Vaibhav Global Limited (VAIBHAVGBL) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Vaibhav Global Limited Q4 and FY '24 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Disha Shah, from Adfactor PR. Thank you, and over to you, ma'am.

Good evening, everyone, and thank you for joining us on Vaibhav Global Limited earnings conference call for the quarter and full year ended March 31, 2024. Today, we have with us Mr. Sunil Agrawal, Managing Director; Mr. Nitin Panwad, Group CFO; and Mr. Prashant Saraswat, Head of Investor Relations. We will begin the call with opening remarks by Mr. Sunil Agrawal and the business operations key initiatives and a broad outlook, followed by a discussion on the financial performance by Mr. Nitin Panwad, after which the management will open the forum for Q&A session. Before we get started, I would like to point out that some statements made or discussed on today's call may be forward-looking in nature, and must be viewed in conjunction with the risks and uncertainties that we face. A detailed statement and explanation of these risks is included in the earnings presentation, which has been shared with you all earlier. The company does not undertake to update these forward-looking statements publicly. I would now like to invite Mr. Sunil Agrawal to make his opening remarks. Over to you, sir.

Thank you, Disha. Good evening, everyone. Thank you for joining us today for the Q4 FY '24 earnings conference call. I believe you have reviewed the results and investor presentation, which provides insights into the quarterly and annual business performance. I'm delighted to share that we have achieved our guidance revenue numbers. Consolidated revenue in Q4 was INR 789 crores, which is 14% higher than the same period of last year. During the quarter, we put a lot of emphasis on reducing the inventory and improving our working capital. This is visible in the form of reduced inventory and much improved operating and free cash flows. On the full year basis, the group's top-line cost produced INR 3,000 crore mark for the first time at INR 3,041 crores, as against INR 2,691 crores, showing a growth of 13% year-over-year. Our gross margin for the quarter remains robust at 62.7% with a cumulative margin of 62% for the full year. We continue to see gross margins in our targeted range of 60%-plus backed by an in-house global supply chain. Our sourcing network, coupled with in-house manufacturing, enables us to offer products at competitive prices with a shorter turnaround time. Let me now take you through each of our addressable retail markets. In the U.S., macro indicators like employment data, consumer confidence, inflation rates are trending positive and driving consumer demand. Also during last year, the mix of e-comm sales in total retail sales in U.S. has improved by 90 basis points. In the U.K., inflation continues to moderate every month, but consumer spending power remains subdued due to high interest rates. We remain vigilant to the broader macroeconomic landscape there. Quarterly growth for our existing businesses in U.S. dollar terms in U.S., U.K. and Germany was 4%, 1% and 38%, respectively. In Germany, our strategic investments across TV networks and digital platforms has yielded desirable results, boosting our revenue to EUR 21.4 million for the full year, having achieved revenue growth of 48% on an annual basis. Such growth underscores our commitment to increasing our market share there. Our focus remains on the four pillars of our growth: widening reach; new customer acquisition; customer retention; and repeat purchases. In this quarter, the reach of our TV networks was 130 million households. As of March 31, 2024, our unique customer base stood at 580,000, which is 26% higher Y-o-Y. Excluding acquisitions as well, the unique customer base has been improving quarter-on-quarter. In our existing businesses, new customer acquisition during Q4 was higher by 8% compared to last year. Further, customer retention stood at 39%. On a trailing 12-month basis, customers purchased on an average of 24 pieces versus 23 last year. Let me now take you to the unique concept called Unreasonable Hospitality. The company is integrating the principles of Unreasonable Hospitality into its operation, drawing inspiration from Will Guidara’'s acclaimed book. The concept focuses on exceeding customer expectations by providing an extraordinary and memorable shopping experience. By prioritizing exceptional service and memorable experience, the company aims to create a strong connection with our customers. This strategy is designed not only to attract new customers, but also to significantly enhance customer loyalty in the long run. This is evident with increased Net Promoter Scores in recent quarters. Now let us talk about world of -- talk about Ideal Worl and Mindful Souls and how they are shaping up. Notably, Ideal World achieved profitability on direct cost basis for the second half of FY '24. We are confident of achieving profitability in the next 6 months on a full cost allocation basis. Meanwhile, Mindful Souls is contributing positive leverage to overall business already. We are actively leveraging the digital progress of Mindful Souls to foster synergies within our existing digital businesses. Further, we have started utilizing the supply chain strengths of the VGL Group for Mindful Souls, which is expected to further improve its profitability going forward. At VGL, community give-back is integral in our business model, where every unit sold results in a meal for school going child. Under our flagship mid-day meals program, your purchase feeds has result -- which was launched about 10 years ago, has resulted in 87 million meals donated to school children till date. Currently, we serve 56,000 meals every school day. On clean energy front, I'm delighted to share that this quarter, we generated 1.1 million kilowatt hours of solar energy, which is catering to 100% power requirements of 2 manufacturing units in India. Additionally, 2 premises in U.S. and 1 premise each in U.K. and Germany are also operating on 100% renewable energy. All these measures are aimed at achieving our goal of carbon neutrality is Scope 1 and 2 of greenhouse gas emissions by 2031. Furthermore, we are constructing another rainwater harvesting tank of 600 kiloliters capacity to ensure prudent water management at VGL Group. On governance part, I'm pleased to announce that the group's subsidiary in India, the U.S. and U.K. and China have once again been awarded the Great Place to Work certification. I extend my gratitude to all our colleagues across VGL Group for their feedback in judging our workplace as Great Place to Work. As we celebrate this, we reaffirm our commitment to encourage inclusive and supportive culture across VGL Group. We believe in creating long-term value for our shareholders. The Board has recommended a final dividend of INR 1.5 per equity share, which is subject to shareholders' approval at AGM. Including 3 dividends, total dividend payout against earnings of FY '24 would be 78%. We'll continue to keep our focus on growth and profitability, with prudent capital management and, hence, want to reiterate our earlier stated guidance. We expect a robust performance in FY '25 and achieve 14% to 17% revenue growth with strong operating leverage. For subsequent periods, we expect the revenue to grow in the mid-teens range with decent operating leverage. Towards then, I would say that over the past year, we have seen tangible improvements across various assets of our business. We are optimistic about our outlook, buoyed by positive trending macro indicators and multiple growth drivers in place within our business. While unforeseen challenges may arise, we are confident in our ability to navigate them effectively due to our low-cost vertical model as well as high agility attitude. I now hand over the call to Nitin to discuss financial performance. Over to you, Nitin.

Thank you, Sunil. Good evening, everyone. I am delighted to welcome to you at Vaibhav's Q4 FY '24 earnings call. While Sunil has given an update on operational performance and key initiatives undertaken during the year, I will now take you through our financial performance for the quarter and fiscal year ending 31 March 2024. Revenue growth in Q4 was healthier at 14% year-over-year and was INR 789 crores versus INR 693 crores in Q4 FY '23. During the last 2 quarters, we have seen visible improvement in our volume growth, driven by positive consumer sentiments. During Q4 FY '24, the volume growth was 26% year-over-year. Even after excluding impact of acquisitions, the volume growth is much stronger at 13%. As Sunil also mentioned earlier, we optimized our inventory and working capital during the quarter. Consequently, the operating and free cash flow during FY '24 was INR 270 crores and INR 230 crores, respectively. On a full year basis, the group's top line was INR 3,041 crores, against INR 2,691 crores in FY '23, registering an annual growth of 13%. Now let me brief you on geography-wise revenue breakdown. In U.S. dollar terms, Shekel to U.S. grew by 4%. PGS U.K. grew by 1%, and Germany grew by strongly 38%. On a combined basis, our existing business grew by 5% in U.S. dollars. If we include acquisitions, the overall year-over-year growth was 14.5% in U.S. dollars and 13% on a constant currency basis in last quarter. Further, we maintain our stance of achieving breakeven point in Germany in H2 of FY '25 at operating level. During the fourth quarter, TV revenue amounted to INR 453 crores and digital revenue reached INR 305 crores. While TV revenue experienced a growth of 10.8% year-over-year, digital revenue saw a relatively stronger growth of 19%. Digital continues to complement the TV segment driven by its extensive reach and discovery capabilities. The digital business accounts of 39% of total revenue, the Mindful Souls -- the acquisition of Mindful Souls is anticipated to drive long-term growth, and we believe that this strategic move will lead us to 50% digital revenue share by FY '27. The sales mix of lifestyle products has been growing over the years, now standing at 30% versus 12% of FY '18. Looking ahead, our goal is to elevate the contribution of lifestyle products to 50% of our total sales by FY '28. A unique offering in the form of budget pay gives customers the option of buying product on a EMI basis and is valuable feature for the buyers. In FY '24, budget pay contribution to overall retail revenue stood at 39%. The gross margin remains strong at 62.7%, demonstrating the efficiency of our vertically integrated business model. The EBITDA margin for the quarter was 8.1%. Adjusting for Germany, EBITDA margin during the quarter was 11.6%. Operating margins were slightly affected by higher shipping costs, driven by an increase in volume of 26%, and increased content and broadcast expenses, which was primarily on account of acquired businesses and new airtime cost of Vodafone in Germany. On an annual basis, EBITDA margin improved to 9.7% from 8.4% in FY '23, reflecting 130 basis points improvement. Excluding Germany, EBITDA margin for full financial year was 12.3% versus 10% in FY '23. We remain confident that EBITDA margin will continue to improve going forward. The profit before tax for the quarter stand at INR 36 crores, which is 18% higher year-over-year. For full year, the profit before tax amounts to INR 190 crores, which is 35% higher year-over-year. Further, both acquisitions are robust and growing. The Ideal World business is profitable on a direct cost basis, and we are confident of achieving profitability on a fully allocated cost basis within the next 6 months, as the performance is better than what we were expecting. Mindful Souls is already a profitable and margin-accretive business, and it continue to progress well. We are leveraging the supply chain of VGL, which is expected to further enhance the group's profitability and strengthen our digital segment. We are delighted to share that this year, we generated stronger free cash flow, which is INR 230 crores, underscoring the cash generation capacity of our asset-light business model. Further, our net cash balance remains positive at INR 168 (sic) [ 167 ] crores even after consistently quarterly dividend payout and funding the 2 acquisitions. At present, ROCE and ROE stands at 19% and 10%, respectively, showing an improvement of 500 and 100 basis points, respectively, versus last year. This highlights our ability to manage capital prudently and generate healthier returns. We are committed to generating value for our stockholders. The company paid interim dividend of INR 4.5 per equity share during the first 9 months of FY '24 and has recommended a final dividend of INR 1.5 per share for the year. Resulting in a total dividend payout of 78% against total earning of FY '24. Looking ahead, we are optimistic about the performance in FY '25, expecting revenue growth in the range of 14% to 17%, along with strong operating leverage. For subsequent periods, the project revenue growth in mid-teens range with operating leverage. Thank you. Over to you, moderator. We may now open the line for Q&A.

[Operator Instructions] The first question is from the line of Rishabh Gang, who is an individual investor.

Am I audible?

Yes, you are.

Wonderful. So sir, the EBITDA margin is currently on a blended basis are around 8% to 9%, excluding Germany, 11.6%. But historically, we have gone as high as 17%. So what the EBITDA margin do you think you will be able to achieve in FY '25, '26? And what line items in P&L should propel that changes? That's my first question.

Yes. So we give guidance for strong operating leverage. And so this will come, #1, with the volume going up. So revenue going up and the expense not expanding in the same proportion. So the expense leverage line item will be HR costs for this year, the shipping costs and SG&A. The content and broadcasting costs may not offer leverage this year because we took some extra airtime for Ideal World for Germany. And even for U.S., we've taken some better channel position in some -- it does not increase the number of households, but we have taken a better channel position and the digital marketing. So we have to recreate HR cost, SG&A and shipping will give us leverage this year and plus some a bit expanded margin. We're expecting the margins to expand a little bit this year.

Okay. On the shipping cost, sir, like the volumes are expanding a lot. So do you still expect the operating leverage to play there?

Yes. So we have renegotiated some shipping costs this year. So that will give us some leverage.

Got it. And sir, I wanted to ask on the ROCE and ROE front, right? So we used to have a 25% kind of ROE, 35% kind of ROCE 3 to 4 years back. So how do you see the return ratios panning out over the years as and when your acquisition starts paying off? Like what is your view on the return ratio, sir?

Yes. So we don't give specific guidance on return ratios. But we've given a guidance of strong leverage this year and decent leverage for next year and onwards. So they'll continue to expand and the investment cycle that we had of last 2 or 3 years so that we not need to make investments in the foreseeable future.

Okay. Just one last question. On the target ROI and the payback period, like, what are your criteria when you actually search for this acquisition? And what was in your mind when you acquired Ideal World and Mindful Souls? Like what was your target ROI and payback period for them?

Yes. So our criteria for the acquisition is different for whatever we have done in last year is the one for the Mindful Souls is to get a synergy and learning from digital business, while existing business is profitable, and Ideal World to expand our market share in the U.K. We are targeting that company we acquire, which it has a healthy profit and healthy return ratios in ROCE and ROE terms, at least at a current level or higher than our current level of VGL's ROCE and ROE numbers. And at our VR expansion strategy to hit 50% retail share by FY '15 and increase further onwards, we are constantly looking to find an opportunity or a learning from digital side, wherever we can, either through acquisitions or improvement in our existing channels.

So, no criteria of minimum payback period that you see when buying these things? Just a serious question, sir.

The criteria is to make sure that any acquisition we do gives us a leverage from the current business, but lower in terms of the ROCE, so they should give us leverage and never a re-leverage.

[Operator Instructions] The next question is from the line of Pradip Maiti from RGI Private Limited.

I want to know about the broadcast and advertisement cost. Sir, will this expand in FY '25? Or will it remain same?

Sir, the current participant got disconnected. I'm reconnecting the participant. The next question is from the line of Deepak Kumar, who is an Individual Investor.

Sir, my question will be more on the demand side. Like how do you see demand panning out in the U.S. and U.K. in the next 2 or 3 -- in the next 2 fiscal years. And you're especially keeping that in mind, like what kind of revenue growth do you estimate on like-to-like basis, like excluding the acquisition?

Thank you for the question, Deepak. Our guidance is including the acquisition. So we have broken down existing business guidance and a separate guidance. But even if we include acquisition, so even accounting for acquisition, we've given a guidance of 14% to 17% for this financial year and mid-teens for next financial year onwards. Now given that these new 2 businesses that we have would not account for all the growth, there will be growth in existing businesses, but we are not quantifying that separately.

Okay. And another question is more on the target customers, like your target customers are mostly like what you have mentioned in the PPT, it's like 55-plus years and 45-plus years. So like are we targeting 13% of our sales to younger population? Is there any strategy on that front?

We believe that 45-plus women have more money, more disposable income, more time on their hand to watch our programming and our product is designed towards them. And that demographic is increasing in U.S., U.K. and Germany faster than the younger demographics. So we love that demographic and want to stay focused there.

The next question is from the line of Pritesh Chheda from Lucky Investments.

Sir, for FY '24, how many months...

Sorry to interrupt you sir. [Operator Instructions]

So for FY '24, sir, how many months was Mindful and Ideal World consolidated for?

6 months was roughly for Mindful Souls and Ideal World in operation in full financial year.

Okay. And can you quantify the $ 1 million or EUR 1 million revenue, whatever you [indiscernible] from Mindful and Ideal World?

Yes. Mindful and Ideal World was roughly around $17 million, both of the new acquisitions.

Okay. My second question is -- so basically, you will have half year. My second question is, in your guidance of 14% to 17% growth, what is the inherent assumption for Shop LC, U.S. and TJC, U.K.?

Yes. So for both of them, we are assuming growth to be there, but we are not giving specific guidance for individual entities because of -- mainly because of uncertainty around the election in the U.K. and U.S.

Usually, what's your experience for election periods in your business in your past years what has happened?

So that's why we have taken the wider number 14 to 17 because of that uncertainty. So the experience has been different of different election cycles, some election cycles, we did not see any impact. Some election cycles, we did see some impact. So it's difficult to predict.

Okay. And on the -- on your segmental where you've given Europe, excluding United Kingdom, I'm presuming this is Germany operations?

Germany and Mindful Souls, both acquisitions. Yes.

Germany and Mindful Souls, okay? So there is this swing in profitability for a minor swing in revenue? What is it on a Q-o-Q basis? So a INR 90 crore revenue was down to 84, but your loss widened. So is there anything which you want to call out?

Yes. So it is in the Ex -- ForEx losses, which is not actually a ForEx losses on account of P&L as the loan -- gross loan ForEx losses goes to OCI, other comprehensive income, which we -- our Germany business has taken U.S. dollar loan from our U.S. business. So euro movement in last quarter has resulted in this kind of higher losses that you see in Europe business. But in group overall account, it doesn't show in the P&L, it goes in other comprehensive income.

Okay. It goes in other comprehensive income.

OCI, yes.

So, other comprehensive income, remuneration of defined benefit plan and exchange difference of minus 80 -- 88.

Because it is not realized, it is unrealized. Once it is realized, then it goes to [indiscernible].

So is this INR 9 crore swing, which I can see from the P&L, which I have to match up with the INR 9 crore here in your segmental. That's how I have to understand, so your PBT is 31 points...

Yes. Correct.

No, sir, you're -- no, I don't understand because the segmental is at PBT level and PBT -- PBT is matching, so that explanation, which you're trying to give doesn't go with the number...?

Yes. So there's one last line item in the segmental, if you see -- segmental is the 1 one line item within the consolidation. The name is the intersegment elimination, it goes to intersegment elimination. If you see the -- in segment wise?

Okay. Okay. I'll take this off-line, but in your opinion, it's to do with the FX movement for the swing in numbers that we see on the segmental.

Right. Yes.

Now, my last question is. We are running at about, let's say, from the segmental annual P&L at about INR 52 crores segmental loss in the Germany operation, including Mindful.

Yes.

At what scale does this becomes neutral?

Yes. So it is -- if I talk specifically about Germany and 50% higher than current scale, it will be neutral.

So you have grown 50% this year, FY '24.

Yes. So in current level -- from the current level, what we see in the run rate 50...

EUR 22 million, if it grows by 50%, we see this loss going away, right?

Yes, right. Yes.

So in your 14% to 17% top line growth inherent assumption, is there a fair bit of possibility that Germany losses would not be visible in a couple of quarters from now?

We're anticipating, but by the guidance that we have given for the second half, we will be breakeven at operating level, and we are anticipating that we will achieve that level. But full year, it will not be profitable.

Okay. That's why I said my couple of quarters from now. Okay. All the best, sir.

The next question is from the line of Pradip Maiti from RGI Private Limited.

I want to know about the other cost, especially broadcasting and advertisement costs. Sir, will it expand more in the FY '25 or will it remain same just like FY '24?

Yes. So for, it will remain same as a percentage of revenue. So in absolute dollar-rupee terms, it will go up. But as a percentage of revenue, we won't see leverage on that one and current [indiscernible].

[Operator Instructions] The next question is from the line of Tanvi, who is an Individual Investor.

Sir, this would be of more repetition. Can you just again repeat the revenue that you've derived from Mindful Soul and Ideal World for FY '24?

Yes. Around $17 million in FY '24, we generated from new acquisitions.

Okay. And sir, at optimum utilization when we account them for the full year, so FY '25, what is the revenue that can we anticipate from these new acquisitions?

So we don't give additional guidance for the individual units, but I can give you a rough number. It will be between $40 million to $45 million.

So GBP 40 million to GBP 45 million?

Dollar.

Dollar?

For this current financial year, this is what we are looking at approximately. But we don't give guidance specifically for unit. But since it is a new acquisition and you asked the question, so I'm giving you a ballpark number.

Okay. Any guidance in terms of your overall EBITDA margins considering the losses that we have in Germany so far? Any guidance for overall margins for FY '25?

Yes. We don't give the guidance on margin numbers, Tanvi, but we gave a guidance of strong operating leverage on EBITDA or PBT level for current financial year compared to last year. No, other participant had asked a question, then we will reach earlier numbers of 15% to 16% of EBITDA. So we're unable to give any specific guidance, but we will see continued leverage on improved revenue numbers for foreseeable future.

No, sir. I'm getting -- in terms of revenue, I know the growth guidance that you've given. But sir, in terms of EBITDA, because, as you've earlier spoken that Germany by second half would be basically -- it would be neutral. So there will be some synergy -- some benefit coming from that part also in the second half of the year. So overall, definitely, we would be getting -- if it goes in line, we would be getting some margins better than FY '24. Is that the correct understanding?

That is correct. And EBITDA will flow in from not only Germany, it will flow from the U.K. and U.S. businesses as well. So Germany is the only EBITDA leverage place. It will be from all 3 geographies.

Okay. Okay. Got it.

The next question is from the line of Gaurav Nigam from Tunga Investments.

Yes. First question was on, can you maybe specify the unique customers on TTM basis for the base business, which is U.S.A. and U.K.?

It's -- Gaurav, it's roughly around 465,000 roughly around.

465,000. So it has materially gone up, sir? I think last quarter, it was around 410,000 if I remember correctly.

Yes. I think that was number 400,000 we told last time it was excluding Germany. And this -- that is including Germany that number. So on quarter-on-quarter, we see -- we saw on TTM basis 2% improvement.

Okay. The 465,000 is including Germany. How many would be Germany, sir, in this 465,000?

It's roughly around ILS 50,000.

50,000. Okay. Understood. Understood. Sir, there is a reduction in number of households. Is there something in U.S.A very specifically? Is there something because of visits has happened? I think right now your...

Yes. We exited some houses that were not producing for us. So we've certain criteria for our revaluation of the households. So some houses don't produce, we exit them. And we enter into new houses that we think will produce for us. So this change is only in the U.S.

There's a material decline, sir, I think from 80 million to 61 million, if I'm not wrong in 1-year. Is that correct?

I think, it's just U.S. business sound, right.

Okay. Okay. I'll check. Okay. understood.

Even if you're seeing, it doesn't sound, right. Let me just check, I remember, what I said [indiscernible] about 5 million to 6 million homes. This 19 million doesn't sound right.

Understood. Maybe I'll check with Nitin and Prashant, separately.

Yes. Yes. [indiscernible]

So just to continue on previous participant, where you gave like 40 million to 45 million kind of for the new acquisition. I think in the last con call, you indicated that the base businesses can grow at high-single-digit, low-double-digit, that kind of a number. I'll just do a backward calculation. You're probably indicating now that base businesses will grow 3%, 4%. Is there something I'm missing? Has something changed quarter-on-quarter because of there's a change in guidance?

No. Actually, Gaurav, as Sunil just mentioned about the -- we have taken the impact of election in our assumptions this year. That's why we want to be conservative on it. The last quarter, we mentioned high-single-digit around that we expect that we will generate from our existing business. And new acquisitions will shape up accordingly in this year. But we have account for in the conservative approach for the -- both of the countries has the election in U.K. and U.S. So we have considered that in the assumption.

Got it. So there is a -- like change in guidance for the base business? Which is that...

Yes.

Because of election. Understood, sir. Just one more question, sir, on the ASP side, I saw a significant decline in ASP, although, I think earlier, we were thinking that we can keep it constant. Is this because of the market changes or we have done something to reduce the ASP?

After 2 years, when the customers have come back from travel and going out a lot, so they've resumed -- they're resuming more their natural habits of buying. So until last year, we were having to sell high-end investment kind of product that pushed on the ASP. Second thing is during this quarter, especially, we exited a lot of our inventory, which we had purchased during COVID and some of that was delayed in transit time given the shipping disturbances. And we exited a large part of that, and that was a lower price point inventory. So that has lowered the price point, but we are not giving a guidance that we'll go back up in a higher price point because the investment-driven demandthat was there last 2 years because of inflation may not be there. So we are keeping our guidance to the similar price point for going forward.

Understood. Understood. This is great, sir.

[Operator Instructions] The next question is from the line of Deepak Kumar, who is an individual investor.

By any chance, like do you have like a gross margins at the segment level, jewelry and lifestyle? And how do these margins vary when we sell our products through TV sales, online, website and [ outside ] channel?

So gross margin is roughly pretty much similar in both of the categories. Even I would say that it's slightly higher in lifestyle product, as it requires storage costs and other fulfillment cost. But broadly, both of the categories has similar margins.

Okay. And like even when we sell them through different channels, the margins would be similar?

Yes, different. On the website, it is slightly higher margin. But website, we have options of exiting that old inventory via clearance and rising auctions. So overall combined, website margin is slightly lower, but selling through the normal sales through website and live TV streaming platforms, the margin is slightly higher on that.

Okay. And do we have any rough estimate as -- how much delta is there in the gross margin in terms of [indiscernible]?

It's not a material difference, yes.

Yes.

Okay. Okay. Okay. And one more question, like how does the -- how much is the incremental gross margin for -- like for own brand products? Hello.

Products margin.

Yes. So our own value product margin is slightly higher than the third-party branded products. I don't have specific delta between the 2, but they are a bit higher. But nevertheless, our criteria to get any third-party brand, even from our site is 60%. So it's -- sometimes, if there was any clearance, we may have reduced that margin, but we try not to go for outside brand below 60%. And that is the reason we would never sell Apple or Bose or Samsung products.

[Operator Instructions] The next question is from the line of Rishabh Gang, who is an individual investor.

Wanted to ask about jewelry is [ FM ], right? So if we -- you can give a mix on what is the percentage fine metal jewelry and what is the percentage of silver and base metal products that we sell, so that I can get to know what is the proportion, yes.

Yes. So gold and the platinum jewelry is very small ratio. Of the total jewelry by volume, it may be less than 1%. By value, it may be less than 10% of all the jewelry. I don't have exact number there, but I'm giving best estimate.

Yes. No issue, sir. Also, the high-value diamond or stones are also less -- are lesser value, right?

So total sales amount of the gold and platinum would be 10% lower. I'll have to figure it. I'll have to figure it out. But in fact my estimation, I'm giving you this number. Specifically, our team will research and give it to you later.

Sure, sir. Second question, sir, was regarding Mindful Souls, right? So I think it is very good -- sir, congratulation for that. And which geography does Mindful Soul actually serve them, right? Have we considered expanding it in other geographies as well since margins are very good?

Yes. So about 90% is in U.S., and the rest of the 10% is from U.K., Canada, Australia and Germany. So we have recently launched just before we acquired within the last 1-year, they had launched into these countries.

Okay. Okay, sir. Also, what is the revenue model for the sales that we actually make through social retail and OTT platform? Like, I just could not think about how you sell through that. And what are the -- and that is my first question on that. And second question is, what are the gross margins and data base, I think, to Walmart also. I think we sell it to Walmart as well. So any idea on the working capital days for that end?

We don't sell to Walmart. We sell on Walmart platform as a third-party vendor on Walmart. And they are ahead of ASP, we get the payment billing 3 days from Walmart and Amazon. So there is no data base. And your other question was?

What is the model for social retail and OTT platform? Like how do you sell on revenue model?

For social, we sell through advertisement on Facebook, Meta and a little bit of TikTok. So we advertise there, and the customers will land either on our website or land on Meta Shop, where we list our products. But the customer retail is ours. So the customer belongs to us. Unlike a platform like Amazon or Walmart, the customer doesn't belong to us. Customer knows only Amazon or Walmart. On social customer belongs to us. OTT is very similar to our television. Instead of seeing the streaming on television, they see streaming on connected TV, even through the linear channel on OTT or through the app on OTT platform. For example, Roku or Fyre TV or Samsung TV. Our apps are on the platform. We advertise that app, so people will get the advisement for the app, and they see -- they like message that we are getting on the advertisement. You can download our app on the smart TV and watches live. And when they watches, they can order on smart TV or through their website or call our customer service on a dedicated IVR number.

Okay. Very interesting. Just one last question, if time allows. How does the mechanism work for the budget pay, right? Who bears the delinquency risk? And what kind of additional cost does VGL incurs in budget pay option?

Right. So our -- roughly for the group, around 39% sales comes through budget pay, and we give the budget pay based on customer payment history. And every customer has a different financing options. It gives from an -- option from 2 to 5 installments, not more than that. First installment, we collected the first fee, and rest is equally in each month. Customers don't need to pay any interest or other cost is just as we do finance that cost ourselves from our own working capital. And delinquencies roughly around 1.5%, 2% from total budget pay sales.

[Operator Instructions] The next question is from the line of Shreyansh Jain from Swan Investments.

Sir, my first question is with regards to what you were talking about Germany. So there is an OCI in Germany because of a loan that you've given from U.S.A. So is my understanding correct that INR 9 crore loss in Germany should be a INR 9 crore gain in the U.S. business in the segmental bid that we report? So am I understanding this correctly?

Yes. So that segmental profit, because we are unrealized gain in their books as of now. But in last quarter, it was a flip side or reverse on debt calculation. So overall, in the books in consolidation, PBT, PAT and EBITDA it doesn't -- doesn't account it.

So INR 37 crores is EBIT in U.S.A. should have been lower by INR 9 crores, if you had not booked the gain. Is my understanding correct?

I have to check that number because I don't have that ready with me. But I have to check and then I'll get back to you.

Okay. And sir, my second question is what is the absolute spend on content and broadcasting in this quarter versus last year?

Absolute number I'm not sure, but roughly it is around 16%. 16% of the sales and -- yes, 16% of the sales.

Okay. And sir, just last question on Germany again. So even if I adjust this OCI build, INR 9 crores. But after that also, we would have done about INR 12 crores of loss. So Q-o-Q from INR 5 crores to INR 12 crores, that's again a swing of INR 7 crores. So have you done something? Because I think Vodafone -- addition of Vodafone customer, I think, was there in the last 2, 3 quarters. So is that the only reason? Or we've done something more in Germany?

Yes. In Germany also, we have done -- cleared up our existing inventory that we done excess buying in the previous quarters and the -- that we have done a one-off exercise to clearing that inventory. That account of additional losses that you see in Germany.

What was the amount, sir, exact contribution for that?

Yes. Roughly $300,000 to $400,000 roughly.

$300,000, $400,000.

Yes.

Okay. Got it. All right.

The next question is from the line of Rishabh Gang, who is an individual investor.

Sir, you have mentioned about crowd sourcing of idea looks very innovative. So I wanted to understand what is the reward mechanism of crowd sourcing of ideas? And also you mentioned about revenue contribution of new items introduced is 70%. So what is your -- how do you clear your old SKUs? And at what margins do you clear those old SKUs? Yes, sir.

Yes. Yes. Thank you, Rishabh. So crowd sourcing means we have multiple channels of getting the idea, so #1 is customer, customers we encourage through our television or website to share the product ideas with us. With employees, we have a very robust program of sourcing ideas from all blocks of employees and their family members. So -- and then we get the ideas from outside innovators. It's our Catapult program, where we get the product pitched to us. And then those products, then we would -- our committee will decide they're going to take on air or not. And we also let draw a design program, where we encourage schools or design institutes to draw the design and participate. Now there is a different reward mechanisms for different people. For internal team, we have $100 for idea accepted and then 1% of revenue for 1-year. For external customers, we don't reward because that earlier we use and then we used to do that, that led to some dissatisfaction. They gave design, but design was already in work, the effect was other region reward [indiscernible] as much. For Catapult outside reward -- outside the new vendors, if they manufacture for us, they would sell the product to us. If we manufacture for them, we give them commission from 4% to 8% of revenue. So there are different mechanisms, and this concept is working out well for us.

Very interesting. Yes, sir. On the inventory of old SKUs, how do you go ahead with that?

[Operator Instructions].

Thank you. And I apologize for the disconnection here, some issue. So, Rishabh did I answer your question?

Sir, my question was, how do you clear the old inventories, right? Because revenue contribution of new items introduce is 70%. So you would be having some -- a lot of inventories of previous year item. So how is your mechanism for clearing those SKUs? And how does the margins look for those kind of SKUs?

Yes. So for clearing the existing inventory or the earlier inventory, we have multiple mechanisms. #1 is we run clearance sales 4, 5 times a year on television. And we have clearance within our websites. And then the third is providing auction -- for the auction. So the small, fragmented item, whatever has left we put up on the rising auction at $1, and people bid against each other, and they buy the product. So the rising auction has a margin of about 8% to 10% only. Then the clearance of website has about 35% margin and clearance of television has about 45% margin. So the margin that you see of 62.7% is a blended of clearance and the new margin.

Excellent. Good margins.

And the 70% given there is a -- all 30% of -- 70% is a new product that is launched within the last 12 months, but 30%, not all goes into clearance. Many of those products are sold at full margin, majority of that. And only a small amount would go through this clearance mechanism at lower margin.

All right. Sir, in the last con call, you had mentioned that -- so Ideal World used to be in the 30% gross margin kind of product space. And you have actually entered even through Ideal World in the product categories in which we are already 60%. So what are we actually leveraging of Ideal World? Are we leveraging their reach? Because we are not selling in the product categories, they are in. So what do you think about that?

Yes. So Ideal World, we have not sold jewelry there. We are selling home, beauty, accessories, what we were selling earlier. And the customer base that they had was quite substantial. We got the customer list of about 480,000 customers, who are active within the last 12 months from them. So we are able to reach out to those customers and get them back. And plus, we have a list of about 5 million customers that they have -- over lifetime, they developed. We can't email to all of them because of the GDPR constraints, but we can retarget them on Google and Facebook over the time.

Okay. Fine. And just one last question, if time allows. What are your return rates across jewelry and lifestyle, right? And how does it actually correlates, the value of the item and the return rate? And how is the cost of return calculated, if possible?

All the categories you mentioned has a different rates, even with the price point categories and the Indian products and the geography also. So U.S. geography, U.S. has a lower return rate. And being Germany, the higher return rates. But for the group, overall return rate is around 23%, 24%. Jewelry being the higher and lifestyle being the lower return rate.

Sir, how higher in Germany? How lower in U.S. A bit idea on that, if possible?

U.S. is roughly around 17%, 18%. And Germany is around 35%, 36%.

So whenever these returns happen, like what are the additional costs, like logistic costs? Like, what is the percentage which you get to -- which you have to incur because of that?

Yes. That number, I don't have readily available. But roughly, fulfillment costs, excluding shipping, is account for around 7%.

All right. Okay. Really appreciate your time and effort.

Ladies and gentlemen, we will take that as a last question. I would now like to hand the conference over to Mr. Sunil Agrawal for closing comments.

Thank you. So I want to thank all the participants for your time and great questions. If you have any further questions, feel free to reach out to Prashant Saraswat at VGL or Amit Sharma at Adfactors PR India, and we'll be happy to answer your questions. Thank you once again.

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