by Suhani Adilabadkar

It's been yet another strong performance by Vaibhav Global in its March quarter FY20. The stock has been hitting new 52-week highs and gained 60% over the past one year. Headquartered in Jaipur, Vaibhav Global Limited (VGL), was originally incorporated as ‘Vaibhav Gems Limited’ in 1989 and later rechristened in 2013.

Post its IPO in 1997 and over the past two decades, VGL has evolved into a strong, vertically-integrated electronic retailer of fashion jewellery and lifestyle products catering to the US and UK markets through  its TV shopping channels – ShopLC, USA and The Jewellery Channel (TJC) UK, complimented by web, mobile apps, smart TV interfaces, OTT platforms, social and third-party marketplaces.

Quick Takes

• Revenues jumped 8% YoY from Rs. 498 crore in Q4 FY20 against Rs. 461 crore same period previous year.

• TV revenues jumped 16% YoY while web revenues grew 10% YoY for march quarter FY20.

• Operating profit for the quarter stood at Rs. 56 crore, rising 35% YoY and PAT was Rs. 40 crore growing 22% YoY in Q4 FY20.

• VGL introduced 250 essential products such as masks, sanitizers, health supplements, kitchen accessories, colouring books, board games etc in march quarter FY20.

• In the developed markets of US and UK,  consumer spending is roughly two-thirds of their respective GDPs. VGL interacts with these customers through home shopping TV, web platforms, digital platforms, social media platforms and mobile apps.

• VGL is a small, but a nimble and low-cost structure player and in the current coronavirus scenario this has helped to maintain its growth trajectory. While, market leader QVC has reported 5% decline in revenues for jan-march period due to Covid-19, VGL has grown at a stable rate. 

• Speaking on future growth targets, Mr Sunil Agarwal, MD, VGL said, “We are very confident of 15% to 17% growth in the current (June) quarter and current financial year or even mid-term through the next 2 to 3 years as well”.

Momentum in the March quarter FY20

After a robust december quarter, VGL continued its strong growth momentum with operating profit and PAT coming out in double digits in Q4 FY20. Revenues jumped 8% yoy reported at Rs. 498 crore in Q4 FY20, against Rs. 461 crore in the same period last year. Retail revenues constituting 97% of total revenue mix grew 14% YoY, TV revenues jumped 16% YoY while web revenues rose 10% YoY for march quarter FY20. Operating profit stood at Rs. 56 crore in march quarter FY20 against Rs. 42 crore corresponding quarter previous year growing 35% YoY.

Operating margins came out at 11.3%, expanding 228 bps YoY. PAT or net profit stood at Rs. 40 crore in Q4FY20 compared to Rs. 32 crore same period previous year rising 22% YoY. In addition to healthy revenue and profit growth, VGL reported operating cash flows of Rs. 68 crore and free cash flow of Rs. 61 crore in Q4 FY20.  Speaking on VGL’s strong quarterly performance, Mr. Vineet Ganeriwala, Group CFO, Vaibhav Global said, “We have delivered a strong performance amidst the ongoing pandemic and a stressful environment. Going ahead, we will continue to rationalize costs across all business functions and geographies, while maintaining a healthy balance sheet. We are confident of continuing our operating momentum and remain optimistic about the business”.

Vaibhav Global's focus on home shopping TV

In the developed markets of US and UK,  consumer spending is roughly two-thirds of their respective GDPs. VGL interacts with these customers through home shopping TV, web platforms, digital platforms, social media platforms and mobile apps. And its business model is straightforward - products are sourced at lower cost and sold in foreign markets, the US and UK. Vertically integrated with its manufacturing set-up in India, VGL boasts robust supply chain management with sourcing channels in China, Thailand and Indonesia, and thus is able to offer deep discounts to its UK and US customers.

A differentiating strategy followed by VGL is with respect to its attractive ASP (average selling price) which is set 50% lower than its competitors. On the global platform, VGL is a small, but a nimble and low-cost structure player and in the current coronavirus scenario this has helped to maintain its growth trajectory. While, market leader QVC has reported 5% decline in revenues for jan-march period due to Covid-19, VGL has grown at a stable rate with its retail business rising 14% YoY in Q4 FY20 and 15% YoY for FY20. VGL witnessed healthy growth in both the geographies as Shop LC, USA grew 9% YoY, while TJC, UK grew 17% YoY for march quarter FY20.

With the lockdown in China from the last week of January and Covid hitting Europe and US from early March, disruption came in the form of raw material and product sourcing, supply chain interruption and the most significant, change - in customer proclivity. Closures of shopping malls, other retail formats and reality of work from home led to altered routine itinerary resulting in higher demand in kitchenware, home fitness and home cleaning equipment, laptops, printers and household decorative items from e-retailers.

VGL with 97% of its revenues accruing from the retail segment, also witnessed similar sales trends in march quarter. As per the management, jewellery segment (70% of revenue mix), witnessed higher demand of low priced and family denominated jewellery items such as crosses, rosaries, and charm bracelets instead of high value investment pieces. VGL also responded during the covid hit quarter by shifting its product mix and introducing 250 essential products such as masks, sanitizers, health supplements, kitchen accessories, colouring books, board games etc.

VGL manufactures and sources quality products at optimal prices, maintaining stringent control over its entire supply chain, giving deep value proposition to its customers which supports its industry leading gross margins. The company follows an internal guideline of 60% gross margin for all its products, including the recently launched essential category. No doubt, VGL is targeting double digit growth even in the current Covid hit scenario.

Speaking on future growth targets, Mr Sunil Agarwal, MD, VGL said, “We are very confident of 15% to 17% growth in the current quarter and current financial year or even mid-term through the next 2 to 3 years as well”. Not only for the medium term, the company is confident of strong long-term growth steered by its four levers or 4 Rs as outlined by the management. First lever is ‘Reach’, expanding or reaching out to the customers through television, OTA (Over the Air) markets, OTT platforms and marketplaces such as Amazon, Ebay, Walmart etc, second is registration or new customer acquisition by introducing new product categories, improving the retention ratio which currently stands at 50% and lastly increasing repeat purchase.

All these four levers will play into topline growth and leverage higher growth into the bottom line for robust long-term growth. Though management is highly positive of future trajectory, the company has a long runway to capture, with just 3% market share in US and UK markets and with QVC’s revenue per home in US above $60 against VGL’s $ 3.