hardly be doing 20% of our annual advertising. So wherever possible, we have cut down our expenses. All our top management has taken a salary cut. And like the directors, commission has been totally waived off. So everywhere, people are -- we have had to lay off a lot of people. One of our factories in Haridwar, we have temporarily put on sleep mode because ours is a very extreme position. We cannot take a very liberal attitude of not playing off or retrenching employees because, otherwise, we will ourselves become insolvent. So we are -- our employees are understanding that. And let me say, their response has been very good. They understand the dire situation, and they have responded well. And we are -- reluctantly to take all these extreme steps. Diversification is something we are looking at. And right now, we are considering various things, so it is too early to say what we'll be finalizing. I mentioned about our supply chain. Supply chain is not the problem today. It is more of the demand. And supply chain is now mainly within our own control. That should not be a problem. Our dividend policy has always been quite liberal. We give about 40% of our retained earnings, and we have been doing that, and we will continue to do that. Regarding investor relations and investor conferences, we have quarterly conferences. In fact, our investor relationship is very good, and we are one of the -- I think our record for corporate governance as well as investor relations is very good. We have regular quarterly investor calls. And then from time to time, we have meetings with -- whenever some of the investor community invites us. And we have to see -- I mean, we are a small company. We are not a very large company. So we have to work according to our size. I mean you cannot compare us to the companies whose market cap is $10 billion or $20 billion. Today, the trend is everybody compares all companies with Reliance, which is in a different league on its own. I mean even in the whole world; in India, also, there is another company compared to that. But because of the publicity it gets and on the television channels and all that, but it's a different size. So I think for the company of our size, we have very good investor relationships, and of course, that is a very important part of our business. So we will always nurture that. There was something regarding the object's clause. Neetu, will you explain that, why we have to change our object's clause?

So the purpose of changing the object clause was basically to make it more inclusive. Also after the new Companies Act, we did not do the amendment. So both the things we are doing it now.

It was more of a statutory requirement, and that is why we...

There is some new business initiatives, which we want to start, so we wanted to make included -- include those items. So that's why we are doing the change.

And Neetu, if there are any other things which I have omitted to answer, you can just bring in my notice.

I think you've covered most of it. Only thing is, what is the capacity utilization during the last 3 months. So it's a...

As I explained, we are not producing anything because you see what happened that at the end of March, we are -- our stocks are at the highest because the first quarter, April to June, is our largest quarter. So we were very well stocked up, but our sales were hardly there. So in fact, our stocks will last us out quite -- right up to December. Regretfully, even more because of the poor sales, and whatever little bit we need for balancing some items, we will be able to get them. So that is -- as I said, the issue is not so much of manufacturing, not the supply side, it is more the demand side. So I will now proceed. Ms. Ragini Choksi and company -- practicing company secretary has been appointed as the scrutinizer to scrutinize the voting and remote e-voting in a fair and transparent manner. Ms. Ragini Choksi is present to conduct the voting process. The proceeding of the meeting, along with the results of the remote e-voting aggregated with results of e-voting earlier, will be placed on the website of the company and also on the website of BSE and the NSE and the NSDL within 48 hours of conclusion of this meeting. Further, a recorded transcript of this meeting shall as soon as possible be made available on the website of the company. I take this opportunity to thank all members for taking the time out to join the 53rd Annual General Meeting of the company. And for all those members, who are still wanting to exercise their vote, the e-voting will be valid for 15 more minutes. With this, the meeting is adjourned. Thank you.