Ladies and gentlemen, good evening, and welcome to the Q2 and H1 FY 2024 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 any assistance during the conference call, please signal an operator by pressing star and then zero on your touchtone phone. Please note that this conference has been recorded. I now hand over the conference to Mr. Snighter Albuquerque from Adfactors PR, Investor Relations team. Thank you, and over to you, sir.
Thanks, Malcolm. Very good evening to everyone. We have with us the senior management, Ms. Radhika Piramal, Executive Vice Chairperson, and Ms. Neetu Kashiramka, Managing Director Designate and 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 performance, 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 risks and uncertainties. Thank you, and over to you, Radhika.
Thank you so much. Thank you, everybody, for attending the call and making the time. I believe most of you all received the performance highlights that's been shared. I would like to begin by saying it's not our best performance. Our MD, Neetu Kashiramka, will walk you through the financials shortly. I wanted to take the opportunity to just mention some highlights, which is primarily the gross margins. Definitely the sales growth and the absolute profits were not in line with our own expectations. But the gross margins has been good, and that gives us confidence because achieving gross margins to a good level takes longer structurally than addressing fixed costs, which can be addressed over a period of time. Neetu will talk in much more detail about all of these.
I just wanted to take this opportunity to also talk about the change in senior leadership that we've had here in VIP. We had a quite sudden resignation of Anindya Dutta, post which the board met and actually very quickly took a unanimous decision to promote Neetu from CFO to MD. And since that decision, it's, you know, it's been about six days since that decision, and we feel very confident in that decision. So looking at what the sort of, the way Neetu looks at the company, the future of the market, vendors, customers, et cetera, I feel, as well as, you know, she's not an industry outsider. She's a company... She's been in our company for many years, and she's seen it through all the challenges we've had in the last two or three years.
So taking all that experience, plus her natural energy and ambition, I personally am very excited about the future. So with that, Neetu, over to you.
Thanks, Radhika. Good evening, everyone, and thanks for joining the call. We just announced our results, and the presentation is already with you. I know the growth has not been great, but yet this is what it is. So quarter two revenue growth of 6%. However, volume growth is 10%, which is good. If I have to speak on the channel-wise performance, our trade channel, which, you know, comprises of GT, MT, online, actually is 13% growth. So what has dragged is actually CSD, CPC. And quarter one, we spoke about the refreshment of portfolio for CSD. Future, it will be good, but it's just taking some time for this refresh to convert into revenue. International also suffered, mainly because of the demand slowdown across in the international markets. We have been hearing that.
Also, the supply chain in China has improved quite a lot, and that's also impacting our international business. However, our concentrated efforts with BCG and along with the organization, the e-com channel is beginning to show some results. This quarter, we grew 50% on e-commerce. Also, the channel salience in e-commerce is 30%, which is close to the industry. So in the BBD season, the industry revenue for this category is around 35%, and we are coming close there. And our distribution expansion journey is on. We added 57 towns in this quarter. We have opened 37 EBOs, all through FA route. Also, you'll soon see us on, in key airports. So we have signed up for 6 airports already for exclusive Carlton stores. Aristocrat brand did better than all the other brands again.
Skybags, however, is following up, so Skybags growth was 12%. After a long time, actually, Skybags has shown good growth. That also shows that our new launches are picking up. Caprese also picked up in this quarter with new launches and a lot of activations which happened. Our salience on premium brands for this quarter was better by two percentage points as compared to Q1 . Soft luggage growth also picked up in Q2 , mainly because of Bangladesh, where Q1 got sorted. Radhika also already mentioned about gross margin, but yes, we are happy that we have reached our target GP of 55%, we have been talking for last three quarters.
And this also gives us a leeway to now, this 55% of gross margins, it helps us to look at growing revenue, so I can then have more money to spend and then see how to grow business. So that's something which we'll be doing going forward. Our EBITDA improvement did not happen in this quarter, mainly because of I would, I would say three reasons: One, we spent more on the e-commerce channel. The second one, there is an outflow of around INR 6 crore on the BCG. There's also increase in the freight for us overall. Freight, as well as there's some detention, mainly because we are carrying high inventories. We had anticipated a very high growth in Q1 and Q2 for this year, which did not happen.
With that, we have high inventories, and therefore, to store that inventory, we have taken more warehouses. So I think in Q1 or so, this unusual freight and warehousing costs should stabilize. Fundamental demand indicators, like passenger traffic, hotel occupancy, is all positive. In Q3 , there is a large wedding cohort, and industry experts are talking about a great Q3 . I'm looking forward for that, and hopefully I can have share of my... My fair share into the growth is what I'm looking forward for. With that, I conclude and open for Q&A.
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 touchtone telephones. If you wish to withdraw yourself from the question queue, you may press star and two. Participants are requested to use handsets 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, I have a question on our growth prospect vis-à-vis competition. So if I look at Samsonite India, they have set a pretty decent growth guidance for about 40% in CY 2023 and about 30%-35% in CY 2024. While our other listed peer also did pretty well in the last quarter by putting about 45% growth in top line. But if I look at our performance, I mean, in Q1, we were at about 7% growth, and in Q2, we are at about 6% odd. So there has been a considerable underperformance on the top-line side. So can you just highlight what has been the problem area for us?
I mean, is it product, is it channel or pricing? And how do we plan to address this concern, basically?
So you are absolutely right, that we have not been able to capture the market growth. I would attribute this to our own internal problems and nothing else. However, I'm also confident that we should be able to get to the market growth immediately, but in one or two quarters. So we need to do some work on the product. So I would say that, yes, we did not do too much work on our product. Also, some of the things which are, for example, international, didn't do well because of the China coming back. Now, those things are external, but still 80% of the internal problems are internal, and I'm, I'm looking forward to solve it. In next three to four months, we are having 26 new launches lined up. I'm also looking at premiumization as a theme, because India is growing towards premiumization.
So with all this, I am definitely confident. The other piece which we have been talking a lot about are fill rates and supply chain overall. I think, that is something which we are on the track to solve. So basically, once our fill rate improves, I think we should be there. We're also looking at upping our hard luggage capacities, because hard luggage, demand is higher than what we can service at this point of time, and that's also converting into a lot of revenue, and which we are addressing immediately.
Sure. Just one follow-up. You mentioned about upping your hard luggage capacity. I think in the past, we had mentioned that we'll spend about INR 200 crore to expand our capacity. So where are we on that currently?
So at those... That INR 200 crore capacity, which we had talked about, was mostly actually soft luggage, one additional soft luggage plant in India and then Bangladesh. However, we are changing that, and now all the additional capacities will be only on hard luggage, and for that we need INR 50 crores. So that's where we are. So soft luggage, we are not- we don't need to increase at this point of time.
Got that. One last question from my side. So if I look at our other expense, in this quarter, it was at about INR 184 crore, and in the previous quarter, which typically is a very strong quarter for us, we were at about INR 167 crore. Now, I understand that in this quarter, we had this INR 9 crore of one-off relating to payment to BCG and certain marketplace activations, which we have done on the e-com channel. But beyond that, is there any one-off which you would want to call out? And also within this INR 184 crores, if you can explicitly share what is the A&P spend which we have done in this quarter.
So overall, A&P spend is around INR 56 crore. VIP is INR 30 crore in the previous year. So that's an incremental-
And-
26 crore. There is a INR 6 crore payment to BCG. There is an incremental INR 5 crore, INR 5 crore on warehousing and what is that?
With handling, INR 15 crore.
15 crore. So overall, INR 15 crore additional on freight and handling charges.
Okay. So, INR 6 crores to BCG and INR 15 crores is something which is over and above that?
Yeah. INR 15 crore is actually additional freight and handling charges.
Got that. Thank you so much, and all the best for second half.
Thank you.
Thank you very much. The next question is from the line of Tejas Shah from Spark Capital. Please go ahead.
Hi. Thanks for the opportunity. Neetu, you spoke about margins, gross margin revival, and that seems to be very healthy in this quarter. Was just curious to know which all factors would have contributed to the same?
So mainly, there was a better mix. I said 2% premium mix. The second is the reduction in... So basically, the crude reduction, what happened six months ago, the full impact is visible in this quarter.
Okay. And if you see the trade-off between gross margin and EBITDA, it has not played out. Obviously, you called out the one-offs which are there. But you also mentioned some e-commerce spend. So, what will be that amount, which will be part of other expense?
That is an additional incremental, INR 25 crore?
INR 23 crores.
INR 23 crores.
This is in addition to the ad spend that we would have done, is it?
This is basically the performance marketing for e-commerce. Our e-commerce revenue in this quarter was 31% of sales. The salience of e-commerce was 31%.
Okay. Okay. And performance marketing is not part of COGS. We actually put it as other expenses.
Not part of COGS.
Okay, okay. And now-
I understand some companies are doing that, so maybe we'll look at something around that in the next quarter. But I will also just inquire into what other companies do, because they are spending 25% versus we spending 18%.
Sure. And now looking at this, margins that we have achieved at gross level, what if we are near to medium-term guidance on EBITDA for the rest of the year and perhaps FY 2025, if you can give some visibility?
I can say that the second half, EBITDA improvement should be around 5%.
500 basis points versus first half?
Yes.
Okay. Last question: so looking at our inventory, and then this is slightly for immediate the current quarter also, and if I have to kind of see for last three, four years also, we have been, and this is based on the commentary that you have shared on the call. We are either undershooting or overshooting our demand estimates, and that's visible in the volatility that we are seeing in inventory. Just wanted to know what are the steps that we are taking so that we are not that kind of missing the targets on either side, A.
And B, looking at the inventory that we're entering with as on quarter end and then for the second half, should we expect that there'll be much more aggressive discounting and hence this gross margin might not be sustainable? Because inventory looks, at least on balance sheet, it looks very high for the balance of the year.
Yes, you are right. So there are a few steps which we have taken. So in the past, the forecasting was in the hands of the salespeople. However, we have now changed it slightly by moderating at the HO. So now the forecasting is has to be you know somebody in HO, the marketing and sales together have to own it up. So that's one change. The second change is, yes, whatever inventories are there, we are definitely looking at reducing it, but not at deep discounts. So the way we are looking at is the backpack season is approaching. A large part of our inventory is backpacks, and I may delay my new launches on backpacks instead of doing a deep discount. So that's what we are going to do. And hard luggage, I have no problems in the inventory.
So the large inventory which we have is on the backpack and soft luggage upright. And soft luggage upright, anyways, there are no new fashionable designs as well. That's anyway simple. So we can live with what we have. So we are not producing to a large extent, more on soft luggage at this point in time.
Got it. Got it. That's all from... Bye.
Reminder to all participants that you may press star and one to ask a question. The next question is from the line of Karan Khanna from Ambit Capital. Please go ahead.
Yeah, thanks for the opportunity, and, congratulations, Neetu, on the elevation. So Neetu, my first question, you know, some of us have heard Managing Director and your, your predecessor, and the one prior to that as well, but, clearly we haven't seen the numbers reflecting, the sort of optimism, in the commentary. So if you could help us understand, you know, last two, two and a half months since you've, taken over as the Managing Director-designate, what initiatives have you taken internally, which gives us-- which should give us confidence that, you know, the narrative around market share improvement and margin improvement should clear out in the next one to two years? That's question number one.
Okay, Karan. Radhika here. Allow me to answer that. I, you know, I think Neetu has already in this call laid out her immediate focus areas. And in terms of, you know, what the predecessors did versus her, I, I think we have been saying, the same things over many quarters now. It's a time for actions more than words. So I don't think there's anything I could say more on this topic that, would show that confidence. I think the thing that will give the confidence is, performance over the coming quarters. So we look forward to that. And all I can say is that many of you are investment professionals. You all have known... Some of you have known Neetu for many years. So everybody can make their own view as to the likelihood of her success.
Personally, I remain extremely confident.
Sure. Just a follow-up to ask you, Neetu, if you talk about the gross margins, so like you mentioned, that despite, just curious to understand, despite higher salience of the value portfolio, the gross margins were at 55%, and now, with focus on the premium segment and improving, the product portfolio, especially on the premium side, how should one think about the gross margins going forward? Is there further, room for improvement, or you think that 55% is the number you're comfortable with?
I think 55% number I'm comfortable with, and if there's any additional thing, then I may look at using that money to revive growth.
Sure. And lastly, just to understand more on the CapEx plan, you did indicate in the Q1 earnings call that you have relayed your INR 2 billion CapEx plan. So any update on that? What would be the CapEx numbers for FY 2024 and 2025?
Going forward, we have plans to spend INR 50 crores mainly on the hard luggage capacity.
This is for FY 2024?
So, I think INR 25-30 crores we have already spent. So for the year, it will be around INR 80-85 crores.
Got it. That's it from my side. Thank you, and all the best.
Thank you.
Thank you. The next question is from the line of Lokesh Maru from Nippon India Mutual Fund. Please go ahead.
Thank you. Ma'am, my question is more on the gross margin front. So if you adjust the INR 23 crore spend on performance marketing, net-net, I think the gross margin would be 51%, right? So again, if you account for the lower cost inventory or like you said, the crude price correction reflecting this time, I just wanted to understand if, you know, if this is, crude has been only rising after that, what we saw two quarters back, right? So do you expect 51% to continue or correct to 49%-50% on a sustainable basis after accounting for the performance marketing cost?
Yeah. It should be in the range of 53-55. Also, this performance marketing, e-commerce quarter is heavy in Q2 . It's not every quarter our sales for e-commerce cross into the 50+. So from that point of view, 53%-55% is the range in which our gross margin will play out.
Okay. So basically, net of it, you are expecting 200-300 basis points of an improvement in subsequent quarters, right?
Yes. Yes.
Okay, um-
More premium, going forward.
Just one more question on that. When you look at your gross margins channel-wise, is there any difference in e-commerce and traditional channels?
Our gross margins are highest in the retail channel, followed by GT. MT and e-commerce is similar, which is on the lower end.
Okay, understood. Thank you.
Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants in this conference, please limit your questions to three questions per participant. Should you have a follow-up question, we would request you to rejoin the queue again. Thank you. The next question is from the line of Jigar Jani from B&K Securities. Please go ahead.
Yeah, hi. Thanks for taking my question. So firstly, when you say INR 56 crore of A&P spend, this performance marketing is over and above that, right? INR 33 crore in the quarter.
It's part of this amount.
It is part of this amount. Okay. And, these INR 200 crore CapEx, which was expected on soft luggage, that is now put on hold or, you know, doing it?
It's put on hold.
It's put on hold. Okay. And, thirdly or lastly, there have been news reports of the company being on the block for sale.
... Could you comment on that, whether there is any tentative track news or, whether there is actually some plan going on, on that front?
Yeah. Radhika here, let me answer that question. You know, my father has over the years, decades even, received many different offers from different PE funds. It's a continuous process, it keeps happening. I understand that the rumor mill is particularly strong at this time, and it is possible that ultimately a sale might happen sometime in the future. But I can tell you it's not happening today, not happening tomorrow, and Neetu is fully focused on improving the performance in, of this company for short term, medium term, and long term. She has a long-term plan. We have a long-term vision. So there's no question of Neetu and myself being distracted by any such rumors.
Sure. Thanks so much for answering the questions. Just last one. On the other expenses side, would it be fair to assume that, this performance marketing would be a one-off and obviously some moderation in the warehousing and freight, costs will also happen? So probably INR 160-odd crore would be the number we would be looking at over the next couple of quarters.
Yeah. So as a percentage of revenue, I would say it should keep coming down.
Okay. Understood. Thank you so much for your help. Thank you and best of luck.
Thank you. The next question is from the line of Shobit Singhal from Anand Rathi. Please go ahead.
Yeah, hi, thank you. So then, so how much, how much, growth are we expecting in second half, regularly? And, how many stores, we have to open in first half and in second half, how many we are expecting to open?
Let me just answer on the growth question. I think it is too early to give guidance at this time. Neetu has just taken charge in a new role very recently. So at this time she'll not be able to share any specific numbers. After one or two quarters, she might be able to give guidance for the following years, fiscal year. Stores, please answer.
Yeah. 63 stores in first half, and we intend to open around 40 stores more. So maybe addition, additional stores in this year is going to be 100.
Okay. And these are all franchise, yes?
Yeah, all franchise.
Okay, thank you.
Maybe five, five, six will be in our own, but maybe five franchise.
Okay. Thank you.
Thank you. Before we take the next question, a reminder to all the participants that you may press star and one to ask a question. The next question is from the line of Akhil Parekh from Centrum Broking. Please go ahead.
Yes, thanks for the opportunity. My first question is on the, have you taken any price cuts in Skybags? Because our channel check, at least on the e-commerce side, were indicating that the pricing of Skybags were, trending in line to likes of Safari and, Kamiliant, which is a value brand for, Samsonite. And has that led to, good growth in e-commerce?
I don't think we have reduced our prices in Skybags. However, there are one or two SMUs which are products specifically made for e-commerce, which is not same as Safari, but however, as in Safari, the highest end product can match with Skybags lower end, something like that.
Okay. So it's only specific to few SKUs, that is okay.
Yeah. Specific SKU, which is not there in the other than e-com.
Okay. And the second question is on the inorganic growth front. Are we exploring any of the B2C brands to grow at a faster pace in the premium segment?
I cannot talk on this question at this point of time.
But are we open for acquiring the outside brand, or we still want to focus more on the organic-led growth?
We will be evaluating both. Yeah.
The third and last question, I mean, maybe Radhika can highlight, are there specific reasons for constant churn in the top-level management? This is, I think, now the second instance in last four-five years, we have seen an exit. So if you can throw some light.
No, I don't think there's any specific reason. It's definitely luggage industry for us has been volatile. Because Covid happened, that was a big shock. And there can be many high-performing individuals who, you know, don't want to go through this down and up of... It was a big setback, right? In 2020. So, Sudip Ghose had been with our company 2013, and in 2020, due to no fault of his, the revenue was back to pretty much when he joined the company. So, you know, that is not, that can be tough. In terms of frequent change, I think, you know, I think talking about the past doesn't help. Let's talk about the future. And in terms of the future, I think Neetu's got a good grasp of the company. She has seen it at its worst.
She joined our company in February 2020, so she's gone through the whole pandemic. And then with her business-oriented approach as a CFO, so she understands everything, and I think has had a view on what immediate actions to take. I think we should see a better picture play out in the next couple of quarters. But as I said before, we... I know, I am fully aware that we, we have said this before, so let's, let's see the performance and go from there.
... Sure. That's all for my side, and best wishes for coming quarter.
Thank you.
Thank you. Before we take the next question, a reminder to all participants that you may press star and one to ask a question. The next question is from the line of Nihal Mahesh Jham from Nuvama. Please go ahead.
Yes, good evening to the management. One question from my side. Neetu ma'am, you mentioned about the gross margin profile for the e-commerce channel. Now, if you look at the amount you spent on, say, performance marketing to get a certain level of sales, which is impressive, how does the EBITDA or the contribution margin of this channel compare versus the other channels?
There is a performance marketing spend which happens in e-commerce. There are 2,000 people in modern trade channel for us. If I have to compare net margin for both the channels, it will be different by 2%-3% only.
Sure.
It is not a much of a gap. As I said, in modern trade, I have 2,000 people, so the margin of modern trade is equal to e-com.
So you're saying the contribution margin for modern trade is equal to e-com?
Same as e-commerce, yes.
And even, even in terms of, say, the inventory or any of the working capital, is it similar versus the other channels? What I'm just trying to understand is that, say, as you try targeting scaling this channel up further, how different will, say, our performance look in the future? Maybe our margins would go down slightly also because of slightly lower margin business. How would the working capital move in that situation?
Working capital has no major impact because, in fact, modern trade pays better than e-commerce. So if I have to see, we can't compare it with general trade and retail trade. It's, it has to be compared with modern trade. And the modern trade versus e-commerce, working capital is as similar.
Got that. And if you had to just compare, say, the margins of EBOs and GT versus e-com, how different would that be?
It will be around 10%, different.
Understood. So from our side, this is a channel that we still believe even as it scales up, it will incrementally be positive and not that it is, as much as-
Yes, definitely. Today also, it is positive only.
Understood. Sure. Thank you. I appreciate it.
Thank you.
Thank you. The next question is from the line of Devesh from Macquarie. Please go ahead. Devesh, are you there? Hello, Devesh? I think we have, we have lost him. A reminder to all participants, you may press star and one to ask a question. We'll give it a moment for the question queue to rise. The next question is from the line of Sayan Das Sharma from Bajaj Asset Management Limited. Please go ahead.
Hi, thanks for the opportunity. Couple of questions, ma'am. First, the 6% top line growth, right? Can you give us some background of how the industry has done this quarter, Q2?
Industry has grown around 20-25.
Okay. And my second question is on the product mix, so the brand mix, so to speak. So basically, if I look at the last few quarters, the value end of the market was doing better. We have also seen Aristocrat and Alfa do better than your VIP and Carlton. But this quarter, like you highlighted, your premium products have gained a salience of 2 percentage points, right? So is the trend reversal that premium is now coming back and the value growth that we saw a lot of shift from organized, that kind of stopped in-
Also, it's to do with what we want to do. So basically, my focus going forward will be to capitalize on our brand equity, on our great brands like VIP and Skybags, also Carlton. And India is moving towards premiumization is another theory. So as we move the second half, I'm actually targeting a much better premium mix.
Okay, but I mean, this-
Like, I have six luggage launches lined up between February and March, which are lightweight. I have products which are getting launched in luxury. I have products which are getting launched in innovation. And all this will be in Skybags, VIP and Carlton.
That's interesting, actually, because if I'm not wrong, the perception was that this industry has a large unorganized, still presence, and there was a shift steadily towards branded trade, and that first comes to the value space, where we were traditionally little weaker.
Right.
So, that strategy is not no longer there, right? Because I think one of the tenets that BCG was also helping us explore was that value segment and e-commerce, all that, right? So slightly surprising to see.
No, so that keeps continuing. I would say that instead of focusing only on Aristocrat, we need to focus on everything, and that's going to be the strategy. Today, India is moving towards premiumization, and therefore, VIP needs to capture that.
Mm-hmm.
This organization has always been strong in premium, and therefore, we know this better than anybody else.
Okay, that's it from my side. Best of luck.
... Thank you. The next question is on the line of Akhil Parekh from Centrum Broking. Please go ahead.
Thanks for the follow-up opportunity. My first question is quite a broader question. If I look at last, I would say 3-4 years, right? Since onset of pandemic and till date, like, our growth rate has been slower as compared to our peers, right? If I look at VIP, it's a pan-India brand. We have brands across price points, and we have fairly good recall value if I look at it. But still, our growth has not been satisfactory. I'm not just talking about the last two quarters, but over the last 3-4 years. I'm sure a lot of brainstorming would have happened internally in the team. So what were the key challenges, basically, right? I mean, is it at channel front?
Is it at the product front, or is it at the sales team level, where we are not able to capture the growth which has come, especially after the pandemic?
Let me take that. Radhika here. I'll answer that. I'd say there's two really broad, big, broad reasons. The first is that we made the decision during COVID to use that opportunity of, you know, very low sales to change our whole supply chain and the back-end process. So we moved out of China and rely totally on Bangladesh, which we maintain is an excellent longer-term strategy, medium-term strategy. But in terms of delivery of Bangladesh's delivery to VIP across all brands, when the pandemic ended and we reopened, there were delays. So Bangladesh's ability to make the premium products were not what we expected, and that has led to adverse brand mix that is not helping VIP. Given its overhead structure, it's important that we sell a certain number of premium or mid-premium brands. So that is one whole chunk.
The second piece, of course, is the management issues. So we all know that, a frequent change of managing director, does not lead to, like, longer term strategy, even execution, morale, et cetera. So we all understand that, and we have lived through the past, and we are looking forward to a much more steady and stable leadership going forward.
Sure. So, I mean, growth in the mass segment is not much to do with the macro situation, but you are saying VIP didn't have the required infrastructure to manufacture the premium products, especially during last two years, and that's why we have not grown in the premium segment. Is that correct?
With our manufacturing ability, it was Bangladesh's ability to match up to Chinese manufacturing excellence.
Mm-hmm.
China has been doing this now for 30 years. We tried to do it in 1 year.
Oh, sure. Fair enough. And the second to last question on the unorganized segment, right, which we have seen in last three years has taken a big hit. Have we seen any changes? Like, are the Chinese products, especially on the soft luggage side, coming back into India or the situation remains strong for organized brand at this point?
It is stable, so it's, they are not becoming stronger. It remains. So maybe the shift which we have seen in last three years about unorganized to organized may not happen so steep now, but it's not deteriorating.
Got it. Got it. Thanks a lot.
Thank you. The next question is from the line of Pranay Shah from Anand Rathi. Please go ahead.
Yeah, thank you for the opportunity. I just have one question on the capacity. So what is our current count on the capacity front? And after we invest on our capacity front, what will be the end number looking like?
Our capacity is around 17 lakh pieces. Immediately, we are taking it to 20 lakhs.
Thank you.
Thank you. The next question is from the line of Jigar Jani from B&K Securities. Please go ahead.
Yeah, hi. So, just wanted to check, what was our performance marketing spend in the Q1 first quarter?
First quarter was very low. Just give me a moment, I'll give you.
Sure.
Eight crores.
5 crores, right? Hello?
Twelve crores.
12 crore. Okay. And the guidance of 53%-55% gross margins, this is excluding the performance marketing spend? That-
This is as it stands.
As it stands. Okay. Okay, thank you so much.
Thank you. Before we take the next question, a reminder to all the participants that you may press star and one to ask a question. The next question is from the line of Devesh from Macquarie. Please go ahead.
Yeah, thank you very much for the opportunity. And, yeah, my, my question is more around Caprese. We recently read in the news that Lavie has raised some private equity capital, and, they are now closer to INR 350-INR 400 crores in sales purely in women handbags. Whereas Caprese, as a brand, has been around INR 80 crores or so for the last four or five years, so there's not been any significant growth in that category either. So what is the overall brand strategy to grow Caprese and capture more market share in this vertical?
We have done quite a lot of work on the product, at this point of time, and we are also looking at increasing our-
... presence and visibility on Caprese through two ways. One, all our VIP stores will be having Caprese. The second, all our exclusive Carlton stores are having one side wall on Caprese, and the third one is exclusive kiosks for Caprese. So this year we'll be having around 50 Caprese kiosks. 10 are already up and running. So we definitely look forward for a high growth in Caprese, starting from next year onwards. A lot of base work has already happened.
Got it. All right, thank you.
Thank you. A reminder to all participants, you may press star and one to ask a question. We'll give it a moment for the question queue to establish. Since we have no further questions, I now hand over the conference to Ms. Neetu Kashiramka from VIP Industries Limited, for the closing comments. Please go ahead, ma'am.
Okay. Thanks for joining the call. I know we have been showing subdued results for some time. I will not give you big promises. However, I will. I can only say that I work hard, and let's see the results together. Thank you. Thank you.
Thank you very much. On behalf of VIP Industries Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.