Vaibhav Global Limited (VAIBHAVGBL) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Vaibhav Global Limited Q4 and FY '25 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand over the conference to Ms. Nishita Bhatt from Adfactors 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 fourth quarter and full year-ended 31st March 2025. 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 the opening remarks by Mr. Sunil Agrawal on the business operations, key initiatives and a broad outlook, followed by the discussion on the financial performance by Mr. Nitin Panwad, after which, the management will open the forum for the 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, Nishita. Good evening, everyone. Thank you for joining VGL's Q4 FY '25 earnings conference call. Hope you have reviewed the results and the investor presentation. Before we discuss the financial performance, I would like to briefly touch upon some broader macro developments in recent weeks that has influenced upon our operations in U.S. and U.K. First the tariffs issue. In anticipation of this we had already shipped advanced inventory to U.S. assuring we are well stocked for next few months. However, policy fluidity causes uncertainty and consumer confidence erosion. We are hopeful for a trade agreement between India and U.S. in near future which would fit vertically integrated retailer like us. Among our peers, we are uniquely positioned with our in-house manufacturing and a global sourcing base which gives us agility and flexibility to respond quickly. Two days back the much-awaited India-U.K. FTA got signed which is timely development and could open opportunities for our industry and VGL. In addition, the U.S.-China tariff discussion is encouraging especially as our U.S. Group companies procures lifestyle products from China. These micro developments offers opportunities that we believe leads to improved consumer sentiment and market share gain for VGL. Let me now take you through financial performance. Revenue for the quarter 4 stood at INR 850 crores reflecting a 7.7% Y-o-Y growth. For the full year, revenue reached INR 3,380 crores up 11.1% from INR 3,041 crores in the previous year. Our gross margin for the quarter remained robust at 62.1% with a cumulative margin of 63.1% for the full year. We continue to see strong gross margins in our target range of 62% plus backed by global supply chain. This integrated setup allows us to offer competitive prices with quicker turnaround times while enjoying industry leading margins. The digital business is contributing 41% to overall sales registering 5-year CAGR of 16%. We are on path to achieve 50% sales mix from digital businesses by FY '27. Let me now walk you through the performance across key retail markets. In the U.S., retail demand was subdued in January due to economic uncertainty and tariff concerns. February and March showed a bit sign of improvement, particularly in e-commerce. Our 1% growth in U.S. while modest reflects market share gain amid a challenging environment. The U.K. retail industry is continuing to face challenging environment with growth held back by economic uncertainty and cautious consumer spending. While this affected TJC, the Ideal World continued to show strong growth and helped support U.K. performance. We actively manage airtime and product mix to align with evolving customer preferences. Germany continued to gain market share maintaining EBITDA breakeven for this current quarter as well. We are confident about achieving EBITDA profitability in FY '26. Notably, this has been a much faster turnaround than we experienced in U.S. and U.K. when we launched there originally. Thanks to our past retail learnings. In local currency terms, Q4 growth in U.K. and Germany stood at 2% and 18.7% respectively. We expect Ideal World to start contributing meaningfully to the Group's profitability in coming quarters. Mindful Souls continued its steady performance delivering 7% PBT margin in Q4. With over 107,000 unique customers, we see tangible benefits from VGL supply chain and ongoing product expansion to get wallet share of these consumers. We continue to focus on 4 pillars of our growth that is: widening reach; new customer registration and acquisition; customer retention; and repeat purchase. In Q4, our TV network reached 127 million households. As of 31st March 2025, our unique customer base stands at 710,000 which is up 21% Y-o-Y and the highest ever for VGL Group. Even excluding acquisitions, unique customers grew 7% Y-o-Y. New customer acquisition stands at 410,000 in Q4 while we sustained retention rate at 43% (sic) [ 44% ]. On a trailing 12-month basis, customers purchase an average of 22 pieces from us. Sustainability continues to be the core of our business and we are strengthening our ESG initiatives to drive long-term value. I am pleased to share that VGL has been assigned a combined ESG rating score of 72 that is strong from ICRA ESG Ratings Limited. Vision reinforces our position as a responsible corporate citizen. At VGL, community give back is integral to our business model where every unit sold results in a meal for a school going child. We are pleased to share that this quarter we served 100 millionth meal to a school child since the inception of our mid-day meal program called Your Purchase Feeds. Currently we serve 57,000 meals every school day. On the clean energy front, we generated 1.1 million kilowatt hour of solar energy this quarter meeting 100% of our power needs of our manufacturing units. In addition, 2 U.S. sites and 1 site each in U.K. and Germany also operate 100% of renewable energy. These steps bring us closer to our target of achieving carbon neutrality in Scope 1 and 2 emissions by 2031. From the governance standpoint, our subsidiaries in India, the U.S., U.K., Germany and China are certified as great places to work. We are grateful to our employees for their honest feedback and are committed to imbibe inclusive collaborative workplace environment across the Group. We believe in creating long-term value for our stakeholders. The Board has recommended a final dividend of INR 1.5 per equity share subject to shareholders approval. Including the 3 interim dividends already paid, our total dividend payout for FY '25 stands at 64% of earnings. We remain focused on profitable growth. For FY '26, we expect to achieve revenue growth of 8% to 12% with operating leverage. While macro risks persist, we are well-positioned to navigate them thanks to our low cost, vertically integrated model and high agility. For subsequent periods, the project revenue growth in the mid-teens range with operating leverage. I will now hand over the call to Nitin to discuss the financial performance. Over to you, Nitin.

Thank you, Sunil. Good evening, everyone and thank you for joining Q4 FY '25 earnings call. Let me walk you through the key highlights of our financial performance for the fourth quarter and full year-ended March 31, 2025. As Sunil mentioned earlier, we continue to closely monitor market dynamics and proactively manage our operations. In anticipation of tariff disruption in April, we strategically shipped additional inventory ahead of time, giving us a distinct advantage over many competitors. Additionally, positive development like India-U.K. Free Trade Agreement and U.S.-China Trade Deal are promising and can unlock long-term opportunities for business growth. Turning to our financial performance, revenue for Q4 FY '25 grew by 7.7% year-over-year reaching INR 850 crores compared to INR 789 crore of Q4 FY '24. For full fiscal year, our Group recorded revenue of INR 3,380 crores, up 11.1% from last year, marking double-digit revenue growth. Geographically, the U.S. market demonstrated resilience. Though growth momentarily paused due to tariff uncertainties, we remain confident that the digital first retailer like us will benefit significantly in long run. In the U.K., consumer sentiments remained subdued with weak discretionary spending. However, Ideal World robust growth helped offset softness in our TJC core operation. Germany stood out by significantly outpacing the market, achieving EBITDA breakeven once again in this quarter. In local currency terms, growth in U.S., U.K. and Germany was 1%, 2% and 19% respectively. In terms of sales, TV revenue was INR 456 crores showing a modest growth of 1% year-over-year, while digital revenue reached INR 350 crores demonstrating strong growth of 15%. Our digital expansion is driven by strategic investment into enhancing our omnichannel capabilities. Digital now represents 41% of total revenue and we are confidently on track to reach our goal of 50% digital revenue fared by FY '27. Lifestyle products now comprise 33% of total sales compared to just 12% in FY '18 and we aim to raise this further to 50% in medium-term. Additionally, our budgetary option which allows customers to purchase on EMI, contributing notably to 39% of retail revenue in FY '25. Our gross margin remained healthy at 62.1% in Q4, reflecting the strength of our vertically integrated business model. EBITDA margin stood at 8.3%, slightly impacted by ongoing investment in digital growth and challenges in U.K. profitability, though partially offset by operational efficiencies and lower shipping cost. For full year, EBITDA margin was 9.4%, slightly down from 9.7% of FY '24. Profit after tax for Q4 was INR 34 crores, up an impressive growth of 62% year-over-year. Annually, our profit after tax reaches INR 153 crores making a solid growth of 21% year-over-year. Both of our acquisitions continue to perform well. Ideal World maintains strong growth momentum while Mindful Souls remain a high gross margin business and is actively expanding its product offering and customer base. The cross-learning opportunities from these acquisitions are delivering tangible benefit across the Group. Our business model continue to generate healthy cash flows with free cash flow at INR 127 crores and operating cash flow at INR 162 crores. With regular dividend distribution, our net cash position remained robust at INR 170 crores. Our return ratio ROCE 19% and ROE at 12% continue to strengthen. We remain firmly committed to delivering consistent value to our shareholders. The Board has recommended a final dividend of INR 1.5 per equity share subject to shareholder approval. Our total dividend payout for FY '25 stands at 65% of our earnings. Looking forward, while we remain optimistic about growth trajectory, ongoing macroeconomic uncertainties prompt a cautious approach. For FY '26, we expect revenue growth in a range of 8% to 12% with operating leverage. Over subsequent years, we anticipate revenue growth in the mid-teens with operating leverage. Thank you. And I now turn the call to moderator for Q&A.

[Operator Instructions] We have our first question from the line of Rupesh Tatiya from Intelsense Capital.

My first question is for FY '26. Can you give some idea about the content broadcasting budget? I think the number was INR 650 crore for FY '25. What kind of spend are we looking for in FY '26? Hello?

Hello? Hello?

Yes. Am I audible?

Yes.

Should I repeat my question?

I just -- actually I just connected the call. Sorry, I maybe I missed your question. I just connected the call. If you can repeat, that will be helpful?

So my question sir, is the content broadcasting budget for FY '25, was INR 650 crore. What would be the budget? What kind of spend are we looking for in FY '26?

So the content broadcasting cost right now is roughly around 18%, 18.5% of our business. And then, we expect that, that we expand based on the company's performance. But respectively we'll increase this budget if we see the momentum increase in our margin. So we are monitoring both of the costs in line with our gross margin improvements. So if our content broadcasting goes up by 1%, we expecting the additional gross margin will achieve by 1%.

Okay. I mean sir, that is -- it's a little bit difficult to make. I don't know what to make of that answer sir. So I mean would it remain at 18% even if the gross margin goes up? So gross -- let's say hypothetically gross margin goes up by 3%, 4%, the content and broadcasting cost will also go up by 3%, 4% as a percentage of revenue?

Yes. So our -- let me brief about the bifurcation this content broadcasting cost. So the -- roughly around 11.5% is our TV broadcasting cost included in this content broadcasting cost number, and remaining 7% to 8% cost is our digital marketing. So major cost increase happen year-over-year in digital marketing cost, and that we continuously investing year-over-year, to see the momentum and acquiring higher number of customers. As you may have seen our investor presentation also. And that we are -- we'll not try to invest further to get more customer acquisition, so we can convert those customers in our omnichannel platforms. So right now it is difficult to guide this number that will it remain to 18%, but definitely this number will not be below for the next financial year below 18%. Either it will be 18% to 19% I can give the range for the next year, it will be the content broadcasting cost, but we will not see the operating leverage in particular this line item as a P&L perspective.

Okay, that is clear sir. The second question sir is -- I mean can you give some idea about how would Germany revenue and EBITDA will look like in FY '26, and same for Ideal World, because these 2 are not contributing to EBITDA and between I think 2 of them is roughly I think INR 400 crore kind of revenue. So if you can give some idea about these 2 components businesses that will be very helpful?

Yes. So last 2 quarters were Germany and Ideal World, they both performed well. So for second half both of the units has done a EBITDA breakeven, and first half of the year both of the units have done losses that will convert it to the profitability. The full financial year, we expect that the EBITDA margin from Germany operation will be in positive territory, which is right now in around for -- let me just see, is around so around 2 million, 3 million losses that we have seen in the Germany operation in full financial year that will be resulted in our profitability in Germany per se. And also from the Ideal World perspectives, Ideal World from the second half has done well, and our growth of over 40% we have seen from the Ideal World operation. And the recent improvement in our airtime cost negotiations, and the productivity improvement in different areas of the warehouse. We expect that the Ideal World will improve the profitability margin by 1% in total terms.

So to summarize sir, Germany will grow at let's say 20%, 25% and there will be at least 2%, 3% EBITDA margin. Is that a fair assumption for Germany?

Yes. So EBITDA margin specifically is hard to guide from the Germany. But last year we had a losses. So losses will not be reflect in the Germany operation. So slight profitable, not 2%, 3%, but slight profitable from Germany.

Okay. And then Ideal World you are saying GBP 21 million it was, and it had 40% growth maybe, I don't know we can repeat that kind of number, but maybe 20% growth. So GBP 25 million and 1%, 2% EBITDA margin?

Yes. So growth that I mentioned was the previous quarter that Ideal World had the operation. So we expect that Ideal World will grow to 20% growth rate year-over-year specifically. And it will be the similar kind of EBITDA margin around 1% from Ideal World operation same as Germany.

And when do you see both these components coming to company average for 8%, 9% margin in that -- is possible in FY '27?

Yes. So both -- so this both business will continue to grow with the pace of 20% and above. So in next 2 years we will be similar kind of margins that what we are seeing in U.S. can be achievable.

Okay. So FY '27, there will be significantly closer to company average?

So let me just clarify, this is Sunil. Ideal World should be there in FY '27. Germany is still new. So to give a guidance of 8% to 10% kind of EBITDA in FY '27 is too premature. So -- but what I can say is, there'll be EBITDA positive in FY '26, which we are negative almost $3 million. So that will help the group profitability by I believe 1.5 to 2 percentage point average, but will be EBITDA positive and in FY '27 will be EBIT positive for Germany. To what extent? I cannot state at this time. It's too early.

Okay. Yes, that's clear sir. And sir, I think we were expecting a better gross margin due to Ideal World due to LGD and all of that. But it hasn't kind of come through in Q3, Q4. So if you can give some color around that?

Yes, sure. This is Sunil. So one thing is the macro environment still is a bit challenging, because the consumer sentiment is weak so to push through price increase at this time is difficult. Second thing is our B2B sales had a bit of increase last quarter, and B2B at lower margin. Therefore, you don't see that flow through into the overall margin. So these 2 factors.

And it would be like -- I mean this -- I mean I don't think the macro scenario has improved. So it would be similar. It's fair to assume similar gross margin for this year as well?

Yes. So at the guidance level we want to give between 62% to 63% gross margin guidance for this current financial year FY '26. But there will be operating leverage coming from our HR, SG&A line items, because we are seeing a lot of optimization happening in HR area with AI, with talent density initiatives that we have across the whole organization.

Okay. And then sir, my final question is for the full year what percentage of…

Sorry to interrupt, Mr. Rupesh. May we please request you to rejoin the queue.

Okay.

We have our next question from the line of Gaurav Nigam from Tunga Investments.

Sir 2 questions. One is, sir, wanted to understand what is the PBT drag of Germany in Q4 and whole of FY '25?

Yes, Gaurav. So PBT level, the Germany is still in losses as the depreciation and the interest of intercompany still there, but EBITDA level it is a breakeven.

What about Q4 at a PBT level was it still in...

PBT level still losses, because interest cost is high for the intercompany loan, though that it is eliminated in the consol level because the loan given by U.S. subsidiary company to Germany, but on the EBITDA level. But the specifically depreciation, which is couple of hundred grands per quarter.

Understood. But excluding the interest, will it be fair to say that PBT level, there is a breakeven in Q4 or there is also...

Very close to breakeven, not a breakeven, but very close to breakeven.

Understood. And Sunil sir, just wanted to get a sense from you on sir, U.S.A. sentiment with the tariff and everything. I think things are still, I mean not very clear. So how's the consumer sentiment, and is there any improvement? Because I think already 2 months have passed since the quarter has ended. I mean, how are you seeing things on the ground?

Yes, so consumer sentiment still is a bit challenging. We are faring better than many other. For example, Target just declared yesterday they had negative comps after a very long time. And we're reading about negative comps, but our business is currently about mid-single-digit growth level for the first 1.5 months so far. So we are seeing about mid-single-digit growth for U.S. business this year for us, or this quarter for us. For the year, it's too early to make the guidance right now, but our guidance stays true for the whole year, 8% to 12%. That accounts for uncertainty in the environment. If the sentiments become positive, because of, say, India, U.S. treaty or U.S. does treaty with, say, 10, 12 different countries before the expiry of 90 days that may bring a lot of positivity. And if they can settle it with China also, that will also bring a lot of positivity. But if the stalemate continues, and the tariff again kicks in, that may bring in negativity. So it's very early for us to define how the sentiment will shape up. That's why we have given very wide guidance this time.

Very interesting sir. And sir, just one more point you mentioned about the operating leverage on the HR and SG&A line item. It would be great, if you can help understand like, what are the initiatives that we are taking, which will drive this operating leverage here?

Yes, so good question. From HR point of view, we drove -- we started driving about 8, 10 months ago. The talent density across the whole organization. This was based on a book by Reed Hastings called No Rules Rules, so that we read all across the whole organization, and we started that initiative. And that is creating good results for us across whole organization. Just to give an example, in our U.S. and in our Germany warehouse we hired talent with higher pay than our average pay. So that led too much higher output per person and reduced our warehouse costs both in Germany and U.S. substantially. So with less number of people with higher output. And similar initiatives, we drove across entire business in back office operation, into factories, into our call center, into management team, mid management team everywhere. So that is the initiative that is helping us across the group. AI has helped as well. We have eliminated a lot of repetitive functions, which we were able to automate. So HR as you might have seen in the number, HR costs are down year-over-year for us. Now SG&A includes the shipping costs, where we are able to consolidate some, and also automate many functions to reduce the SG&A costs across organization.

Very interesting sir. And so just a final question to understand the overall dynamics, sir one, I was observing that the digital revenue for us is growing faster. And as my understanding is that digital revenue comes at a higher cost, and because of the nature of the customer, it is also has a lower repeat rate. And I can see that the gross margin that we are earning right now has not gone up in line with the digital revenue increase. So I mean, when you're thinking about let's say 1-year, 2-year down the line, are you thinking about the profitability? Because I think you expect the digital revenue to go up? But if the profitability of a digital business is relatively lower, how should we think about the blended profitability going forward?

Yes, it's a good question, Gaurav. Now digital, when we started investing into digital almost a year ago, we were not profitable in first purchase, and we still are not. But over the last 1 year, we have come to the stage that we are profitable between 90 to 180 days in the customer that we have...

Sorry, Sunil, sir, sorry to interrupt, but your voice is getting bit muffled.

Okay. This is another speakerphone. Is it better now?

Now it's clear. Yes, yes, it's clear.

So last -- since within a year when we started investing in digital, we've learned quite a bit to make the customer profitable within 3 months to 6 months of acquiring that customer. So we are learning that to make it shorter and shorter period. So as we go forward, if we can bring that profitability to say 2 months instead of currently 3 to 6 months. So we have 6 brands and some brands are profitable within 2 months, and some are takes about 6 to 8 months. But if you can bring that forward to 2 to 3 months for all the brands, our profitability goes up. It is not this factor of say understanding Meta or understanding Google. We have about 12 or 13 customer acquisition funnels, and so we are driving each funnel through talent density of increasing the customer, our employee talent density in each funnel, and then reducing the time to profitability for each funnel. It's pretty complicated. E-com is much more complicated than television. And we've learned quite a bit from the Mindful Souls that we acquired, and from our own participation on e-com masterminds and forums, where I personally participate and all my senior team participates and our middle level team members also participate has brought in tremendous learning, and the investments is getting better and better for us.

We have our next question from the line of [ Apurva ] from Whitestone Financial Advisors.

Sir, I have 2 questions. First is on the receivables. Sir, I'm just thinking that the complete business is online, right, online sales. So then why do we have such high receivables of around INR 300 crores?

Yes. Apurva, let me take this question. Receivable mainly in line with the -- our financing option to the end consumer EMI option, which we call as a Budget Pay. Where customer has a -- customer can pay in 2 to 5 different installments if customer opt for this option. So that outstanding is related to the Budget Pay EMI option, which contributes right now 39% of total B2C sales. And this is roughly around 33 days outstanding period in terms of receivable number of days.

Sir, the line which we have not been receivable is because of this EMI only is it? Is it right?

Yes. Yes, it is. Yes.

Okay. And sir, my next question is on Budget Pay only. So the risk is on us or some other company takes the risk of this EMI?

So risk is on us. But we have a robust procedure internally to check the customer payment pattern and the customer buying history, before giving finance to the consumer. So effectively our bad debts is within the range of 1% to 1.5% of our Budget Pay sales. And it is -- over the period it is similar. We haven't seen any kind of disruption -- like anomalies in this trend.

We have our next question from the line of Tanvi, an individual investor.

Sir, I just had one question. Sir, earlier in the beginning of FY '25, you had recommended a growth of 12% to 15%, and we've achieved roughly around 11% even after we had 2 acquisitions of Mindful Souls and Ideal World during the year, now you even lowered your guidance -- revenue guidance for FY '26 as compared to 8% to 12%. So why is that so happening?

Let me answer this. Thanks for the question, Tanvi. It is true that we did guide 12% to 15%, and then we had this uncertainty in the market economic environment impacted. We were expecting when we guided that the economic environment would improve and go to the steady state after the war, inflation and the consumer sentiments. But did not happen it actually was further deaccelerated. Actually, after the new administration came in, the policies, the fluidity of the policy and uncertainty caused further deterioration. And that is the reason as I mentioned earlier, we are giving a guidance of 8% to 12% now, which is much wider than we have given in the past. Because the sentiment, we do not know how they will shape up. And that is why we are giving this guidance. If the consumer sentiments go up, then we will be at the higher end. But still, it may take time. And this is the guidance for the full year. So it may not be -- the sentiment may not hold full year where the guidance stands.

Okay. Sir, I just have a follow-up question here. Sir 2 things. First, out of the 11% growth that you've done in last year, how much was due to acquisitions of Mindful Souls and Ideal World? And second, if you could split up -- so if you talk about growth, you said that in U.S. growth was flat, so was in Germany, so the entire growth, is it coming only due to acquisitions last year?

Yes. So Tanvi, let me take this question. So excluding Mindful Souls and Ideal World we have a growth of roughly around 4.5% in rupees terms. And sorry, what was your other question?

Okay. I just wanted to know this only. What was the growth excluding these acquisitions? And what is the projection of growth excluding these 2, Ideal World and Mindful Souls for the next year?

Yes, projection is combined actually. So now in comparable numbers, Ideal World and Mindful Souls both are including. So it is all in combined 8% to 12%.

We have our next question from the line of Pallavi Deshpande from Sameeksha Capital.

It was related to initially you mentioned about the content cost. So in terms of the air -- taking to air, the broadcasting fees were increased by the broadcasting company. So what was the percentage increase they took and when did that come, which quarter?

So that increase that we have done throughout the year. That is why you may have seen the -- this cost has been jumped year-over-year. Earlier it was 16.5%, now it is 18.8%. So that has been increased because we started doing investment in March 2024 onwards.

Right sir. I'm not talking about the digital part, which is 7% to 8%. Sir, I'm talking about not the investment part, but what was the increase taken by the broadcasters? The percentage I was looking for, which is you've given the split 11.5%. So what was the increase percentage by the broadcasters then?

Yes, that increase is related to Ideal World that recently that we have launched. So they obviously there's a -- whenever the new channel launch the cost to sales ratio is higher. And predominantly airtime is fixed in nature. So once revenue built up, that cost goes down. Also that the airtime cost we have done some investment in U.S., some OTA households, and the -- some cable household with the lower channel positioning that we have taken. So that resulted increment in airtime cost.

Right sir. And second sir was on this, QVC has done a tie up with TikTok so I just wanted to understand, how does that impact the competitive dynamics and are we -- I mean looking for something similar to do on the -- for your digital marketing side?

I'll take that. So we believe that the TikTok has been there, and we've been on the TikTok, but at a small level. So we are doing organic as well as paid TikTok, but to a small extent. So still to be seen how you shape up for QVC. I hope they are very successful. I hope it take up well, if it does we can replicate that in a way which we are not doing. Yet to be seen how they will take up. Having said that, many B2C brands are doing well on TikTok, and some have done exceptionally well. So they are mostly mid to small size brands. At QVC level, how much needle it will move? Difficult to say.

Right. Sir, these small brands, any idea of what kind of growth they are seeing? The B2C small brands because of the current environment that is -- are they at a better competitive edge?

It's differing. Companies which are China exposed are having difficult time. So from my interest in a lot of B2C players through the mastermind that I and other team members are member of. So the China centric brands are having a difficult time, but brands which are not China exposed, they seem to be doing okay, not as robust as they were last year, but they are doing better than exposed to China.

Right, right. And last -- lastly would be this the DHL tie up on some -- any developments there for the small packages and jobs that we are in doing this meeting?

Nitin, some more information on...

Yes, it is under discussion and going from the Indian Post. So Indian Post is recently launching the single parcel services from SEZ unit that we have. Expecting that they will start the service from June. We have done a cost benefit analysis based on the shipping what we will do, we will start from the small parcel. But yet to be seen in June, how fast we will implement and how rapidly we will expand. But definitely it will be help not only in terms of the freight and shipping cost, but also we can enjoy the benefit of the de minimis, which is duty free goods in U.S.

Right. Sir, my last question was on the current assets we've seen a notable increase in the others from INR 2.7 crores to INR 43 crores. We just wanted to understand what is that pertaining to?

Yes, so current assets increased mainly related to the balance lying with the payment gateways. So that has been increased. So last couple of days this time, compared to previous years that was increased. Last 3 days balance was there, but earlier it was not. So -- but that is realized in 1st and 2nd April of this financial year.

We'll move on to the next participant from the line of Rupesh Tatiya from Intelsense Capital.

My question is for FY '25, can you give what was our financial provision or impairment because of -- what percentage of sales was from financing and the corresponding impairment? And it will be great if you can give the same numbers for FY '24 as well?

Impairment you mean, which was standalone accounts only?

Sir, no 3%, 4% provision we do, right sir, when we do financing credit loss?

Yes. So that was related to our bad debts provisioning that we do for the -- our Budget Pay offerings. So for the particularly Budget Pay sales, as I mentioned to previous caller also it is 1.5% of our total Budget Pay sales, and it will remain same for the upcoming years.

So this number was same in FY '24 as well?

Yes, pretty much similar, yes.

And what is the Budget Pay proportion, sir? I couldn't find it in the presentation, again this is...

9% of our total.

9% of total sales of Budget Pay.

39% of total B2C sales.

Okay. And this number was in FY '24?

It was similar. The budget rate is over the years is very much similar.

[Operator Instructions] We have our next question from the line of [ Ashish Shah ] from Business Match.

Just some thoughts on this whole tariff thing, and how is it impacting our business? And have we taken -- are there any price hikes to offset, or some thoughts there?

Yes, I'll take that call. So we shipped extra inventory to U.S., before the tariff hike, the announcement that Mr. Trump had made. So we don't -- so we have inventory for at least 3, 4 months during this negotiation that is happening. And we are hopeful that negotiation that happens, India will get a favorable treaty in coming maybe 30, 45 days and we should be fine. Just in case there is no favorable treaty for India, India is still placed at equal to most of the countries, and we should be able to compete with anybody else. If many of the companies depend largely on China, we will be competitively better placed than those companies. So all in all, we will be equal or better than most of the competitors.

But sir, in a scenario assuming a status quo then there could be while relatively we'll be better off, there could be yet a meaningful price hike, right, in that scenario to offset some base case tariffs as well, right?

So my worry is not so much for the price hike, because our gross margins are pretty high. The price hike doesn't look as high, but it's more about the consumer sentiments. If the consumer sentiments stay low or subdued that could impact our business. That's why we gave 8% to 12% of guidance. So if the consumer sentiment stays low, then it will be more like 8%. If it is -- consumer sentiments are positive then we'll go towards 12%.

We have our next question from the line of [ Pradip Maity ] from RBI Pvt. Ltd.

My question is pertain to material consume cost. So sir, are you expect the material consume cost will increase in FY '26, or it will remain in line with the FY '25 in full year basis?

Yes. So margin will remain in improvement trajectory, as we are getting a higher digital share, and the optimization in terms of pricing. And also the recent India-U.K. FTA will help us to improve the margin. So COGS will be lower comparatively to previous years. In the guide -- I mean guidance terms it will be -- the margin will be 62%, so material consume will be 38% predominantly that number year-over-year.

Okay. That means material consume cost will not increase in upcoming years? Am I Right?

Yes. Yes. Right, yes.

We have our next question from the line of Tanvi, an individual investor.

Sir, just one -- sir, like 2 questions on your margins. First sir, in the last con call you had mentioned that if we exclude the loss from Germany in Ideal World, then our EBITDA would have been greater than by 2.5%. So assuming that as you said for FY '26 we would not be -- there won't be any losses from Germany in Ideal World. Sir, can we assume on a full year basis that our margins will improve by this 2.5%? As earlier you said it will improve by 1% overall. But for the 9 months data you had said that number 2.5%. So what number shall we take?

Yes. So definitely there is an improvement in overall margin through Germany operations. Earlier when -- in FY '24, when we were having a full year losses in Germany, the gap between the EBITDA margin excluding and including Germany was 2.5% and that is getting better in this year and next year also that will be better. But the last couple of quarters we have seen the softness in the U.K., TJC U.K. profitability. That resulted that the margin improvement was not in line with the 2.5% that you mentioned earlier, but based on the initiatives that we have in U.K. so that will improve the margin upcoming period. As you might have seen the excluding Germany operation was 2.5%, and that may be resulted in coming years. However, that 2.5% was the -- if we exclude full Germany operation. That means that this operation is in a similar pace as U.S. operation. So that will take another couple of year to in line with this to catch up the U.S. operation pace, to achieve the 2.5% improvement in EBITDA margin. So you can assume that it will gradually improve up to the level in next couple of years to achieve 2.5% improvement from Germany operation.

So as of now we can assume 1% increase due to these EBITDA losses being wiped off in Germany in Ideal World as you've mentioned earlier?

Yes.

Okay. Sir, also just had a question regarding margins only. So 2 things. First, you've said -- just wanted to know, sir, had there not been any inventory pile up for next 3 to 4 months due to weak consumer sentiment in U.S. How much better would we have been on an inventory level? Because change in inventory is also accounted for in the P&L. And second sir, what is the stance on lab grown diamonds? Because in the last quarter we had talked a lot about lab grown diamonds that they have been showing double-digit growth, and also improving the overall gross margin and the customer sentiment. So what are your thoughts about lab grown diamonds for this quarter? And also about the -- like these 2 questions. Yes, that's it.

So I'll take the number -- lab grown numbers, but Sunil will talk about the performance side what he -- we anticipating lab grown. So lab grown is continuously improving and lab grown category itself has reached a double-digit share of overall business sales in our all of the 3 geographies U.S., U.K. and Germany. And we are seeing pretty good response from consumer side in terms of lab grown products. In terms of inventory pile ups, inventory pile up, mainly we have done in U.S. to but that is for the 3 months inventory that we have over there. And the respective -- I would pass on to call to Sunil for the, what we anticipating the lab grown performance from coming period.

Yes, as Nitin mentioned it is doing well for us double-digit sales and we continue to -- we see this to continue for next few quarters at least unless the price goes further down. Consumer trust needs to stay with this. It depends a lot of consumer trust on what they're buying. If they see price continue to go down then they may not buy as much or they still may buy, who knows? Still to be seen. But we are continuing to look at this business in a positive way while keeping the inventory low, because we know the inventory price may go further down.

Okay. And sir, about the first question, the earlier question that I had asked. Had you not maintained an inventory pile up in U.S., how much your EBITDA margins would have been better for this quarter?

There is no impact with the EBITDA margin with inventory pile up, because it is recorded at the cost of purchase price. So there is no impact in EBITDA margin with the inventory pile up. But that will be benefiting at least for some period to not to pass on the increased price with the tariff increment.

We have our next question from the line of Harsh Mehta from Perpetual Capital Advisors.

Sir, my first question is around why are the tax rates lower for the quarter? Like if you see as a percentage of PBT, your tax rates have most of the time been above 25%, but this time it's only 17% or something of your PBT?

Yes Harsh, thanks for the question. So as I think previously also we guided that tax will continue to be lower as the Germany operation become breakeven and profitable as that the losses are not accounted for. So that will be beneficial in terms of reduced tax rate. Also that we have seen the lower profitability in U.K. this year, which is coming up eventually lower tax rate. But we anticipate over the period in coming quarters the TV ATR will remain at 22% around.

Okay. Right. 22% for the whole year, right?

Yes. Yes.

Okay. And could you share the volumes for the whole year for all the 3 businesses like Germany, U.S. and U.K.?

I think it was in our investor presentation, yes.

We have our next question from the line of Pallavi Deshpande from Sameeksha Capital.

Yes, I just wanted to understand on the auctions. Did we do more of the online auctions given the slowdown in the U.K. this year?

Pallavi, can you repeat the question? You're talking about the online?

Yes. Online auctions, I wanted to know what was the percentage this year? Was it higher as you mentioned U.K. was slower so you had to TJC online auction?

You're looking for just U.K. online auction ratio as a total percentage of sale of U.K. or more of a...

No actually overall, yes?

Okay. Nitin, do you have the data?

So U.K. TV sales online. I mean the TV sales is lower than the last year, while digital is flattish. But the online auction sales is lower than the last year.

Can you quantify the number, Nitin?

Quantify, Prashant will share. I don't have right now, but Prashant will share the number.

What Pallavi is looking for overall option revenue this year versus year before?

I'll give you that just in my commentary that TV sales grew by 1% year-over-year for the group, and digital was 15% growth year-over-year. So online auction is the TV sales. So it's a 1% growth year-over-year including U.S., U.K and Germany.

Oh no, she's looking online or auction I believe. Maybe Prashant, you can share that with Pallavi later. It's a very, very micro data.

Sir, just wanted to -- does the trend -- yes, just wanted to know like, because of the slowdown that -- this should have gone up, right? So you said it's down.

I'm not seeing so from the intuitive information that I place on the daily report or weekly report, I'm not seeing much change in that the revenue going up significantly, very meaningfully. So I wouldn't be surprised the number is about similar for U.S., U.K. put together, because we don't have auction in Germany. You see end shoppers in U.S. overall revenue would be about flattish year-over-year on the auction part. The digital revenue that has gone up has -- gone up largely with the catalog as well as the web TV and the mobile app sales have gone up quite substantially. Within those auction hasn't gone up much.

Okay. And one more was on the initial remarks you mentioned about the reach of 127 million. The number and I remember it was 130 million or so. So there has not been an increase in the reach. Is that a fair assessment?

Nitin, do you have data? TV household reaches in FY '25 versus '24?

That remain same, the U.S. 127 million. Sorry, total 127 million. Yes, U.S., 60 million, 27 million in U.K. and 40 million in Germany.

No. So that's -- there's no increase, right?

Yes, there's a no increase in the household. Like U.K. and Germany, they both are pretty much covered in terms of reaching the -- all the household. U.S. has a potential to increase, but U.K. and Germany they both are covered.

Ladies and gentlemen, that would be the last question for today. And I now hand the conference over to the management for closing comments.

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

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