Ladies and gentlemen, good day and welcome to the Q1 FY 2025 Earnings Conference Call of VIP Industries Limited. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing the star, then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Pratik Patil from Adfactors PR, investor relations team. Thank you, and over to you, sir.
Thank you, Steve. Good morning, everyone, and welcome to the Q1 and FY 2025 Earnings Call of VIP Industries Limited. From the senior management, we have with us Ms. Neetu Kashiramka, Managing Director, and Mr. Manish Desai, Chief Financial Officer.
Before we begin the conference call, I would like to mention that some of the statements made during the course of today's call may be forward-looking in nature, including those related to the future financials and operating performances, benefits and synergies of the company's strategy, future opportunities, and growth of the market of the company's services. Further, I would like to mention that some of the statements made in today's conference call may involve risk and uncertainties. Thank you, and over to you, Ms. Neetu Kashiramka.
Good morning, everyone. Thanks for joining the call. We announced our first quarter results yesterday. Before I get into revenue and profitability, I would like to highlight two positives for the quarter. Firstly, we gained 2% market share last quarter, and we also expect to have a 2% gain in this quarter. And therefore, December end, our market share of 36% now will look like 40%. The second is we have made progress in inventory reduction. So during quarter one, we have been able to reduce our inventory by INR 120 crore. In pieces, it is 13 lakhs.
Moving to quarter one P&L, the revenue growth value-wise was almost flat, but volume was 11%. Overall revenue growth for the quarter was actually low, mainly because of April performance, which was hit mainly by less wedding dates, heat wave, and some part of availability. However, May and June, we had a healthy growth of 14% and 18% value, and volume was 31% and 36% respectively.
Channel-wise, again, this quarter, e-commerce continued its growth trajectory , and we grew by 66%. Offline channels, as I said, got impacted because of lower footfalls due to heat wave, Lok Sabha elections, and lower wedding dates. Institutional sales again did better because of a focused approach. International business got impacted due to countries like Asia and GCC.
Our premium share of business continued to hold at 56% of revenue. Value segment again showed growth. Carlton was actually successful in the premiumization agenda, and our average selling price increased by 16%. VIP continued to grow on the back of successful new launches, mainly in lightweight and tech-enabled luggages. Skybags volumes were impressive during the quarter, driven by backpack and pickup in e-commerce.
In case of Caprese, Kiara Collection was very successful, and we are seeing better response in July. Soft luggage year-on-year dropped, and the share of business was actually in line with the overall shift. Hard luggage now continues to be the fastest- growing category. And as of date, 56% of the overall revenue of the organization now is hard luggage.
Moving to profitability, gross margins declined by 510 basis points, mainly on account of soft luggage liquidation, channel mix, and under-absorption of overheads due to lower production at Bangladesh. EBITDA year-on-year movement was again on account of lower GC and increased other expenses on account of forex and marketplace expenses.
I also mentioned in my previous quarter that the organization is onto a transformation journey this year. As a part of this journey, sustainable profitability is a key milestone. To help us on this journey, we have engaged Boston Consulting Group for EBITDA improvement. I've also mentioned earlier that meaningful improvement in profitability will start showing from quarter three onwards. I still maintain this.
If I have to talk about the demand indicators, barring quarter one, we still feel that festive season, travel, and if you see the travel portal results, everything is pointing towards better demand indicators. However, we'll have to wait and watch, quarter one for this sector, especially for luggage, has been subdued. We are definitely moving ahead in our transformation journey. A lot of work has happened, the results of which will be visible, as I mentioned, in quarter three.
Lastly, there's a lot of news which is floating around Bangladesh. The situation looks alarming. However, VIP factories are in EPZ zones which have not got impacted. In fact, in last 40 days of unrest, only three days our factory was shut. Even as we speak, all our factories are up and running. All the employees are present, and production is happening as desired. Material movement is also happening. Further, if there are some production losses, we still have 6 lakh pieces of soft luggage inventory, so that, we can use.
We are, however, closely monitoring the situation as it progresses, and we'll take corrective action as and when needed. One good part is that all our Indian expats who were working in our factory, we moved them into India a day before the episode. At the end, I would like to conclude by saying that it's one more quarter of pain before we start to see good profitability. Let me open the forum for questions.
Thank you very much. We will now begin the question- and- answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. If you wish to withdraw yourself from the question queue, you may press star and two. Participants are requested to use handset while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Jinesh Joshi from Prabhudas Lilladher Private Limited. Please go ahead.
Yeah. Thanks for the opportunity. Madam, in the opening remarks, you mentioned that the inventory reduction in 1Q was about INR 120 crore. So can you highlight how much of it was soft luggage? And I believe in the last quarter, our slow-moving soft luggage inventory was about INR 300-odd crore, s o when do you think the full liquidation will happen, especially given your comments that from 3Q, we may see margin improve, but given the liquidation which we have to do in 1Q, our margins were under considerable pressure?
So the soft luggage inventory has reduced by INR 80 crore.
Yes.
I think one more quarter. Today, as we speak, in number of pieces, it is around 6 lakhs. We are selling 1.5 lakh pieces approximately a month. That's where most of these old inventories will get cleared by September.
Sure. And Madam, my second question pertains to our other expenses, which is at about INR 175 crore in this quarter. Now, given INR 120 crore of inventory reduction has happened, perhaps our warehousing and freight cost should have fallen leading to a fall in other expenses. And also from this quarter, you have mentioned in your PPT that payout relating to e-comm is getting netted off from the revenue rather than getting clubbed in the other expenses. So despite these levers, our other expense is up by 4%. So any specific reason which you would want to highlight here?
One, there is a forex loss of around INR 5 crore, which got impacted. Another one is warehousing cost reduction takes time. It's a cycle. If we have to give notice, also there is a three-month lock-in. So most of these reductions in the warehousing cost will actually start to come in quarter two and large part in quarter three.
Got that one. Yeah.
The other one is on the e-commerce cost. So there are two kinds of costs which are paid to the e-commerce. One is discount, and the second one is performance marketing, which is basically the marketing expense. Marketing expense is part of the other expenses, whereas the amount given for discounts is netted off from revenue. So [crosstalk] .
Got it, got it. Understood. Understood. Madam, one last question from my side. You also mentioned that we have engaged BCG for EBITDA improvement. So can you highlight some details surrounding this? What is the term? What will be the outgo for it, etc.?
I don't think I can give you more details. The costs are not going to be pulsing out as it happened in the e-commerce because it's all dependent on reduction in costs. So the reduction in cost will be much higher than what we are paying to them.
So in short, it is linked to the outcome, Jinesh, so.
Yeah.
Understood. Understood. Thank you. And hopefully, we'll turn around by 3 Q or 4 Q. Thank you so much.
Thank you.
Thank you. The next question is from the line of Shirish Pardeshi from Centrum Broking. Please go ahead.
Hi Neetu. Good morning, and congratulations for gaining market share.
Thank you.
I think things are happening, but just more curious, I have three questions, so first question is that you did mention that the inventory is cut by 16 lakh pieces. But if you can help us to understand this 11% growth, how the growth has happened in terms of volume for the premium and mass and versus the other segments. And if you can give me the volume number?
Yeah. I will give you.
[audio distortion]
Premium is 10%.
10%.
Premium is 10%.
Value is 18%.
And value is 18%.
Okay. So what is the total number of pieces which would have sold in quarter one?
Around 50 lakhs .
Okay. So that's broadly remained. The second question which I wanted to check that when we look at this slide says that premium and mass premium segment has remained 56% brand saliency. But within that, if I look at the hard luggage, which used to be about 48% a year before, which has now moved to 56%, and soft has come down from 25% to 19%. So what explains this 515, 510 basis point decline in gross margin? Is it largely the discounting has gone up in the system or something else ?
So one is soft luggage is sold at a discount. The second is the channels which are growing are actually the lower end of the pyramid. So for example, e-commerce. Now, on e-commerce, we don't sell high premium. It is mass and slightly premium. So VIP and Skybags, which is in the opening price point range, only will sell on e-commerce.
So you mean to say that the contribution of e-commerce is rising because we are giving discounting and that's why we are getting the volume?
I won't say that. But the e-commerce is actually so we were under-indexed on e-commerce. We are catching up the game. So e-commerce, travel industry, revenue from e-commerce is around 30%. We were at 20%. We are catching up. And therefore, the growth is high. But on e-commerce, we don't sell too much of Carlton and VIP premium. So it will be opening price point which gets filled. So my average realization on e-commerce is actually lower than the other channels.
Okay. My second question.
And furthermore, just want to add, what MD said. You have to appreciate that unlike the other industries, still, in the luggage, the value contributes more compared to the premiumization or a higher premium. And that's why you find that the volume growth is much higher compared to the value one. And we are not seeing any major change in the shift in the demand in the next one or two quarters, given that it is more layered to the festival and the e-commerce market.
Manish, that's helpful, b ut I have a broader question. Now we are getting the volume at a price discount. Now, historically, we have under-indexed on the channel. So I'm only saying that if the margin expansion story has to be built over the next two, three quarters, and the e-commerce channel will go back to 30% what the industry is doing, so where is the margin lever and what is the confidence which we are talking about?
So there are many levers on which the cost optimization drive needs to work to improve the overall margin. And when I say about it in terms of the growth is coming at a cost, I would not like to agree on it because we have to align with the market demands. If the market is asking for a value product, I cannot do tom-tom on the premiumization. And that's the alignment what we did. And that's why I repeatedly saying that our volume growth was on the higher side compared to the value one.
The cost optimization drive on which we are working towards it, including the calibrating the price at which we are seeing the option to go up, will certainly contribute in the overall gross margin. And what I repeatedly said again or reiterate that, MD s aid it can be seen only from the quarter two, quarter three, and that's what our objective is.
So it will be in all segments, Shirish. So for example, there'll be some kind of price increases in some of the ranges. There'll be some direct costs. So basically, on the product side, we'll be doing some work. And then on the overhead as well. So gross margin is definitely going to be around 50%.
Just one question here. Do you think the input prices will remain stable from here to next two, three quarters?
Import price you are talking about, Shirish?
Input prices.
Input prices. We have to see over there looking into the geopolitical situations. But if I see the last 10 days trend, it is showing on a downward side. Furthermore, on a continuous, we are also working on a value engineering drive, what a few minutes back MD explained. So altogether, we like to contain our input cost from where we are currently, rather improving upon it, looking into the various options we have to go on a cost optimization.
Got it. Just last question [crosstalk] .
Sorry to interrupt, sir. Could you please fall back in the question queue?
Yeah. I'll just put the question. You can answer later. The question is on the employee cost because we have already taken a lot of action as we moved the manufacturing from Bangladesh to India. So INR 59 crore, what we have charged in this quarter, is there any further room for further reduction in employee cost, or it will be stable at INR 59 crore going forward? Yeah. That's it for me. And thank you.
Actually, in INR 59 crore, there is a reversal of performance incentive payout of INR 7 crore. So INR 65 crore-INR 66 crore is what the employee costs will be at this point of time. Reduction on employee cost is planned in the last phase, s o that will happen only in quarter four onwards.
Thank you, and all he best.
Thank you.
Thank you. The next question is from the line of Bhavin Rupani from Investec. Please go ahead.
Yeah. Hi, ma'am. Thank you for the opportunity. My first question is related to netting off of e-commerce thing. Is it possible to quantify the amount of net- off from revenue related to e-commerce?
It's around INR 15 crores.
INR 15 crores. A nd do you think this will continue going ahead or it will decline?
See, as we all know, Q2 is largely e-comm events sale. So probably it will see some kind of incremental trend. And we are growing as well. So obviously, in the e-comm channel, so the amount will keep on an increasing trend.
So as a percentage of revenue, it might remain the same. However, it will change depending on the [crosstalk] .
Absolute amount may undergo a change.
Yeah.
But percentage of revenue expected to remain same .
All right. Second question. Our channel check suggests that there were certain schemes during Q1 wherein we were offering soft luggage at a discounted rate if a customer purchases above certain value. Hence, do you think that could be one of the reasons for decline in gross margins during the quarter as our selling price of soft luggage and the promotional scheme was way lower than what our actual prices were?
That's what I mentioned also in my opening comments.
Liquidation drive. See, there are two ways in which we can do it. Either I can do a flat, a discount, or I could do a bundling of the product, giving, I would say, more offering to the end consumers. And that's what we plan for. And that's one of the reasons attributing to the lower GC.
Okay. My second question is related to Bangladesh. In your earlier con call, you had mentioned about converting soft luggage upright capacity to duffel and backpack. Is it possible for you to quantify how much capacity of soft luggage will be converted to duffel and backpack?
So earlier, we had a 2.5 lakh pieces of capacity of soft luggage upright, which we are reducing to 1 lakh.
Less than 1 lakh.
Yeah. Close to 90,000, actually, to be more precise, and backpack and duffel will be closer to 2.5 lakhs.
See, what happens generally, it's a kind of fungible because what we are doing is we are recalibrating our manpower. However, the machines are going to be still there. So the strategy is to have completely going on a fungible. So whenever we require, we can adjust our capacities to the market demand.
Okay, and if I'm not wrong, there is a FTA between India and Bangladesh to export goods duty-free. Do you think, if this is removed, we'll lose the duty arbitrage that we hold right now?
I don't see the impact on this because both countries need further economic support. But we have to see because situations are getting evolved. I don't think so FTA will come as a first stage of negotiation between two countries, keeping in mind the safety, security, and the economic growth that both countries are looking for a nd more importantly from Bangladesh perspective given that their GDP is largely contributed by textiles and garment industries.
All right. And ma'am, last question on guidance. You indicated double-digit revenue growth and 15% EBITDA margins for FY 2025. Do you still maintain the guidance for the year?
I always said that H2 f or profitability, i f you can read my transcript of last quarter also. I've always maintained that H2 will see profitability. A nd exit quarter at 15% is what I have guided for. I still maintain.
All right. Perfect. That's all from my side. Thank you.
Thank you. The next question is from the line of Surya Narayan from Sunidhi Securities. Please go ahead.
Yeah. Thank you, ma'am, for giving me the opportunity. So just wanted to know, that what you said, the liquidation of the soft luggage will continue till another two quarters. So we have reached nearly 42% GP this quarter, and this is nearly 12 quarters low. I mean, it is there. So shall we mean that now in going forward for next two quarters also, we'll be seeing a similar kind of GP?
One more quarter.
One more quarter.
And then it should start [audio distortion] .
Okay.
And exit should be 50%.
Exit should be our exit will be 50%, you are saying.
Yeah. Exit quarter [crosstalk].
Exit quarter of the year.
Yeah.
Exit q uarter will be 50%. But 44% is the lowest, and it can improve, inch up to 50% as we move forward, right?
Yes. Yes.
Okay.
One more quarter of pain. Like September should be around this, but from December onwards, it should start improving.
Okay. And secondly, any update on the Bangladesh fire insurance claim?
So we have received interim INR 5 crore in the month of July. And balance, we'll have to see. It was expected in three to f our months, but now looking at the current situation, it might get delayed. We'll have to wait and watch.
Okay. And secondly, what I'm seeing with the channel-wise salience, we have put a lot of effort to improve the general trade, but now it is showing opposite results. So when can we expect that channel? B ecause that happens to be biggest one. So when that can improve?
Now, that channel improvement, we will see only in the next year because the biggest salience in that channel is actually quarter one. And this time, because of the no wedding dates, the pickup was very, very weak. The secondaries are not there for that channel. And that's why you see this salience has come down.
Okay. Even more [crosstalk].
Over time, I think that 25% is where it will remain. Over a period of time, it will stabilize at 25% salience for the channel.
Okay, so what sort of.
[crosstalk] people are starting to buy from modern trade, from e-commerce. Even smaller towns are now having chains like Vishal and DMart. A lot of people are moving there. A nd Reliance Retail is becoming aggressive.
Okay. And in the modern trade also, it has declined YoY. So just wanted to say.
E-commerce has increased from 13 to 21, no?
Yeah. But more we do the e-comm, or let's suppose e-comm, then obviously, we are also sacrificing the margin on commission and other things. So wanted to know.
It's the only channel which is giving growth. W hat is the choice? Either leave it or grab it. So if I don't take it, somebody else will take it. That's what happened earlier also, no?
Just to add to this. P robably some of the channels will get recalibrated in such a way that everyone will have a potential to grow. And that's what our objective in a mid-term kind of tenure. Because the overdependence also on one channel may impact your and create a more kind of risk.
So this is going to be a mid-term strategy, a lthough current we are increasing our position in the e-comm because we are lagging behind compared to the market trend. But I'm sure that over a period of time, you find that all important channels are getting equalized in terms of the sales mix and contributing handsomely to the overall results.
So we are not doing any kind of downsizing in the general and modern trade.
No, no, no. There is no downsizing. It's like if I have more proportional sales coming from one channel, obviously, it impacts the contribution of the other channels.
Okay. Okay. Thank you, sir.
Thank you. The next question is from the line of Ashok Jindal from Anand Rathi. Please go ahead.
Yeah. Hi. Thank you. Sir, I have a question on product mix. So if you can give brand-wise gross margin. And also, we were saying earlier that we will focus on premium category brands, but we are expanding in lower end of the populations that are 30,000- 50,000 population, where we believe that mass brand will be dominant, which will keep Aristocrat's share higher and continue to put pressure on margins, right?
So basically, if you see the salience of our VIP, Skybags and Carlton, has remained the same. So it has not declined. And Aristocrat has moved from 40 to 41. So it's not that it's Aristocrat is moving substantially up. So we are definitely working on across the brands. In fact, Aristocrat used to grow like 3x and 4x in last three, four quarters. This quarter, our volume growth actually is highest in VIP. VIP, I think volume growth is 7%.
Okay. And earlier, we were saying that the contribution from.
Let me just tell you. So VIP is 7%, Skybags is 15%, and Aristocrat is 18%. So it's like almost close.
Okay.
And premium agenda is there. The only thing is if market is not taking that, i f you see some of our competitors who are in premium segments are de growing 10%-12%. I didn't want that situation. And therefore, we have to supply what the customer is demanding. Our focus on premium will keep continuing, but I don't want to miss the bus also.
So just to add here, what will happen is even though Skybags and VIP remain our premium portfolio, there is a need to come with the entry-level product as well to fill up the price gap. And that's why you find some kind of difference between Aristocrat and the price point of the VIP or Skybags. It will still fall under the entry product, but it still commands some kind of higher realization between these two brands.
Okay. But going forward, we will keep the Aristocrat share to around 25%, right, which we have said earlier.
So it all depends upon how the, as I said, you cannot be different than what market is asking for, right? Otherwise, the other brands who are on a premium segment showing some kind of degrowth, we cannot be a different alike on this. So we keep our strategies aligning with what market requires and keep introducing the products to fill up the price points at which the demand is coming from.
Understood. And one bookkeeping question, sir. W hat is the current capacity now?
Could you please fall back in the question queue for further questions?
Okay. Thank you.
[audio distortion]
Ladies and gentlemen, in order to ensure that the management is able to answer questions from all participants in the conference, please limit your questions to one per participant. The next question is from the line of Saumil Mehta from Kotak Mutual Funds. Please go ahead.
Yeah. Thanks for the opportunity. Just 1% growth in the offline channel, which has been there in the presentation. In your best estimate, how much has got to do with the weak wedding season which went by? O r it has largely got to do with customer shift towards the non-offline, which is also visible from a significant rise in e-comm contribution from your [end].
Very difficult to quantify, but I can say that 50% of it will be because of the less wedding dates and 50% because a lot of the consumers who were earlier buying from offline are moving to online.
[audio distortion]
Sure. And my second and last.
[crosstalk]
Sure, ma'am. And my second and last question, in terms of the gross margin from 44% to 50%, which is going to be for the exit quarter Q4, which you just alluded , do you believe this 50% will be more sustainable for a year as a whole in FY 2026? O r maybe it's too early to comment on that. And assuming things [audio distortion] .
So historically, we used to be in the range of 50%- 55%, so in FY 2026, our endeavor is to go back to 55%.
Because then I was coming from.
After seeing the success.
Yeah.
[audio distortion]
Got it, Manish. Where I was coming from is, unfortunately, the industry competitive intensity is not coming down. Safari's large capacity is also hitting market. So I'm sure they will be in the urge to gain market share, and overall pricing will continue to remain weak.
No, I agree, but you must have seen one remarkable change. What is happening is those brands who have been having presence in the e-comm are now looking for retail trade for expansion of their business, right? Which means what we are seeing in the last 18 months-24 months, probably they'll be seeing now for the next two years.
And let's see and then compare where are we and where are they. But it will be premature to make the statement, but that's what they are coming up, right? All fund mobilization on what they are doing today, it's to expand the retail strategy. And retail comes at a cost. It doesn't come as quickly or accessible to what we have in e-comm.
Sure. And any trends in the raw material prices, PP or PC, any positive, negative, details?
It's stable, showing some movement on upward trajectory on a few commodities of ABS and PC, but our contribution to that is minimal. The worrisome is only the freight rate, which has almost quadrupled compared to what we have seen quarter before. So that's only a cost element to keep in mind when we are looking into a price calibration.
Sure. Thank you so much and all the best for future calls.
Thank you.
Thank you.
Thank you. The next question is from the line of Jigar Jani from B&K Securities. Please go ahead.
Yeah. Thanks. Just a clarification on value and volume slide. It's 14% and 18% growth [audio distortion] .
Sorry, Jigar, your voice is breaking. I could not hear the question. Some clarification on volume, but after that, I could not hear.
[audio distortion].Hello.
No. I t's breaking.
Not completely audible.
Hello.
Yeah. Continue.
Yeah. So I was asking that on the value/ volume slide [audio distortion] 14% and 18%. This is ex of discounting, right? This is gross revenues that you have mentioned de growth, right?
Yes. This is gross revenues.
Right. So would it be fair to assume that discounting has been the major factor why growth in terms has been majorly impacted this quarter?
So I would say see we just answered a few minutes back about the SL liquidation contributing to a lower growth and coupled with the contribution coming from more of value products. So I would say product mix and the SL liquidation resulting into a lower value growth.
And sir, just two bookkeeping questions. What is the debt that we have on the books as of Q1? And what would be the [crosstalk].
Sorry. Continue. Sorry.
And the tax rate that we are expecting for the full year?
Tax rate.
Tax rate.
Okay. So if I look from the answer to the borrowing , it remained at the level of what were there in the March. However, as we plan to reduce some of the debts during the year, and you can see some result in this regard by end of quarter two. In terms of the tax rate, it is the 25% which will continue, which is there, in fact, under the new tax regime.
Okay. Thank you so much for answering my questions. And best of luck.
Thank you.
Thank you. The next question is from the line of Pranay Chatterjee from Burman Capital. Please go ahead.
Hi. Thanks. Am I audible?
Yeah.
Yeah, yeah, yeah.
Good. My question is basically with respect to the YoY volume and value growth that we saw in Q1, which is flat at 11%. So as far as I recall, I think, in January 2023, there was a fire-related incident, which sort of started impacting our sales after a strong run from Q1 FY 2024 onward. So the base was actually weak. So with this context, how should we read the results? And then would you say that the overall market would have actually declined or stayed flat? And the volume growth that we see is not a true representative of the market.
I would say differently, chief, because the fire took place. That's right, but what is contributing or what is more noticeable is the overall shift in demand. So it's more from a Bangladesh operation where the fire took place was largely attributed towards the soft luggage, and soft luggage demand seen a dramatic change from the Q1 of the last year. So I would not agree on the lower, kind of fire resulting into a lower base and other stuff.
Got it. And the market share movement, you said 200 basis points YoY. Sorry, 200 basis points. Was it YoY or quarter-on- quarter?
It's on a quarter-on-quarter.
Quarter-on- quarter.
Got it. Thanks. Thanks a lot.
Thank you. The next question is from the line of Niharika Karnani from CapGrow Capital. Please go ahead.
Hello. Am I audible?
Yeah.
Yes, please.
So you mentioned about 3 % gain in market share in this quarter and maybe 3% more in next quarter. So if you could throw some light whether we have gained it from the major competition. Or have we gained it from the unorganized sector? And are we facing any threats from the upcoming B2B brands more?
So whenever we are talking about market share, we are telling about the three large company market share because the data for others is not available in the public domain. So between the three large companies, this is the market share what we have talked about.
Okay. Okay. And [crosstalk].
This is the data which gets published for this quarter one. This is based on our internal estimate. And some of players are going to have a negative growth. And that's why we have gained market share.
Okay. Understood. My last question is, will we see any more new designs of the products coming into the market in the next couple of quarters?
Every quarter, we keep refreshing or adding few products. In fact, if you've gone through our presentation, we have already shown quarter one launches. And there are a few in pipeline. So as we speak, we have launched something which is a Signature collection. You can go to our store and see it's doing very well in Carlton. We just launched so t hat we will share in our quarter two presentation. But if you go to the store, you can see a few more happened already after this quarter one also.
Okay. Thank you.
Thank you. The next question is from the line of Naveen Baid from Nuvama Asset Management. Please go ahead.
Thank you for the opportunity. Can you throw some more color on brand-wide gross margins?
So brand-wide gross margins, we do not share. However, what I can say is that there is a 10% gap between the premium and the Aristocrat. So basically, three brands which we club as premium and mid-premium versus Aristocrat, it's a 10% gap.
Okay. That's helpful. Thank you.
Thank you. The next question is from the line of Deepak Shah from KR Choksey Finserv Private Limited. Please go ahead.
Thanks for the opportunity. I have only two questions. The first question is on the Bangladesh front. If you can quantify the total percentage of supplies that you are receiving from Bangladesh. And second one, in one of the earlier con calls, you highlighted you're targeting to reduce the debt nearly to half. I mean, the amount was somewhere around INR 250 crore. Are we still sticking to that number?
That is for the end of March.
Yeah.
Yeah. For the entire year, minimum, the FY 2025 target.
Yeah. Our target is to reach there, and hopefully, we should be fine. In terms of the Bangladesh, it is largely, I would say, the soft luggage or the soft luggage contribution comes from the Bangladesh. And it fluctuates between the quarters depending upon the [crosstalk].
Overall 20% to.
Overall remains at 20%, 23%.
Okay. And is there any issue on the labor side?
Labor count, there is no unrest as such currently [crosstalk].
So count. So basically w e have reduced it by 50%. So it used to be 8,000. As we speak, it's 3,800. By June end, it was 4,100. Today, it is 3,800.
Okay. I mean, last few weeks, how is the situation on the labor front? That's what I was trying to understand.
At this point of time, I mentioned in my commentary also that the EPZ zones are running fine. In last 40 days, our factory was closed for three days. Since yesterday, it opened normal, and all the workers are coming. Even material movements are happening.
Okay. Thank you. And all the best for the rest of the year.
Thank you.
Thank you. A reminder to all participants that you may press star and one to ask a question. The next question is from the line of Surya Narayan from Sunidhi Securities. Please go ahead.
Yeah. So ma'am, you told that the labor force at Bangladesh has been reduced from 8,000 to 3,800, right?
Yes.
How much is the contract labor, and what is the on payroll?
There is no contract labor in Bangladesh. This was all on payrolls. That was planned reduction because of the soft luggage demand reduction. So we used to run our factory in two shifts, and we made it one shift now.
Okay. So I mean, irrespective of the production, the wage will be paid.
If for the balance, 50% of the people, yes. It has to be paid.
Okay. And second question is [crosstalk].
Only three days were shut. And normal production now.
Okay. And f rom this level, this will be maintained, or it will be further reduced.
[crosstalk]
Depending upon demand, chief. S o as I said, your production facilities will be completely fungible, and that's what we are working towards.
Okay. And ma'am.
[crosstalk] as difficult as India for asking workers to go there. It's very flexible. The law is very, very flexible around it.
Okay. And ma'am, compared to the last year, the revenue, though, remains flat, but the interest component has gone up significantly. So just wanted to understand. A nd you said that the debt level is also remaining same. So what has led to the rise in the interest rate? Were there any working capital needs have spiked?
When I said debt remained at the same level, I was comparing with March and not the June over the last year. If I compare with June, the debt has gone up by at least INR 280 crores.
Because of high inventory levels. So by March, we were almost 900+ inventory. So the debt has gone up in last year, which now will get reduced.
So, can you give us is working capital cycle improved in the first quarter?
Yes. The inventory is getting reduced, so definitely it has a cycle on the working capital days. And that's why we are still sticking to our target to reduce the debt by March 2025.
By 50%.
By 50%.
Yeah.
Okay. Okay. Thank you very much.
Thank you. The next question is from the line of Drisha Poddar from Carnelian Asset Managers. Please go ahead.
Yeah. Hi. Just a couple of questions [audio distortion] .
You are not audible, Drisha.
Sorry to interrupt, ma'am. The current participant has been disconnected. We will move on to the next question. It's from the line of Anik Mitra from Finnomics. Please go ahead.
Good afternoon, ma'am. Thanks for taking my question. My question is related to current Bangladesh situation. Ma'am, what is your employee mix in your Bangladesh plant? I'm referring Indian employee and Bangladeshi employee.
All the Indian employees, so we have around 20 people from India. All of them are already moved to Kolkata a day before this incident. All the other employees, which is 3,800, are all Bangladeshi.
Okay. And ma'am, considering a strong anti-India campaigning in Bangladesh, so what, in fact, you are sensing could have in the production or, let's say, in the operation? And what would be your strategy as well?
It's too early for to comment. As I mentioned, currently, we are having stocks on soft luggage. So I have some time to think. We are definitely strategizing. It's just three- to four- days- old incident, s o we will need some time to re-strategize.
At this point of time, as I said, the factory is running full fledged with all the workers. I don't see an immediate issue there. But yeah, long term, we may have to think depending on whatever is being talked about, anti-India and all that. But there are so many companies who are there. So even for Bangladesh economy, I don't think they can afford to not have Indian companies there. All Indian companies put together are generating so many employment.
Okay. Okay. Thank you. That was from my side. Thank you so much.
Thank you.
Thank you. The next question is from the line of Deepak Shah from KR Choksey Finserv. Please go ahead.
Hi. Just one follow-up, ma'am. You said 20 people have shifted from Bangladesh to India, Kolkata side. So this is employees. Where do they come in terms of the structure of employees? They are like managers, supervisors, or just laborers who are working [crosstalk].
No, no, no. These are all management staff. So all our senior top management is from India and Bangladesh. So they are now in Kolkata. They are working from Kolkata office.
So do you see this shift will not lead to any kind of disturbance as far as the operations are concerned in terms of running smoothly?
I don't think so. For short term, it should not.
Okay, and just one hypothetical question. You said those are long-term things we need to look into, h ow does this Bangladesh situation evolve, but if at all you have to shift, is there any kind of internal risk management measurement people are working already?
Yes. For short term, we are already working on something. For long term, we need to still decide basis the situation. We'll have to wait for some time to assess the risk and then look at the mitigation. For short term, we have already decided what we will do. But for long term, we are still waiting to know how it will pan out.
Okay, and short term, I mean, just one last one before I wrap it up, so the short-term measures you are taking, you are confident about sticking to the guidance that you have alluded in the con call so far.
Sorry. We missed your question because.
No. I'm saying the measurements that you are taking for the short-term purpose. Y ou are confident about those measurements would be sufficient enough to adhere to the guidance that you have given on the top line and the bottom line front.
Yes.
Thank you.
Thanks.
Thank you. The next question is from the line of Drisha Poddar from Carnelian Asset Managers. Please go ahead.
Yeah. Hi. Am I audible?
Yeah.
Yeah. So sorry, I just got disconnected. I don't know if this was answered. Just want to understand that what's the capacity utilization currently at the Bangladesh plant. And where do we see it at the end of FY 2025?
It is at 54% currently. Going ahead, it should increase by 10%, 10%- 12% for the next quarter. After that, it will depend on the demand, s o we will have to assess it.
Okay. Understood, and I wanted to understand a bit on the strategy on the Carlton side. You did mention that premium is still kind of a muted growth, and we've seen that also in the salience of Carlton coming down to 5%. So what is our strategy here to increase the salience of Carlton, and where do we see this? What is our kind of aim to take it to by the end of FY 2025 and FY 2026?
So by FY 2026, we definitely have a vision to take it to 10%. We are working towards it. There are a lot of new launches. In fact, next two quarters, a lot of the new launches are planned in Carlton. We are also looking at expanding Carlton exclusive store. So what is stressed is actually mid-premium. I think super- premium will still doing well. But today, we do not have many touch points, s o we are basically going to increase our touch points in case of Carlton and have competitive launches around it.
Right. So how many outlets are we targeting by 2025 and 2026 for Carlton?
By 2025 end, we should have 10; and 20 by FY 2026.
This would include the airport outlets as well.
Yes.
Okay. Thank you. Thank you so much.
Thank you.
Thank you. Ladies and gentlemen, that was the last question for today's conference call. I would now like to hand the conference over to Mr. Manish Desai from VIP Industries Limited for the closing comments.
So, I hope that we could answer to all of the questions you have. If anything remained un answered, w e are just a phone call away. A nd I'm sure that, the strategy on which we are working upon, you can see major upsides when we go and close the year FY 2025. Thank you all, and have a good day.
Thank you.
On behalf of VIP Industries Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.